Latest news with #Enron
New York Times
27-05-2025
- Business
- New York Times
Remember Enron and WorldCom? Let's Not Do That Again.
More than two decades ago we blew the whistle at Enron and WorldCom, industry giants whose spectacular falls revealed two of the largest accounting fraud scandals in American history. We know the destruction that fraud causes. We lived through it. We witnessed how unchecked power, collusion at the highest levels and manipulated financial statements can bring down iconic companies, destabilize markets and vaporize billions of dollars and thousands of jobs overnight. That's why we are raising our voices now against a proposal by Republican lawmakers to eliminate the Public Company Accounting Oversight Board, a watchdog that Congress created in the wake of those scandals to protect against accounting fraud and audit failure. The rollback of this hard-won safeguard would unleash additional risk into this highly uncertain economic environment and make the next corporate disaster more likely. The collapse of Enron and WorldCom exposed a broken system for verifying financial honesty. Before the P.C.A.O.B., accounting firms essentially policed themselves. That system failed in part because they often earned far more money selling advice to the same clients than they did from auditing. As a result, firms were sometimes incentivized to go easy on the auditing side — by reducing testing, lowering standards or putting more junior staff members on complex audits, for example — to secure their more lucrative consulting business. This conflict of interest, combined with auditing methods of the time that weren't strong enough to uncover elaborate, high-level fraud schemes, created an environment that allowed enormous deceptions to go unnoticed. At their peak, Enron and WorldCom employed more than 100,000 people combined and operated in over 40 countries. Enron pioneered the trading of energy derivatives, reinvented the natural gas industry and earned Fortune magazine's title of America's Most Innovative Company for six consecutive years. WorldCom was the dominant player in internet infrastructure and a telecom leader that reshaped the industry, once boasting the largest acquisition in corporate history and the fifth most widely held stock. Both had powerful chief executives and celebrated chief financial officers who were beloved by Wall Street. The cost of their deceit was staggering. More than 50,000 employees lost their jobs and the companies entered bankruptcy, leaving investors and creditors with catastrophic losses. At the time, these were the largest bankruptcies and civil settlements in corporate history. In response to these and other failures, Congress came together in 2002 to pass the Sarbanes-Oxley Act, which created a strong framework to deter and detect fraud. The P.C.A.O.B. was a cornerstone of that reform: an independent, nonprofit, nongovernmental regulator charged with overseeing public company audits and restoring trust in financial reporting. The bill enjoyed overwhelming bipartisan support and passed almost unanimously in the House (423-3) and in the Senate (99-0). The accounting oversight board ushered in rigorous inspections, enhanced enforcement and an improvement in audit quality that the profession badly needed. Successive Securities and Exchange Commission chairs from both parties have affirmed the board's value as a vital post-crisis innovation: Thanks to its work, audits today are more consistent, more credible and more accountable, helping to uncover deficiencies that might otherwise fester. The board's continued vigilance is crucial, as many of the systemic risks that necessitated its creation — such as the inherently conflicted relationship between auditors and their clients and the temptation of fraud — still endure. Every organization has room to improve, but any needed changes can be addressed within the current framework. Instead, as part of its broader federal budget reconciliation bill, the House has advanced a measure to eliminate the board and shift its responsibilities to the S.E.C. That might sound like a bureaucratic tweak. It isn't. Independence from the S.E.C. is one of the board's greatest strengths. The S.E.C. does oversee it, approving its budget and appointing members, but the two work separately and in complementary ways to protect investors. While the S.E.C. has a sprawling agenda — regulating public companies that sell investments such as stocks or bonds — the board has one mission: ensuring high-quality audits. That laser focus is critical, and it's only possible because of the board's operational independence. One of the most concerning risks is losing audit oversight for overseas companies listed on U.S. exchanges. Under formal cooperative agreements with many foreign regulators, the P.C.A.O.B. has conducted inspections in over 50 international jurisdictions — including China, where in 2022 it secured unprecedented access. That may not survive a transfer to the S.E.C., a government agency, because Chinese regulators have historically rejected direct involvement from other governments. Without