Enron: Guilty as charged

So Messrs. Lay and Skilling are guilty. The frustrating part of this case and others of its ilk is that the original charge has never been addressed. This, like WorldCom and many others, was described as a case involving accounting fraud. Yet, nothing about accounting was said at any of these trials. Was Jedi legal? We never heard anything about that. The case came down to whether they were overblowing the results of the company. Call it a disclosure case. Nothing, though about accounting. Continue reading

Freakonomics

I have just begun to read Levitt & Dubner’s admirable book Freakonomics. The first chapter posits with examples that if one provides enough economic rewards that people have an incentive to cheat. Teachers and sumo wrestlers are used as the example. (Interestingly, the authors avoid using university professors as their example.) The really interesting question to me, though, is why so many people who have huge incentives to cheat do NOT do so. Is it lack of imagination? Fear? Or, is it something deeper? The authors never explore this issue.

The second chapter raises the issue of what one can do with information. They point to the Ku Klux Klan and real-estate agents who were able to use information to their own advantage. Once again, the really interesting question is why so many people seem to be more than willing to share their knowledge. What was it about Stetson Kennedy that persuaded him to pass the secrets of the Klan on to others? Presumably, he could have used this information to his own advantage but he did not. Why?

As Sherlock Holmes commented, it is the dog that did not bark that is sometimes more interesting than the one that did.