Seeds of Enron collapse were planted years ago

It's not all that often that editorial writers get to say, "We told you so," and we're going to avail ourselves of this opportunity.
Back on Dec. 6, 1995, we said in this space that Congress was going too far in deregulating the securities industry. We noted that the Senate had approved legislation that severely restricted class-action securities fraud lawsuits. The measure was part of the "Contract With America" and was being billed as one way to rein in a society that had become too litigious.
We have often supported tort reform of various kinds, but in this case we were convinced that the legislation went too far in blocking suits against lawyers and accountants who look the other way when confronted by corporate fraud on the part of a client.
We urged President Clinton to veto the bill, which he did. Congress -- including a strong and bipartisan majority of the Ohio delegation -- overrode the veto.
A bill that was supposed to open up investment for new high-tech enterprises instead gave a degree of legal cover to the businessmen, accountants and lawyers who gave us the Enron debacle.
The legislation was the brainchild of the Coalition to Eliminate Abusive Securities Suits, which was formed in 1991 after accounting firms had to pay $1.4 billion in fines, verdicts and settlements arising from savings and loan failures in the 1980s.
Anderson connection: It should come as no surprise that one of the founders and supporters of CEASS was Arthur Anderson, then one of the "big six" accounting firms. Nor should it be surprising that between 1989 and 2000, Arthur Andersen contributed more than $5.2 million to political parties and individual federal candidates, according to the nonpartisan Center for Responsive Politics.
Such investments paid off when Congress overrode the president's veto. At the time we said that critics of the Private Securities Litigation Reform Act might be going to far in terming the bill a license to steal. In retrospect, we might have been too kind.
Certainly the PSLRA was not the only thing that contributed to the rise and fall of Enron. There was also the Securities Litigation Uniform Standards Act of 1998, and there was energy deregulation and there was the evolution of a culture in which no one was willing to ask just how a relatively small Texas energy company could emerge into one of the nation's most highly valued companies ($60 billion) in a matter of a relatively few years.
But the PSLRA was part of the mix, and it -- along with some other excesses of deregulation -- should be addressed now by a contrite Congress.