PURSING ENRON

Like cartoon characters that turn their unusual intelligence to evil deeds, Enron officials are being exposed by one of their own in a plot to enrich themselves while California suffered in darkness and the company’s many investors lost their life savings. This first plea and others likely to follow should persuade Congress that its new rules for accounting and securities should be matched with regulatory budgets that ensure enforcement.

Shadow companies, inflated revenue figures, off-shore subsidiaries, illegal banking arrangements, false energy holdbacks, hidden and illegal ownership of companies – where the cartoon bad guy might use a sure-fire satellite laser gun to try to take over the world, Enron used paperwork and smarts. In Enron’s case, of course, the pain was real – a huge and fast-growing corporation that cheated people, sucked dry retirement accounts and stranded innocent employees when their plans went awry.

A former director in Enron’s global finance unit, Michael J. Kopper, pleaded guilty to conspiracy charges Wednesday and confirmed some of the Justice Department’s charges against the company. Prosecutors say they will try to recover many millions of dollars from Mr. Kopper and from chief financial officer Andrew S. Fastow. It certainly is necessary to recover as much money as possible, but the largest losses are gone forever.

Sen. Susan Collins, the ranking Republican on a Senate subcommittee investigating this disaster, said she wasn’t surprised by the guilty plea. “I trust that the fate of Mr. Kopper will send a strong signal to other corporate executives who have engaged in wrongdoing that they too are unlikely to escape prosecution,” she said. “We now have a sweeping new law that addresses many of the problems that Congress discovered in its investigations into Enron. That law establishes a strong oversight body for the accounting industry, to help ensure auditor independence, which will restore faith in the accuracy of corporate financial reporting.” Congress indeed made a determined start at reviewing rules of corporate behavior, but it is not finished yet.

Economists have speculated in news accounts how much the budget of the Securities and Exchange Commission’s would have to be increased before it had sufficient resources to adequately prevent something like this from happening again. After urging financial deregulation and a smaller role for the SEC during his first year in office, President Bush properly asked Congress to increase its budget by $100 million recently, a figure that apparently still is insufficient given a workload that reportedly has doubled since the early 1990s.

The new Accounting Oversight Board may do as much for reforming accounting practices as the threat of prison will, but a stronger SEC should accompany them. That will mean new financial disclosure rules, including those proposed by the commission, and rules on write-offs and restructuring, changes in trading of company securities and limitations in employee benefit and stock ownership plans. This will require more oversight, resources and, as important, encouragement from Washington for the SEC to be aggressive.

The Enron investigation probably taught financial regulators a lot. Chief lesson: Never trust people who are trying to take over the world.