Wednesday, July 12, 2006

All criminals have friends


Ken Lay was eulogized as a "straight arrow" and a "boy scout" at his funeral yesterday. I'm sure his friends and family loved him, and I am sorry for their loss. In his personal life, he was probably a sweet guy.

However, he wasn't a straight arrow in his business dealings. He was a white collar criminal, whose malfeasance and nonfeasance cost real people hundreds of millions of dollars worth of real money. That's just the truth, most recently confirmed by a jury verdict.

Ken Lay had always been willing to overlook criminal or merely stupid behavior if it looked to be profitable. As the superb book Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron details, in the 80s, Ken Lay was well-briefed on an scam that nearly lost hundreds of millions and ruined his company.

In that case, some crooked commodities traders were allowed to bet much more in futures than their entire company was worth. Luckily for Enron, their overleveraged maneuver was never uncovered. Someone more skillful was brought in to clean up the mess; he was able to unwind the trades without anyone being the wiser. The key point is that Ken Lay knew these two were wrong before things turned sour. He had been briefed in exquisite detail. He knew they had actually set up an account in the Cayman Islands to store their money. Unfortunately, he also knew that they were the only profitable arm in Enron at that time. After a meaningless investigation, these two crooks were sent forth with a mere "sin no more" warning from him, then they proceeded to literally bet the farm. (NB: the movie "Smartest Guys in the Room" is excellent too, although I was quite surprised to see some of the bad guys in the book are actually in the movie, cheerily telling anecdotes about Lay and Skilling. I guess they didn't read the book.)

The point is repeated a million times over. If you rob a bank and take 1,000 dollars, they'll throw you in jail for life. But if you steal hundreds of millions of dollars through complicated financial chicanery, you get to die in your sleep, in a comfortable house in Aspen, Colorado.

As the song goes,
Them that's got shall get
Them that's not shall lose
So the Bible said and it still is news
Mama may have, Papa may have
But God bless the child that's got his own
That's got his own
I actually met the guy who wrote "God Bless the Child" at the Columbia U. Folk Crypt. A cheery little marxist sprite, he was. Now I can't find his name. It looks like people think Shania Twain wrote that darn thing.

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