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corporate crime
by leon on March 1, 2006

Consider this report of one court-room exchange between Delainey and prosecutor Kathryn Ruemmler, as reported in the Houston Chronicle's TrialWatch blog
"On March 27, Delainey said Enron North America chief accountant Wesley Colwell suggested moving the CPUC-related losses into Wholesale. By March 29, he said he had gotten cold feet and announced that at a meeting with Enron CEO Jeff Skilling, Chief Accounting Officer Rick Causey and Enron Wholesale President Greg Whalley.
'I said, 'We didn't need to do this ... and this lacked integrity,' ' Delainey testified.
The response was swift, he said. Whalley pushed away from the small conference table in Skilling's office.
Causey was angry, he said, asking, 'Isn't this a bona fide operational change?'
As for Skilling, 'He looked at me and said, 'What do you want to do?' ' Delainey said.
Ruemmler asked what Delainey thought Skilling meant.
'Get in line,' was Delainey's interpretation of his boss's statement. 'We've come up with a solution, let's move forward.' "
But one of the questions is this: what the hell were the lawyers doing?
Well, not much, according to Corporate Counsel.
The journal spoke to 12 in-house Enron lawyers who seemed remarkably candid about why things went wrong. One of them, Peter Del Vecchio said he regretted he didn't ask more hard questions. And yes, he says he would ask them this time around.
"What are they going to do, fire me? It's better than working for another bankrupt company."
Probably the answer is yes. Or at the very least, it could be a career-limiting move.
Trouble is it's hard doing that in a place where there are real disenctives to challenge the rules. As the lawyers point out, the legal departments were decentralised which meant they worked for the units that put pressure on them to shut up. What made it worse was that there little control from the General Counsel James Derrick. And to make it even messier, Enron's executives decided how much the lawyers got paid. That doesn't leave any incentive to ask hard questions. After all, in an aggressive outfit like Enron, the worst thing that could happen to your paypacket and ultimately your career was to get branded as obstructionist.
All of which tells us that a company's systems and governance are far more important to stopping these sorts of shenanigans than legislation. That's where it starts.
Permalink: Enron lawyers a law unto themselves
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