a nongovernmental alternative like the P.C.A.O.B., oversight would likely have to be renegotiated from scratch and might be lost entirely. The upshot would be a higher risk of frauds like that of Luckin Coffee, a Chinese company that fabricated approximately $310 million in sales and cost investors billions after listing on a U.S. exchange in 2019. Systemic risks metastasize in regulatory gaps. The United States learned this after the free-market fever of the late 1990s and early 2000s, when Congress deregulated the telecom, energy and financial sectors, including by repealing the Glass-Steagall Act and exempting derivatives from oversight. The rollback of these essential guardrails contributed to the downfall of WorldCom and Enron, as well as the 2008 financial crisis. Since then, technological risks and the complexity of financial markets and reporting have only grown. Yet Congress is now considering barring states from regulating artificial intelligence for 10 years despite knowing very little about how A.I. tools might be used. It is highly likely that A.I. will dominate audit procedures and public company financial statement preparation in the near future. Accounting oversight has never been more needed. The proposed bureaucratic consolidation purports to save taxpayer dollars. That is merely wishful thinking or creative accounting. The P.C.A.O.B. is funded by fees from public companies and registered brokers and dealers, not taxes; transferring its duties to the S.E.C. would only shift its costs to the public. And taking on yet another job couldn't come at a worse time for the S.E.C., which reportedly has lost 16 percent of its staff in the past year, mostly because of Department of Government Efficiency-related buyouts. To continue the board's work, the S.E.C. would effectively need to rebuild it, but it does not have the resources to do so. Representative Michael Oxley once said, 'We often think of money as the currency of a free market system, but in truth the system rises and falls on the confidence of its investors.' Trust is hard won and easily lost. The P.C.A.O.B. was built to protect it. But if it's allowed to erode, we will all pay the price from market volatility, higher borrowing costs and potentially taxpayer-funded cleanup efforts. The silent, immeasurable value of well-designed safeguards lies in the scandals they prevent from happening.
The Hindu
23-05-2025
- Business
- The Hindu
Permanent damage: on the Trump administration and Harvard
Civic life in the United States stands on multiple, strong and independent institutions in different fields. These institutions, whether constitutionality mandated or not, have a continuity, life and standing of their own, beyond particular individuals. They enable diversity and pluralism, and provide protection against arbitrary decisions by those in power. Ironically enough, U.S. President Donald Trump is intent on damaging its oldest and wealthiest educational institution — Harvard. After harassing the institution with investigations, orders to turn over records, and freezing funds and grants running to hundreds of millions of dollars, the U.S. government has said that Harvard cannot enrol foreign students in 2025-26. Some 6,800 international students, including more than 750 from India, constitute more than 27% of its current student strength. They will have to transfer to other institutions within the U.S. or leave, as per the government, which does not want any new international student there in 2025-26 either. The U.S. government has said that the student visa programme is a privilege that it has granted and Harvard 'relies heavily' on foreign students to 'build and maintain their substantial endowment', which is said to run to over $55 billion. And it sees foreign student visas and tax-exempt status as weapons in its arsenal against Harvard. Across the world, the authoritarian's playbook for pluralistic societies is to identify an enemy against whom a campaign is unleashed based on real and imagined grievances. The campaign keeps the 'enemy' in a state of disarray, even turmoil, with long-term damage and a chilling effect. Though sullied by unsavoury links, from the Salem witch trials to Enron, Harvard attracts some of the brightest talent from across the world and trains them for leadership roles in their chosen fields. It represents liberalism and knowledge creation that advances globalisation. Mr. Trump's working and middle class support base looks at Harvard as one among elitist vehicles of globalisation that have excluded them while promoting affirmative action for minorities, especially African-Americans. While lineage and family background of prospective students are a factor for Harvard, an extensive scholarship programme seeks to balance that. Harvard has said that it will go to court against the government's move just as it sued the Trump administration for freezing government funds. While the courts may well stay the ban, the damage has been done not just to Harvard but also to the image of American higher education and democratic principles. It is damage that cannot be easily remedied.
