Investigating Enron

Clear focus: Were laws and regulations broken? If not, are new ones needed?

January 11, 2002

THE BIGGEST bankruptcy in U.S. history calls for investigations of absolute clarity to see whether laws and regulations were broken, to ensure that remedies are undertaken and to learn whether gaps are exposed that new laws and regulations should cover.

Consolidation of several criminal investigations into a Justice Department task force investigating the collapse of Enron Corp. is welcome.

As there are several areas to investigate, fragmentation of inquiries by separate U.S. attorneys would put contradictory pressures on witnesses and evidence. Even the lead defense attorney finds his task made more doable by this consolidation.

Congress, with six investigations into Enron's collapse begun or scheduled, one by Sen. Paul S. Sarbanes' Senate Banking Committee, should follow suit.

Each of the committees has legitimate interests. But a joint committee that included all could proceed in an orderly fashion, offering more benefit to lawmakers, citizens, shareholders and employees.

Investigations by the U.S. Treasury into the company's retirement plans and by the Securities and Exchange Commission into its candor to the market undoubtedly must be separate.

The role of the company's accountant, Arthur Andersen LLP, opens up an entirely different area of inquiry in the national interest, about the adequacy of the accounting profession's performance and self-regulation.

Was Enron's freezing of its shares in employees' retirement plans, after top executives had profitably unloaded theirs, more than a moral outrage? What about the accuracy of its reporting to Wall Street? Are present safeguards on the integrity of this process adequate? The role of private partnerships that took company debt off the books needs a thorough airing.

The temptation of prosecutors to seek easy indictments, and of congressmen to engage in political grandstanding, is all too obvious. But the country deserves better.

The profile of Enron's chairman, Kenneth Lay, as a supporter of President Bush is high. While it is right to inquire whether improper influence eased regulation or enforcement, or attempted to, none has been shown.

Justice must seek redress for individuals wrongly injured. Government must figure out what was broken and fix it, to prevent the preventable in the future.

The United States is trying to show former Communist and Third World countries how to free markets and make capitalism create wealth and serve people in an environment of law and transparency. It had better start at home.

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