From the Editor

Risk & Insurance, Feb, 2002

Just as we'll be dealing for years with the aftereffects of the terrorist attack that collapsed the World Trade Centers, a more recent collapse will preoccupy the business world in a different if no less momentous way. I'm talking about the fall of Enron Corp., the Texas-based energy giant that appears to have played a monumental shell game with investors and, perhaps worst of all, its employees.

The evidence so far suggests that Enron executives sold some $1.1 billion in Enron shares even though they may have known there was some $600 million in debt hidden-- stashed so far off the Enron books that apparently not even its accounting firm, Arthur Andersen, could track it.

Enron's leaders were able to cash out, of course, before the walls came tumbling down. But the most disturbing reality of all is that Enron's rank-and-file--the non-elite employees whose retirement portfolios were once fat with Enron stock--were prohibited from doing so. As Enron shares slid from $85 to 68 cents or so, Enron's workers could only watch their retirement dreams crash and burn.

That tragedy has been fairly well documented, but right now the focus of the Enron debacle is on whether or not the whole thing will amount to a political scandal for the Bush administration. Given that Enron's hefty financial contributions to Bush's campaign afforded its top brass some enviable access to the executive branch, the Washington scandal-mongers and Democratic machine are sniffing for blood and smoking guns.

Whoa. The American people would be better served by efforts to mitigate the risk of undiversified retirement accounts (which still hold sway in more than a few big companies), and improve accounting standards and loan policy. Lawmakers are looking at proposals to limit employer stock in retirement plans to 10 percent to 20 percent of assets, to guarantee all employees the right to diversify their holdings, and to ease the Enron-type "lockdowns" that prevent them from selling their company stock. Let the legacy of the Enron outrage be measured thusly--not in presidential hot water.

Matt Damsker

Editor-in-Chief