The Enron case is way too important to be a scandal.
Most of the unsolicited opinions that have come my way this week agree: Enron isn't like the other scandals because it really matters to real people who lost real money. The essence of contemporary political scandal, whether sexy (Monica) or mind-numbing (Whitewater), is that it doesn't matter.
So to turn the Enron case into a scandal is to trivialize it. Hunting for political scandal, groping for the smoking-gun conflict of interest, the quid pro quo or the missing tape, saps energy and attention span away from the more important, more difficult and more boring mission of legislating and regulating to help prevent similar financial damage in the future. The politics, the influence peddling, are a diversionary sideshow in this case. Follow the big money.
Powerful forces are pushing Enron from the business section onto the front page. There are newspapers to peddle and commercials to sell. There are hearings to be held – hearings with TV cameras even. There is Democratic thirst for parity and revenge.
And there is, admittedly, the plain fact that Enron was an egregious and adept influence grubber. Its connections to President Bush, Vice President Cheney and House Majority Whip Tom Delay are extraordinary. That makes for a tempting and wholly legitimate target, but it's not the main target. It's an important and slimy story, but not the main story.
I realized just how fast the Washington scandal machinery could digest and trivialize the Enron case one morning this week when both The Washington Post and The New York Times ran humorous guides to the sandal.
The Times had a funny piece by a screenwriter trying to decide if she should commit to following the Enron story closely. The Post ran a guide to how to differentiate between an Incomprehensible Washington Scandal (Asian Fund-raising, Filegate, House Post Office, Savings and Loans) and a Simple Washington Scandal (Monica, Gennifer, Donna).
The thing is, newspapers don't run gag stories about people who have lost their retirement savings. Scandalizing Enron means sending it to the zone of "doesn't matter."
What matters is the apparent breakdown of every function in what passes for a system of "corporate accountability" in American business. In brief:
Boards of Directors: They have a fiduciary responsibility to watch out for the shareholders. Where were they? Enron board members had pay packages of more than $300,000 a year (for very part-time work); more than three times the norm even for the biggest companies. The lack of independence and real-time knowledge of boards of directors has been a long, loud complaint of shareholders groups.
Outside Auditors: The crash of this system is getting plenty of attention from the press and feds but, again, it's an old story. Sunbeam, Waste Management Inc., Rite Aid, MicroStrategy and Cendant are just a few of the companies that made headlines when they eventually got caught using the kinds of accounting "irregularities" that auditors are supposed to rat out, but didn't.
Enron's auditor was Arthur Andersen, which was also an Enron consultant, to the tune of $27 million in 2001. That's the kind of conflict of interest that needs to get unconflicted. The SEC is looking into it, they say. The chairman of the SEC, represented the Big 5 accounting firms when he was in private practice. (And get this: Sen. Jon Corzine, D-N.J., who once ran Goldman Sachs, thinks Pitt should step aside for "appearance's sake." Hey, Kettle, this is Pot – you're black!)
Bankers: Lenders tend to keep pretty close track of the businesses they back. Two of Enron's biggest creditors are Citigroup and J.P. Morgan Chase, companies that also earned tens of millions in investment banking fees from Enron. The conflict between lending or commercial banking and investment banking was what the Glass-Steagall Act of 1933 ended. But Congress repealed it in 1999. It's another conflict of interest to be examined.
Wall Street Analysts: Forget fiduciary responsibility, corporate accountability and full disclosure. What about the good, old-fashioned profit motive? Didn't the Wall Street analysts who follow Enron in order to make money for their firms smell some rats? If they did, they wouldn't tell you. In late October, when Enron's stock was in full plunge, 15 of the 17 analysts who tracked the stock had "strong buy" recommendations on it. These guys aren't dumbies, but they are boosters. Again, it's an old, if ignored story. Most analysts work for companies that want to do investment banking business with the very companies they are analyzing, companies that hate to get bad grades. Another systemic, long-standing conflict of interest.
Regulators: The idea that regulators could keep pace with a wily company like Enron as it was getting into trouble is probably fanciful. But one group that should have been better protected, and could have been better protected, was the Enron workers whose retirement accounts were holding Enron stock. And Enron was so politically greasy that any contact it could possibly have with government was and would be suspect. If companies couldn't give so much money to politicians, that particular set of conflicts could be avoided altogether.
Tackling the problems exemplified in the Enron case means that politicians and regulators would have to be willing to appear far more "anti-business" than they have been in many years, at least since before Ronald Reagan. But this is where politics and money most importantly meet – in responding to Enron. The long, wide flow of corporate capital, not just Enron's, into the political sysem is an immensely important factor in determining who our elected officials are and what they do. But it is not the sole factor. Public opinion matters as well. The Enron case seems to have scared people. At least for the moment.
E-mail your questions and comments to Against the Grain
Dick Meyer, a veteran political and investigative producer for CBS News, is the Editoral Director of CBSNews.com, based in Washington.
By Dick Meyer