WS>>TOP DEM OPENED THE DOOR

carl william spitzer iv cwsiv_2nd at JUNO.COM
Sun Feb 10 18:36:43 MST 2002


          January  29, 2002

          DEMOCRATS seeking to blame  President Bush  and the GOP
     for the Enron scandal need  to  look more  closely  at their
     own house - especially at the work done by the former  Demo-
     cratic  National  chairman,  Sen.  Christopher J. Dodd.

          While  many  candidates of both parties  have  received
     campaign  contributions  from  Enron  and  its  "independent
     auditor" Arthur Andersen, very few have passionately  fought
     their  cause in Washington as diligently as Chris Dodd.   It
     was on account of Dodd's tireless efforts that Arthur Ander-
     sen  was able to act as both "independent auditor" and  man-
     agement  consultant to Enron for $100 million a  year.  That
     role - so fraught with conflict of interest that it makes  a
     joke  of the concept of outside auditors  protecting  share-
     holders - has been identified as one of the major causes  of
     the debacle.

          In  1995, it was Dodd who rammed  through  legislation,
     overriding  President Clinton's veto, to protect firms  like
     Andersen  from lawsuits in cases just like Enron.  The  Dodd
     bill  limited  liability  for lawyers  and  accountants  for
     "aiding  and  abetting" corporate fraud  by  their  clients,
     making  them liable only for their "proportionate" share  of
     the blame, rather than for the entire fraud.

          So, if an accounting firm kept secret the true  picture
     of  a  corporation's finances, it would only be  liable  for
     part of the total fraud on the investors.

          For  shareholders, this law is awful -  the  fraudulent
     company  has  usually lost nearly all its value  before  the
     shareholder  learns about it, so there's nothing  left.  For
     the  accounting firm, though, it's great - the  shareholders
     can't pin the total losses on you.

          And  from Andersen's point of view, it was really  won-
     derful,  because they were already facing thousands of  law-
     suits for their role in securities fraud.

          A grateful accounting industry showed its  appreciation
     to  Sen. Dodd by contributing $345,903 to his campaign  bet-
     ween 1993 and 1997. Every major accounting firm pitched in -
     Deloitte  & Touche, Ernst & Young, Coopers &  Lybrand,  Peat
     Marwick,  Price  Waterhouse. (Dodd has received  more  money
     from Arthur Andersen than any other Democrat - $54,843.)

          From  '93 to '97, Dodd also received $523,551 from  the
     securities  industry, which was thrilled with  other  provi-
     sions of the '95 law that limited liability from  securities
     lawsuits, notably for firms that failed to live up to  their
     predictions about future earnings.

          Consumer groups had opposed the legislation - the  U.S.
     Public  Interest Research Group labeled it "The  Crooks  and
     Swindlers  Protection Act." But Dodd's services to  Andersen
     didn't stop there. Every analysis so far of the Enron  scan-
     dal lays much of the blame on the conflict of interest  that
     Andersen  faced in auditing and consulting for Enron at  the
     same time.

          Auditors  must be independent to assure that  companies
     do  not  report misleading financial data  to  stockholders.
     Once  Andersen  was  getting up to $100 million  a  year  in
     consulting fees from Enron, does anyone really believe  that
     they would have blown the whistle on the firm's shady books?
     But when the SEC tried to bar this practice, so ridden  with
     conflict  of  interest, it was Chris Dodd, along  with  Rep.
     Billy  Tauzin  (now R-La., though a  Democrat  until  August
     1995),  who  according to the Associated Press  "brokered  a
     deal" to stop the SEC action.

          As a result of Dodd's intervention, the SEC agreed  not
     to  issue a ban on the practice of auditing  and  consulting
     for  the same client. Such practices have led to  what  Sen.
     Barbara  Boxer (D-Calif.) called "the kind of  hide-the-debt
     shell game that took place at Enron."

          In an ultimate act of hypocrisy, Dodd has now  actually
     introduced  legislation to ban accounting firms  from  doing
     consulting  for  companies it audits -  precisely  the  same
     policy he killed when the SEC was considering it.

          Now  that  this  issue is in the public  eye,  Dodd  is
     pretending  to be an advocate for the shareholders. But  the
     Enron  workers who lost their pensions and the Enron  share-
     holders  who lost their portfolios know it is too  late  for
     them.  And Arthur Andersen knows it makes no  difference  to
     them now.

          http://www.nypost.com/postopinion/opedcolumnists/40083.htm

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