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    Thursday, May 25, 2006

    Enron - The final step - Big lesson for everybody

    The book is now largely closed on one of the most scandalous chapters in the history of American business, as former superstar executives Kenneth Lay and Jeffrey Skilling were found guilty of conspiracy and a host of other charges in the ruinous collapse of energy giant Enron. The years-long saga came to an end as a jury of eight women and four men on Enron's home turf in Houston determined after a bit more than five days of deliberations that Mr. Lay was guilty of all six charges against him, and that Mr. Skilling was guilty of 18 counts of fraud and conspiracy. He was acquitted on nine counts of insider trading and found guilty on one insider-trading count. Mr. Lay was also found guilty of four counts of bank fraud and making false statements in a separate trial decided without a jury. For the workers and investors who lost so much in the company's slide into the void, the outcome offered closure, even though most will never recover their losses. It was also vindication for those skeptical analysts, investors and journalists who raised questions about Enron's finances long before what was once the seventh largest company in the country crashed and burned. And finally, it was a sharp rebuke to the deluded corporate arrogance that allowed Enron's bad-acting executives to believe that they could fool whomever they chose, and fool them forever. As it turns out, the Enron brass may have been the smartest guys in the boardroom, but beyond those walls other considerable minds challenged them, and prevailed. Of course, Mr. Lay and Mr. Skilling are but the most widely recognized players in the sorry tale of an era's excesses. They are joined by figures like Bernard Ebbers, the former WorldCom chairman and chief executive, who like Mr. Lay offered a clinic on how not to behave when testifying in one's own defense, and then was sentenced to 25 years in prison for orchestrating the U.S.'s largest-ever accounting fraud. There is also L. Dennis Kozlowski, the former Tyco International chief executive who also took the stand in his own defense and who, along with former Tyco finance chief Mark H. Swartz, was then sentenced to at least seven years for looting the company. Beyond that, there's John Rigas of Adelphia Communications, who with his son, Timothy Rigas, was found guilty of looting the cable company of more than $100 million and lying to the public about Adelphia's health. Enron's collapse shook the business world to its foundations. The company's bankruptcy was the second largest in U.S. history -- behind only WorldCom's wipeout, as it happens. Billions of dollars in market value were lost in Enron's demise, as were thousands of jobs and billions of dollars in pension savings. One of the nation's largest accounting firms, Arthur Andersen, was ground to dust under the wheels of the case. Enron reawakened campaigns for corporate-governance reform, and for investors who lost their shirts during the bursting of the tech bubble, the company became synonymous with both the excesses of the 1990s boom and the turmoil of the start of this decade (in a macabre bit of symmetry, the executives will be sentenced on Sept. 11, five years after the terrorist attacks). With the guilty verdicts, it will remain so. But as with so many things, corporate misbehavior is cyclical, and like a stubborn weed, scandal is certain to emerge from the soil again.

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