The collapse of Enron demands a congressional investigation and legislative remedies to some obvious gaps in a system that is supposed to protect all investors.
But more, the present law must be enforced, the courts must do their job, and the people at the top of Enron should do serious time in prison. That's how the system has handled others who deceived investors about the value of their companies.
If the story evolving about Enron and the high-rollers who hyped it sounds familiar, it should. We saw it a decade ago in the Mahoning Valley, but on a smaller scale.
The government aggressively pursued Mickey Monus for overstating the value of Phar-Mor, the discount drug store empire that he built. By varying accounts, the amounts involved ranged from $350 million to $1.1 billion. That's a lot of money in almost anyone's book -- anyone, that is, except Enron. To Enron, that's chicken feed.
A year ago, Enron's stock was valued at $60 billion. Today it's worth next to nothing. When Monus' house of cards toppled, he was worth about $3 million personally. Again, chicken feed. Newsweek magazine reports that between May 2000 and August 2001, Enron Chairman Ken Lay cashed in more than $37 million in his stock. A former CEO, Jeff Skillin, took $14.5 million, and a former unit CEO, Lou Pai, walked away with just under $63 million.
They cashed out when stock was trading as high as $90 a share. When the company filed for bankruptcy, outside investors and lower-level employees were left with stock worth 26 cents a share.
Matter of trust: Securities law may be complicated, but the principle behind it is quite simple. For our system of capitalism to work, investors must be able to trust that a company's reports accurately reflect the value of its assets and the extent of its debts. That obviously didn't happen at Enron.
Six years ago, Mickey Monus began serving a 20-year sentence in federal prison. That sentence was reduced by eight years on appeal.
We don't think Monus got any worse than he deserved. We think the Enron swindlers deserve more. They underreported, they overhyped, they covered up. When they couldn't do that any more, they turned on the shredders and destroyed documents.
The political issues and ramifications of the Enron story will be pursued and revealed in the coming months and years. But the first order of business should be for the Justice Department to build the strongest possible criminal case it can against the perpetrators of this multibillion-dollar fraud.
Liars, cheaters and thieves belong in jail. The fact that they did it all on a grand scale or ran in high circles doesn't change their being common criminals.