The Enron Case in Focus
by Tibor R. Machan
After the jury came back with a guilty verdict against the two major players in the massive Enron fraud case, Kenneth L. Lay and Jeffrey K. Skilling, there could have been cheers going up around the country concerning how well justice is pursued in a relatively free market, capitalist society. For that is one of the major lessons here.
A free market, capitalist society is the best place where corporate—or white collar—criminals are prosecuted. Indeed, it is in such a system alone that it’s possible to identify bona fide crimes and distinguish them from mere regulatory infelicities that are too often nothing but pre-emptive, precautionary measures politicians and bureaucrats undertake in defiance of due process and civil liberties.
Unfortunately, too many didn’t focus on the way justice managed to be served in the context of a largely free society but, instead, cheered how big corporations en masse have been dealt a significant blow. As a report in The New York Times put it,
...the testimony and the documents admitted during the case painted a broad and disturbing portrait of a corporate culture poisoned by hubris, leading ultimately to a recklessness that placed the business's survival at risk. "Enron is one of the great frauds in American business history," said James Post, a professor of management at Boston University. "But it is also a symbol of a particular era of management practice. The excesses of Enron point pretty clearly to what was going on in mainstream companies across the business landscape in the 1990's."
I am no attorney and am not familiar enough with the details needed so as to give a confident assessment of whether justice was fully served here. The trial of Lay and Skilling, did appear to bring to light that the defendants perpetrated massive fraud and clearly violated both their moral and legal fiduciary duties. From the perspective of business ethics—namely, the set of standards that guide professionals such as Lay and Skilling—these men appear clearly to have engaged in malpractice.
Yet these kinds of cases are sadly marred by mixing standards of unethical versus illegal conduct. Government regulation subjects the profession of business more than most others—and certainly more than, say, journalism and the ministry, the two fields the U. S. Constitution unjustly picked for special protection when it should have provided all profession with it—to policies of prior restraint and, accordingly, government harassment. Such government regulations help to confuse bona fide crime with unethical behavior. The two are different in a free society—the first must involve violation of the rights of others, the second the violation of standards of professional propriety.
Even apart from this confusion, there is in the present case the unfortunate eagerness with which too many influential commentators—such as The Times’s analysts and those they call upon to comment on the case—condemn the entire profession of corporate managers on the basis of what happened at Enron. It is just false that the "excesses of Enron point pretty clearly to what was going on in mainstream companies across the business landscape in the 1990's." Justice and morality demand that cases be considered individually and only those who have been subjected to careful investigation and subsequent prosecution be treated as legally guilty if so found by a jury. It is scandalous, and indeed a form of professional misconduct itself, for a professor of management to rush to judgment about all "mainstream companies across the business landscape" who were not charged, let alone convicted, of any crimes.
Alas, business has been the black sheep of the professions from time immemorial. History is replete with major and minor cases of prejudice against traders, merchants, and other members of the profession of business. So, much of the bluster following the conviction of Lay and Skilling is, sadly, par for the course.
In a recent column I noted the contrast between the nuanced treatment terrorists received in Steven Spielberg’s movie Munich and the crude picture given of business professionals in the 2005 movie Enron: The Smartest Guys in the Room. You can add to this the contrast between how crime is viewed when it occurs at various universities—such as the University of California at Irvine where last November, the liver transplant program had been suspended after the government revoked UCI’s certification in the wake of a report by the Los Angeles Times concerning some 32 patients who died over the past two years and UCLA hospital’s body parts selling scheme—and when it occurs at business corporations. Did what happen at UCI and UCLA amount to "excesses [that] point pretty clearly to what is going on in mainstream [university hospitals] across the [medical] landscape"? QED.
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