the CAMP ENRON Report

... gateway to the next Progressive Era?

Some say it's nothing but a train wreck ... roll in the big cranes, clear the track, see what the crew's been smoking. If I thought so, I'd not be writing this ... and if they thought so, they'd not be drumming so hard.

For a brief orientation, see this
Welcome to Camp Enron

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Camp Enron Archives
01/01/2002 - 02/01/2002 02/01/2002 - 03/01/2002 03/01/2002 - 04/01/2002 04/01/2002 - 05/01/2002 05/01/2002 - 06/01/2002 06/01/2002 - 07/01/2002 07/01/2002 - 08/01/2002 08/01/2002 - 09/01/2002 06/01/2003 - 07/01/2003

(2) All "major" articles of older material have now been imported, some with updates worth perusing. We'll keep it all on the main page for a while, will add a few loose pieces of history, will trim the main page and index the archives for convenience later.


free agent, loose cannon, pointy stick ... taking an imposing analytic toolkit out of the box, over the wall and into the street ... with callous disregard for accepted wisdom and standard English

reading the tea leaves from original angles, we've led with uncannily prescient takes on the federal surplus, the dotcom crash, the "Energy Crisis", the Afghan campaign, the federal deficit.

More where those came from ... stay tuned.

For brief orientation, see this
Welcome to CP

... gateway to the next Progressive Era?

For a brief orientation, see this
Welcome to Camp Enron

Many thanks to Tony Adragna and Will Vehrs, still shouting 'cross the Potomac at QuasiPundit. Early Camp Enron material can be found in QP's Dispatches department.
Monday, March 25, 2002

--- No Sympathy, No Reform, and No Heroes ... Yet ---

Joe Berardino fails in leadership before and after the fact. Before the fact, failing to scrub Andersen squeaky clean after a series of probationary plea bargains in other cases. After the fact, failing to recognize the black-hole gravity of the situation, and bidding for cheap buy-off's and quick slaps on the wrist.

Paul Volcker fails in the art of the possible ... demanding indictments dismissed, top management replaced (but refusing to answer whether that means Joe B), liability capped and claims settled on the cheap, partner/client/affiliate defections stopped in their tracks, and a name change. Of these, only the name change is feasible -- and that won't fool anybody.
Speaking of name changes, how's this for "BrandStorming": Accidenture ... Accusature ... Accomplicetrix ... Accessoreon ... Accostia ... Accursacon ... Accordionet?
Andersen fails, period. The War Room map is lighting up with wildcat defections, voiding any opportunity to use what little leverage the firm has left -- mainly the noncompetes and buy-out provisions in engagement agreements, partnership agreements, affiliate agreements, and affiliates' partnership agreements. It's too late ... turn out the lights, the party's over.

Harvey Pitt fails, reading the SEC roadmap at every turn from a Big Five perspective (despite his best intentions). "A man's got to know his limitations", and one of Pitt's limitations is that he will never be taken seriously in this role. Like Newt Gingrich with the Murdoch book deal, he's the only guy in the room who doesn't realize he's a shill. Losing composure and erupting about his critics' "big lie" campaign didn't help his case. He can delay the inevitable, but that may only harden the fall.

Paul O'Neill fails, inveighing against the evils of new law and new regulation, stacking all his chips on the square marked "personal integrity". If integrity was the solution, there wouldn't be a problem in the first place. How do you promote integrity in a reward system stacked against it? A corporation relies on oversight and controls to save the 3rd shift cashier from temptation. How does O'Neill propose to elevate the personal integrity of officers and directors?

The Council of Institutional Investors fails to press any pressing questions, as it has O'Neill over for coffee this morning. These are the shareholders' advocates, they're being taken for a ride, and they seem comfortable enough going along with it.

Credit rating agencies fail, pointing fingers elsewhere. Of all the gatekeepers, they have the best shot. Unlike those who audit and attest on a pass/fail basis, they can already apply grey-scale evaluation. They can demand inside info, unlike security analysts who (in theory) can't use it. Of all the overseers, they have the broadest latitude to act on the totality of evidence ... including questions like "can these ratios possibly be right?".

Lou Dobbs on CNN is fulminating endlessly and pointlessly, bewailing the injustice of it all. Claiming Volcker's plan could have worked (it couldn't), ranting that nobody's been charged except for obstruction of justice (they will be), acting as if DOJ was the straw that broke Andersen's back (as if).

First-generation reforms are failing left and right, as should be expected. Houston Chronicle's Laura Goldberg provides an extended digest of what's on the table and how little is getting done.
On balance, said Sen. Jon Corzine, D-N.J., former chief executive officer of investment bank and financial firm GoldmanSachs, post-Enron results will be "someplace between the illusion of reform and modest reform."
Pension reform will be watered down to trace amounts -- a few PPB. Options reform -- even the small-potatoes reform of applying the same accounting to taxes as to earnings -- is going nowhere. GAAP reform is driving around in a fog ... it's not clear the key players even realize it's foggy out. Audit reform, board reform, other corporate governance and disclosure will get minor cosmetic surgery, and players will mind their p's and q's for a season or two. Security analysts are safe for now, as are derivatives (abusive or not), securitizations (ditto), SPE's (ditto), offshore structures (ditto), executive compensation (abusive).

We can't get serious about audit reform without GAAP reform, and can't do that without some sort of definitional epiphany involving accounting "truth" (or at least "conformance"). How can we disclose what we don't understand?
Accounting is no longer reducible to bean counting -- how many beans in a can, how many cans in a case, how many cases on the shelf, whose are they, when did they get there, what did you pay for 'em, what are they going for these days, how many of 'em are likely to go bad.

Derivatives are contracts under which money (and other valuable considerations, but mostly money) may flow either way, or both, depending on all manner of compound uncertain future events. What's it worth, and how do we label the flows of value? It's no longer possible to distinguish revenues from loans from investments from repayment of loans from appreciation ... it's all proceeds per contract, and those numbers tell us none of what we (lenders, shareholders, taxers) need to know.
Looking ahead, I figure 2-3 years for the factual investigative phases to mature, 2-3 campaign cycles for issues to crystallize, 2-3 administrations for reform leadership to overcome status quo conservatorship. Heroes will be made tomorrow, but no heroes today.