Posted on: Friday, January 4, 2002

Editorial
Enron collapse leaves many questions behind

At this point, there is no direct evidence that the dealings and manipulations behind the shocking meltdown of energy giant Enron were anything but legal. And that's perhaps the most disturbing part of the whole sad story.

The Senate, led by Joseph Leiberman's Government Affairs Committee and Carl Levin's subcommittee on Investigations, plans hearings into the Enron collapse. That's perfectly appropriate and, indeed, important.

It may turn out that legal wrongdoing within the Enron corporate hierarchy led to the complete collapse of what had been one of the nation's biggest companies. It may be that Enron was shielded from earlier intervention because of its close political connections to leaders in Texas and in Washington.

But it may also turn out that the collapse was the result of a regulatory structure that simply could not keep up with the high-flying and fast-moving energy conglomerate.

By the time it collapsed, Enron was not in any way the quasi-utility energy producer, transmitter and supplier that it started out as. It had become, rather, a massive international commodities trader.

But it appears the regulators (as well as many stock analysts and advisers) continued to look at Enron as a de facto energy utility. By that standard, it very well could have appeared to be performing far better than its contemporaries. But if its stock had been measured as that of a commodities trader, a great deal more caution and even suspicion may have been warranted.

Two particular issues must be put to the strictest congressional scrutiny:

• The first is the participation by Enron officials in private, high-level discussions with White House officials on national energy policy. Details of those discussions, astoundingly, have never been made public. Given what has since happened, the public and the taxpayers deserve a good look at what role Enron's executives played in developing the national policy and how that policy may have helped Enron's prospects.

• The second is what appears to be a cruel policy that protected top Enron executives while forcing financial ruin on many employees and retirees. While the top executives reportedly were free to bail out of their Enron holdings while the stock still held value, employees and retirees were forbidden from selling shares held in their retirement accounts. They could only stand by and watch with horror as the stock, and their retirement savings, went into free fall.

Again, given the way these things are regulated, that might have been legal. But by the common sense test, it was wrong.