Asymmetrical Information

This argument was about as surprising as the Sun rising in the East this morning.

If it helps, the issue could more accurately be framed as: Joe Blue Collar stole one guy's car today. Ken Enron stole the equivalent of ten cars from a hundred thousand people.

Which arguments--that expensive government programs (such as maximum security as opposed to lower-level security prisons) should only be used when demonstrably necessary, or that prisoner-on-prisoner violence is a bad thing, or that convicted violent criminals are more likely to commit further violent acts (thus requiring longer sentences)? One would hope that those are as surprising as the sun rising in the East, but as the previous two threads demonstrated, the Enron case has a remarkable ability to cause people to make really crazy arguments.

Well, no. Ken Enron did not steal the equivalent of ten cars from 100,000 people. Thousands of investors lost the value of their Enron stock, but that value did not end up in Ken Lay's pocket. When Joe Blue Collar steals a car, he ends up with the car. When Enron went bankrupt, investors may have lost $70 billion, but that money did not end up in the executives' bank accounts.

Yes, I know that Lay and Skilling sold Enron shares at what turned out to be inflated prices. The amount they got from those sales bears no comparison to the amount lost by investors. In no reasonable sense can we say that the $70 billion was stolen.

Sometimes it's that white collar crime is a violation of a hyper-technical law that nobody understands anyway. Blue collar crimes generally are not usually open to interpretation. You point a gun at the liquor store clerk, that's armed robbery. What kinds of conduct violates 10b-5? Apparently, even prosecutors don't know.

I think there's also more of an element in white collar cases of "making an example," which smacks a bit of unfairness.

On a similar vein, typical blue collar criminal doesn't have a lot to lose in the way of status or income potential. Someone who starts out on a higher rung will fall a lot farther just by virture of having the convict label. Right or wrong, I think we subconsciously factor that loss in as part of the punishment.

Finally, in a lot of cases, it isn't really white collar v. blue collar crimes. It's white collar v. blue collar criminal. Catch a rich kid and a poor kid with the same quantities of whatever illegal narcotic, and same criminal history (or lack of). Do these kids get the same sentence?

Question whether it was possible for Skilling and Lay to get a fair trial, and you apparently can advocate abolishing jail terms in favour of the public whipping post without so much as an eyeblink from your readers.

Of course Jane. What did you expect? You are the economist. You know what they did.

Those Enron Execs tried to get away with something terrible and awful. They were horrible people, monsters. They paid off Arthur-Anderson (which ENDED that company) to get them to fudge the auditted numbers in an effort for them to sell high at the expense of everyone's 401K.

Those Enron Execs violated Capitalism. They put doubt into the minds of millions of (maybe a billion) people, regarding the benefits of stocks and Capitalization to make money. That is a Capital crime. To me, it is deserving of Capital punishment.

Shoot to kill.

I agree. What solution do you offer?

Part of the reason that I don't hold up the local Kwiki-Mart is that I could work 8 hours at a fast food joint and make more money. It damn sure isn't worth getting 18 months in the county lock up for.

But...give me a chance to make, say even $10 million at the risk of what? I'll have to give it back? 18 months in a minimum security facility?

I'll be the first in line.

The punishment has to be magnified because the possible rewards of that action, as opposed to knocking off the local Slurp-n-Steal, are so much more inviting. So, with white collar crime, the percentages are more like -0-% protection, 75% deterrance, and 25% justice.

I would say with white colar crime, you lock them up in the deepest darkest dungeon living only among the sodomites, so that the next would be white-colar criminal would think twice. You want to steal $20 mil from the 401Ks of 1000 future retiries? You risk being bent over for the rest of your life for a pack of smokes. In that, the lock up is 0% protection from physical danger, 100% deterrance, and 0% justice, as I can't think of an adequate punishment that is just for these guys.

