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    A Times Editorial

    Courageous warnings on Enron

    © St. Petersburg Times
    published January 27, 2002

    Everybody's lining up to beat up on Enron now. Politicians, lawyers, regulators, stock analysts, accountants and business journalists know a fat target when they see one.

    But just a few months ago, it took real courage to raise questions about Enron's business practices, or about the company's systematic efforts to buy the support of elected officials and regulators. Enron chairman Kenneth Lay and other company executives went to great lengths to bully Enron critics, and they were reinforced by an amen chorus of true believers who had a financial or emotional investment in Enron's success story.

    Consider the pressure Bethany McLean felt when she raised reasonable questions about Enron. A year ago, McLean, whom the Washington Post's Howard Kurtz described as "a 31-year-old Fortune magazine reporter with an impossibly soft voice," began researching a story on Enron. According to Kurtz, Lay himself called McLean's boss to complain about her questions. Enron's then-CEO, Jeffrey Skilling, hung up on her after questioning her ethics. Enron's chief financial officer flew from Texas to New York to meet with McLean and her editors to try to dissuade them from publishing a critical story.

    Despite that pressure, McLean (with the support of her editors) completed a story that raised concerns about Enron's secrecy and convoluted accounting practices. She wrote that they constituted a "red flag" that "may increase the chance of a nasty surprise." At the time, Enron stock was selling for $76 a share. Now it sells for pennies.

    John Olson, a Houston energy analyst, was one of the few hometown observers who raised questions about Enron while the company was riding high. He told U.S. News & World Report last June that Enron was "not very forthcoming about how they make their money" and said no "analyst worth his salt . . . can seriously analyze Enron."

    According to the New York Times, Lay sent a handwritten note to Olson's boss the day after the U.S. News story appeared:

    "John Olson has been wrong about Enron for over 10 years and is still wrong," Lay wrote. "But he is consistant (sic)."

    According to the Times, when his boss showed him the note, Olson said, "You know that I'm old and I'm worthless, but at least I can spell "consistent.' "

    The pressure on Olson didn't come only from Lay and other Enron executives. As Enron's stock bubble expanded through the 1990s, Olson was subjected to ridicule from trendier analysts who were boosters of the company. Many people reaped short-term profits by ignoring the warning signs about Enron and riding the speculative wave. In the long run, though, honest reporters and analysts who trusted their own instincts were vindicated, and speculators who didn't do their homework got burned.

    Other people, especially the few executives within Enron who tried to call attention to the company's unethical behavior, showed great courage, too. But too many people -- including many of the politicians, lawyers, regulators, analysts, accountants and journalists now lining up to take shots at Enron -- were too lazy, too frightened, too greedy or too compromised to act responsibly from the start. The Enron scandal will produce many more victims and villains than heroes.

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