Enron's Board Games

By Adam Zagorin

A stinging new congressional report mocks claims of ignorance by Enron board members like former CEO Ken Lay and Wendy Gramm, the wife of Texas Senator Phil Gramm. As a top federal regulator during the previous Bush Administration, Wendy Gramm promoted a lucrative regulatory exemption that benefited Enron, and then became a director of the company months later, in 1993. She also served on Enron's crucial audit committee as the board "knowingly allowed Enron to engage in high-risk accounting." Another of the report's conclusions is that Enron directors were aware of everything from extensive off-the-books deals to conflicts of interest and excessive compensation for senior executives--and did little or nothing about the alleged transgressions.

Chairman Carl Levin of the Senate's Permanent Subcommittee on Investigations (which prepared the study) also blasts directors for "failing to acknowledge" their share of the blame for Enron's collapse. A lawyer for the board said directors were "misled" and that the report is "very unfair," but it will be welcome news to shareholders seeking billions of dollars in compensation from Enron; they could get a legal boost from the 60-page document. The bipartisan study also raises the likelihood that onetime Enron board members will come under renewed pressure to resign directorships at other major corporations like Lockheed Martin and Qualcomm. Wendy Gramm has already stepped down from several of her board assignments, but her husband Phil is leading the G.O.P. bid to block legislation due before the Senate this week that its proponents say will prevent future Enrons. --By Adam Zagorin