When the nation’s seventh-largest company files the largest business bankruptcy proceedings in U.S. history, shockwaves are bound to reverberate through economic, political, financial and legal circles. But to the shareholders, workers and retirees who invested faithfully in the Enron Corp. stock, such a colossal collapse deals a devastating blow that for many wiped away personal fortunes and even retirement security.
As the events that led to the Houston-based energy conglomerate’s rise and fall are pieced together by a slew of government, media, prosecutorial and legal investigators, I want to make sure similar corporate missteps, including fidiciary mismanagement, aren’t allowed to fester elsewhere, especially when it comes to protecting worker’s pensions.
Just as the vast majority of the scorned pensioners and shareholders who saw their investments wiped out likely are interested in righting a wrong, I’m interested in securing public policies that promote financial transparency, greater accountability and tax compliance by corporate America.
As lawmakers sift through the evidence and hold congressional hearings to get the facts out on the table, it seems to me Congress will need to consider changes to pension, tax, securities and accounting laws. As the senior Republican on the Senate Finance Committee, which bears primary jurisdiction over tax and pension laws, I’m busy writing legislation to tighten pension protections for working and retired Americans and also drafting a legislative proposal that would help the IRS prevent tax cheats from shielding tax liabilities with the use of corporate tax shelters and other vehicles often used as tax-free havens.
It is disturbing to learn the company may have used as many as 900 tax-haven subsidiaries to avoid taxes and mask financial debts. Such activity underscores the need for full disclosure of tax shelters so the IRS can better police their use. I’ve also written to the Enron Corp. to request its full cooperation and public release of all tax information since the company started in 1985. I’m a true believer that sunshine indeed is the best disinfectant. And the public has a right to know what went wrong. Indeed, there are valuable lessons to be learned.
Although all the facts aren’t yet out in the open, it doesn’t pass the smell test when corporate big wigs apparently cashed out more than $1 billion in stock options while thousands of employees are left to hang high and dry. Thousands helplessly watched their retirement savings go down the drain when the company’s stock tanked from more than $90 a share in 2000 to 34 cents a share in January 2002.
According to news reports, the top dogs were allowed to sell their shares before the stock value bottomed out leaving the rank-and-file empty-handed once the perilous financial condition of the company was exposed to the light of day. Such behavior smacks of mismanagement and moral disregard for shareholders, a loyal workforce and retired employees.
What’s more, Enron and its Big Five auditor are under fire for alleged document shredding that took place after the Securities and Exchange Commission launched a probe into the company’s financial dealings last October. Reportedly, the shredding even continued to take place through January at Enron’s Houston headquarters. Such alleged activity makes it more difficult to give the executive decision-makers any benefit of the doubt.
It’s no secret that publicly-traded companies today are under ever-growing pressures to constantly increase their stock value in a dog-eat-dog world where meeting quarterly performance goals are critical to maintaining a competitive edge. As businesses expand, merge, diversify and globalize, traditional accounting systems have moved beyond tracking expenses and revenue to complex bookkeeping practices that even stock analysts, investors and external auditors often can’t interpret.
Some may argue that honesty isn’t always the best policy when it comes to delivering a company’s financial statement. Creative accounting may look good on paper, but investors now will likely employ a long-standing consumer tip: If it sounds too good to be true, it probably is. Cooking the books may yield short-term gains, but it’s all but certain to be short-lived. Sooner or later, the truth will come out. And as the executives at the Enron Corp. and Arthur Andersen are discovering, it’s no picnic to wade through highly publicized congressional and criminal investigations, not to mention a string of class-action lawsuits in the civil court system.
For generations of Americans and recent newcomers to this country, the allure of America’s free market system appeals to the masses because it holds the promise of economic opportunity, individual prosperity and a better life for those willing to work hard and play by the rules. Those who cheat the system ought to be pursued relentlessly and shoulder the full weight of the law for wrongdoing. The integrity of free enterprise must be defended and protected from those willing to exploit it for their own ill-gotten gain.
While Enron’s collapse elicits plenty of outrage, I’m looking for the silver lining and intend to turn the harsh lessons into meaningful improvements in the nation’s pension and tax laws.