Yesterday, a hometown jury in Houston, Texas, found Enron’s masters of the universe—Ken Lay and Jeffrey Skilling—guilty of fraud, conspiracy and insider trading. They’re headed from the boardroom to the prison cell. The verdict stands not only as a judgment on them, but on the Enron conservatism that set the stage for their crimes.
Lay and Skilling’s defense was that they didn’t do anything wrong. They didn’t know about the internal corruptions. And the financial dealings—the cooking of the books—was simply a normal business practice in the new go-go economy.
They are right about that. Enron, at its height the seventh largest company in the US, was celebrated as the model corporation of the new global information economy. It scorned the old ways of doing business—owning pipelines, pumping gas. It did deals, created markets, bought and sold across the globe. Skilling was hailed as the paragon of the modern manager.
And what they did—cooking the books, plundering the company, misleading employees and investors—was too often business as usual. It wasn’t just Lay and Skilling, it was Ebbers, Koslowski, Rigas, Arthur Andersen, Martha Stewart. Five years after the Bush administration reluctantly set up its corporate fraud tax force, there have been 1,063 convictions, including 167 corporate presidents and CEOs and 36 chief financial officers. Literally thousands of companies have “restated” their profits in the wake of new laws that hold executives responsible for the accuracy of their reporting. As Steve Pearlstein of The Washington Post writes , “there aren’t enough jail cells in Christendom to hold all the corporate executives who engaged in 'earnings management' during the late 1990s.”
It was business as usual and it was also illegal and immoral. The jury that found Lay and Skilling guilty was an all-American jury—an elementary school principal, a school teacher, a payroll manager, a small business owner, a human resources manager, two engineers. They liked the defense attorneys. They were cautious about holding the government to its case. But in the end, they applied basic American common sense and morality to the actions of Lay and Skilling.
How could they say they didn’t know, Freddy Delgado, the elementary school teacher wanted to know. Parents hold me responsible for the safety of their children. “I am responsible if a child gets lost. To say that you didn’t know what was going on in your company is not the right thing.”
We’re accountable, said Carolyn Kuchera, a payroll manager. Those with full-time jobs did them at night “when we were so tired we hardly knew who we were. We were responsible… And I think those (Enron) employees were entitled to the same thing.”
They were outraged that Lay was selling his Enron stock while assuring employees the company was in great shape. That was a question of “the character of the person,” said Delgado. “I thought it was an absolute disgrace,” said another juror.
The right thing. Accountability. Responsibility. Basic character. The jurors did not let the charming defense attorney nor the complexity of the case distort their common sense of decency.
The question is whether that judgment on Enron’s piranhas will ever be applied to the Enron conservatives that created the conditions for their crimes. It is worth remembering the “cult of the CEO” touted by conservatives over the last decades. Free them from government regulation, curb trial lawyers, break labor unions, give them financial incentives to make profits, and they will generate growth, jobs, innovation, profits. So the Gingrich Congress—with lots of help from New Democrats—passed laws insulating executives, accountants and lawyers from accountability while making civil suits by small investors more difficult. Short-term stock options were protected in law, and allowed to be carried essentially off the books.
CEOs got a multimillion dollar incentive to cook the books, to plunder their companies in order to meet short term profit goals—“earnings management” was the euphemism. Too few resisted the temptation.
Lay and Skilling may go to jail, but Enron conservatives still rule in Washington. They still protect short-term stock options. They still seek to insulate executives from civil liability. They still drive deregulation and celebrate an economy in which CEO salaries are soaring, while wages are stagnant and Americans are spending more than they earn. They still dismiss the corporate crimes as a problem of a few bad apples. The good jurors in Houston did their civic duty in the courtroom. Now the question is whether the rest of us will have the same good sense when it comes to holding our own leaders accountable for the crimes and destruction that they have abetted.
