The Enron investigation creeps forward:
Posted by DeLong at October 10, 2003 09:04 AM | TrackBackEx-Enron Accountant To Settle (washingtonpost.com): A former senior accountant at Enron Corp. has agreed to pay a $500,000 fine to settle government charges that he and other executives fraudulently manipulated the Houston company's earnings, shifting energy-trading profits in California and other states to hide more than $1 billion in losses in 2000 and 2001. The Securities and Exchange Commission said yesterday that Wesley H. Colwell, who had been the chief accounting officer of Enron North America, the company's energy-trading arm, is cooperating with the Justice Department's criminal investigation of Enron's December 2001 bankruptcy filing.
Colwell was a close friend and colleague of Enron's top accountant, Richard A. Causey, and will become a pivotal witness in future cases if he has evidence that top executives knew about earnings manipulation, according to lawyers involved in the case. The SEC's complaint said that the trading profits were used to help hide $1 billion in losses at its retail energy unit in the first six months of 2001 -- a period when Enron's declining stock price threatened a financial crisis at the onset of Jeffrey K. Skilling's tenure as chief executive...
Does anyone have any comment on Greg Palast's story linking our New Governor to Enron?
http://www.gregpalast.com/blog.cfm
Posted by: Alan on October 10, 2003 09:47 AMCould somebody really smart give a game theory analysis of this? I guess in terms of public policy.
If the risk of getting caught means a $500,000 penalty, but the reward for not getting caught is say... $20,000,000, no rational person would refuse the gamble.
What would be the means by which to punish miscreants such that the rational choice would be to seek profits honestly?
Posted by: Saam Barrager on October 10, 2003 09:51 AMSaam,
$500,000 might be a slap on the wrist,
though it wouldn't be for me,
but if he's cooperating and singing to the feds about Kenny Lay and the rest of the principals (who profitted much more), then sure, let this particular small fry get away with just a slap on the wrist.
I'm not sure about gaming theory, but I think a dog track theory example might suffice. Suppose the word of honor system was used to determine which dog everybody betted on. If you say that you bet on the winner, you get the prize. No other proof is needed. Now suppose that the risk of getting caught in a lie is simply paying back a small percentage of your wrongful winnings. Further suppose that jail time is not even threatened for cheaters. Next suppose you have been going to the track for a while, and you are on to the game. I would suspect in gaming theory that the odds a dishonest person would cheat approach 100% over a long enough period of time.
Posted by: Mike on October 10, 2003 10:12 AMThe question is, is this fine above any previous forfeiture, or instead of it?
Posted by: Rob on October 10, 2003 10:31 AMWas this at the same time the Enron was claiming it was not profiting from the California energy crisis? My memory is a bit fuzzy on some details, but I suspect the worst.
rbb
Posted by: Mobius Klein on October 10, 2003 10:56 AMI guess that, now that the FBI is through with the New Orleans brothels and the CA medical marijuana clubs have been trashed, Ashcroft can put some agents on lesser crimes, such as Enron. I imagine that Worldcom people are worried.
I would fear that the Plame investigation would drain the FBI's strength too much, but somehow I don't think that that'll happen.
Posted by: Barry on October 10, 2003 01:11 PMI'm sure der Gropenfuhrer will get right to the bottom of this Enron business.
Posted by: hackticus on October 10, 2003 01:28 PM