WASHINGTON, Feb. 27 (UPI) -- There were no white hats, no heroes at Enron. Like many "growth companies" of the 1990s, its ethical and corporate governance standards left a great deal to be desired. Nevertheless, from Tuesday's Senate grilling of former Enron CEO Jeffrey Skilling, a few truths began to emerge.
"Whistleblower" Sherron Watkins certainly wasn't a heroine. For one thing, she didn't blow any whistles: She didn't go to the SEC; she didn't even go to The New York Times, which would have welcomed with open arms in August 2001 a female whistleblower with dirt on a Texas company with connections to President Bush and Vice President Dick Cheney. She went only to Ken Lay, and there the matter rested while she continued to earn -- or at least receive -- her munificent Enron salary. With her holier-than-thou whining about "intimidation" by Skilling, she reminds one only of the sanctimoniousness of an ex-wife after an unpleasant divorce.
Enron Chairman Kenneth Lay certainly wasn't a hero. Lay is a typical '80s "borrow the money, buy everything in sight and worry about it afterward" operator and survived into the '90s only because he built his rickety empire on the solid base of two profitable U.S. gas pipelines. His lack of success in integrating his international operations was exceeded only by his lack of any kind of control over the executives who looted his domestic ones. His attempts to sway not only presidents, legislators of both parties and regulators but even the International Accounting Standards Board were common big business practice, but he clearly took it further than most. By pleading the Fifth Amendment, he indicated not necessarily that he had anything criminal to hide but only that he lacked the courage to face the inevitable congressional onslaught.
CFO Andrew Fastow certainly wasn't a hero. Fastow was the Enron executive responsible for what is still the only activity at Enron that clearly was on the face of it highly unethical and probably illegal -- the establishment of the separate asset-owning companies and the insider deals through them that enriched him and some of his cronies. In any case, chief financial officer of the largest bankruptcy in U.S. history is probably not going to be a real plus on his resume.
Rebecca Mark, the name almost unmentioned in most of the controversy, certainly wasn't a heroine; it can be claimed that she bore the largest single share in the disaster. As head of Enron's international operations, she invested billions of dollars in India in a power plant -- already declared hopelessly uneconomic by the World Bank -- to supply power to some of the poorest people in the world via an electric utility controlled by a Communist local government at prices far above the prevailing market rate. There was a reason why Enron, in spite of its trading successes, could never get its credit rating above a shaky BBB-plus, and Rebecca Mark's bizarre asset-spending spree was that reason.
Skilling, too, was not on balance a hero. He failed to supervise Fastow and Mark properly and he built a huge derivatives business in a company with a BBB credit rating, which as any professional in the derivatives market knows is a highly unstable creation. With such a poor credit rating, any financial hiccup or breath of scandal (such as the revelation of the Fastow side companies) was bound to cause a withdrawal of confidence by derivatives counterparties, that would quickly turn into a withdrawal of funds and a refusal to roll over contracts -- as Skilling himself said "a classic run on the bank."
All the top Enron executives were grossly and excessively paid -- but in that they were absolutely typical of the top executive class of the 1990s, and by no means among the worst of them. Remember, after all, that Cisco management took $8 billion in stock option value out of that company in 2000, in a year when the company made only $2.5 billion. In fact, when management withdrawal of value through stock options is factored in, Cisco, the icon of the tech sector, has made no net profit over the entire period of its existence. Even after the October 2001 accounting restatement, Enron still showed healthy profits in 1997-2000, even after executive stock option costs are netted out. Like Cisco, Enron made fixed asset investments that in retrospect were folly; its misfortune, unlike Cisco's, was its involvement in derivatives and the cash outflow tsunami.
Cisco's defenders will claim that Cisco was a technological innovator, but so was Enron. Enron's energy derivatives business was a pioneering operation, and its activities in that area, freeing up the energy markets both short and long term, will benefit energy consumers for decades after its demise. Skilling was the man who developed this business, and as such he deserves to be remembered as a major business pioneer, and not as a crook -- it was not after all Skilling but California Gov. Gray Davis who grossly betrayed his fiduciary duty to California taxpayers by wasting billions on high-cost fixed price energy contracts, just before the market was about to collapse.
For in the end, how much crime was really involved here? Of course, once congressional committees get involved, it may be that all the principals will be locked up for decades -- that's the way of American justice. But in reality, the only Enron-related activity that appears clearly to have potential for a criminal indictment on a level playing field was the establishment and concealment of the asset-holding companies -- and, of course the shredding of documents, primarily by Arthur Andersen, once a cover-up appeared necessary.
One is reminded of another congressional-fueled scandal in which there was much foolishness but very little actual criminal activity -- Iran-Contra. After huge amounts of congressional posturing and half a decade of expensive investigation, that scandal ended in the indictment of former Defense Secretary Casper Weinberger a week before the 1992 election, in order to ensure the victory of Bill Clinton.
Iran-Contra, of course, did have a hero, of sorts, in the public eye if not in reality, in National Security Council aide Oliver North, who staunchly defended his position to a congressional committee and achieved immense national popularity in some circles.
Maybe, in this respect, Enron, too, may now be finding a hero in Jeffrey Skilling. Far from pleading the Fifth Amendment and refusing to talk, as everybody had expected, he confronted his critics in Congress on Tuesday and announced that "Quite frankly, there is nothing I would think I would do different, given the facts I had at the time." Superbly, he reminded the senators that "the framers of the Bill of Rights are watching," and reminded them to conduct their witch-hunt with "common decency."
Whether this was the flailing of a doomed man or a magnificent rebuttal by a largely innocent and very able executive of a McCarthyite Senate committee, time and the reader's own prejudices will determine.
At least in terms of raw moral courage, however, Skilling, in the final analysis, became a hero Tuesday.
