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Without Due Diligence
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Business New Haven
3/4/2002
By: BNH
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Perhaps what is most illuminating about the current Enron scandal is not how the energy giant collapsed, but why. After all - no one in management or on Enron's Board of Directors is willing to claim they had anything to do with some of the company's most significant operations. At least that's the story these hooligans seem to be
sticking to.
In reviewing the Enron scandal we've been struck by how many have seen this collapse in value as the result of a collapse in “values”. We agree with the investors that are questioning how the public capital formation system can function without the integrity, stewardship and fiduciary responsibility that the Enron scandal has unmasked.
It seems a system that has worked for decades, albeit for mostly well heeled and schooled investors can't be trusted to perform for a more broadly based market.
The culture of Wall Street, the corporate suite and dare we say main street has turned its back on accountability, in the hot pursuit of “other people's money”. This is a culture we had hoped was more exclusive to government – well read on.
It is not true that all Wall Street investors and analysts bought into Enron's energetic story. Nor was there a lack of warning in the media, those warnings were simply ignored or pushed aside.
Indeed by December 18, 2000 when Enron executives met with Governor John Rowland and his right hand man Peter Ellef (also chairman of the Connecticut Resources Recovery Authority), the Internet bubble had already burst and ostensibly our collective investment naivete with it.
If you believe the Governor's story about a meeting set up by Republican fundraiser Anthony Ravosa Jr. (and we do) the Enron executives didn't discuss a pending $220 million unsecured loan to the energy authority. Why would they? The Enron folks knew they had swallowed a canary – they were sure to keep their mouths shut.
No doubt Enron executives were there to “buy” Fuel Cells from a Connecticut company as the governor has said, just as they were “buying” energy from the authority. Our guess, the meeting was set up by a political operative because Enron wanted something from Connecticut tax or utility rate payers.
There has been a great deal of discussion as to why Mr. Ellef and the CRRA board would okay an unsecured loan to Enron for such a huge amount of money. Mr. Ellef who was appointed to his position at the CRRA by the Governor had been a business executive that should have known better and acted wiser.
We believe he would have, if he and others weren't sucking up to Enron executives for something. Perhaps it wasn't campaign cash as has been suggested, perhaps it had more to do with finding fuel cell customers, but nothing short of a full investigation is acceptable.
Finally what is disturbing about Connecticut's Enron connection is how officials at the CRRA and elsewhere seem to have the same problem as Enron officials when it comes to accountability.
A quasi-government agency has put taxpayers (CRRA's trash collection payments are a regional tax) on the hook for $220 million with an unsecured loan. Neither the Governor, the Attorney General, the state Treasurer, the authority board or its chairman are willing to step up and take any responsibility.
Faced with calls for Ellef's resignation the Governor has pointed to the democratic appointees on the board. We're with you Governor Rowland – clean sweep, get rid of the whole bunch.
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