The collapse of Enron, the once powerful U.S. energy company, has raised critical, even painful, questions on Wall Street about how corporate America does business.
Enron made it to the big leagues when it moved from its roots as a gas utility in the 1990s. It started trading gas futures, then moved ambitiously into other commodities, including high-speed Internet access, even television advertising time.
Wall Street cheered the company on. Its stock jumped from $15 to $90 a share by the fall of 2000.
Today, Enron stock is worth less than a dollar and has been removed from the list of stocks traded on the New York Stock Exchange.
The expected profits never materialized for Enron, and the company hid its losses by moving them off its balance sheets into a complex series of partnerships that were invisible to investors. It worked for a while.
Arthur Andersen, Enron's accounting firm, and some say co-conspirator, shares the glare of notoriety as government investigators try to build a criminal case. Many Wall Street analysts, including veteran Art Cashin, put much of the blame on Andersen.
"The real problem, and this is Wall Street talk, you want a validity in the people who are auditing and checking out," he said. "If a hospital sends a patient's results to a lab for work, they do not expect the lab to re-work it so it looks like the hospital is doing a good job. You want to know what is going on."
Financial strategist Gregg Hymowitz says there is a lot of blame to go around. But he thinks the main fault lies in the scope auditors give corporations.
"There was clearly fraud here," he said. "When these people allowed Enron leeway in derivative transactions, they were effectively saying to Enron, the more derivative transactions you put on, the more you can put into current earnings. It was like a license to mint counterfeit money."
Andersen shredded documents related to Enron. Experts say that, in itself, was damning. Doug Carmichael, a professor of accountancy at Baruch College in New York, believes Andersen is likely to face criminal charges.
"The auditor is supposed to be the public watchdog, the one entity in the whole group that is supposed to protect public investors. Andersen did not do that," he said. "Given what I know now, I would expect to see criminal indictments of some of the people. And a really rough road for the firm unless they can work out a quick settlement."
Nanette Byrnes, an associate editor with Business Week magazine, has been coordinating coverage of the Enron scandal. She thinks the investigation, at the very least, will lead to some much needed reforms of the accounting business, which experts agree operates without adequate supervision.
"I think it does begin with self-regulation, and by self-regulation here I mean some sort of a system that is dominated by people outside the auditing profession and also overseen by perhaps the SEC," she said. "It must have subpoena power. It must have disciplinary power. It must have the power to set the rules for auditor independence. All of these things are currently done now by the industry itself and they're not doing a good enough job."
If Andersen is under threat of prosecution, there are some who believe Enron should be also. Enron defenders say the company simply did what it was allowed to do, however unethical it may seem.
But investigative reporter and author Carl Bernstein says that line of defense needs re-thinking.
"Should not there be some kind of protection for the shareholder from these rapacious executives such as Mr. Lay of Enron, who raid their own company of stock, make billions of dollars, line their pockets, and their employees and shareholders go broke," he asked. "And there is a question of criminal behavior there as well. If it is not criminal, should it be?"
The issues raised by the Enron scandal have burst onto the public stage in a most dramatic fashion. A giant has fallen, crushing under its weight millions of ordinary investors, even its own employees.
Accounting lapses are not that uncommon in corporate America. But Enron's impact, experts say, is too big to ignore politically.