Under this credo, if a company has some kind of difficulty, whether it be a massive fib on its balance sheet or a simple tendency to lose money, the problem is not the company, and heaven forbid not the CEO or the board of directors. It is them. The objects of blame can be short-sellers, "Wall Street," journalists, independent analysts (another post-Enron Good Thing we are supposed to cherish) or sometimes all of the above working in cahoots. Lay and Skilling personally acknowledged the popularity of this latest corporate rage at their trial, when they testified that Enron was a victim of evil short-sellers working in league with journalists, unfairly driving down the share price.
The them defense is gaining currency, bringing the paranoia of UFO-ers and four-shooters-at-Dealey-Plaza wackadoos into the boardrooms and business news programs of America. The media, instead of scoffing at such rubbish -- there are notable exceptions -- either ignores them or actively promotes their cause.
A good example of the media swallowing this line of corporate swill came in July 2005, when "Dateline NBC" told the sad story of a company called Eagletech Communications that was "mysteriously" victimized by those awful short-sellers. What "Dateline" left out was that Eagletech was an old-fashioned stock rig, and that a federal grand jury in Newark had indicted some reputed Mafia guys for manipulating Eagletech like a yo-yo and, in the process, cornering nine-tenths of the company's unrestricted stock. There had even been two guilty pleas by airtime. "Dateline" also left out that Eagletech's stock registration had been revoked for not filing all those lovely, Sarbox-seal-of-approval financial statements. Reams of indictments and SEC complaints were readily available to "Dateline," and not a single one claimed the company was a "victim" of short-selling or even that such trading had taken place at all. All that stuff notwithstanding, the "Dateline" piece parroted the company line that whatever went wrong was not the fault of Eagletech's management. It was them.
The grotesque procession of phony CEO "victims" continues. In March, "60 Minutes" highlighted the "plight" of Eugene Melnyk, CEO of a company called Biovail, whose accounting is under investigation by the SEC. Melnyk, however, prefers to talk about them -- in this case a hedge fund and an independent stock-research firm called Gradient Analytics that he says conspired to screw Biovail. The business news channels have given ample airtime to the self-promoting them-blamer Patrick Byrne, who runs a money-losing Internet retailer named Overstock.com, and who spends considerable time waging what he tastefully describes as a "jihad" against the horrible people victimizing his company. The them-blaming cause gained a further boost recently when the vice chairman of General Motors, Robert Lutz, claimed that those dastardly short-sellers -- not GM's massive pension woes -- were behind the negative stories about his company.
Three very different companies with very different problems, but with one thing in common: their stock price is in the dumpster. No, make that two things in common -- it's the fault of them!
If you read the conspiracy literature being circulated on the Internet, the ranks of corporate "victims" is a large and illustrious one. Terrific companies ranging from Enron to Martha Stewart Living to wonderful little diamond-mining stocks and tout-sheet specials have all been "victimized" -- not by their managers or stock promoters but by pernicious external forces, all plotting evil.
Ah, you laugh. But the SEC has taken up the cudgels of this lunatic-fringe obsession, passing a rule that makes it harder to short-sell the Eagletechs of the future. Even worse, it has turned its regulatory gun sights on Byrne's and Melnyk's enemies -- launching an investigation into Gradient, which is being sued by both companies, and reporters to whom the firm has allegedly given information. In the process, the SEC (before backing off under pressure) subpoenaed phone records from two tough Dow Jones journalists, Carol Remond and Herb Greenberg, as well as the manic CNBC host Jim Cramer. In effect, the SEC is intervening on behalf of blame-shifting companies, and investigating the investigators. It's the epitome of weirdness, and wimpy SEC officials will no doubt see to it that it happens again.
Only last week, the picture got even more bizarre as Lay and Skilling were being hauled down the Via Dolorosa. Utah quietly rushed into law a bill aimed at advancing the "it's them" agenda of local resident Byrne, who is the top campaign contributor in Utah, according to the Deseret Morning News. The them cause strikes considerably closer to home than other past Byrne causes, such as the Swift Boat Vets and POWs for Truth. The new Utah law targets "naked" short-sellers supposedly besieging the state's companies. The searing irony of all this is that Utah has achieved quite a reputation over the years for its worthless mining stocks and penny-stock scams. But that's not a problem, in the view of the state of Utah.
The them campaign is the antithesis of everything we have supposedly "learned" from Enron, with its shifting of responsibility, banal dishonesty and exploitation of shareholder ignorance. Yet it is gaining adherents far beyond the Great Salt Lake.
Some weeks ago I spoke to a writer for a small but influential media journal about those SEC-subpoenaed reporters, and we chatted about short-selling. Short-selling has never driven a company out of business, I said. Yes, it has, he responded.
For instance?
"Well," he said, "I would say Enron is an example."
I then listened, in amazement, as an opinion leader in medialand went on to recite from the Enron defense playbook, detail for detail, with the credulity and naiveté of a teenager discovering the joys of chemistry for the first time.
Ken Lay and Jeff Skilling are facing life in jail defiantly, sort of like Jimmy Cagney in one of those old Warner Bros. movies. Out there in the gold-lamé tenements, meanwhile, the slums of the rich are still breeding corporate delinquents and Pat O'Brien is nowhere in sight.
About the writer
Gary Weiss is the author of "Wall Street Versus America: The Rampant Greed and Dishonesty That Imperil Your Investments." He is a former investigative reporter for Business Week.
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