Corporate crime and enron

Research Article – Barlow & Barlow

Copyright 2010 - The Journal of Criminal Justice Research (JCJR) - Volume 1, Number 1 – Page 1

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The Journal of Criminal Justice Research

RESEARCH ARTICLE

CORPORATE CRIME NEWS AS IDEOLOGY NEWS MAGAZINE COVERAGE OF THE ENRON CASE

David E. Barlow1

& Melissa Hickman Barlow

Fayetteville State University

ABSTRACT

The presentation of street crime in the media has been well documented in the literature. Some research on the presentation of corporate or white-collar crime in the media also exists but it is much more limited. Much of the critique of the media by critical theorists has suggested that the social harms of the rich and powerful are presented as much less threatening than the social harms of the poor. This study uses the news story of the Enron scandal as a case study to observe how this white collar crime is presented in both Time magazine and U.S. News and World Report for a little over one year. Keywords: Crime, Media, Corporate, Enron, Ideology, News Authors’ Biographies Dr. David E. Barlow is a Professor and Dean of the College of Arts and Sciences at Fayetteville State University in North Carolina, USA. Dr. Barlow‟s research interests include multicultural issues in policing, white-collar crime, and the history, ideology, and political economy of crime control in the United States. He has worked in the criminal justice field as a correctional officer, deputy sheriff and university police officer in South Carolina and Florida. Barlow is the author of numerous articles in professional journals, co-editor of two books, Classics in Policing (Anderson 1996) and Police in America:

1 Correspondence should be forwarded to David E. Barlow, Dean. College of Arts and Sciences, Fayetteville State University, 1200 Murchison Road, Fayetteville, North Carolina 28301. E-mail: [email protected]

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Classical and Contemporary Readings (Wadsworth 2004), and co-author of the book, Police in a Multicultural Society: An American Story (Waveland 2000). Dr. Melissa Hickman Barlow is Professor in the Department of Criminal Justice and Director of the Center for Community Justice and Service Learning at Fayetteville State University in North Carolina. She is co-author of Police in a Multicultural Society: An American Story (Waveland, 2000) and has published articles on the history and political economy of crime control policy, crime and justice in the news media, and race and class issues in criminal justice. Her article, "La natura ideologica delle notizie sul crimine" appears in Gabrio Forti and Marta Bertolini's (2005) La televisione del crimine. Professor Barlow is interested in the race and class politics of criminal justice policy, critical resistance to mass incarceration, and grassroots efforts to reduce incarceration through community justice initiatives.

INTRODUCTION News reports on corporate scandals combined to become a major news event in 2002 and provided researchers with a relatively rare opportunity to explore concentrated media coverage of corporate crime. Chief among the corporate crime stories of 2002 was the Enron story. The financial collapse of Enron, and related allegations of wrongdoing by corporate executives and Enron‟s auditor, Arthur Andersen, first became a major national news story around December of 2001. The collapse of Enron was a major news story for a number of reasons. Enron began as a small pipeline company in Houston in 1985 and grew to become the seventh largest firm in the United States in 2001 by taking advantage of newly deregulated energy markets and by being a leader in asset-light finance capitalism. A key to Enron‟s success was maintaining a steady influx of cash by preserving artificially high stock prices through promoting the appearance of a very successful and wealthy company. In collaboration with auditor Arthur Andersen, Enron executives were able to keep the company‟s credit rating extremely high by hiding huge amounts of debt. Part of the Enron story includes the cooperation, or at least the inaction of a large number of people, banks, and regulatory agencies. The Enron bankruptcy in December of 2001 was the largest in U.S. history to that date. The collapse shocked the government, the business community and general public. Thousands of employees lost their jobs. Thousands of stockholders lost huge amounts of money. 401K plans were in shambles. The stock market went into a tailspin. And a number of other large companies began to collapse under the weight of the declining economy and the loss of faith in U.S. corporate executives and government regulatory agencies. An essential element of the Enron story is that corporate executives were investigated, and a few were eventually indicted for illegal business practices, including insider trading, money laundering, wire fraud, accounting fraud, conspiracy, market manipulation, and obstruction of justice. A number of other parties, including Enron‟s Board of Directors, stock analysts, investment bankers, lawyers, accountants, and government regulators were criticized for illegal behavior, unethical business practices,



