In lies we trust
The bad news for former Enron execs just keeps coming, doesn’t it? Reuters reported yesterday that “Former Enron chief accounting officer Richard Causey was sentenced to five and one-half years in prison for approving the bogus bookkeeping that led to the company’s 2001 collapse.”
“Causey, 46, the last of the top-tier Enron executives to be sentenced, pleaded guilty to securities fraud in December 2005, weeks before he was scheduled to go on trial with former Enron chief executives Ken Lay and Jeff Skilling, both of whom were found guilty in May. Lay died of a heart attack July 5.”
“Improper things were done at Enron,” Causey told U.S. District Judge Sim Lake at his sentencing hearing. “Some things were done by me and for that I am profoundly sorry.”
(Of course the ex-CEO of Enron, Jeffrey Skilling, continues to deny that anything improper occurred, and it was unfair reporting on Enron that caused their stock to plummet and their business to fail.)
Apparently the entire executive team was involved in the massive fraud, which is amazing to me; and their now-defunct independent auditors (Andersen Consulting) were either complicit or profoundly ignorant: either scenario is frightening.
Despite all the new rules of Sarbanes-Oxley, all the accounting oversight by auditors, the reporting that publicly-traded companies must do, I must admit I wonder if it really matters. Because at the most basic level, the financial world is really based on trust, isn’t it?
If you take out a car loan, the bank or car dealer is trusting you to pay it back. Sure they check your credit rating, they can take you to court if you don’t pay up, but in reality there are lots of ways to wriggle out of debts. If you buy stock in a company, or a government bond, you are trusting them, too, to keep to the agreements you’ve made. Whatever might be written on paper, really it just boils down to trust that each party will be honest and keep their word.
When an entire executive leadership team just agrees to lie, cheat and steal, can you really stop them? Sure, Enron eventually failed, but not before thousands of people lost their jobs, and even worse in many cases–their lifetime savings for retirement, tied up in Enron stock.
Even six years later I’m stunned and dismayed. Investing is risky enough (and like most of us, I’m a novice) but if your fundamental trust is shaken, it really is tempting to stick your savings under the mattress, isn’t it?
The Reuters article concluded “Causey will begin his prison sentence after the U.S. Bureau of Prisons determines where he will be housed. He left the courthouse with his wife and three teen-age children without commenting to reporters.”
Well what is there to say, really?
If your fundamental trust is really shaken you wouldn’t even use paper money. Stop and think about it. How much of our daily life in a media market culture requires a kind of deference to and trust in all sorts of things from the accuracy of journalism to the accurate portrayal of statistical significance. Enron’s the tip of the iceberg and an easy fall guy but the trust issues you’re worried about go more than skin deep.