Statement of Senator Carl Levin on the Enron Convictions

Mr. President, five years ago, the Enron Corporation, the seventh largest publicly traded corporation in America with a $100 billion in annual revenue, collapsed. Its sudden plunge into bankruptcy destroyed the savings of thousands, eliminated the jobs of tens of thousands more, and, more fundamentally, damaged Americans’ faith in U.S. capital markets. In the years following, the extent of Enron’s misconduct became clear – the dishonest accounting, nonpayment of taxes, excessive executive compensation, collusion with banks and brokers, the lies to the investing public and their own employees.

Many Enron executives have since pleaded guilty and accepted responsibility for their role in the Enron disaster. Enron’s two most senior executives, however, did not. They spent the last five years denying responsibility and fighting all efforts to hold them accountable. But yesterday, a jury found Ken Lay and Jeffrey Skilling guilty of 25 counts of securities fraud, wire fraud, false statements, and other misconduct. The jury held both men accountable for Enron’s misdeeds.

Some want to portray those convictions as the end of an era of corporate corruption. They are already urging Congress to weaken the Sarbanes-Oxley Act, the law enacted to prevent future Enron catastrophes. For example, they want to exempt 80% of the publicly traded companies from rules requiring internal controls to ensure that their books accurately reflect their finances. They want to weaken or eliminate the Public Company Accounting Oversight Board that now polices the accounting industry. They want to weaken other corporate reforms as well, from rules requiring oversight of hedge funds to rules requiring mutual funds to have independent directors.

But corporate corruption is not over. Just this year, AIG, one of the country’s largest financial firms, agreed to pay $1.6 billion to settle state and federal allegations of securities fraud and bid-rigging. Fannie Mae, an American symbol of financial success and affordable housing, paid $400 million to settle allegations of accounting fraud. In April, the former chief executive of Computer Associates, a leading high tech company, pled guilty to securities fraud and obstruction of justice. Another 20 publicly traded corporations are currently under investigation for playing games with the timing of stock option grants to maximize the profits that their top executives could pocket. The list, unfortunately, goes on.

The message that should be taken from the Enron convictions is not that corporate oversight is too tough, but that corporate executives must and can be held accountable when they misuse funds, abuse their positions, and mislead the investing public.

I’m told that some corporations are waiting for my good friend, Paul Sarbanes, to leave the Senate, before attacking the law that he championed. They want him out of the way first. But my friend fought too hard and too long for the corporate reforms embodied in Sarbanes-Oxley to be tossed aside or watered down. This country can’t afford more Enrons, and I, for one, believe the Senate cannot and will not turn back the clock on corporate oversight.