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The Problem With Punishing Enron

If we punish Enron's corporate leaders -- the brilliant think tank that created $100 billion of value for their shareholders -- we'll merely be punishing ourselves for decades to come.

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In Defense of Enron

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By Beth Elkind
April 1, 2006

It's human nature to take pleasure in the pain of scoundrels. We're heartened that Martha Stewart serves jail time for insider trading. No tears are shed when Alan Rickman falls off that building at the end of Die Hard.

We all rejoice when frauds and rascals are made to pay for their foul deeds.

So when the international media serves up a single seemingly evil defendant -- Enron's executive team -- it's hard for any of us to withhold judgment. They must be guilty. But if we assume Enron to be flat-out guilty, we're wrong -- and we'll suffer the consequences for decades to come. Here's why:

1. Employees will be denied access to amazing financial upside.
A remarkable amount of press ink was given over to the stories of Enron employees that saw their nest eggs obliterated because they invested it in company stock. But what about the thousands of Enron employees who bought and sold shares actively during their tenure, enjoying the stock's dramatic rise for more than a decade and making millions in their retirement accounts?

Punishing Enron's corporate leaders for trying to do what was right (build a great business for the long run) sends the message to employees that investing most or all of their retirement savings into their company stock is bad. It dissuades them from becoming owners -- or active traders -- in their futures. It denies them the opportunity (cut short by government interference) that Enron employees had to ride and profit from an inevitable run-up.

In short, all of us (not just employees) lose when inside ownership of great companies like Enron is held up as a (false) cautionary tale.

2. Whistleblowers will be undeservedly canonized and cast in a flattering light.
The media love to make heroes out of whistleblowers. More often than not, whistleblowers are more interested in their own celebrity than in making the world a better place.

Case in point: Erin Brockovich was a nobody until Hollywood made a movie about her and cast Julia Roberts to play the lead. That guy Russell Crowe played in the movie The Insider looks nothing like the actor in real life. Most whistleblowers don't give a damn about you or me; they just want to be made to look hot on the big screen.

Watkins: Illegally Blonde.

Is Sherron Watkins any different? Is she dedicated to helping this great country move forward? Or is she more interested in luring Reese Witherspoon to play her part -- a part that requires nothing more than a dramatization of sending a shrill (unsubstantiated) memo? (Who do you think should play Sherron Watkins? Vote here.) It's time we call most whistleblowers by their real name: opportunists. (Click here for more about Sherron Watkins' charade.)

3. Small investors will continue to be locked out of the black box of real-world corporate accounting practices.
Not a single "journalist" who has written about Enron understands the company's accounting principles. Not one has bothered to find and profile financial analysts familiar with the FASB Accounting Rule 346(a-7.2).

In short, Rule 346(a-7.2) stipulates that corporate financial officers may judiciously use rounding in calculating any expenditures associated with off-balance sheet entities. It's an accepted accounting practice -- one that should exonerate Enron executives of all charges. Analyst Bill Mann goes into detail about this everyday rule that everyone overlooked in this expose.

A final call to action
It may be challenging for Americans to change the way you think about Enron. But change you must. Email us at EnronClassAction@fool.com to tell us if you are ready to change.

Together, we must force the federal government to come clean and to clear the names of some of this country's visionary contemporary leaders. Here's how:

Provide testimony: If you have been a victim of this malicious prosecution -- if you were an Enron shareholder or ever considered buying Enron shares or know someone who did -- fill out a Plaintiff Certification form, which will guarantee you a pro rata share of the recovery (up to $500,000).

Show solidarity: And to show your support of Ken Lay, join us in the Million Ken March. Here's how.

Next: The Death of Innovation