Ken Lay, American Hero?

Papers filed last week report that Enron Corp.'s former chairman is about to be indicted by a federal grand jury. While those who lost their savings won't rest easy until Ken Lay is behind bars, the rest of us may ponder if U.S. business is stronger and the markets more durable because of the scandal. Without Enron, none of the reforms that force companies to disclose more information and hire genuinely independent auditors would have occurred.

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Perhaps Ken Lay shouldn’t be prosecuted after all. The papers were filed last week with reports that Enron Corp.’s former chairman is about to be indicted by a federal grand jury. Lay is the final major figure involved with the energy trader’s collapse to not yet face charges. The Houston Chronicle said Tuesday that Lay’s lawyers have requested another meeting with prosecutors in Washington by early this week after a grand jury spent five days this month hearing testimony about the chairman’s alleged misdeeds. Lay’s lawyer told the Chronicle that his client is prepared to answer the government’s questions. “I don’t believe Ken Lay will be indicted at all,” the lawyer told the Houston paper. “Ken Lay didn’t do a crime.” Lay may well have committed a crime by either failing to detect the chicanery of ousted chief financial officer Andrew Fastow, who has pleaded guilty to fraud, or by tacitly approving of Fastow’s cooking the books so Enron would look healthier than it was. Yet without the collapse of Enron, other corporate scandals could have remained hidden for years. Instead of surfacing in 2001, the malfeasance could have come to light in 2003 or 2004 and hurt the U.S. economic recovery. None of the legal reforms that force companies to disclose more information, hire genuinely independent auditors and have their chairmen certify corporate financial statements would have occurred. No independent agency would have been created to police the accounting industry. Republicans might be especially grateful for Lay’s contributions to corporate reform. Imagine if all the business scandals were coming out now, near the end of President Bush’s term and only months before he faces re-election. Even supporters of a Financial Accounting Standards Board plan to require companies to expense stock option owe a debt of gratitude to Enron. Repercussions from the string of corporate catastrophes in recent years spurred a serious review of the accuracy of financial statements. That, in turn, revived the options expensing movement. But while those who lost their savings because of Enron won’t rest easy until Lay is behind bars, the rest of us may want to ponder if U.S. business is not stronger and the markets more durable because of the scandal. Lay has yet to face charges. But three former National Westminster Bank plc employees are accused of stealing $7.3 million in an Enron-related scheme. The Houston Chronicle said Tuesday that David Bermingham, Gary Mulgrew and Giles Darby, who face seven counts of wire fraud, are fighting extradition. They appeared before Bow Street Magistrates Court in London to ask why they were not being charged there. “Why is this case not being brought to trial in London?” the Chronicle quoted attorney Alun Jones, who represents the three men, as saying. “NatWest Bank is based in London. All three are U.K. nationals who live here. They are being investigated by the Financial Services Authority here, and the U.S. government is relying on interviews that have been given by the three to the FSA.” No word on when the London court will rule. Meanwhile, the first criminal trial stemming from the Enron affair is likely to be delayed even longer. The Houston Chronicle said a grand jury on Wednesday added additional charges against four former Merrill Lynch & Co. employees and two former Enron employees who are accused of setting up a fraudulent transaction involving the sale of barges. They initially were set to face trial on June 7, though that was later switched to Aug. 16 when it became apparent the trial would take longer than scheduled. Enron officials are not the only ones facing trial. Bloomberg News said Wednesday that former Global Crossing Ltd. chairman Gary Winnick must face charges leveled by a group of banks that he misled them about the company’s finances. The banks, led by J.P. Morgan Chase & Co., want $1.7 billion in restitution. Copyright �2004 TDD, LLC. All rights reserved.

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