Congressman Sees Enron as Lead Roach
from July/August 2002
As chairman of the House Committee on Energy and Commerce’s Subcommittee on Oversight and Investigation, Representative James Greenwood (R-Pennsylvania), 51, has emerged as a leader in Washington’s post-Enron reform movement. He talked with Corporate Board Member’ s John Engen:CBM: What’s the mood in Congress toward corporate America?
Greenwood: There’s a sense that the emperor has no clothes when it comes to the credibility of audited financial statements. We have to make some reforms to restore investor confidence.
Is Enron viewed as an aberration, or is there a deeper problem?
Nobody really knows. I don’t think it’s the norm, but I subscribe to the roach theory: If you see one scurrying across the floor, it’s a good bet there are others behind it.
What have you been hearing from constituents?
The average person simply knows that some big guys got very wealthy and a lot of working stiffs got creamed. If I walk into a hardware store, I’m likely to hear “Go get those bastards.“
What are corporate leaders saying?
Most believe that we need to make some changes to restore confidence.
Does that mean new laws or stricter enforcement of existing laws?
Both. The Justice Department and the SEC are charged with punishing violations of law. Congress’s job is to examine how the laws function and make changes. What we’ve discovered is that Andersen—particularly as applied to special-purpose entities and off-balance-sheet accounting—helped Enron create false impressions in financial statements without necessarily breaking the law.
Is there a danger that Congress might overreact?
It’s important to strike a balance. Congress could do nothing, and then the public would say that we’re beholden to special interests. It could also overreach by creating new bureaucracies to audit every publicly traded firm. Frankly, with a Republican House and president, there’s not much chance that we’ll wind up with a big-government approach.
Your committee is pursuing reforms in the Financial Accounting Standards Board. What do you envision?
We want to reconstitute FASB as an independent entity, not one that’s owned and operated by the Big Five accounting firms. Congress would require that every determination an accountant makes would encourage transparency and prevent management from fooling the investor.
You voted for the Corporate and Auditing Accountability, Responsibility, and Transparency Act, which, among other things, gives the SEC administrative power to bar “unfit persons” from serving as directors. Are you comfortable with that approach?
In very egregious situations, where directors are clearly lawbreakers, there is a role for the SEC. But I think the private sector will take care of this itself. I wouldn’t expect, for instance, to see Enron board members being snatched up by other companies.
