What Is in a Name?
Enron's attorneys evinced a strong negative reaction to the company's trading practices and particularly the nicknames of the trading schemes during an October 2000 strategy session. Would they have felt better if the schemes had been nicknamed things like Operation We Love California and Fuzzy Little Kitten, instead of Death Star and Black Widow?
The government investigation into Enron's practices in the California market has, so far, turned up no evidence that Skilling or Lay knew about the practices in question. If that is true, however, it points to a failing in corporate governance procedures, for which the men should still be liable. If concern about allegations that Enron was gaming the power markets had grown to the point where a strategy session was called with the company's attorneys, the top executives should have been aware. They certainly knew about the mounting allegations. The attorneys at the strategy session realized the company could be in trouble and drafted up an eight-page memo listing the charges Enron could face. Yet these practices continued well into 2001.
At worst, the top executives knew the practices were questionable and allowed them to continue. At best, they did not know, but should have. It is unimaginable that the senior executives of any company should not have known for months that their attorneys were drafting up a legal defense against allegations of wrongdoing on this scale. It was their business to find out what steps were being taken to address the allegations. Senior executives at other companies have been held liable for failures in their corporate governance procedures. There is no reason the Enron executives should not be.