I'm going to have to be honest here and state my pet peeve: I really don't understand the HUGE distinction legal systems make between "violent" and "non-violent" crimes. As I see it, if you kill or injure me, you take part of my future life, while if you steal from me, you undo the fraction of my life devoted to producing/acquiring that thing. Also, people do not have ascribe infinite disutility to being a victim of violence. If we draw an indifference curve for someone covering "crimes he's indifferent to being a victim of", there *will* be a finite amount non-violent victimization on the curve. That is, at some point, someone will say, "I'd rather be robbed at gunpoint than lose my nest egg."*

Add to that, the fact that organizations espousing "non-violent" means aren't incredibly principled themselves. For example, Greenpeace considers it a creative, non-violent means of achieving their goals to invade a stock exchange and litter the place with devices that make blaring noise. What do you think their position is on people who do that to a Greenpeace meeting?

So, I can't but remain perplexed at people who try to morally distinguish acts based on whether they used violence.

*No, that's not a subtle reference to some argument that Ken Lay destroyed people's nest eggs. I don't accept that. It wasn't his fault they put all their money in one stock. It's just a hypothetical I'm using to illustrate a point. Thanks for reading this footnote before making a response.

I would say with white colar crime, you lock them up in the deepest darkest dungeon living only among the sodomites, so that the next would be white-colar criminal would think twice.

Statements like that certainly would make anyone think, although these thoughts are more of the "despair for humanity" variety. Seriously--rape is an appropriate punishment for understating volatility in commodities markets?

Yeppers, it sure is.

Paul,

Your comment was absolutely disgusting.

1. If you want rape to be a punishment for a crime get it on the statutes.

2. The crimminal justice system is just another government program that is subject to the same bad actions and human foibles every other government program is.

The justice system has made mistakes and it will continue to make mistakes in the future. That is why we don't allow the system you are advocating for.

Seriously--rape is an appropriate punishment for understating volatility in commodities markets?

I don't think a lifetime of rape is severe enough. But that is the worst society can give them (certainly worse than a bullet in the brain.)

These guys "raped" thousands of people out of their nest eggs to the tune of $2 billion. That is what they did, they raped them, literally. How many thousand or tens of thousands (dare I say 100,000) years of labour did those people collectively work to build that $2 billion in assets? It is all gone, thanks to these guys.

What is worse is that they thought they could get away with it. They thought about this in a cold and calculating manner. They planned it. They got caught and I'm glad they did. And I want the next multi-millionaire to think twice before he or she tries to do the samething if they see their company going down the tubes.

Seriously.

6 years for Fastow is a slap in the face of all those people who put their hard earned dollars into Enron.

Theories of Punishment:

(1) Specific Deterrence--keeps that person from committing the crime again.
(2) General Deterrence--keeps other people from committing the crime.
(3) Rehabilitation--rehab the person so they won't commit the crime again.
(4) Retribution

Theory 3 was much in vogue 20-40 years ago, but has seemed to drop (somewhat) by the wayside. Theory 4 was always pooh-poohed as not being a legitimate reason for punishment, but that's what most people really want, and that's what has been making a big comeback under the guise of victims' rights.

Theories 2 and 4 are the only ones that really apply to Enron.

They are also the main ones that apply to white collar crime generally, along with a little of theory 1. Theory 3 doesn't really apply because of a sense that white collar criminals already know that they aren't supposed to commit criminal acts.

For blue collar crimes, it really depends on what the crime is. Crimes of violence are treated harsher because they scare us, and because non-violent crimes weren't always crimes in the past (sometimes very distant).

Theories 2 and 4 seem to be the main force behind the drunk driving laws, which has always puzzled me somewhat, because MADD spends more money lobbying for tougher penalties than they do for publicizing the current penalties. The last state I lived in, I knew what the penalties were because I represented people charged with DUI, but in my present state, I don't know what the penalties are even though I've lived here for 20 years now. Do I go to jail automatically the first time I'm stopped, or do I get a "free" pass from jail as long as I complete an alcohol safety course and pay a hefty fine and get hefty points against my license? I don't know and haven't felt inclined to check it out.