Yahoo
20-05-2025
- Health
- Yahoo
Opinion: Why Biden's Cancer Diagnosis Could Become as Big a Scandal as Watergate
Anthony Scaramucci thinks former President Joe Biden's cancer diagnosis has the potential to rival the Watergate scandal. The broadcaster and financier, who briefly served as the White House's director of communications in 2017 during President Donald Trump's first term, joined The Daily Beast Podcast this week, where he and host Joanna Coles discussed Biden's Stage 4 prostate cancer diagnosis. 'My heart goes out to him. He served the country for 50 plus years. He lost his son,' Scaramucci noted. 'My heart goes out to him and his family.' But when asked by Coles how Biden could not have known that he had prostate cancer while still in office a few months ago, Scaramucci said, 'I don't think it's realistic.' Biden was last given a clean bill of health by White House Dr. Kevin O'Connor in February 2024. Annual medical reports from his presidency did not show that he was tested for prostate cancer, and representatives for Biden have yet to comment on whether he was screened while in office. '[If] you told me that you had a very obscure, hard to understand disease, you know, one out of 300 million people have it and they missed it—okay. But this is something that most men unfortunately are gonna get before their lifetime is over,' Scaramucci said. 'Whether Joe Biden just learned about this stage four cancer yesterday, even if that's 100% true, it doesn't matter for the conversation,' he continued, 'because the people don't believe that.' Since Biden's diagnosis, supporters and critics alike have raised questions about how—and whether—the cancer went unnoticed by doctors. Biden's health had already been under scrutiny amid new reporting about how aides concealed other health and acuity concerns. If Biden knew about his cancer diagnosis while he was still president it could be 'a scandal as bad as Watergate,' Scaramucci said. 'If that is true, this is political Enron. This is a scandal as bad as Watergate. You can't tell me that you're taking oaths to the Constitution and you've got somebody now that is not capable of doing the job that he's in and you're not removing him.' The loudest voices pushing questions—and raising concerns—about the context of Biden's diagnosis have come from the MAGAverse. Just hours after the announcement of Biden's cancer on Sunday, Donald Trump Jr., for one, alleged that it could have been 'coverup.' His take was echoed by a slew of pro-Trump influencers. The Sunday announcement from Biden's camp said that a doctor had discovered a nodule on his prostate last week and that the 82-year-old had been diagnosed with an 'aggressive form' of cancer that had spread to his bones. 'While this represents a more aggressive form of the disease, the cancer appears to be hormone-sensitive which allows for effective management,' the statement said. 'Cancer touches us all,' Biden wrote in an X post on Monday, alongside a photo of him and his wife. 'Like so many of you, Jill and I have learned that we are strongest in the broken places. Thank you for lifting us up with love and support.' New episodes of The Daily Beast Podcast are released every Tuesday, Thursday and Sunday. Follow our new feed on your favorite podcast platform at and subscribe on YouTube to watch full episodes.
