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Guest Commentary January 23, 2002
The Lessons of Enron
The Honorable Jon Kyl
Anger and disgust are what all of us should feel about the conduct of Enron executives. For those who may not have followed this story closely, Enron was a once-mighty financial giant that collapsed into bankruptcy, taking with it the life savings of thousands of its employees whose pensions were heavily invested in the company. Meanwhile, Enron executives sold their stock, cooked the books, and barred employees from selling any of their own stock while the company was going down the tubes.
So far there is no evidence implicating the White House or any members of President Bush's cabinet in inappropriate behavior on Enron's behalf. In fact, those seeking to attack the current administration based on mere association with Enron should tread carefully. As the Washington Times recently reported, President Clinton, his Cabinet, and Vice President Gore appeared to be very active on behalf of Enron officials.
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Enron's collapse also severely tarnishes the reputation of the once-respected accounting firm, Arthur Andersen, and warns other companies against conflicts of interest. By acting as an accounting firm as well as a business consultant to Enron, Arthur Andersen might have compromised its auditing responsibilities. It also appears that Andersen officials destroyed documents, helping Enron executives mask the severity of the company's financial problems.
To examine this appalling behavior, I wholeheartedly support the investigations underway by the Securities and Exchange Commission and the Labor and Justice Departments to determine what civil and criminal penalties may be applicable. Congress also has a legitimate role (though whether it can resist the temptation to play politics is another matter.)
What Congress should do is hold hearings that focus on what changes in the law may be required to protect investors and employees. What Congress must avoid is the temptation to launch political witchhunts. Republicans and Democrats alike received enormous sums of campaign contributions from Enron. That fact alone is neither unusual nor sinister -- and should not be used as an excuse to attack either the Bush administration or prominent Democrats. Public servants on occasion receive contributions from groups and individuals who later turn out to be scoundrels. In fact, I received $500 from Enron in my last campaign, and $1,000 when I first campaigned for the U.S. Senate in 1994.
The more pressing concern should be for those whose financial futures are now at risk. President Bush spoke for many of us when he expressed his concern for Enron employees who lost their life savings due to Enron's bankruptcy, and I strongly support his calls for changes in pension laws to help employees at other struggling companies.
As the President said, employees and their families should not be forced to invest so heavily in one company -- becoming in effect hostages to its financial future -- and then barred from selling their stock while the company teeters toward collapse. Congress should move toward reforms that will allow workers to better diversify their holdings, so they are not too dependent on the success or failure of one corporation. We should also investigate the rationale, if any, for rules that permit employers to bar their employees from selling stock while they themselves are allowed to do so.
These reforms, in fact, may be the only good things that come from the Enron mess.
Jon Kyl is a U.S. Senator (R-Arizona) and writes a weekly column; the above has been adapted from his January 18, 2002 column. To contact him, Click Here.
The above column has been distributed by PoliticsOL.com.