Really, except for getting other prisoners to beat the crap out of them, what exactly is it we want the State to do to these guys that it can't do in a minimum security jail? Take their tv time away? And as I said before, if we want the crap beaten out of Jeff Skilling, then we should be man enough to do it, not snicker about it behind our hands while some drug lord carries it out.

Skilling and other white-collar criminals are probably at higher risk of physical violence in a minimum-security prison than in a tougher place. Prisoners have more access to one another in minimum-security prisons, especially dormitory-style ones as opposed to ones with separate cells, and there's less oversight by the corrections officers.
At least Bernie Ebbers isn't in much danger, being a hulking former bar bouncer.

I don't think a lifetime of rape is severe enough. But that is the worst society can give them (certainly worse than a bullet in the brain.

Well then we disagree. And on one side of the debate, there are people advocating vigilante justice of the most horrific sort, and who have yet to identify the specific laws they think Lay and Skilling broke (see other thread)--which side do you think is more likely to convince anyone of anything?

It's sad that positions as contemptible as yours are even expressed openly in modern society--hopefully some of the "they were definitely guilty" side will drop by and reassure readers that your disgusting views are not held by more than a sliver of people.

Sometimes it's that white collar crime is a violation of a hyper-technical law that nobody understands anyway.... What kinds of conduct violates 10b-5? Apparently, even prosecutors don't know.

I think there's also more of an element in white collar cases of "making an example," which smacks a bit of unfairness.

A specific example is Fife Symington, the former governor of Arizona. Fife Symington was found guilty of bank fraud. His crime? Using false information to obtain a bank loan. What did he do? After a construction loan was obtained, Symington was required to periodically report to the bank on the progress of the project, update the bank on his net worth, etc. Part of this report involved valuing projects under construction. Symington obtained an appraisal. The appraiser estimated the buildings value, upon completion, would be several million dollars less than the costs of construction (and several million dollars less than prior estimates). This reflected the significant decline in real estate values after the 1986 tax act. Symington disagreed with the appraiser's value and used the estimated construction cost as the value of the building on his statement of net worth. It was the fact that Symington used a value other than the appraiser's value that constituted fraud. It mattered not that Symington footnoted the discrepancy on his statement of net worth, that he attached a copy of the appraisal to his statement of net worth, or that he discussed the difference of opinion over the building's value with the bank manager overseeing the loan. The fact this "false" number was used as part of the loan process was the fraud he committed. The fact the bank was not "fooled" by his false submission, that he drew the bank's attention to it, and that he intended no harm by it, was of no consequence. (You might ask why Symington did not use the appraiser's number and footnote his disagreement. His answer is that he signed the financial statement under penalties of perjury and that he honestly disagreed with the appraiser's number. Besides, it would not have mattered. Had he used the appraiser's number and then included his own value for the building in a footnote, he still would have been guilty of fraud. The government would still have argued that, by including his own estimate in the footnote, he had provided the bank with false information.) Did Symington harm anyone by this fraud? No. Like many other real estate developers, the real estate market crash made many of his projects unviable -- but that's not usually considered a crime. He went to jail because the government wanted to prove it was doing something about the Savings & Loan crisis. Absent that crisis, his "fraud" would never have been considered such.

It's sad that positions as contemptible as yours are even expressed openly in modern society--

You are damn right we disagree. Boy do we ever!

"Modern society" (your words) should not tolerate board members of a publicly traded fortune 500 company manipulating stock values to enrich themsleves when they have access to inside information that tells them their company is about to go under. They stole that money and they will never be able to replace the $2 billion that once existed in those 401Ks. That is gone forever.

Steven, let me bring this a little closer to home with a hypothetical. You have worked your whole life and you have $350,000 in an individual retirement account. It is yours. You put the money there, year by year. Now, you are forced to make a choice of losing all of it or having someone bend you over and violate you in the most horrible of sexual ways. Which do you pick?

You are a LIAR if you don't offer to give the would be rapist a tube of KY.

That is what these "execs" did to those people. Only the damage will never go away. Those former 401K holders will not live long enough to replace what was taken from them. I don't think you could ever imagine what they are feeling today when they see the words.... 6 years in jail.