Yahoo
15-05-2025
- Business
- Yahoo
Jim Chanos is Buying Bitcoin and Shorting Strategy
Jim Chanos, the veteran investor who made his name shorting Enron, is betting on bitcoin (BTC) trade while shorting Strategy (MSTR), the largest corporate holder of the biggest cryptocurrency. In an interview at the Sohn Investment Conference in New York with CNBC, Chanos detailed the bet. 'We're selling MicroStrategy stock and buying bitcoin,' Chanos said, calling it an arbitrage move: 'Basically buying something for $1, selling it for $2.50.' Strategy started acquiring bitcoin in 2020 and has since morphed into a bitcoin proxy for investors. The firm has issued debt and equity to accumulate the cryptocurrency, and now has a 568,840 BTC hoard bought at an average cost of $69,287 per aggressive bitcoin accumulation, backed by Wall Street analysts, has made its stock sensitive not just to bitcoin's price, but also to investor appetite for risk. Strategy's shares are up 3,500% in the last five years to now trade at $416 a piece, giving it a $115 billion market capitalization. To Chanos, Strategy's valuation doesn't make sense as MSTR shares have surged more than the price of bitcoin. The fund manager argues that this rise reflects retail speculation more than fundamentals, a theme he believes is echoed by other firms now trying to replicate Strategy's bitcoin accumulation in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Forbes
02-05-2025
- Business
- Forbes
Everyone Wants Integrity, But No One Knows How To Measure It
De-risking leadership selection is vital to improving team and organizational moral and performance, partly by reducing the probability of selecting unethical or immoral leaders. An evil devil or Satan businessman in business suit pointing at the viewer When it comes to leadership, few qualities are praised more universally—or more naively—than integrity. And for good reason. A meta-analysis of 665 correlations found that integrity isn't just a 'nice-to-have' trait—it's one of the most reliable predictors of leadership effectiveness, employee satisfaction, and organizational performance. Teams led by honest, ethical leaders tend to outperform, trust more, and burn out less. So, yes, integrity matters. And yet, the business world is littered with cautionary tales of leaders who lacked it. From the predictable implosions of Enron and Theranos to the more insidious forms of everyday corporate toxicity—bullying, gaslighting, backstabbing, and Machiavellian scheming—it's clear that unethical leadership isn't rare; it's rampant. Despite near-universal agreement on its importance, integrity remains the leadership trait we most admire and least reliably detect. According to the United Nations, corruption and illicit financial flows cost the global economy approximately $3.6 trillion each year. This figure includes $1 trillion in bribes and an estimated $2.6 trillion stolen annually through corruption, amounting to more than 5% of global GDP. Everyone Wants Integrity, But No One Knows How to Measure It Part of the problem is conceptual: integrity is easy to revere in theory, but maddeningly hard to pin down in practice. It's not binary. Nobody is a moral saint. Even the most principled individuals will occasionally shade the truth, hide inconvenient facts, or bend the rules under pressure. As Warren Buffett famously noted, it takes 20-years to build a reputation and 5-minutes to ruin it. On the flip side, those who are truly corrupt—pathological liars, opportunistic fraudsters, and narcissistic manipulators — are, by definition, quite good at pretending otherwise. To make matters worse, these toxic individuals may be honest at times… This is the paradox I explore in my upcoming book Don't Be Yourself: Why Authenticity is Overrated and What to Do Instead, the world rewards those who are better at managing impressions than managing themselves. The cult of authenticity—'just be who you are!'—sounds noble, but if who you are is a charming sociopath, you might climb pretty far before anyone catches on. In fact, some of the most successful people score high on deceptive self-presentation: they know what to say, when to say it, and how to game the system. More often than not, organizations do little to improve things, including when they advertise strategic efforts to boost integrity and ethics. As Alison Taylor, an NYU professor and the author of Higher Ground noted, "What companies name 'business ethics' is usually a set of functions and processes designed to deflect reputational risk... These tools are becoming less and less effective in a hyper-transparent environment, where the boundaries between corporations and society are dissolving.' So, if we can't trust leaders to self-report their integrity, and we can't always detect it in their behavior until it's too late, how are we supposed to assess it? The Traditional Tools: Flawed but Useful Psychologists and HR professionals have tried. Here are the main approaches—and their limitations: Different approaches to measuring integrity While these methods offer some insight, none are