There is a typical discussion going on in my About the Enron Blog section. It is a dynamic I have seen dozens of times during the past ten years. Basically, it goes this way:
A person with an accounting background has suddenly discovered the old Enron financial statements. Using a limited set of documents, he has declared that he is absolutely convinced that there was accounting wrongdoing at Enron. Based on this limited analysis, he decides to not question anything else about the various Enron trials, but to focus entirely on a few accounting transactions. He also states that it is my job (or the defendants’ job) to prove that the accounting transactions were not based on intent to commit criminal wrongdoing.
I haven’t responded much because I have seen this argument played and replayed so many times that I find it boring. But, once again, let’s run through some basics:
1. Good for the accountant for looking at some accounting documents. But he has discovered nothing new. All his alleged issues (and more) were litigated at the various trials. The accounting issues were largely ineffective for the prosecutors. Witnesses and accounting experts failed to convince the jury that there was anything wrong with the transactions. Even where the Feds won convictions (Skilling), it was not accounting wrongdoing that got the convictions, according to the words of the jurors themselves. No, this does not absolutely mean that there was no accounting wrongdoing, but it does mean that the Feds could not prove it to the jurors.
2. Looking at one side of the issue is self-deception. If we could convict a person without examining their evidence, there would be no need for a trial.
3. I am sorry it is so difficult and relatively expensive to get trial transcripts. But if you are serious about understanding the Enron trials, they are indispensable. Looking at the full trial and how the Feds attempted to use the accounting transactions is much more revealing than basing your entire analysis on a few documents.
4. I saw one comment in which the accounting guy justified his view by declaring that textbooks teach Enron as an example of corporate greed and corruption. I wonder if his point is that the textbooks couldn’t be wrong?! Even if you assume that the two convictions that the Feds actually managed to get at trial were legitimate, they utterly failed at dozens more. If the Feds falsely accuse a few dozen people in order to attain two convictions, that strikes me as a textbook example of (at least) Federal over-reach. I am amazed that people are satisfied with this behavior by the Feds.
5. Finally, I suspect that the accountant is missing the forest by looking at a few trees. Let’s assume that the few accounting transactions that the accountant is focused on were actually the result of intentional wrongdoing. Even in that circumstance, they would historically rise only to the level of a civil complaint against Enron, not criminal indictments against dozens of individuals. The accountant’s analysis ends just where the real work begins. If there was wrongdoing, who is responsible? Based on the transactions the accountant has questioned, I see at most 4 or 5 counts against a couple people. The accountant is ignoring the huge question of how do you go from a few accounting transactions to hundreds of counts of criminal wrongdoing against dozens of people?! That’s the kind of bigger question that is being totally ignored in the obsession with a limited set of accounting transactions.
I am not sure how to respond to people like the accountant. On the one hand, I like that he has taken the time to look at a few documents. On the other hand, I am frustrated that he is satisfied to stop at that point. His position seems to be that somebody is guilty of criminal wrongdoing because of certain accounting issues, but he refuses to try to definitively link the wrongdoing to an actual person, and he refuses to examine the actual cases to see how the evidence he so loves actually stood up at trial.
And the accountant wants me to argue with him on my blog and spoon feed him information. I used to do those things, but my standards are higher now. I want to talk with people who actually have cared enough about justice to go out and dig through both sides of the issue.
By the way, based on what I am hearing, academia is ** finally ** starting to actually examine the Enron cases with growing skepticism. A new generation, less steeped in the Enron Myth, is starting to wonder what actually took place. It will be interesting to see what emerges from this new analysis.