"Rape" is not just a physical violation Steven. You can get therapy for that and move on with your life. These people who were violated will never be able to move on with theirs. What was taken from them can not be replaced.

-Paul

And people think that I'm hyperventilating when I call attention to the Maoist impulses behind BJD's comments and the fact that he and his ilk are encouraging violence and terrorism through their enraged lamentations of the state of the economy and nation. Paul shows exactly what I'm talking about and how widespread this actually is. But this will be waived away by the same people that are cheering Paul on in their heads. Lovely.

This will be my last comment toward Paul, and I apologize to the rest of the readers, and I certainly don't think his position is held by more than a fraction of people, but I just can't help myself:

Your comment makes absolutely no sense. First, you talk as if I have a choice between losing $350K (which apparently MUST be entirely in Enron stock, a ludicrous assumption with no grounding in reality) and being raped. You assume (wrongly, as it turns out, though that won't stop you from calling me a liar) that I would take the rape.

Presumably, you are saying that what Enron's management did was worse than rape, so it deserves rape as a punishment. Now this is stupid by any standard, but particularly so when you are viewing losing money as such a horrible outcome--well, then what's wrong with being completely penniless in a minimum security prison? By your own argument, this bankruptcy is worse than rape, so presumably we should send these criminals (whose exact crimes, I note in passing, you are completely unable to identify) to minimum security prison in order to maximize their punishment.

When Jane said that people had a "deep...emotional investment" in this case, she wasn't kidding. It's apparently enough to make people act like complete fools and give up any semblance of "due process" (it's not like rape is a convict's sentence...).

These guys "raped" thousands of people out of their nest eggs to the tune of $2 billion. That is what they did, they raped them, literally.

Literally? I think not. Otherwise I'm positive that their sentence would be a lot harsher than it currently is.

Steven, let me bring this a little closer to home with a hypothetical. You have worked your whole life and you have $350,000 in an individual retirement account. It is yours.

Also, can we please have some recognition that putting 100% of your 401(k) into one stock is a bad idea? They didn't steal money directly out of accounts -- they screwed with the stock enough that its value went down to $0. That's a risk that every stock faces. It's the reason that my 401(k) has more than one stock in it.

Yes, they (possibly) committed fraud. But I can't hold them responsible for other people's bad investment decisions.

Also, can we please have some recognition that putting 100% of your 401(k) into one stock is a bad idea? They didn't steal money directly out of accounts -- they screwed with the stock enough that its value went down to $0. That's a risk that every stock faces. It's the reason that my 401(k) has more than one stock in it.

While I'm not totally familiar with the Enron case, it's my impression that management kept exhorting the employees to fund their 401K's solely with company stock, it was a can't-miss proposition, doing otherwise would be disloyal to their employer, and so on. It's easy for us to look back and say that the employees were schmucks for listening to what amount to a sales pitch from management, but human nature being what it is I rather suspect that many of us would have done the same thing.

David,

I could easily bring up the hundreds of people that have been falsely imprisoned on capital crimes, including those released off death row in Illinois by former Gov. Ryan, as a reason that we should no have laws prohibiting murder.

It would closely mirror your argument that we should abolish white-collar crime because of some overzealous prosecutor and the former gov of Az.

I don't, though.

Paul's rantings do an excellent job of underlining Jane's point that whether Lay and Skilling were innocent or guilty their chances of getting a fair trial were pretty low.

While it's true the depth of the violent crime is far worse, the breadth of the crimes the Enron gang committed call for severe punishment too.

Also, you ignore deterrence. I know it's unseemly to bring these things up in polite society, but an exec who understands that instead of a house in Aspen, he might be spending that SERP money paying a lawyer to legally change his name to "Bitch" on the orders of some prison gangster just might decide to be honest. Who knows.

" Are unarmed burglars, car thieves, grifters, and so forth generally given stiffer jail terms than, say Bernie Ebbers? My sense is that they are not"

I'm not aware of any such criminal whose criminal activity even approached the scale of what Ebbers did. I suspect if somebody stole several billion dollars worth of cars they might spend a lot of time in jail.

