Enron & Politics

investmenttool.com Opinion

The Enron debacle has shown once again the smelly underside of the American campaign finance system. What Democrats wish it was it can not be. It is not a political scandal. It is a business scandal that requires political action.

For decades Congress has resisted changes in accounting rules. They did this because many politicians on both sides of the aisle received substantial campaign funding from thousands of executives in the field of accounting.

As a result of this, Enron got away with shady accounting practices that pushed the line on fraud. There is however little likelihood that anyone is going to jail over anything other than the destruction of evidence. The accounting practices were quite legal. Anderson realized they were close to the edge of the law but they could not have certified the audits if laws were actually broken.

What needs to happen is simple. The penalties for false and misleading forward looking statements needs to be stiffened. Enron executives knowingly lied about the companies prospects as the stock fell.

The United States Congress needs to mandate some clear, basic minimum standards with regards to financial reporting. The average investor needs to be able to rely on the earnings statement to understand how a company has actually done in the past three months.

If campaign finance reform passes, even the watered down McCain version, that is an ancillary side benefit.

Enron got away with what they did because government was not performing an essential function. The time has come for the government to step into that role in a meaningful way.

It is not time to create a series of complex accounting rules that act as an employment project for accountants.

It is not time to pursue a witch hunt against Enron or Arthur Anderson. It is time to realize that government does have a role and it should carefully fill it with the minimum amount of damage to legitimate business.

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Shmuel Protter
investmenttool.com

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