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Dow Jones S&P 500 NASDAQ 10-Year Note
10,328.89 1,102.47 2,211.69 35.46
Oil *
73.88
UP
20.63
UP
6.40
UP
31.64
UP
0.59
10 Yr
3.55%
SPDR Gold
108.95
+0.20%
+0.58%
+1.45%
+1.69%
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RealMoney.com : James J. Cramer


No Excuses for This Enron Board

By James J. Cramer

11/05/2001 03:27 PM EST

Read More
Click here for the latest from James J. Cramer

The more I look at this board of directors at Enron (ENE:NYSE - news - commentary - research - analysis), the more puzzled I am. I thought that the directors would be somewhat typical of the "professional" board members that predominate at large companies, busy people who wouldn't know a derivative if it walked into them and hit them along side the head with a two-by-four.

It's just the opposite. Let me rip down some of these folks' bios, and you can be as puzzled as I am. Let's take them alphabetically.

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Robert Belfer ran Belco Petroleum, and comes from a sophisticated family of oil operatives. He should be able to spot anything that even smacked of chicanery in the oil business from just his old-boy ties. I know this family; they are very smart and very wise to the ways of Wall Street, Main Street and the oil patch.

Norman Blake is a gent I met years ago at USFG, before he sold it at a huge profit. This man has recently served as CEO of Comdisco, a leasing company that is not only comfortable with debt and financing, it is wallowing in it.

Blake has General Electric training. This man can smell things that are not so right from miles away. Where was he in all of this? Stuck in Comdisco hell?

Ronnie Chan is a longtime kingpin in Hong Kong, a place where financial originality is always on display. Chan certainly would have understood how unseemly all of these 17 partnerships would have appeared. He's seen everything over in Kong.

John Duncan is an energy investment guy, a director of EOTT Energy, and a seasoned pro who knows oil and gas financing and accounting. Again, very sophisticated.

Wendy Gramm regulated derivatives. She was the chairman of the CFTC and a director of the Chicago Mercantile Exchange. How could she not have spotted this obvious conflict and probed what these partnerships entailed? That was part of her old job.

Robert Jaedicke was a professor of accounting at Stanford Business School, where he was also dean. This guy wrote the book on this stuff and really should have seen it coming.

(I am skipping Ken Lay, the CEO.)

Charles Lemaistre and John Mendelsohn, two execs from the University of Texas M.D. Anderson Cancer Center, can't be expected to catch this stuff, and therefore gets a pass from me.

Paulo Ferraz Pereira is a former president and chief executive officer of the State Bank of Rio de Janeiro. That's probably put him in more than his fair share of difficult financial situations. How could he not raise a word about it?

Frank Savage serves as chairman of Alliance Capital Management International, perhaps the most sophisticated company in the world of money management. I am sure Savage never saw a situation as bad as Enron's looking through his own company's portfolio of investments.

Jeffrey Skilling, the man who resigned as CEO, needs to be heard from. We know that he is a director of the Houston branch of the Federal Reserve Bank of Dallas, a sinecure that slouches and undervigilant execs don't get hold. What did he know and when did he know it?

John Wakeham, Lord Wakeham to everybody, is perhaps the most financially sophisticated Brit to serve in Parliament. He managed a large private practice as a chartered accountant. He's big and powerful and smart.

Herbert Winokur is a longtime financial hand who also has run investment partnerships and used to serve as a director of Penn Central, a place that saw more than its share of ups and downs and tricky financial situations.

In short, this is the most sophisticated, hands-on group of folks I have come across. I can't believe they checked off on this stuff. I have to believe they didn't know, or if they knew of the partnerships, I believe they had no idea what they were doing.

I want so badly to presume that these partnerships were simply set up to take down a lot of debt and not hurt Enron's credit rating with the agencies -- not that that's such an ethical setup. But at least it makes me think that the board might have been confused or not focused because it would have seemed unimportant, as they might not have known how big and how extended the partnerships were.

Still, let's not fool ourselves. This was a powerhouse, fantastic, upright board of people who know a thing or two. I can't believe they let this stuff occur. I think they knew nothing.

Which is pretty terrible in its own right.


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Dow Jones S&P 500 NASDAQ 10-Year Note
10,328.89 1,102.47 2,211.69 35.46
Oil *
73.88
UP
20.63
UP
6.40
UP
31.64
UP
0.59
10 Yr
3.55%
SPDR Gold
108.95
+0.20%
+0.58%
+1.45%
+1.69%
Data delayed 20 minutes

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James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to jjcletters@realmoney.com.
Read our conflicts and disclosure policy.
Order reprints of RealMoney.com articles. Top


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Dow Jones S&P 500 NASDAQ 10-Year Note
10,328.89 1,102.47 2,211.69 35.46
Oil *
73.88
UP
20.63
UP
6.40
UP
31.64
UP
0.59
10 Yr
3.55%
SPDR Gold
108.95
+0.20%
+0.58%
+1.45%
+1.69%
Data delayed 20 minutes

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