"if we want the crap beaten out of Jeff Skilling, then we should be man enough to do it"

If you held a lottery in which the winner won the right to beat Jeff Skilling to death, I'll bet you could almost recover the losses from his crime with the proceeds. The fact that this type of punishment is (in my view correctly) illegal doesn't mean it wouldn't be immensely popular. I think in an earlier post you identified yourself as one of those people who inexplicably thinks televising executions would reduce public support for them. Make some non-journalist/academic friends.

The rewards for commiting a white collar crime is usually much greater than for blue collar, so you need a greater deterrance. This means either an increased chance of getting caught or more severe punishment.

Also, you ignore deterrence. I know it's unseemly to bring these things up in polite society, but an exec who understands that instead of a house in Aspen, he might be spending that SERP money paying a lawyer to legally change his name to "Bitch" on the orders of some prison gangster just might decide to be honest. Who knows.

I'm with Jane. If you feel that is the appropriate punishment then start a campaign to make fraud punishable by public anal rape. Let's dispense with the charade of "prison" and just get straight to the real punishment.

Personally, I don't think that's an appropriate punishment for any crime except real, literal, physical rape.

Mickslam,

I must have been unclear. I'm not advocating decriminalizing white-collar crimes. I am saying we need to distinguish between actions that are intentionally wrong and those that are not. Intent should matter. In some parts of the law, the legislature has removed any requirement that criminal intent be proven. This put too much power into the hands of prosecutors -- particularly if the public is demanding someone's scalp.

The deterrence effect of criminal law only works properly, if at all, if people understand what is and what is not permitted. Too often, in the white-collar area, what is or is not a crime depends on the 20/20 hindsight of the prosecutor. That's manifestly unfair. It's also a circumstance that does not arise as often, if at all, in other areas of criminal law. You don't need to consult with your attorney to know that beating up an old women and taking her purse is a crime. Most would not know that giving your bank information you believe to be true, but is false, is a crime.

What these guys did is more damaging than physical rape. It is far more damaging than any violent crime, sans maybe murder. You can council a rape victim and that person can recover (after a while) and be made whole again. You can council one of these Enron victims, but you can NOT make them (or their familes who were also "violated") whole. The damage is ever lasting.

That is the difference.

6 years in jail is travesty. Try 600 years in jail (or death, whichever comes first) of hard, 3-shift labour, where all the prisoner's earnings are given to the familes whose nest eggs were destroyed. They'll never be able to replace that money, but they will understand what they did.

And no one will repeat this in the future. This will deter further white crime of this magnitude.

I'm begining to think that Paul is just messing with us here:

"'Rape' is not just a physical violation Steven. You can get therapy for that and move on with your life. These people who were violated will never be able to move on with theirs. What was taken from them can not be replaced."

Really? Money can't be replaced? Ever?

And can we get a few more clever euphemisms for "getting raped in jail" in here? Thanks.

withnail,

I find it more than a little telling that you find it uncomfortable to even mention by name what you're assigning as equivalent to loosing your life savings.

I have heard it argued that white collar criminals are much less likely to be caught than blue collar criminals. If that's the case, then achieving the same level of deterrance would require much harsher penalties for white collar crime.

Harsh penalties for white collar crime coupled with very arbitrary process of establishing a fact of such are bound to create some very interesting incentives for corporate executives. I can think of a few:

- Bribe DAs early, bribe DAs often
- Grab the money and run (overseas)
- More business for Killers'R'Us

Also, the marginal law-abiding executive-to-be may be discouraged from following the lucrative but personally risky career, and the marginal devil-may-care competitor will be that much likelier to take his place.

Do I qualify for a "think as an economist" badge?

Your implication that Lay/Skilling's criminal actions are responsible for the lost $70 billion in market value of the stock is unusually sloppy of you. This same mistake you are making is at the heart, I think, of one of the reasons people get so worked up about Enron -- ie that so much value was destroyed, employees fired, pensions lost, etc.

