Houston Community News >> Enron Convictions

5/25/2006 HOUSTON (Chicago Tribune) - Enron. The very word encapsulates an era. It conjures images of too-cozy board rooms, all-powerful CEOs, compliant accountants, greed-struck employees and, ultimately, out-of-luck investors. And now, thanks to the convictions of former chief executives Ken Lay and Jeff Skilling, Enron finally can stand for something else. It stands for justice, thanks to the jury's unequivocal verdict.

The convictions also likely will embolden the sheriffs in town - federal prosecutors, the Securities and Exchange Commission, ambitious district attorneys and even a few private investors - to forge ahead in the challenging, ongoing effort to battle business corruption. Some argue that a guilty verdict was not needed to exact justice. A flurry of post-Enron reforms, highlighted by the Sarbanes-Oxley law, had done that, they say.

"Even if there had been an acquittal, that would have been ok," said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. "The changes that this case has brought are a victory in their own right." But Andrew Weissmann disagrees. Weissmann laid the investigative foundation for Thursday's verdict as head of the Justice Department's Enron Task Force. Before he stepped down nearly a year ago, he sifted through the grubby entrails of the corrupt Enron enterprise.

Weissmann also led the prosecution of Arthur Andersen. And since the Supreme Court threw out the Andersen guilty verdict because of the judge's flawed jury instruction, he has seen how a final verdict can muddle the public's perceptions of right and wrong. An acquittal would have changed the conversation. Inevitably, people would have focused us on the ways the prosecutors blew the trial, or that the government overreached, in much the same way that people now muse about Andersen's demise.

Apologists might even have emerged. Some might even have embraced the preposterous Skilling-Lay defense - that a cabal of journalists and short sellers doomed a complex but legitimate enterprise. "A huge part of the justice system is holding people accountable," Weissmann said Thursday. "In terms of the larger picture - what Enron meant to corporate America - this is a real sea change, a paradigm shift in the way corporations view their obligations to the public."

To appreciate how far the verdict takes us, first consider how far we've already come. In their hey days, Ken Lay and Jeff Skilling straddled the world. Lay was George W. Bush's "Kenny Boy," a source of civic pride to Houston, an architect of Dick Cheney's energy policy and a leading voice in corporate America. Skilling was slicked-back and whip-smart. He was the brain and the bustle behind Enron's transformation from a company that traded electricity to a new kind of corporate colossus that made billions trading just about anything. Had Lay and Skilling been acquitted, they might have become objects of pity, or at least puzzlement. Convicted, they become object lessons instead.

Any executive, anywhere, who might want to cut a corner or break a law, must keep Lay and Skilling in mind. And government enforcement officials, everywhere, should take note, too, and vow not to let things get quite so Enron-bad before they step in. The conviction is a signal that there's still plenty of work to do. For example: Hedge funds are powerful and mysterious, just as Ivan Boesky and Michael Milken were in their heyday. Prosecutions around the fringes of that industry are an encouraging sign that regulators are beginning to keep tabs on the derring-do of hedge funds, and are trying to sort out the legal from the illegal before a crisis occurs.

An acquittal for Lay and Skilling could have set vigilance back. It could have emboldened critics who say reforms such as Sarbanes-Oxley have gone too far. Acquittal might have encouraged the SEC, or the Justice Department, to ease up, to quit bringing criminal cases. If you can't convict on Enron, the argument might go, then you just can't convict. So when the Enron jury spoke on Lay and Skilling, they did more than call the former Enron executives guilty. They gave voice to the notion that the reform movement in corporate America still has plenty of room to run.

(c) 2006, Chicago Tribune