News

Causes For Enron’s Collapse Discussed

The former president of a large investment company similar to the Enron Corporation said yesterday government regulation of large companies would hurt the market.

Elliot Morss, former president of The Asia-Pacific Group investment company, described the causes of the collapses of both Asia-Pacific and Enron last night at a Harvard University seminar.

Morss attributed Enron’s collapse to bad investments and executives who covered up the monetary losses by moving money to “fictitious entities.” This is legal for a public company such as Enron if 3 percent of the money comes out of the organization, but Enron did not follow this law. Enron, he said, was doing “nothing but a shuffling of paper and money around … and they fell like a house of cards.”

Morss said Enron got away with this for a while because the entities it created were public and therefore did not have to report according to FCC regulations. Morss said existing laws should be supported and enforced to prevent this.

“You have to listen to the problem before you can come up with a solution,” Morss said. “As soon as you start regulating, you’re screwing up the markets.

“It’s sort of like terrorism. We’re never going to get rid of it all.”

Morss suggested caveat emptor, which means enlisting someone to manage and research your investments before making them, as a solution. He said investors, investment managers, accounting firms and senior executives of publicly traded companies like Enron would benefit from this policy.

Morss said the curriculum in business schools is leaning toward this risk-taking trend in the United States.

Event organizer Bruce Mazlish, a history professor at the Massachusetts Institute of Technology, said business schools are pushing the wrong ideas.

“What is our education that schools are now pushing? We need a moral fiber to a country as there is to a person,” he said.

Most in attendance agreed business classes are teaching the methods of risk-taking used by Enron but are not teaching the consequences.

Morss said the people who lost their pensions at Enron are to blame for their losses. He said this was a great wake up call to tell them that stocks are risky.

Lowell Steinbrenner, chairman of a small specialty steel company, agreed the employees are to blame.

“Investors rely on trust,” he said. “I own a small 200-person company. There is still a need to have accountability for the big companies.”

The seminar, part of a weekly series, was organized by Mazlish and Akira Iriye, a history professor at Harvard.

Website | More Articles

This is an account occasionally used by the Daily Free Press editors to post archived posts from previous iterations of the site or otherwise for special circumstance publications. See authorship info on the byline at the top of the page.

Comments are closed.