However, there is nothing in what Lay or Skilling were convicted of that had anything to do with making bad decisions to bring down the company. In fact, it would be incredibly dumb policy to start punishing CEO's criminally for bad business decisions.

Lay and Skilling were instead sent to jail for covering up the reality, good and bad, of the company's financial results. They actually were not even convicted of the charges of doing so for personal financial gain. So, for reasons that might actually include trying to help shareholders hang onto the value of their equity, they manipulated reported results. In doing so, they probably delayed the credit crunch and liquidity crisis that killed Enron in the end. I have heard no one with any business IQ that argues the acounting shenanigans themselves caused Enron to go down and destroy all that value.

So Lay and Skilling fiddled the books, and both made bad business decisions that brought the company down. They were however, rightly, only sent to jail for the former. I think the reason people want to flog them in the street is actually for the latter, which is actually not even a crime.

By the way, I do agree with your point about Fastow. While both he and skilling are criminals, Skilling cooked the books to try to protect the business model into which he had so much of his ego invested. Fastow actually looted funds for personal gain. Fastow's crimes actually contributed to Enron's demise, while Skillings crimes (remember, his crimes, not his business decisions) did not materially contribute to Enron's demise. I am therefore astonished that Fastow will likely do less jail time.

As I see it, if you kill or injure me, you take part of my future life, while if you steal from me, you undo the fraction of my life devoted to producing/acquiring that thing

There's a glaringly obvious difference -- a person can return stolen money. He cannot un-kick your ass.

6 years in jail is travesty. Try 600 years in jail (or death, whichever comes first) of hard, 3-shift labour, where all the prisoner's earnings are given to the familes whose nest eggs were destroyed. They'll never be able to replace that money, but they will understand what they did.

Paul, try dealing with the devil within, before attempting to deal with the devil without. You have one doozy of a violent imagination, and the first person it's going to kill, is you.

There's a glaringly obvious difference -- a person can return stolen money. He cannot un-kick your ass.

Glaringly obvious, but not incredibly damning. He *could* return me to my indifference curve -- if he's found and convicted and can pay. Remind me how often that happens?

annon,

Paul, try dealing with the devil within, before attempting to deal with the devil without. You have one doozy of a violent imagination, and the first person it's going to kill, is you.

I am offering absolute reasons and purpose for my anger and lust for vengence. You, Jane, (and a few others) are offering nothing but rhetoric. You have no solutions to deter what other executives might do in the future, no plan to prevent future Enrons. All you have is sympathy for these cold, calculating, devious individuals.

I have no sympathy. If Fastow is held down in jail and violated repeatedly, so be it. Maybe that will teach him a lesson he so sorely needs?

These monsters knew their company was doomed. But they wanted to make sure that they (and they alone) had a seat to sit down on when the music stopped playing and everyone else was left scrambling to liquify their assets. So they took the necessary actions to see to it that they could cash out. One of those actions involved Arthur-Anderson (one of the nation's oldest and most respected accounting firms) being bribed to "cook the books" in an effort to deceive the public and buy time. That is above and beyond stealing. That is a conspiracy, one that left the lives of so many people in ruin.

The devil without and the devil within? Please. Two of us can play this bullsh*t rhetoric game. Let me take my turn. Most all of us have the devil lurking within, a devil in every heart. And that devil creeps out and gives us the motive to act on wrath. That is what I am doing, and I have no problem with that even if you do. But those Enron Execs do not have the devil in their hearts. That is because in order for the devil to pay any interest in you whatsoever, you need to have a soul that the devil might take possession. With what those men did, I doubt very seriously if they even have a soul. How's that?

Paul, lusting after the violent sodomization of people who did not even personally affect you, has nothing to do with a desire for justice or anything vaguely related to justice. It's a selfish indulgence that, long-term, will not be good for your health if you don't get a bead on it.

