As Enron’s slogan went, ‘Ask Why’, let us ask why. Why is it that insiders are getting rich(er) and the little guy is steady
loosing?
The ‘little’ guy First, let’s take a close look at one of the people directly affected by the insider trading. A 54 year old man named Roy Rinard, he owned a subsidiary of Enron. His 401(k) savings account (all of which was invested in Enron) was valued at $472,000! He was getting quite comfortable with the thought of retiring early and, dare I say, being
financial sound; and then came Enron’s bankruptcy. He was immobilized by company rules from selling his 401(k) invested stock. Alas, the top executives and board members sold more than $1 billion in stock, driving Enron’s stock even lower. When Rinard finally could get rid of the chancy stock his account was down to $4,000, giving him a loss of 468, 000 dollars!! That is not a gamble I would want to make, but giving him the benefit of doubt there were few to have seen it coming!! The media reported how the board members gave such surety and confidence that all was well within the company.
As a chapter of history unfolds, it seems to have a common theme: Greed, inflated accounting, and the law being treated like a rubber band, often being stretched so far that it finally breaks, oh and we shall not forget shady characters.
Insider Trading
Waste Management Inc. has twice in 10 years, had to restate their previously reported earnings.
Cisco Systems , misled investors about their serious financial problems, but not before the board of directors and the elite executives could sell over $600 million of their own company stock.
Sunbeam Corp . Albert J. Dunlap, chairman and chief executive was found to have falsified
financial reports. Before filling for bankruptcy he sold 100% of his holdings— he received more than 60 million dollars.
Enron Corporation , Andrew S. Fastow, CEO of Enron Corp., also director of yet another subsidiary of Enron, liquidated $30 million of his own Enron shares.
Arthur Andersen was billing around $1 million a week in fees from Enron. They never disclosure that Enron had created partnerships with Fastow primarily to hide debt, which allowed Enron, on paper, to appear profitable.
AA was also responsible for auditing Sunbeam favorably. Recently they had to pay $110 million to the share holders of Sunbeam Corp. as settlement to their
litigation.
Corporations are allowed’ to ravage the stock market and pillage 401 (k) plans… Why?
Private Securities Litigation Reform As said by the authors, “The Private Securities Litigation Reform Act might more accurately be labeled the ‘Corporate License to Steal Act.’ the law was written largely by and for powerful corporate interests. It gutted historic safeguards against fraud and weakened those protecting investors. Under the law, victims must prove a fraud in detail without access to evidentiary documents. Damages are limited. Accounting firm, are protected from liability. The allegations in the Enron story echo some of the allegations in suits our law firm is currently litigating or has settled since the act was passed.”
There has been talk of congress to revisit the Act; but if we the people for the people do not start following this and other white collar crime with a magnifying glass and if we don’t start asking why, the financial well-being of Americans will “left in the hands of the insiders, who can only be faithful to the instincts of greed.”
A motivator as old as humankind: greed. Ask Why.