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`The press blithely accepted Enron as the epitome of a new, post-deregulation corporate model'
The man who first laid Enron bare was not a journalist. In October 2000, a hedge-fund manager named James Chanos began to scrutinize the company's financial statements and was astonished by what he discovered: murky references to "related party" transactions involving Enron's senior officers, and massive insider selling.
Chanos attacked the documents, filling the margins with exclamation points and notations, and marking dubious footnotes with yellow Post-its. In November 2000, he shorted the stock, and the result, when the price plunged, was a windfall for himself and his clients. In February 2001, Chanos tipped off a reporter at Fortune, Bethany McLean, who in March, published a story entitled "Is Enron Overpriced?" That story was a link in a chain of events that eventually destroyed the company and ignited one of the most explosive corporate scandals in U.S. history.
It's a scandal with numerous culprits and accomplices, some of whom were named in a page-one story in The New York Times on January 14 by the business writer Gretchen Morgenson. "The bull market euphoria," Morgenson wrote, "convinced analysts, investors, accountants, and even regulators that as long as stock prices stayed high, there was no need to question company practices." One could add an additional culprit to that list: the Fourth Estate.
"Gurus, analysts, and the media must take some blame for what happened," Richard Lambert wrote in the Financial Times on December 15. At least one major American publication concurs with that bleak assessment. In a December 17 editorial headlined LET US COUNT THE CULPRITS, Business Week lashed out at Wall Street, mutual funds, and the rating agencies, urging them to rethink why "each, in its own way, celebrated what is now revealed to be an arrogant, duplicitous company managed in a dangerous manner." And then, in a moment of unusual candor, the magazine issued its own mea culpa: "The business press, including Business Week, did no better. It celebrated [ex-CEO Jeffrey] Skilling's vision of Enron as a virtual company that could securitize anything and trade it anywhere. The press blithely accepted Enron as the epitome of a new, post-deregulation corporate model when it should have been much more aggressive in...