Enron-driven reforms are unraveling

Enron was the beginning, and now it's the end.
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After six years as the avatar of reform, the lessons of Enron are being rolled back, the consequences overlooked, history rewritten to offer an air of legitimacy to the vacuous deals born in Smith Street hubris.

Long-expected decision
On Tuesday, the Supreme Court issued a long-expected decision in a case with direct bearing on Enron shareholders. The Supremes found that third parties can't be held liable in cases of fraud.

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"They're basically providing escape routes for people who are going to be pursuing their own game at the expense of investors," said Stephen Arbogast, a finance professor at the University of Houston and author of Resisting Corporate Corruption: Lessons in Practical Ethics From the Enron Wreckage.

The cable company case
The case in question involved a cable company paying inflated prices for set-top boxes. The box makers, in turn, allegedly paid inflated prices for cable advertising. The whole scheme was designed to make everybody's numbers look better, according to a lawsuit filed by cable company investors.

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The court's decision in the cable case comes at a time when some of Enron's biggest enablers are reporting record losses related to subprime mortgages.

From Enron playbook
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LJM2's job was to buy Enron assets that were underwater and keep them off the company's balance sheet. Fastow got some of the top banks on Wall Street to invest in the deal by assuring them that as Enron's chief financial officer, he knew the deals inside and out.

Insider's knowledge...

With Enron, investment banks convinced the world that the process of sliding money around was a viable business. Now, as the mortgage crisis goes global, the world is paying the price.

Enablers' role irrelevant

The Supremes apparently see no problem with this. In their decision, the role of the enablers — no matter who they are — doesn't matter.

The box makers can't be held accountable because "deceptive acts were not communicated to the public."

That, of course, is the nature of deceptive acts. They're not deceptive if you tell everyone about them.

The real losers, though, aren't Enron's shareholders. They may not get their day in court, but they are getting a record settlement. This week, even as the Supreme Court was making sure a recovery like that never happens again, Enron's victims were told they would receive an average of almost $7 a common share.

It's a pittance compared with their losses, but it's a victory nonetheless.

The next victims in the next fraud won't be so lucky. With five pen strokes, the Supreme Court consigned the lessons of Enron to the dim halls of history.

Chron