First, you are ascribing for yourself a lot of first-person knowledge you could not possibly have, as to who knew what/how and when, and then using that as a basis of your desire for harsh penalties. That right there is a sign that you are not to be taken seriously, since any system that actually operates on those principles is a quick hop away from a rogue totalitarianism that might decide to turn on YOU at some point. Or me. And I happen to not be so enamored with such a system as you evidently are.

Second, the criminal justice system HAS addressed the crimes. Maybe you don't like the outcomes -- you can say so. But what you are presently saying goes far beyond the boundaries of any civil society, and *I* can say so.

Paul said:

"These monsters knew their company was doomed. ..."

Actually that is not what happened. Some of Enron's enterprises were not performing as expected. Rather than acknowledge the problems and work on doing better in the future Enron started cooking the books. The errors were small at first but grew steadily larger as the books became increasingly divorced from reality. At some unknown time Enron passed the point of no return and even honest management could no longer have saved the company. However it is likely that even near the end Lay and Skilling found it hard to acknowledge to themselves that the company was doomed.

It's a selfish indulgence that, long-term, will not be good for your health if you don't get a bead on it.

While I appreciate your concer, let me assure you, I'll be just fine.

That right there is a sign that you are not to be taken seriously, since any system that actually operates on those principles is a quick hop away from a rogue totalitarianism that might decide to turn on YOU at some point. Or me. And I happen to not be so enamored with such a system as you evidently are.

Full stop.

I have no idea how you can get from bystanders wishing for appropriate justice (and deterence) to a totalitarian state. That is so far out of bounds, it isn't even worthy of a response.

I want these b@stards to held up as an example: our corporate executives are not entitled to destroy the savings of others to preserve their own. They need to know that if they do that (and we catch them) that there will Hell to pay. You on the otherhand, are not nearly as bothered by what they did as I am. So instead of defending their actions (or minimizing them) you attempt to tear me down or (at the very least) delegitimize my position. I thought you all were libertarians, not liberals?

Maybe you don't like the outcomes -- you can say so.

Imagine my surprise? I have your permission to mention how ridiculous I find these outcomes. Now I really feel empowered.

But what you are presently saying goes far beyond the boundaries of any civil society, and *I* can say so.

Good for you. Say whatever you want. You are still wrong, but blather on and on if it pleases you.

The issue of the 401K holders is a tricky one, isn't it? It is true that holding a significant portion (or even any, considering the correlation of your employment income with that of your employer's future success) is a bad idea. While I have been encouraged to invest my 401K in my employers' shares I have always refused - it can be done. By the same token, in many cases the only reason the employees had large 401Ks is that Enron's stock value was unsustainably high. So are Skilling, Lay and Fastow guilty of hurting their employees by committing a fraud that caused the stock price to crash in 2001 instead of earlier? If they had been scrupulously honest, Enron would have just failed earlier and less spectacularly (note that I'm not accepting the run-on-the-bank explanation for Enron's demise). Either way the employees would have been broke and out of work. Or are Skilling, Lay and Fastow guilty of having been found out, thereby destroying the share value? After all, any employee who sold their shares in the $80's profited handsomely from the deceit. Maybe justice requires that they all give their money back too? Maybe the real archtype here is the poor fellow who had $350,000 in his 401K, but wouldn't have had a nickel except for the fraud perpetrated by Enron's senior management.

I'm sure most rape victims would gladly surrender $350,000 if it meant that the rape they suffered never happened.

jl said:

"... If they had been scrupulously honest, Enron would have just failed earlier and less spectacularly (note that I'm not accepting the run-on-the-bank explanation for Enron's demise). ..."

I don't think with honest management Enron need have failed at all. When their first investments turned bad they could have retrenched instead of pretending the investments were successful and then making more and bigger bad investments until the whole house of cards collapsed.

Paul, your hypothetical employee with $350,000 in a 401K account didn't invest $350,000 but rather a fraction of that. The employee enjoyed the dizzying stock runup and perhaps did not stop to reflect that big returns come with corresponding big risks. How much did s/he lose -- the $350,000 fraud-pumped price or the $70,000 he actually invested in a single stock?

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