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
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
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
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