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Both parties stub toes on scandal

By Thomas Oliphant, The Boston Globe Staff, 1/15/2002

SNIP...The Democrats are faring only a little better. The Democratic National Committee is playing politics shamelessly, but that act itself is keeping it from being taken seriously. Party figures in the Senate, like their Republican counterparts in the House, decided well in advance of last week's feeding frenzy to treat Enron as one of those rare business scandals that easily engages the public and not as a governmental story as long as the evidence doesn't make it one.

When Joe Lieberman and Carl Levin begin public airing of this astonishing tale of duplicity, it is Enron and its see-no-evil accountants who will be in the cross hairs, not President Bush or top members of his administration...SNIP

Enron scandal one of accounting, not politics

By WILLIAM SAFIRE, New York Times

SNIP...The dozen or so investigations may turn up something to embarrass the White House, especially if Bush pulls another "executive privilege" when Congress wants facts. But the scandal I see in this corporate debacle is nonpolitical; it's professional.

This affair shows the accounting profession all too often to be in bed with the oldest profession. Accounting standards have been frequently prostituted by the new Uriah Heeps: These are executives in ever-merging firms afraid to challenge their clients' phony numbers and secret self-dealing because they might lose fees in the lucrative consulting business they run on the side...SNIP

The major failing at Enron was Ken Lay's establishment of a corporate culture that extravagantly rewarded short term "profits," however derived, without any recognition of the long term consequences of the actions which led to booking those "profits." This is evident in Enron's practice of routinely booking profits from the anticipated earnings from projects in the year in which the project was negotiated, rather than over the life of the project, as is done in most other companies.

The exaggerated focus on "profits today," regardless of the long term consequences, can be found as a common denominator in many of the poor investment decisions made by Enron, as well as in the now famous Limited Partnerships established by Andrew Fastow. This corporate culture was brought to Enron by Jeff Skilling, when he was a consultant to the company, long before he became CEO. But it was accepted and endorsed by Ken Lay.

The press is trying to focus on insider trading and other scurrilous acts by top Enron executives as they tried to protect their own personal fortunes during the collapse of the company. This is important and may result in criminal indictments. However, in the long run, it is more important to concentrate on the management process that led to the collapse, with the hope of preventing such a collapse at other firms.

Until this past fall, Enron was widely viewed as a shinning star in the development of a new business model. It is probable, and almost inevitable, that other companies have attempted to copy Enron's approach. Given weak auditing oversite, and compliant boards of directors, it is possible that some of these other companies may also have fallen prey to the trap of "profits today," regardless of the consequences. Investors and employees of other companies may perhaps now be exposed to debacles similar to Enron's. This is the real tragedy of Enron.

At the heart of this scandal are the incestuous relations among our political, financial and business elites.

The truth is, I think the heart of this scandal is Enron tried to be the biggest company to NEVER produce anything. I think it may be a precursor to what will happen as "the service industry" is forced by NAFTA, WTO, and other so called trade agreements to become bigger than the manufacturing industry...

The so called service industry is almost half the GDP and Enron (who never produced anything) was supposedly the 7th largest corporation in America.