The Enron affair is a great deal more than the largest corporate bankruptcy in US history. The collapse of the energy company, with debts in excess of $15 billion, is likely to open up at least two cans of worms, each potentially extremely damaging for those affected.
The first can concerns Enron’s relationship with the White House of George W. Bush. Enron chairman Kenneth Lay is a longstanding friend of the president and his company contributed heavily to the Bush presidential election campaign. It is becoming clear that as Enron headed toward the financial rocks, its management did all it could to call in favors from the Bush administration in an attempt to have it lean on Enron’s increasingly skeptical banks.
In particular, heavy pressure was placed upon the US Treasury to intervene and assure Enron’s bankers that it was desirable that further credit be advanced to the cash-strapped company. It seems, for the moment, that despite attempts by a number of senior political figures, including former Treasury Secretary Robert Rubin, the US Treasury refused to help out. The Washington rumor mill is, however, speculating that other powerful individuals made separate attempts to persuade Enron’s banks to cut the company some financial slack. Who these people were and what shape their interventions took has yet to be revealed.
And that brings us to the second can of worms. One of the world’s top accountancy firms, Arthur Andersen, had not only signed off Enron’s latest accounts as being a fair reflection of the true state of the business’ financial position, but had also given virtually no warning of the problems that finally emerged at the core of Enron’s operations. Were this mere incompetence on the part of a firm with a global reputation to protect, it would be bad enough. However, Andersen has now admitted that "a significant but undetermined" number of documents relating to Enron have been destroyed by some of the accountant’s own employees. Whether this was merely overenthusiastic housekeeping or an attempt by any Andersen staffers to cover up wrongdoing has yet to be determined.
It seems increasingly likely that criminal charges will be brought, certainly against senior Enron managers who are alleged to have sold out their shares in advance of the collapse, which saw the value, once $80, tumble to just 67 cents before dealings were suspended last week. The investigative net, however, may widen to include some of the company’s advisers and consultants and could even perhaps include senior political figures. What makes it certain that the Enron affair is not going to be swept under the carpet is that US shareholders have lost big time on the company. Worse than that, Enron’s 20,000 employees’ had invested heavily in their own company for their own pensions. Now they have lost their jobs and much of their financial security in old age as well. It appears that, before the collapse, when top management were already bailing out and cashing in their shares and options, the company had barred ordinary employees from selling their shares.
In virtually every respect, the Enron affair appears to represent the unacceptable face of US capitalism.
