Sunday, June 04, 2006

Enron Follow up


A little more detail supporting my Enron argument from a few days ago:

The NY Times has an interesting story today co-written by Kurt Eichenwald, the author of the great Enron book Conspiracy of Fools.

The article traces the difficult task of finding something to charge Ken Lay with over the course of the investigation.

The public widely perceived the criminal case against Mr. Lay to have been a "can't lose" proposition, similar to the parallel case assembled against Enron's former chief executive, Jeffrey K. Skilling. But the legal hurdles on the path to Mr. Lay's conviction were so daunting that some prosecutors privately worried that they would never even be able to charge Mr. Lay with any crimes.


I think a lot of people assumed that Lay's conviction and probable sentence of life in prison was a result of the jury finding some mastermind, puppeteer sort of role for him in the whole debacle. Nothing could be furthur from the truth.

"There was this public perception of Ken Lay as the mastermind, but that really didn't bear out," said Leslie R. Caldwell, who headed the task force in its first two years. "We realized very fully early on that Lay was not involved in the decision-making day to day.
What he was ultimately convicted of was telling everyone that Enron was back on track when he should have known it wasn't. The strongest testimony against him was from Ben Glisson - a guy who was actually involved in the illegal dealings and had made money from them.

I have trouble believing that a company could plunder California's energy system and feel good about itself - I have trouble believing that executives could hide all their debt quarter after quarter and steal from the company.

I don't however, have trouble believing that an out of touch CEO who felt his company crumbling around him could give some speeches saying that the worst is behind us, and we can get through this together, and be stronger for it... etc, etc, etc. I mean the guy was desperately trying to sell the company or merge the company or do anything to save the company up until the day they filed for bankruptcy.

He was also convicted of bank fraud - because he used loans from the company to buy more stock on the margin than he should have. That's a real crime, no doubt about it, but it's more of a technicality than a hideous abuse of power. It's not that he did something he shouldn't have, it's that he did more of something than he should have. And it didn't violate the law, it violated the terms of his loan.



Whether or not you believe that Ken Lay deserves to be punished for Enron's crimes, I don't see how either of the things he was actually convicted of should land someone in jail for 40 years.

Maybe he deserves to be punished because the company he created did so much damage. But our justice system shouldn't be about making decisions like that.

Justice without passion says this is a bullshit conviction.

3 Comments:

Blogger Howard Lindzon said...

Tough call.

I say way guilty of being in the wrong place at the wrong time and no one survives those things. It is random.

The bigger issue is the ones that sold out - not just fastow or skilling, but Merrill and Goldman who kept piling on and doing "due diligence" and selling crap to institutions and individulas.

That system has only gotten worse and China is their coup of all times coming soon.

It will make Enron look like a tiny speck.


Like Martha, he should have cut a deal - fast. he got bad advice or is delusional.

1:25 AM  
Blogger Adam Elend said...

Now you're right there. The financial institutions and the system that allowed Andersen to consult and audit simultaneously - they are absolutely to blame.

7:09 AM  
Blogger Adam Elend said...

And whether or not it's China, I do subscribe to the belief that the next Enron will be a global disaster, and that it will affect millions of Americans who's 401k money is tied up in mutual funds that are right now gambling dangerously on global markets.

7:12 AM  

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