The shameful lessons of Enron

Former Enron top executives Ken Lay and Jeffrey Skilling await sentencing Sept. 11 on assorted charges of fraud, conspiracy, lying to auditors and insider trading that, if the judge throws the book at them, could send them to prison for the rest of their lives.

Sixteen other former Enron executives have also been convicted in the collapse of the energy giant.

The social deep thinkers have been poking the remains of the company for lessons about capitalism, corporate governance, the culture of greed, the nexus of politics and corporate cash, all things worth meditating over, but the only things really special about the Enron fraud was its size and brazenness.

Enron’s financial dealings were cloaked in numbing complexity, hidden in off-the-books self dealing, and abetted by investors who suspended their own judgment and skepticism to believe in infinite profits. Any scam requires two parties: the con artist and the sucker.

But nothing about Enron’s business model repealed the laws of economics and the rules of common sense. Beneath all the corporate financial blather, the suckers were handing over cash based on thoroughly misplaced trust and the con artists were living high, wide and handsome on the take.

Enron executives complicit in the scam remorselessly defrauded their employees, their investors and the entire state of California. When the smoke cleared, $65 billion in shareholder book value, $2.1 billion in pension obligations and the best part of 20,000 jobs had disappeared.

The executives blamed short sellers, the uncertainty of 9/11 and a series of Wall Street Journal stories questioning the company’s earnings, but as the Journal observed after last week’s convictions, “companies with real assets and sound balance sheets don’t just go poof …”

If there is a lesson from Enron, it may be that corporate fraud, while not common, may not be all that uncommon. The Justice Department says, “To date, the efforts of the Corporate Fraud Task Force have resulted in 1,063 convictions, including the convictions of 167 corporate presidents and chief executive officers, and 36 chief financial officers.”

The fate of Lay and Skilling should be a warning to somebody.

(Contact Dale McFeatters at McFeattersD(at)