David Duncan, the Arthur Andersen partner running the Enron account, thinks he was just a guy trying to make his client happy and his million-dollar salary by keeping the fees rolling in. Duncan rationalized one Enron scheme after another to gain the approval of the committee that is supposed to protect the auditing firm's integrity.
Joe Nacchio thinks he was just smarter and craftier than everybody else. Nacchio was a top exec at AT&T until he lost out in the race for the top job there (leaving it to Mike Armstrong to sweep Ma Bell into the Internet bubble). So Nacchio jumped to the top job at Qwest. Nacchio was a scorched-earth kind of guy. When a Morgan Stanley analyst predicted an unpleasant bit of news about Qwest, Nacchio raged and berated and ridiculed non-believers. Then what Morgan Stanley predicted actually happened. Where Ebbers was just a hustler, Nacchio was arrogant, unyielding and unrepentant. Meanwhile, he was unloading $248 million worth of Qwest stock, at the same time that he was having the company buy its own stock to shore up the falling stock price.
These are some of the faces in a new paperback collection of articles that chronicle the Swindlers' Market of the last three years. Others include the Rigas family of cable-company Adelphia, who basically had the company pay for everything and were idolized by the little town that knew all about it; social-climber Sam Waksal of Imclone, best buds with Martha Stewart, who unloaded her Imclone stock just in time; Dennis Kozlowski of Tyco; and of course, Jeffrey Skilling of Enron and his CFO sidekick (of whom it is said that one sleazy deal was "so stupid that only Andrew Fastow could have come up with it").
In Best Business Crime Writing, editor James Surowiecki is the docent of a corporate rogues' gallery. The portraits of these corporate illusionists, collected from newspapers and magazines over the past year, tell us about the failure of integrity, vigilance, or basic judgment that afflicted these high-flying execs and the toothless watchdogs who were supposed to protect investors. The paperback is small enough (and inexpensive enough) for a stocking-stuffer, meaty enough for business-scandal junkies, and readable enough for those who buy Sunday papers for the comics and TV listings.
The middle section of the book is about the watchdogs -- the SEC, current uncaped crusader Eliot Spitzer (the New York Attorney General), the stock analysts and the auditors. Jane Meyer, for example, profiles Arthur Levitt, the SEC chairman during the Clinton administration, as a quixotic fighter for investor protection, frustrated at every turn by lobbyists and members of Congress. (Levitt was succeeded in the Bush administration by one-time accountant lobbyist Harvey Pitt, himself now discredited for continuing to hew to the accountants' line after taking public office.) Meyer describes one speech in 1998 in which Levitt said auditors and analysts "are participating in a game of nods and winks" and asked, "How many half-truths and accounting sleights of hand will it take" to tarnish faith in American markets? Levitt, unfortunately, devoted more attention to making the market more "fair" to small investors, through disclosure and a faux egalitarianism, than to preaching against fraud and inflated earnings. Nevertheless, his good intentions stand in stark contrast to the greed and manipulation of the companies and their accountants.
Arthur Andersen, once the model of accounting probity, stars in several chapters. Another chapter profiles Jack B. Grubman of Salomon Smith Barney, the star telecom analyst who helped raise money for WorldCom, Global Crossing and Qwest and continued touting their stocks almost to the bitter end. Less than a month before Enron filed for bankruptcy, 11 of the 16 analysts who followed the company had "buy" ratings on its stock.
The book also includes the obligatory section on "solutions." The good news is that there's a fair amount of humor in that section. The bad news is that some of the humor is really sad. Members of Congress -- especially, but not exclusively, Republicans -- who were frustrating Arthur Levitt at every turn are now great reformers. We have President Bush, whose business success was basically in trading on his family name and connections, calling for higher ethical standards, including legislation to outlaw insider loans like the one he got. Pretty funny, all right.
Neil Skene, senior vice president for editorial at Creative Loafing's parent company, once bought lunch for Ken Lay of Enron. Talk about a raw deal. . .