foolproof. Most are designed for lab conditions, not high-stakes boardroom power plays. All of them signal probability or statistical likelihood of an event at best. And as anyone who's worked in corporate leadership knows, what people say about ethics and what they do when bonuses or reputation are on the line can be wildly different. So much so, that the 'say-do' gap has become a relevant signal or marker of integrity per se! Can AI and Surveillance Save Us From Dishonest Leaders? This is where technology enters the chat—uninvited but not unwelcome. Could AI, data scraping, and behavioral analytics finally crack the code? In a world increasingly shaped by what Shoshana Zuboff called surveillance capitalism, we already leave behind a trail of behavioral breadcrumbs. Emails, Slack messages, performance reviews, even LinkedIn endorsements—these are all data points (as first evidenced by the pioneering academic research of Professor Michal Kosinski and colleagues). Combine them with language analysis, sentiment tracking, and natural language processing, and you start to build a picture not just of what someone does, but how they behave over time. Together with my colleagues Dr. Reece Akthar and Uri Ort, we have demonstrated how digital footprints can be used to reliably infer leaders' deviant, counterproductive, and unethical tendencies. AI detection of integrity The German saying 'Vertrauen ist gut, aber Kontrolle ist besser' ('Trust is good, but control/cheking is better') may feel like a punchline from a Black Mirror episode, but it captures a real corporate dilemma. Surveillance feels ethically icky—until you consider its potential to flag actual ethical breaches before they cause harm. The tension is real: we want to protect privacy, but we also want to prevent fraud, abuse, and toxic leadership. We can't have both. Still, data without interpretation is just noise. AI might help detect patterns of behavior—but it can't (yet) infer intent. And ethical behavior, after all, is all about intention: doing the right thing even when no one is watching. The Best Predictor of Future Integrity Is... Past Behavior Here's the uncomfortable truth: people are not entirely predictable, but they (AKA 'we', including you and I) are consistent. Character, like personality, tends to be stable over time. Which is why, as psychologists Robert Hogan and Rob Kaiser have long argued, the best way to assess a leader's integrity is to talk to the people who work for them. Forget what leaders say about themselves. Ask their direct reports, peers, and subordinates: Reputation, not self-perception, is the gold standard for integrity. Feedback from 360-degree assessments, team reviews, and exit interviews can be more illuminating than any forced-choice questionnaire. Why? Because employees experience the real leader—not the polished interview version. Indeed, the paradox of assessing integrity is that the more someone talks about being ethical, the more skeptical we should be. Truly ethical leaders don't need to remind you they're ethical. They just act that way. Ironically, this quiet consistency can work against them, as they may appear less 'ethical' than their more performative peers. After all, the least honest individuals are often the most skilled at social desirability and impression management—strategically charming others to gain their trust. In Conclusion: Don't Rely on Haloes (Reputational Glow) Assessing a leader's integrity is not about chasing unicorns or canonizing saints. It's about paying attention to patterns, ignoring charm, and trusting those with firsthand exposure. Everyone can fake virtue in short bursts. But consistency over time is much harder to manufacture. So, the next time you're tasked with evaluating a leader's character, resist the urge to ask: 'Do they seem ethical?' Instead, ask: 'Would you trust them to have your back—even if nobody else is watching?' Trust is always a bet. No matter how reliable someone has been, no matter how many times they've shown up, there's always the possibility that tomorrow they won't—and suddenly, we're toast. As the old saying goes: 'Fool me once, shame on you. Fool me twice, shame on me.' At its core, trust is a psychological wager on someone else's future behavior. We're placing bets, not certainties, on whether people will continue to align with our expectations, values, or interests. The good news? While we can't eliminate the risk, we can get smarter about how we place those bets. If we pay close attention—really observe someone's behavior, motivations, values, and incentives—we can increase our odds. We'll still get it wrong sometimes, but the goal isn't perfection; it's improving the quality of our mistakes. It's about becoming wiser in whom we trust, and quicker to learn when we've misplaced that trust. Too much naïveté leaves us vulnerable; too much paranoia makes life unbearable. So what's the answer? Hedge your bets. Build safeguards. Expect to be wrong occasionally—but aim to be wrong less dramatically, and more recoverably. In the end, trust is a risk worth managing, not avoiding.
