Tag Archives: watergate

Enron

Enron: 10 Years Later

Enron.

Similar to “Black Tuesday,” “Watergate” or “9/11,” the term has encapsulated a series of events into a single word or phrase. It is arguably the most well-known, and most scrutinized, financial collapse in U.S. history. This is evidenced by the multitude of books and movies that have rehashed and referenced the collapse.

December 2, 2011, marks the 10 year anniversary of the company filing for Chapter 11 bankruptcy protection. Ten years later, the term is still synonymous with fraud and is, perhaps, more relevant than ever before.

The scandal that was brought to light triggered a domino effect that can still be seen today. Most notably, Enron ignited the Sarbanes-Oxley (SOX) Act. This act resulted in the largest overhaul of the financial markets since the Exchange Act of 1934. This overhaul intended to prevent, discourage and/or identify future collapses.

One of the many significant SOX requirements was believed to be strict whistle-blower protections and protocols for public companies. These protections and protocols were included to safeguard and encourage whistleblowers who found themselves in the midst of Enron-like situations.

Ironically, these future whistleblowers started to use Enron as a reference point in their own claims.  Having worked as a forensic accountant in a post-Enron environment, I have seen multiple instances where the whistleblower actually cited Enron in their anonymous letter or hotline report. This practice has led to the inclusion of Enron as a keyword for investigations alongside terms like “illegal,” “cheat” and “hide.” Many of the vulnerabilities that led to the company’s collapse are now “red flags” for fraud.

Enron has become the ultimate example for whistleblowers to point to and for forensic accountants to measure against.

In response to events in more recent years and even larger corporate failures, including the fall of Wall Street heavyweights and the surfacing of multiple Ponzi schemes, many of the SOX whistleblower protocols have been amended or replaced by the Dodd-Frank Act.

The most recent changes, which went into effect earlier this year, encourage direct reporting to the appropriate government entity, extend the anti-retaliation periods and also provide greater incentives in the form of cash rewards. Theoretically, the current environment will result in more whistleblower reports and presumably more references to Enron allowing the term’s relevance to live on.

[stextbox id="grey"]For more information about the Sarbanes-Oxley (SOX) Act ignited by Enron, visit soxlaw.com.[/stextbox]

Worried about Wikileaks

Should We Be Worried About Wikileaks?

“There’s something happenin’ here. What it is ain’t exactly clear. There’s a man with a gun over there, tellin’ me I got to beware.”

So begins the Buffalo Springfield song, “For What It’s Worth,” written by Stephen Stills. It’s a song that’s remained popular through the decades since the ‘60s, and is timeless in the feelings of suspicion and unease it evokes.

So maybe that’s why it popped into my mind as the Wikileaks saga began to unfold. Once again, there’s something happening — and there seems to be someone with a “gun” telling me I have to beware. But most of all, it sure as heck isn’t clear to me what’s happening, who I should be rooting for and against, or what exactly I should be concerned about. But it seems very clear to me that I should be concerned about something.

As someone who was at least somewhat aware in the late ‘60s and ‘70s, at first glance there seem to be many parallels between the Wikileaks saga and what happened then, especially relating to the Daniel Ellsberg and the Pentagon Papers. For those playing at home, back then there was “The Establishment” (bad), its insidious leader, Richard Nixon (badder), “the counter-culture” (good), and Daniel Ellsberg (good), who leaked (good) top-secret government documents about the Vietnam War (bad) showing that the U.S. government was lying to U.S. citizens (very, very bad) about how it was conducting the war. The infamous White House Plumbers (actually named the White House Special Investigations Unit) were a covert group tasked with “stopping the leaks,” and their illegal break-in of Ellsberg’s psychiatrist kicked off the activities that led to the Watergate break-ins and the ensuing scandal, culminating with Nixon’s resignation — and good triumphing over evil.

So, now we have Wikileaks, led by Julian Assange, leaking government secrets (not just U.S. this time) and the U.S. government vociferously protesting. Must be the same thing, right? Which means Wikileaks is good, Assange is good, etc., etc.

But as the story unfolds, drawing simple conclusions becomes increasingly difficult. For one thing, Ellsberg didn’t release secret documents indiscriminately. He released only those documents showing that the government was lying. Wikileaks releases documents simply because they are secret. So is that a good thing or a bad thing? How should we feel about the implication that any secret is a bad secret?

Another jarring element is the James Bond-esque bunker where Wikileaks’ data center is stored. Who can view pictures of the retro-fitted former Cold War bunker in Sweden without imagining it as a suitable home for a Bond-ian villain? Dr. No, anyone?

And finally, there’s Assange himself. Is he a selfless crusader for freedom of information and speech being smeared for alleged sex crimes? Or a megalomaniac with an agenda?

In the ‘70s, the truth was ultimately revealed. No doubt it will be this time as well. But when? And what will the truth ultimately be?