Fling Open the Enron Mess

Whose business is it when thousands of Enron employees watch their pension savings all but vanish with the company’s stock price, due at least in part to hidden, risky deals made by top executives? When at the same time, just before filing for bankruptcy, Enron gives $55 million in “retention incentives” to 500 high-level employees?

Let’s hope it isn’t left up to House Majority Leader Dick Armey (R-Texas). He recently said of the Houston company, “My impression is that Enron’s business right now is Enron’s business.” No, it is the employees,’ shareholders,’ taxpayers’ and regulators’ business, and deserves the scrutiny of Congress.

Labor Secretary Elaine Chao has, to her credit, launched an investigation into management of the Enron pension fund. Rep. John D. Dingell (D-Mich.), the ranking Democrat on the Energy and Commerce Committee, has said he intends to call hearings in January. And Rep. Henry A. Waxman (D-Los Angeles) continues to press Vice President Dick Cheney for information about the administration’s links to the company.

Many White House aides, including Bush political advisor Karl Rove and Cheney’s chief of staff, Lewis Libby, either owned Enron stock or were paid consultants. And the administration has refused to make public any meetings of its energy task force, which included sessions with Enron executives.

Of course, investigation is not an end in itself. Reforms that have been needed for years should actually be made. The Securities and Exchange Commission has long pushed for more oversight power and tougher regulations but was stymied by the biggest auditing firms. Such firms are an important part of the problem. Now the SEC has issued subpoenas to the accounting firm Arthur Andersen, which stands accused of questionable bookkeeping practices at Enron.

This year, Arthur Andersen has settled $75 million in shareholder claims concerning audits at Waste Management Inc. and $110 million in the collapse of Sunbeam. Glaring bookkeeping irregularities have also plagued Rite Aid Corp., MicroStrategy Inc. and Xerox Corp. The SEC’s staff needs to be expanded, the consulting work that accounting firms can do should be restricted and outside auditors who leave the profession should be barred from immediate employment in the industry they were supposed to keep honest.

The new SEC chairman, Harvey L. Pitt, may unfortunately be the accounting firms’ best friend. A lawyer who formerly represented the accounting industry, he dismisses as hysteria the critics’ warnings about accountants’ conflicts of interest and poor practices. It’s up to Congress to keep the SEC on track or risk more hidden corporate misdeeds that will eventually be laid at government’s door.