Too Late
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
The Enron trial was for 108 days, but Sarbanes-Oxley is forever. Which is why, if anything, the real story of yesterday’s convictions of Kenneth Lay and Jeffrey Skilling on fraud charges in connection with the energy company’s 2001 collapse is that the verdict has come too late. Congress could have saved itself a lot of ink and American businesses billions of compliance dollars if this trial had played out quickly enough to remind lawmakers that fraud had indeed already been illegal even in the go-go 1990s. Alas, it was not to be.
The verdict calls to mind two points Congress would have benefited from considering in its rush to pass corporate reforms in the wake of Enron and WorldCom. First, these companies were run by a bunch of crooks. At last count, 16 Enron executives have pleaded guilty to various fraud charges. Prosecutors have won convictions against another former Enron executive and four Merrill Lynch bankers for a particularly inventive accounting scheme involving the sale of some barges off the coast of Nigeria. All these executives found plenty of laws to break even before passage of Sarbanes-Oxley.
The criminal justice system has also proven fairer than Congress in addressing the problem, at least most of the time. With the exception of its ill-considered Arthur Andersen indictment, the conviction on which was overturned last year by the United States Supreme Court, the Bush administration’s Justice Department has stuck to pursuing individual felons instead of punishing entire companies. As a result, only the guilty have had to pay for the crimes. If only the Congress had been as judicious.
Instead, the solons pushed through a law that has saddled all American business, and especially the law-abiding ones who by definition follow even such ridiculous statutes, with $1.4 trillion in compliance costs. One can forgive the wheels of justice for turning somewhat slowly in these cases. Prosecutors needed to review thousands of documents and depose scores of witnesses to build the case. Congress’s haste in passing the new law is less excusable. Impatience in this case has proven an expensive character flaw indeed.
