Muncie Times, Muncie, Delaware County, 7 March 2002 — Page 27

The Muncie Times, March 7, 2002, page 27

WITNESS FOR JUSTICE

Enron scandal optimizes amoral, unbridled corporate greed

This is one business that can’t blame its demise on Sept. 11. No, the spectacular flame out of Enron was caused by its leaders, who managed to pull the wool over the eyes of seemingly all-too-agreeable accountants, as well as financial analysts, most of the media and millions of I stockholders. U ’ It was caused by a board of directors which did not do its job, by an ^accounting firm which ; seems to have been too concerned about losing consulting business and which had multiple people ties with the company which audited. It seems to have been caused by failures in regulations and by credit card rating companies which missed the iproblems. And, yes, ^probably the largest bankruptcy in American history was caused by our failure as a nation to deal with corporate political contributions. The term “unbridled ^corporate greed” has j become one of this cliche terms which I dom't like to use. But in Enronis case, there's really no other term which fits quite right. What else can describe a company which managed to not only pay no federal income taxes in 4 of the past 5 years, but received a tax refund of $278 million in 2000. That was at the same time that it reported profits that made it one •of the highest performers on Wall Street and seventh on the Fortune 500 list. What else can you use to describe a company where the top

leaders were advising the employees to continue to invest their retirement funds in stock, at the same time that the executives were selling millions of dollars of their own stocks and when they knew that the elaborated scheme, which held the smoke-and-mirrors rosy Enron financial picture all together was quickly unraveling. Not only did thousands of Enron employees lose their jobs and all their retirement funds but s, too, did many subsidiary company employees, such as those at Pacific General Electric in Oregon. Many of these loyal workers will have to sell their homes and family farms while former Enron CEO Ken Lay’s real estate broker is quoted as saying that Lay plans to sell two homes and a building in Aspen for $16 million, but will keep his principal ski residence there. Maybe Ken Lay should be awarded this new centuryis Medicine Man Award. You probably remember the medicine man from the turn of the last century, who went from town to town selling medicine which was really just colored and flavored water. They sold this water by the dint of their own personality and their ability to sway normally practical people. Their fast-talking ways mesmerized many small town Americans into buying their products. But all those people lost were the cost of the bottle of colored

water. Ken Lay and Enron may be our modern day versions of this. But Ken Lay and Enron corporate executives weren’t the only ones at fault inside the company. Corporate boards of directors have a fiduciary responsibility to protect stockholders and American public. But in Enron’s case its directors, who were paid $300,000 a year and included such political heavyweights as Wendy Gramm, wife of Texas U.S. Sen. Phil Gramm, seem not to have asked the right questions or to have studied the reports given to them. Indeed, more than the employees and stockholders were mesmerized by Ken Lay and Enron leaders. So, too, were financial analysts, many of whom were advising the public to invest in Enron stock, only weeks before it filled for bankruptcy. It seems they must have been swayed by financial incentives or the smooth-talking Lay or that they just didn’t do their homework. Similarly very few media business writers picked up on Enron’s imminent demise. Then there is Authur Andersen, Enron’s Auditor. Clearly, it fialed in its duty to raise questions about Enronis financial practices, including its use of some 900 subsidiaries located in tax havens. Moreover, Andersen had a lucrative consulting deal with Enron and Enron turned over to Andersen some of its internal bookkeeping, blurring a

Bernice Powell Jackson

fundamental division of responsibilities which helps assure honesty. And then there was the apparent shredding of documents by Andersen and Enron, which raises all kinds of questions. At least seven congressional committees are holding hearing on the Enron debacle. But Congress must also take some responsibility for failures and loopholes in regulations, which allowed some of this to happen. No one can know how much influence the nearly $6 million given by Enron to both political parties, since 1989. has really had. Some $623,000 has been give to President George W. Bush's campaigns since 1993. but we are unlikely to know how much influence Enron had on the Bush administration's energy policy, although early indications are that Enron's pleas to several Bush administration officials for help in the final weeks were not answered. When airplanes crash, it is said that there is usually not one failure of systems and human error, but several at the same time. Perhaps that

can be said of the Enron crash as well. What is clear is that we are only seeing the tip of the iceberg, as hundreds of millions, perhaps billions of dollars, have been lost not only by individual retirement funds, but also by large pension funds and by man state authorities, which invest in the stock market. Maybe this will be a wake-up call for us all. Maybe we will pass finance reform laws. Maybe we will make changes in laws which govern individual retirement funds and do some reassessing of the move to individualize Social Security accounts. Maybe we will look closer at tax cuts, which allow some of the nation's largest corporations not to pay any taxes at all. • Or maybe we’ll just buy that, bottle of colored water and think that we’re feeling better. Bernice Powell Jackson is executive minister of the United Church of Christ's Justice and Witness Ministries. She can be reached at 700 prospect Ave., Cleveland, OH 44115-1100, phone: 216-730-3700 or fax 216-736-3703.