This journalist reminds us about the pols who enabled the Enron-type crooks, like Joe Liebermann, for one

The Forgotten Enron Enablers -- by Sarah Anderson

At the crescendo of public outrage over the corporate scandals in 2002, the Bush administration began banging the drums of war.

“It's hard not to notice that the sudden urgency of war with Iraq has coincided precisely with the emergence of the corporate scandal story," Jim Jordan, then head of the Democrat’s Senate campaign committee, observed at the time.

That “coincidence” drowned out criticism of politicians who had fostered the disease of Enronitis—just in time for the midterm election.

One who should have taken some heat is Sen. Joe Lieberman, who is now in a bid to keep his Connecticut Senate seat as an independent. For more than a decade, from 1993 to 2005, Lieberman led a crusade on behalf of the business lobby that blocked reforms aimed at making corporate financial statements more accurate.

No, his actions don’t warrant a stint in the slammer beside Ebbers, Skilling, Fastow, Kozlowski et al. Rather, this is a story of how politicians can misuse their power in perfectly legal ways to perpetuate a culture of corporate favoritism. And until there is some accountability, we can only expect more scandals.

This particular fight was over regulators’ attempts to end a ludicrous system that allowed companies not to include stock options as an expense in their financial reports—even though they could deduct them from their taxable income. That meant corporate boards could lavish massive options on top executives with no repercussions for their income statements.

Lieberman wasn’t the only congressional opponent of the reform, but as former Securities and Exchange Commission Chairman Arthur Levitt bitterly recounted in his book, Take on the Street , “none was a more formidable foe.”

By opposing the change, the senator purported to know more about accounting than Alan Greenspan. And legendary investor Warren Buffett. And Nobel economist Joseph Stiglitz. These and most other financial experts argued that counting the options as an expense was necessary to combat deceptive accounting.

Labor groups also backed the proposal as a way to discourage the executive pay giveaways that had widened the economic divide. Between 1980 and 1993, the CEO-worker pay gap climbed from 42-to-1 to 195-to-1.

Who was on Lieberman’s side? At the forefront were high-tech executives, the biggest users of stock options as an alternative to cash compensation. And in the early 1990s, Silicon Valley was an exciting new frontier for politicians seeking campaign dollars.

When the Connecticut Democrat came after them, the green eyeshades at the Financial Accounting Standards Board didn’t know what hit ’em. Calling for a ban on their options expensing proposal was just the beginning. Eventually, Lieberman moved to strip FASB’s power completely.

Unaccustomed to political firestorms, FASB retreated.

As a result, “creative” accountants got to keep one more tool for concealing poor corporate performance. At Enron, this trick wasn’t as nefarious as the illegal use of shell companies. But Enron executive Jeffrey Skilling (now facing 20 to 30 years in prison) admitted in Senate testimony that the options loophole had allowed his firm to inflate profits. The company handed out such massive grants that in 2000 alone, the company took a tax deduction of $1.4 billion for the cost of executive stock options.

This perverse incentive to award boatloads of options also drove the CEO-worker pay gap even wider. Today it stands at 411-to-1 , according to the Institute for Policy Studies and United for a Fair Economy.

Ten years after the first fight, FASB made another stab at options expensing. Again, the high-tech lobby mobilized opposition, with Lieberman at their side. His steadfast support garnered early endorsements of his 2004 presidential bid from 12 Silicon Valley leaders. However, public pressure proved too great in this round, and rules requiring options expensing finally went into effect in 2005.

And so the options expensing battle is over. And with the modest Sarbanes-Oxley accounting reforms passed in 2002 and the convictions of several high-profile executives, the impression is that the book-cooking bonanza is behind us.

But what about political accountability? Lieberman may have been more zealous than most, but he’s hardly alone among lawmakers who helped usher in the era of runaway CEO pay and “anything goes” accounting.

With no price paid for past scandals, Congress got the green light to allow the most obscene corporate scandal of our time: war profiteering. Despite reports of rampant fraud and corruption, the Senate has held only a handful of hearings on defense contracting since the Iraq invasion.

The war should be the primary issue in this election. But let’s not forget the victims of corporate greed. Unless we demand recourse for past acts and clear strategies for ending the culture of corruption, there will be many Enrons to come.

(Sarah Anderson is a fellow of the Institute for Policy Studies and a co-author of the report (.pdf) “Executive Excess 2006: Defense and Oil Executives Cash in on Conflict,” by IPS and United for a Fair Economy)