As we all know, the criminal trial of two former top executives of Enron is taking place in Houston, Texas. The trial appears, based on media accounts, to be progressing at a fairly rapid pace. The company is the symbol of corporate greed and wrongdoing and triggered one of the costliness U.S. bankruptcy reorganizations ever. The legacy of Enron is one that Corporate America will have to live with for years to come. The two men most responsible for this very sad and tragic episode are Ken Lay and Jeff Skilling. If anybody believes they didn’t know what was going on at Enron, that person needs to be bored for the “hollow-horn,” and most Texans won’t need an explanation for that term. No corporation could be as corrupt as was Enron and the big bosses not know all about it.
In my opinion, the unprecedented crackdown on corporate crime by federal prosecutors and regulators would never have occurred had it not been for the Enron scandal and all of its repercussions. The scandals brought about the congressional passage in 2002 of the Sarbanes-Oxley Act, which as you know is the most sweeping anti-fraud legislation to ever come through Congress, and that was a good start. But, I must admit that the criminal trial of Lay and Skilling is something that I never thought would come to pass because of their political connections. I am glad I was wrong. This brings to a climax much of the very sad Enron saga. The roles of these two men in the massive fraud that became public in 2001 and that will go down in history as one of the worst corporate scandals ever was quite apparent. The hurt done by Enron’s bosses will never be fully repaid to their victims. Enron’s impact will be felt for years in a number of ways. Some of those are:
• Lawsuits. Investors suffered $50 billion in total losses. There have been some settlements, such as the $7.1 billion settlement with Citigroup, JPMorgan Chase, and CIBC by investors headed up by The University of California, the lead plaintiff. Some 20,000 former employees and retirees in Enron’s pension and 401K retirement plans that held Enron’s stocks suffered over $1 billion in losses. There was a settlement totaling $482 million with Arthur Anderson and Enron on behalf of former employees.
• The regulatory and corporate-governance arena. Congress took action that was long overdue as a result of the scandal by passing Sarbanes-Oxley. I hope federal regulation will be much better in the years to come.
• The corporate world. Corporate America is now fussing about having to do what it should have done voluntarily. That is, it should have been truthful in its financial statements and in its dealing with shareholders and investors. The America people are entitled to trust and have faith in our economic system. When you cannot trust Corporate America, there can be no such trust or faith.
• The energy-trading business. Since Enron, dozens of industry traders have been charged with fraud, and many firms have done away with their trading units. The industry saw $90 billion in debt reduced to “junk” status. The Federal Energy Regulatory Commission (FERC) has issued rules that I hope will make sure the Enron type scandal never occurs again. But, some believe that FERC rules and state laws must be made even stronger to stamp out fraudulent energy trading in the future.
I believe that if justice is done, Lay and Skilling will be convicted in their trial. To allow these men to escape criminal punishment is unthinkable. They deserve a fair trial, and based on what I have seen thus far, I am convinced these former high-rollers are getting just that. I hope, the jury will do their job – and if the law and evidence supports it, find these two guilty as charged.
Source: USA Today and Associated Press
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