Well, yes Guido, but no Paul

If 52 per cent of the staff of a company were found to have cheated their customers it would be fair to say that firm was a criminal enterprise, a racket. Only a small percentage of Enron’s staff was crooked, yet the whole company was closed down by the authorities.

You see, the thing is, Enron wasn\’t closed down by the authorities.

It was closed down by the markets. It went bankrupt.

As the accounting scandals came to light the share price dropped precipitously. This made lenders wary of rolling over debt (yes, Enron used to borrow short to invest long) and thus the cashflow dried up and they went bust.

In fact, the markets bankrupted the company before a single bureaucrat had even managed to sharpen their pencil.

The bit the bureaucrats did do was get Arthur Anderson convicted and thus bankrupt that firm. Slightly sadly, as three years later Anderson\’s was cleared of those offences on appeal and yet the firm was already dead and buried.

Sure, prosecutions followed but the company was long gone by that time.

As a good little libertarian Guido really ought to know all of this. Markets punish better and faster than bureaucracies and Enron is one of the great examples of exactly that.

Tsk, and to mislead in The Times so as well…..

6 thoughts on “Well, yes Guido, but no Paul”

  1. It’s “Andersen” with an “e”, and the “firm” did not particularly go bankrupt.

    It was a partnership, and most local offices just rebranded as “KPMG” or “PwC” or whoever offered the local partners the best deal. The partners may well have lost money, but it is not like shareholders in Enron or Northern Rock, who lost everything (and rightly so).

    Plus these large accounting forms are all corrupt shits, so I wouldn’t have too much sympathy with them. AA deserved everything they got (which wasn’t much).

  2. “Markets punish better and faster ”

    Slightly weird perspective, but sentiment aside (“better”), I largely agree. I mean, just look around.

  3. It gets uncomfortable if you draw the parallel with Enron out. We have a group of corrupt shits running the country and fiddling the books. What will the markets do to UK plc?

  4. Mark-

    Wow, you really haven’t a clue, do you? You’re dead wrong on each point you address.

    When Enron broke publicly, Andersen had it’s permit to practice pulled by a number of states’ accountancy boards, which effectively closed Andersen down. There was no “rebranding” to another firm’s name. Clients, partners and staff jumped ship when and where they could, but it was not in the manner you suggest (or should I say, guess).

    And let me assure you, the vast majority of Andersen’s partners lost every cent of their investment in Andersen (which in a partner’s case is quite considerable). I know this for a fact.

    And as far as all big firms being “corrupt shits” well, that’s the sort of insight we’ve come to expect from super-genius types like Richard Murphy. Before you vent again, consider the sort of intellectual company you’re keeping.

    Many of us in the profession have spent a hunk of time reading about what went wrong at Andersen and why, obviously you haven’t. If you wishing to be schooled further, with things like facts, let me know.

  5. Markets punish better and faster than bureaucracies and Enron is one of the great examples of exactly that.

    Yes thats right Tim no Police and the crooks would be out of business

  6. Although a fan of @4, I must support my fellow Brit @1 on this occasion. I suspect the differing views are down to nothing more than the different ways in which AA went tits up on either side of the pond. Probably, because there may have been one brand but there was more than one firm.

    @4 is right as far as the UK partners in AA were concerned. There was no sympathy because we were all busy laughing and taking the piss.

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