- The Washington Times - Saturday, February 9, 2002

When a bank gets robbed, members of Congress don't stand up and demand better alarms, vaults and security guards. They accept that human nature being what it is, banks will always attract robbers.
But when investors get robbed by a corporation, the instant consensus is that we need the federal government to tell people how to run their business.
The scandal enveloping Enron and Arthur Andersen has been a perfect excuse for Democrats to deplore the excesses of capitalism. Even Republicans are joining the chorus. In his State of the Union address, President Bush declared, "Corporate America must be made more accountable to employees and shareholders and held to the highest standards of conduct."
Writing in U.S.News & World Report, former Reagan and Clinton administration aide David Gergen, an infallible barometer of conventional wisdom in Washington, says, "Like it or not, the government is the best instrument we have for protecting the public interest, and it is to government we should turn now."
Actually, we have all sorts of instruments for protecting both public and private interests from corporate buccaneers. That they didn't prevent the Enron debacle doesn't prove the need for greater government involvement any more than the existence of U.S.News & World Report means we should repeal the First Amendment. The common trait of all systems designed or operated by human beings is that they have failures. None is foolproof.
How do we guard against corporate theft, fraud and chicanery? The prospect of losing your job, disgracing your name, and seeing most of your personal wealth go up the chimney is enough to keep most top executives on the straight and narrow.
For others, we have criminal sanctions, which could mean that some of the Enron principals could be reunited in federal prison. The sight of once-mighty executives being hauled away in handcuffs would deter a lot of misconduct at other companies.
Some larcenous companies will take the risk, figuring they can get away with it. That's why we have accountants: to notice financial shenanigans and put a stop to them. In the case of Enron, though, Arthur Andersen apparently was either oblivious or complicit. Critics say that's because it was not only auditing the company's books but providing consulting services that it might have lost had the auditors squawked. Therefore, we are told, the feds should bar accounting firms from selling both auditing and consulting services to the same client.
At this point, a regulation would be superfluous. Since the Enron meltdown, all the Big Five accounting firms have announced major changes in how they do business. Deloitte Touche Tohmatsu, the last of the group to act, said this week it would separate the two businesses to remove any potential conflict.
Accountants, like chief financial officers, are not all scrupulously honest. Some may be willing to wink at big, honking financial scams for a valued client. But as Arthur Andersen has learned, the cost of being seen as an accomplice to business malpractice can be ruinous. Any money the firm made from Enron is paltry compared to all the money it will lose thanks to the association. In 2002, how many corporate directors would want their company to hire Enron's accountants?
Ah, yes corporate directors. Where were they when Enron Chief Financial Officer Andrew Fastow was becoming, in the words of one congressman, "the Betty Crocker of cooked books"? Well, the Enron board was tamely suspending conflict-of-interest rules to permit some of the deals he concocted to hide corporate debt.
The directors will be rewarded in various ways for sleeping through the hijacking of Enron. One is that for the rest of their days, they'll carry the distinction of helping cause the biggest bankruptcy in American history.
Even worse, they can expect to spend most of their waking hours meeting with lawyers, giving depositions and sitting through civil trials. Their lives may never again be their own. True, company insurance policies may shield them against much of the financial risk, but those policies usually don't provide unlimited protection. So some of the directors may get to face their own bankruptcy.
As a result, you can be sure that every board of directors is far more diligent today than it was before. And you can be sure that boards across America are looking hard for ways to assure they get the information they need to do their job.
Many Enron critics think the alternative to more government controls is tolerating continued bamboozling by corporate swindlers. But a lot of people in the private sector have been newly invigorated to watch out for serious mismanagement. The self-interest of people with their money and their good names on the line will do more than new legislation or new regulations to protect us from the next Enron.

Steve Chapman is a nationally syndicated columnist.

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