Panel Discussion: Enron: What Went Wrong?
2002; The MIT Press; Volume: 8; Linguagem: Inglês
ISSN
1532-303X
Autores Tópico(s)Business Law and Ethics
ResumoPROFESSOR KATSORIS: I would like to welcome you tonight. I would like to thank the firm of Becker Ross Stone DeStefano & Klein. As Jill1 mentioned, interestingly, last year, at the first DeStefano Lecture, we talked about the Securities and Exchange Commission's (SEC) Regulation on Fair Disclosure2 - disclosure that was sorely lacking at Al DeStefano graduated from Fordham Law School in the late 1940s and was an editor of its Law Review. I had the privilege of introducing Al last year and mentioned that, like many Fordham students in those days, he worked his way through law school, and I described some of the jobs that he had. One of his after-school jobs was to create and map out cartoon layouts for such nationally syndicated cartoon strips as Lulu, Woody Woodpecker, Andy Pandy, and Gangbusters. In effect, he was the Al Capp3 of Fordham Law School. At first, I found that amusing, that during the day Al was briefing cases for class, doing footnote assignments for the Law Review, and during the evening he was creating cartoon strips. Upon reflection, however, his role as a creator of cartoons was perfectly natural for Al. Cartoons, in three or four illustrations, tell us an entire story. They communicate a message in a clear and concise manner. That is what Al DeStefano has done all his life. With tongue in cheek, I suggested to the General Counsel of the SEC last year that perhaps in the future the SEC could follow Al's lead and encourage the insertion of cartoons in prospectuses and annual reports. Although my comments about cartoons were initially made in jest, perhaps they were not so silly after all. Just think if Al Capp had produced a cartoon strip called Little Enron. It would have presented a clearer picture to the average investor than all the footnotes and all the legal jargon in Enron's prospectuses and annual reports. Tonight's topic: Enron: What Went Wrong? The truth is, what did not go wrong? The employees of Enron lost their jobs, and in many instances their life savings. Billions and billions of dollars of losses were suffered by investors. A proud accounting firm is facing ruin, humiliation, and criminal charges to boot. The role of an old, established law firm is yet to be determined. The careers of hundreds of innocent professionals are being tainted and ruined. As if that were not enough, and perhaps worst of all, is the shaking of investor confidence in the integrity of our financial markets. Who is to blame for Enron? Clearly, the blame starts with its management, which can be classified, at best, as either grossly negligent, indifferent, greedy, deceitful, and, if you believe the Justice Department, downright criminal at times. You also have to blame Arthur Andersen, which largely signed off on much of Enron's conduct. The question to be answered is: To what extent did the conflicting business interests within Andersen taint that auditor's independence? But the buck does not stop there. For example, where were the watchdogs? The SEC is charged, under the Securities Acts,4 with matters financial. But whatever fault lies with the SEC for lack of oversight, it should not bear the blame alone. Legislators who received significant campaign contributions from Enron also have some explaining to do. Similarly, Congress, which over the years has unduly restricted the SEC's operating budget - severely curtailing its supervisory capabilities - must also share the blame. Analysts must also explain their glowing recommendations of Enron, right up until the end, despite the presence of many red flags. Indeed, one broker who expressed his apprehension was rewarded by unceremoniously being fired by his brokerage firm. Coincidentally, on that same day the broker was fired for badmouthing Enron, the Chairman of Enron was personally selling a significant number of shares while continuing to advise Enron's employees that the stock was undervalued. …
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