March 14, 2002

 
Thank you, Mr. Chairman. One of the things that has struck me as we get deeper and deeper into the Enron investigation is the ability of almost all of the people involved to disclaim knowledge of, or responsibility for, any of the events that caused Enron’s collapse. The most notable of these are, of course, Jeffrey Skilling, the former president and chief executive officer, and Kenneth Lay, the chairman of the board.

Although Mr. Skilling is widely understood to have been the architect of Enron as an asset-light, energy trading company with an increasing off-balance-sheet debt load, he presents himself as a unknowing "victim" of some as-yet-undefined forces of the marketplace. Mr. Lay, who was CEO for all of Enron’s history except the six months when Mr. Skilling held the job, claims to know even less. Yet both of these top officers ran a company which numerous former and current employees have described as "crooked," a "pyramid scheme," the home of "house of cards accounting," a place where you "drank the Kool-aid" instead of questioning what was going on, and fed the earnings "monster" with more and more questionable deals.

Moreover, the Board of Directors was asleep. For example, it never even bothered to find out how much Andrew Fastow, the company’s chief financial officer, was making on his side deals with the company. To this day, neither the board nor anyone at the top levels of Enron knows exactly how much Mr. Fastow made on those deals. Nor did the board bother to check if the controls it had ordered to keep these deals above-board were actually being carried out.

Today, we will hear more disclaimers of responsibility. We will hear from lawyers who asked questions, but never followed up. And we will hear from lawyers who knew of problems, but never asked questions. For example, both the in-house and the outside lawyers who represented Enron in the related-party transactions involving Mr. Fastow and Michael Kopper, who worked for Mr. Fastow, will tell us that :

-- It wasn’t their responsibility to make sure that Enron or its accountants knew about the side guarantee with Barclay’s bank that brought down the JEDI-Chewco deal.

-- It wasn’t their responsibility to make sure that Mr. Kopper’s interest in Chewco was approved by the Office of the Chairman and known by the Board of Directors, even though these lawyers knew it was a conflict of interest violation.

-- It wasn’t their responsibility to make sure the many deals made between Mr. Fastow’s LJM entities and Enron were actually at arm’s length and represented a fair deal for Enron in both the short and the long term.

We will hear that most of these lawyers didn’t even know what controls were required by the Board of Directors to try to keep the related-party deals above-board. They were told that the board had approved the relationship with Mr. Fastow, and that was enough. Sometimes they relied on Mr. Fastow himself as justification.

We will hear from lawyers who tried to find out how much Mr. Fastow made so it could be included in Enron’s proxy, but when Mr. Fastow refused to tell them, their response was – "next year we’ll do it." We will hear that lawyers were not responsible for asking about accounting decisions. And we will hear from lawyers who ignored, rationalized, or discounted problems brought to the company’s attention by Sherron Watkins and others.

Maybe all the lawyers involved in the Enron mess were simply doing their job -- a most troublesome prospect. Until this fiasco, I had always thought of lawyers as more than just highly paid technicians. In this case, I apparently was wrong.