ENRON’S FINAL ACCOUNTING

A jury’s guilty verdicts against Enron Corp.’s top executives should dramatically end an era of corporate excesses and accounting schemes to exaggerate corporate success. After six days of deliberation, a jury in Houston Thursday found the company’s founder and former chairman Ken Lay and former CEO Jeff Skilling guilty of fraud and corruption.

The Enron case, which included four years of investigation and a four-week trial, was the largest and most watched of a string of corporate fraud cases that contributed to California’s energy crisis and the stock market bust in 2000. It also led Congress to pass stricter accounting and corporate oversight rules.

Enron, which grew from a small pipeline company to an energy-trading giant, was once the seventh largest in the country before filing for bankruptcy in 2001. The company disappeared almost overnight taking with it thousands of jobs and more than $1 billion in retirement funds invested in company stock that became worthless.

Messrs. Lay and Skilling were accused of using off-the-books partnerships and other schemes to hide billions of dollars in losses and to boost earnings. They then lied to employees, investors and regulators about their creative accounting practices, federal prosecutors charged.

Mr. Lay told jurors that the com-pany’s accounting practices were “aggressive” not illegal and that they were misunderstood because they were new and different.

Jurors disagreed, finding Mr. Lay guilty on all six charges of conspiracy and fraud. U.S. District Judge Sim Lake also found Mr. Lay guilty of bank fraud in a separate case involving his personal banking. Mr. Skilling was found guilty on the majority of charges he faced.

Each conviction carries a sentence of five to 10 years in prison. Sentencing is scheduled for September. If the executives go to jail for a significant time, it should send a strong message to others that deceptive business practices will be discovered and harshly punished, says Dan Innis, dean of the University of Maine’s College of Business.

Several other company employees had also been convicted or pleaded guilty as part of the accounting scheme. The company’s travails also led to the closing of one of the country’s largest accounting firms, Arthur Andersen, because it had destroyed thousands of Enron-related documents.

Enron’s demise prompted regulators to examine other companies. Executives at WorldCom Inc., Adelphia Communications Corp. and HealthSouth were prosecuted for fraud with most found guilty. As a result, Congress passed new oversight rules, the Sarbanes-Oxley Act, which calls for more independence among and more oversight from corporate board members.

For all the talk about complex accounting practices, this case was about deception. The jury believed the two executives were guilty of lying about their behavior. Stricter laws and better oversight aren’t needed to re-enforce that.