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Enron and its overseers have left ethics in shreds

Sunday, February 03, 2002

As recently as October, two months before it hit bankruptcy and spilled into the stagnant economy all the toxic elements of a corporate scandal for the ages, Enron's ethics office apparently sent perky memos to other companies reminding them of the responsibility to uphold their ethics codes

No, there is no punch line.

Brad Agle, director of the Berg Center for Ethics and Leadership at Pitt's Katz Graduate School of Business, was in Washington, D.C., when he heard this one.

"This was two weeks ago," he said. "I'm a senior fellow at the Ethics Research Center there. There's a fellows program made up of top corporate ethics officers and a few academics. We get together twice a year to talk about things. One of the ethics officers, when we were talking about Enron, said, 'Yeah, we got a letter from them in October,' and one of the interesting parts is that Enron actually deliberately suspended its own code of ethics on two occasions. One of the company's top financial officers was also president of one of their partnership companies, which is a huge conflict of interest. Enron's code of ethics recognizes that, but the board of directors suspended its own code of ethics to allow it."

Less than four months later, the notion of Enron reaching out to corporate colleagues with an ethics pep talk is like a stripper enforcing the dress code.

As the layers are slowly peeled from the reeking Enron onion, the felled energy giant's bedrock arrogance rattles everyone with a clear view.

James Greenwood, the Pennsylvania Republican heading one of 11 congressional panels investigating Enron, said at midweek, when Enron acknowledged shredding documents until mid-January, "It is stunning to me that this company, which is being investigated by Congress, by the Justice Department, by the SEC, would get anywhere near a shredder. ... They are either incredibly arrogant and out of control, or somebody's incredibly stupid."

I'll take A and B, but not C. The accounting, auditing, psychedelic tax law interpretation, and diversification gymnastics that went into Enron's utter ethical implosion are closer to diabolical genius than to incredible stupidity.

"I was just telling our doctoral students that, for this field of study, this is a seminal event, probably the biggest case of our lifetimes," said Agle. "Part of the reason this story is going to have such legs is that it's not one group that looks bad. Every group in this looks bad, right down the line. Board of directors. Lookin' bad. Enron executives. Lookin' bad. Accountants. Lookin' bad. Stock analysts. Lookin' bad. SEC. Lookin' bad. Accounting standards board. Lookin' bad.

"People are saying, 'Wait a minute, the people who are supposed to be policing this stuff can't police themselves.'"

It can't be even curious, then, that stocks nose-dived Tuesday on fears that the financial police are eminently, even enthusiastically, corruptible.

"There have been a greater number of accounting 'restatements' in the last two or three years than in the 10 years before that," Agle said. "What that says is that accountants aren't getting it right, and that auditors who are supposed to be catching it are not catching it. It certainly makes me uneasy."

What makes me uneasy is that Vice President Dick Cheney's energy policy task force met with Enron executives five times last spring and won't even tell Congress what was discussed. The House's reliable GOP junkyard dogs support that obstruction.

It's funny how when Hillary Clinton moved to hide documents relevant to a smelly situation in the White House travel office, those same dogs howled until Democrats supporting Ms. Clinton backed down, and the files were opened. Now they stand on some dubious principle in a case where corporate criminals likely swayed global energy policy, which makes Travelgate look like a rigged bingo game.

President Bush recently announced that the families of victims of the Sept. 11 attacks would not have to pay income taxes this year or next. If those families could just be free of tax liability for an additional two years in the following three, they'd have gotten the same deal as Enron.

"These are not new issues," said Agle. "We've been discussing them in the field for years, but until you get an Enron, you don't get an urgency on the part of the public."

So thanks, Enron, for that deafening arrogance.

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