It was Houston-based law firm Vinson & Elkins’ turn to get spanked by the Tauzin Tribunal yesterday. As with executives at Enron and Arthur Andersen, they applied the we-know-nothing defense, which was about as well-received as Jeff Skilling’s last performance. They also demonstrated why Top Executives are not the same as the rest of us.
The firm’s lawyers were grilled at length about their work investigating allegations raised by Enron Vice President Sherron Watkins in an Aug. 15 memo to former Chairman Ken Lay, warning the company could “implode in a wave of accounting scandals.”
In addition to numerous accounting issues, Watkins’ portentous memo warned about conflicts of interest and questionable dealmaking that threatened to topple the company.
Derrick, a former partner at V&E who recently retired from Enron, asked the firm to conduct a limited probe of Watkins’ concerns.
Under sharp questioning from lawmakers, the V&E lawyers said they never talked to many of the potential witnesses named by Watkins.
They also did not pursue Watkins’ claim that bankers may have been pressured to invest in questionable deals with Enron as a condition of future business with the company.
Instead, the firm talked to accountants at Arthur Andersen and executives at Enron, who assured them that issues raised by Watkins were well-known and being managed, the lawyers said.
[…]
For months, V&E has been defending its work on the Watkins probe, saying the firm was not asked to look at Enron’s accounting practices.“If a transaction is not legal and it’s been approved by the appropriate levels of a corporation’s management, lawyers … may appropriately provide the requisite legal advice,” Dilg said. “In doing so, the lawyers are not approving of the business decisions that were made by their clients. Likewise, lawyers are not passing on the accounting treatment of the transactions.”
[Rep. James] Greenwood [R, PA] took the firm to task for apparently accepting the assurances of former Chief Financial Officer Andrew Fastow regarding the partnerships and his own conflicts of interest.
“I don’t understand why you didn’t feel responsible for Enron and its stockholders and make those calls right away,” Greenwood said. “You just took Andy Fastow’s word for it.”
Whenever I read something like this I begin to wonder if maybe the Michael Moores of the world don’t have a good point about big corporations. Why is it that the senior people at V&E who were responsible for this so-called investigation are still employed there? Surely if some lower-level employee had failed at a task in such an egregious and spectacular fashion he or she would have been given ten minutes to clean out their desk and then escorted out by security. The worst thing that will happen to these guys is a golden parachute. Why aren’t they held to the same standard, especially given that their decisions have a much greater impact.
My boss has a few simple rules for his employees. Follow these rules and you do well at evaluation time. His #1 rule is “Verify the facts”. Too bad he wasn’t in charge of the Enron/Andersen investigation at V&E.