Ground Floor/Kieran Fagan: Two pictures from the past week say it all. In the first, Enron boss Kenneth Lay is led in handcuffs into the dock of a Houston court to face 11 charges in connection with the energy company's collapse three years ago.
In the second, "Kenny Boy's" good friend George W Bush shuffles uncomfortably away from the media rather than answer questions about his former adviser and major donor.
Lay is smiling despite the handcuffs and 11 criminal counts, including conspiracy, securities fraud and bank fraud. In contrast, George's shoulders are drooping and he looks furtive and embarrassed.
The White House spokesman frowns and patiently explains that it has been quite some time since the president consulted the man, who many thought he would appoint as his energy secretary in 2002 had Enron not imploded in the largest bankruptcy the US had then ever seen. Maybe, but the archives in the Texas state house hold exchanges of letters between the two when George was governor. They paint a picture of good buddies, joshing each other affectionately.
In April 1997:
Dear Ken, One of the sad things about old friends is that they seem to be getting older - just like you. 55 years old. Wow! That is really old. Thank goodness you have such a young beautiful wife. Laura and I value our friendship with you... your younger friend George.
Ken and his wife gave $139,500 (€112,500) to Bush, who got more than $600,000 from Enron overall.
Ken Lay is now preparing a "Barcelona defence" to the criminal charges and the civil suits. The trouble with the Barcelona defence (from the TV series Fawlty Towers, Manuel the Spanish waiter - I'm from Barcelona, I know nothing) is it disclaims fraud at the price of admitting ignorance of the greatest scam in corporate history in a company that he ran as chairman and chief executive.
Apart from the direct fraud accusations, Ken has a particular problem. The indictments claim that, while he was telling people that he was buying Enron stock, he sold $20 million more than he bought. From 1997 to 2001, he made more than $217 million from share sales and got pay deals worth $19 million. Not much wriggle room there, Ken.
Like the skyscrapers in Houston Texas where this story of greed, deceit and colossal fraud began, nothing comes in regular or standard sizes. Lay, as head of Houston Natural Gas, led a 1985 merger that formed Enron. He became an aggressive political player who lobbied to deregulate natural gas markets.
Enron used deregulation to become a dominant force in electricity trading in the 1990s. Note the phrase "electricity trading". We are moving from commerce into commercial legerdemain, products that don't exist. Try getting your head around "futures" in electricity, the most use-it-or-lose-it of all perishables.
A unit - or shtim in Kerry parlance - of electricity is no use unless it is used now. The word shtim, as in "the place was pure black, there wasn't a shtim of electricity in the house", makes a lot more sense than much of Enron's trading practices. Since Enron, deregulation in energy markets in the US has gone off the boil. I hope someone is reading in Merrion Street, Dublin.
Lay was Enron's chief executive for most of the company's history but handed over to his protégé Jeffrey Skilling in February 2001. Skilling suddenly resigned in August 2001. Lay resumed as chief executive, telling staff: "Our performance has never been stronger, our business model never more robust, our growth never more certain."
By October the company was sinking fast - and was bankrupt on December 2nd, 2001. It cost investors an estimated €30 billion in stock losses.
Both Lay and Skilling blame the hole in the accounts on chief financial officer Andrew Fastow, a veteran of the savings-and-loans fiasco that hit US banking in the 1980s. Fastow specialised in "asset securitisation", which allows banks to sell off risk in the form of securities backed by mortgages or other obligations. These vehicles - called special purpose entities - are legitimate, if operated correctly.
Enron's initial investors did well. CalPERS, the California state pension system, put $250 million into one which invested in natural gas projects and got back $433 million, a 73 per cent return over four years. Other pension funds, and Enron's own staff, saw their funds wiped out.
The problem arose when the backing did not exist, or was not sufficient for its purpose. Fastow constructed a labyrinthine network to keep Enron's debt off the balance sheet, concealing the true state of the company's affairs. The auditors, Arthur Andersen, looked the other way and, when that was impossible, took out the shredders.
Fastow has done a deal that gets him a deferred 10-year sentence in return for his co-operation. This week Lea Fastow, his wife and an Enron accountant, began a one-year stretch for helping her husband to cook the books.
There were positive outcomes. Enron's demise gave birth to the Sarbanes-Oxley Act. It requires chief executives and chief operating officers to take personal responsibility for financial statements. It also limits functions auditors may perform for a company.
Pension funds have become more aggressive in pushing for change and there is an increased willingness to challenge directors over poor performance and inflated pay and perks packages. Corporate governance has been tightened.
But at what a price it could never happen here, of course. Could it?
Kieran Fagan is a freelance journalist. He can be contacted at kfagan99@yahoo.com. Sheila O'Flanagan is on leave.
