Bethany Mclean, reporter, wrote, “The company remains largely impenetrable to outsiders. How does Enron make its money? Details are hard to come by because Enron keeps many of the specifics confidential…”may increase the chance of a nasty surprise…”—Stock had jumped 90 percent, story died
WSJ in May 2001
Political meetings were covered in WSJ—Lay meeting with Cheney
Big Plays Came in Oct 2001
Media experts say the regulatory angles did not come up until Enron fired CFO Andrew Fastow in October 2001 for overseeing questionable partnerships overstating profits by $600 million
Oct. 12, 2001-- In-house lawyer at Arthur Andersen emails the lead partner in the firm’s Houston office to remind him of the firm’s document-destruction policy
Oct. 23, 2001-- David Duncan, lead Enron Auditor at Arthur Andersen calls urgent meeting to organize a shredding effort
Timely Remarks: Arthur Andersen CEO Testifies
An Error In Judgment Discussed
Dec 12, 2001--Arthur Andersen CEO Joseph F. Berardino gives testimony at a congressional hearing saying there is “a crisis of confidence in my profession” and that “real change will be required to regain the public’s trust.”
Arthur Andersen’s CEO Points a Finger at Enron’s Business Model reported by Houston Chronicle, Jan. 21, 2002
“ An important point here is people want to focus on the accounting, and I think that’s fair game, but a company has failed. And, it’s failed because the economics didn’t work,” Joseph Berardino, CEO of Arthur Andersen
Fact: Enron paid Andersen $52 million for auditing and consulting services
Fact: Documents show Andersen officials in February 2001 discussed dropping Enron as a client but noted fees could go to $100 million
Kenneth Lay’s wife on the Today Show crying and saying they have lost their liquidity—Over $30 million in assets, especially homes
-- Justice Department confirms that a criminal investigation of Enron’s collapse has begun
Also, in January: Numerous Congressional committee investigations including—
Senate: Banking, Commerce, Energy and Natural Resources, Finance, Govt. Affairs, Govt. Affairs Subcommittee on Investigations, Health, Education, Labor, and Pensions
House: Education and the Work Force, Energy and Commerce, Energy and Commerce Subcommittee on Oversight and Investigations, Financial Services
Fact: Enron has written campaign checks to ¾ of all senators and 1/2 of all House members
Communication During the Crisis Jan. 25, 2002 CJ
Communication During the Crisis Jan. 26, 2002 NYT Former Vice Chairman J. Clifford Baxter found dead in Mercedes—Voiced Concerns at Enron in May 2001 $60 Million in Govt. Contracts to be Reviewed
Communication During the Crisis Feb. 4, 2002 NYT Mr. Lay’s lawyer, Earl J. Silbert, said, “Judgments have been reached and the tenor of the hearings will be prosecutorial.”
Monitoring and Making Adjustments Expected Changes… -- Pension fund reform and more rules and regulations to protect employees --Gone: Inside/Outside Auditors being the same --Overhaul of Accounting Practices and Limits on Consulting Scope --Tightening of SEC Regulations --More Investigations into Energy Trading Operations --Debates and Redefining of Corporate Ethical Business Conducts for Senior Executives --Investigation of Political Investigations
Bond analyst Jon Cartwright said there is "fear out there" among investors that they might own the next Enron.
"The Enron problem has spread beyond the energy group and become a corporate bond issue. Bidding is drying up."
"Companies that have financial statements that are even the most remotely confusing are traded down. Companies with off balance sheet entities are traded down too," said Cartwright. "Investors fear they are missing something or accountants may have missed something."
--taken from Power Engineering magazine on Williams Cos. stock going down,2/05/02
Do an extensive crisis audit of your entire organization. The goal should be to know in advance every major crisis waiting to happen.
Expose as many secrets about your organization as possible. The goal is to know the worst about yourself before others do. In a major crisis, everything about your organization will be exposed.
It is not enough to know the worst about oneself unless one is willing to do something serious to correct it as soon as possible. The media will not only want to know what you knew when, but what you did, and did not do, about it and why.
Get media training for all of your top executives before a major crisis occurs.
Reward and do not kill the messengers of bad news.
--excerpted from Managing Crises Before They Happen
Fire the "spin doctors!" Get rid of communication professionals that are only interested in reacting to a crisis with "spin," rather than finding and preparing for potential crises.
Tell the worst about yourself as soon and as completely as possible. The truth will come out anyway and will only prolong and worsen the crisis.
Do not blame others, it will only worsen the crisis.
Do not give statistics as to why you acted or did not act the way you did. Statistics are not only meaningless to most people, but they are cold and, therefore, an indication of guilt and callowness, especially if there were deaths and serious injuries.
Remember that above all you will be judged on your moral character .
--excerpted from Managing Crises Before They Happen,
Motivation of yourself and others. The power to motivate and inspire is seductive.
Care about how people are treated and their performance. Being fair-minded and sensitive to issues is critical without manipulation.
Keep low-profile and toot the horn of others in the organization. Self-promotion and crusading are ways that managers undermine credibility.
--taken from Real Change Leaders by Jon Katzenbach, and others
Trying Not to Be the Next Enron “ Anytime something like the Enron situation happens, it creates a gut-check time for CEOs and boards, a time to be sure you can pass the red-face test.”—William Zollars, CEO of Yellow Corp., a trucking company “ The degree of due diligence and self-reflection is heightened,”—Alan J. Lacy, CEO of Sears, Roebuck & Co. NYT, Jan.26, 2002
“ On the one hand, companies plead for liberalised markets…but this must also be accompanied by accountability, by transparency, business principles, environmental policy, and by corporate social responsibility .”
— Antony Burgmans, Chairman of Unilever quoted in Bangkok Post, Jan. 26, 2002