"There is no calamity greater than lavish desires.
 There is no greater guilt than discontentment.
 There is no greater disaster than greed."
   - Lao Tzu

I've been watching the Enron scandal unravel itself in all its terrible splendor. I am in awe of the dollar amount lost to the investors in this enterprise, and not at all surprised by the public outrage against the management that sat watch while the company cratered. It's a very bad situation for an incredible number of people.

I'm no stranger to events like this. There was a time when I worked for a company that held a dubious record for achievement: the highest single year's net operating loss, at nearly $225 million, a record they held for a number of years. I joined the company several years after the loss was posted, as part of a brand new management team invited to try to dig the company, by then reorganized and merged and prettied up for new investors, out of the quarter billion dollar hole it had augured itself into. The task was impossible, but our CEO never had less than incredible optimism. When confronted with mounting losses and dwindling revenues, he'd cheerily ask, "Know what's great about our situation?" When we'd confess we couldn't imagine anything great about it he'd laugh and say, "With our NOL so big, we'll never have to post a profit!" That thought was usually enough to send me off to the local watering hole for the afternoon. The company's liquidity, or lack thereof, was a beer chaser par excellence. Needless to say, not one member of the "new and improved" management team, myself included, remains in the company, which is still limping along deep in leveraged debt.

But Enron's management has gone far beyond anything we could have imagined. The implications for investor's portfolios are alarming at best, horrific at worst. Once valued options are wholly submerged, Congress is calling for an investigation, and aspersions are being publicly cast. Lawsuits are being filed on an hourly basis.

I noted one thing that I confess, I find baffling. Enron used the services of Arthur Anderson (now known as Accenture) as its auditing agency. Every year, the auditors are supposed to review the company's books, and file reports with the appropriate authorities and investment groups regarding the fiscal health or unsoundness of the company under review. The auditing agency is one of the largest, and most respected, in the nation. Surely they must have seen signs that something was amiss with the bottom line before it slid into seven- and eight-digit negative numbers. We're not talking chump change, after all. How did they miss this?

I wonder if it has anything to do with the fact that the consulting arm of their business was busily charging nearly one million dollars weekly to Enron for "services rendered?" Even the most inexperienced, naive managers know that the suppliers who provide services to the business probably aren't going to be the most reliable auditors for those same services. If not, our business school curriculae are more severely broken than I can imagine. Regardless, Accenture made a lot of money from consulting, and even more money from auditing, and when the dust settles, Enron's still going to be on record as a colossal investment catastrophe, a record that might stand a few years longer than the paltry $225 million of former years.

Excuse me. I have to write a check to my application programmer. He's nearly finished auditing my programs, and tells me everything's just fine.

R.B.