May 25, 2006
Lay and Skilling Guilty Verdicts Should Chasten Corporate Executives; Corruption of Business and Government Follows the Money
Statement of Joan Claybrook, President, Public Citizen
The fact that former Enron executives Ken Lay and Jeffrey Skilling have been found guilty of conspiracy and fraud will be little comfort to the Enron employees whose jobs and retirement accounts evaporated with the company’s collapse, or to the shareholders, institutional investors and retirees who lost billions. Nor will it cheer consumers in the West, who lived through an unnecessary and manufactured “energy crisis” that stemmed from the freewheeling and corrupt energy trading system that Lay and Skilling helped create.
But Lay and Skilling each face decades in prison, and that should send a chilling message to corporate executives everywhere: Don’t cook the books, or you could do hard time. It is heartening to see prosecutors cracking down on corporate malfeasance. We urge investigators to go after the small cases as well as the large, because every time boardroom executives manipulate the numbers, the economy and consumers suffer.
Energy trading became a playground for unethical actors after the markets were deregulated under pressure from Lay and other energy industry executives and lobbyists. The energy industry gave generously in political campaigns, and for its money, obtained extraordinary access to government regulators and lawmakers.
For example, Enron executives held at least six meetings in 2001 with Vice President Dick Cheney and other administration officials who were drafting energy policy. The eventual administration recommendations were favorable to Enron. Lay also supplied President Bush’s chief personnel adviser with a list of preferred candidates for the Federal Energy Regulatory Commission (FERC), three of whom Bush appointed. And Lay offered FERC member Curtis Hebert Jr., who disagreed with Enron on certain issues, political support to retain his position if he changed his views. He did not and was forced out by the administration.
How was Lay able to exert such influence? The answer may lie in campaign cash. From 1989 to 2002, Enron and its employees gave $5.95 million in individual, political action committee and soft money contributions to federal candidates and parties. From 1989 to early 2002, more than 250 members of Congress received Enron contributions.
There is one solution, and that is the public financing of elections. This is critical if we want to wrest policymaking from the hands of corporations and ensure more balanced decision-making, where lawmakers consider average Americans and not just the interests of campaign donors. Consumers are best served when corporations are not permitted to run amok.
To view a chart detailing the fate of the Enron executives, click here.
To view a chart detailing the fate of Enron energy traders, click here.
To view a chart detailing the fate of Enron investment banks, click here.
For more information about the fall of Enron, click here.