TENAFLY, N.J. – Score one for the good guys.
You knew the defense was stretching when it blamed the press and short-sellers for Enron's problems. Don't get me started on that, but the trend in corporate America to blame the messengers, as an attempt to divert attention from reality, is the ultimate sign that something bad happened.
The only surprise was that such a strong team of defense lawyers would resort to such a ridiculous allegation.
As Yale professor Owen Lamont told Fortune magazine not long ago, "The short-sellers didn't cause the accounting problems. The accounting problems caused the short-sellers."
The first to sound the siren was Jim Chanos of Kynikos Associates, who has a knack for untangling complicated situations.
He actually mentioned to me these odd off-balance-sheet entities at Enron long before they had shown up in the press. Truth be told: I was too busy to give the story the focus it required. (Such is life.) By the time I got back to him, after trying to understand the issues, he was talking to another reporter.
The rest is history, but the very reason I didn't have time — the complexity of the situation — was the first sign something was terribly wrong.
I have this rule: The harder something is to understand, the more likely something isn't right. (That's often the reason it's so complicated.)
I have this other rule: The more arrogant the management, the more likely they are to push the legal limits. On that score, nobody was as arrogant as Skilling, who publicly admonished analysts who got too nosey. (Never a good sign.)
At the peak, Skilling seemed to believe he was above it all, which gets me to yet another rule: Always beware of executives who appear to believe they are masters of their own universe. They begin to believe they can do anything and nobody will notice.
Thankfully, with Enron, somebody did.
P.S.: Don't go thinking this means that the risk of nearly 200 years in jail, as is the case with Skilling and Lay, will put an end to corporate crime. It may delay it a bit. But human nature is human nature. Cycles come and go. So do people. And when it comes to the chance of hitting it big, people tend to have short memories of history.
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