or operating with direct conflicts of interests. The collapse of Enron, along with allegations of fraud and the impact on the stock market, posed a serious threat to the normal functioning of business and to business confidence in the U.S. economy. The order and predictability necessary for confident business exchanges were destabilized. In the year that followed, Enron came to epitomize corporate executive greed and malfeasance, contributing to a declining economy and a collapse in the value of a number of corporate stocks. Unlike most corporate crimes, the actions of Enron executives received a great deal of attention from the news media, business leaders, and politicians. As Friedrichs (2004: 127) notes, media coverage of Enron and the related corporate scandals of 2002 was arguably “the most substantial, pervasive, and sustained coverage of white collar crime (in some form) in American history.” The analysis presented here compares media representation of corporate crime in the Enron case to what we know about media representation of street crime. Guided by previous research on the portrayal of crime and criminals the in news media, we explore how two weekly news magazines constructed the crimes and criminals of Enron.

CRIME IN THE MEDIA

A substantial amount of research has been conducted on news about crime. A consistent conclusion from the research is that news reports on crime are not neutral reflections of an objective reality of crime, but, rather, are subjective social constructions (Marsh and Melville, 2009; Barlow, 1998; Wright, Cullen and Blankenship, 1995). According to Lofquist (1997), research suggests that the news media distort images of street crime, or the crimes typically committed by those with the least amount of power and wealth in our society, in a number of different ways. The news media tend to concentrate attention on extreme, dramatic, or sensational cases (Marsh and Melville, 2009; Beckett and Sasson, 2000; Kappeler, Blumberg and Potter, 2000; Surette, 1998; Barlow, Barlow and Chiricos, 1995a; Chermak, 1994; Benedict, 1992), misrepresent the extent and types of crimes that occur in society (Barlow et al., 1995a; Reiman, 2004; Garafalo, 1981; Sherizen, 1978), and exaggerate the incidents of stranger perpetrated crimes (Kappeler et al., 2000; Chermak, 1994; Tunnel, 1992). In addition to these distortions, the news media typically decontextualize crime, taking it out of its social, political, and economic context and ignoring the complex array of social forces that shape the nature and extent of crime (Barlow et al., 1995a, 1995b; Barlow, Barlow and Stojkovic, 1994; Garofalo, 1981; Humphries, 1981; Sherizen, 1978). A number of researchers have found that racial minorities are overrepresented in the news media as offenders (Barlow et al., 1994a; Smith, 1984; Sheley and Ashkins, 1981; Graber, 1980). Others have observed that news stories identify the “newsworthy” offender as the one who is in direct contrast to the stereotype of the young urban Black male offender (Marsh and Melville, 2009; Roshier, 1981; Graber, 1980). Whether the news is about the problem of crime or about a particularly newsworthy criminal offender, the media tend to distort the reality of crime by supporting racial stereotypes implying



that Blacks are more likely than Whites to be involved in criminal activity. Crime news researchers have also observed that the victim that appears most worthy of sympathy in news accounts is one who is white, affluent, and female (Beckett and Sasson, 2000; Benedict, 1992; Graber, 1980; Fishman, 1978). Concentrating stories on cases involving socially favored victims is an important way in which the news media distort the threat of crime. A common criticism of the news media is that they are inclined to distort social images of crime by substantially over reporting incidents of violent street crime, while underreporting acts of white collar crime, including corporate crime (Marsh and Melville, 2009; Friedrichs, 2002; Burns and Orrick, 2002; Cavendar and Mulcahy, 1998; Coleman, 1998; Lofquist, 1997). Cavendar and Mulcahy (1998: 699) argue that stories about corporate wrongdoings are usually not considered newsworthy because they are often “morally ambiguous in terms of crime, criminal and victim; they unfold slowly; and they do not culminate in a clear resolution.” News Coverage of Corporate Crime The existing research on white collar crime, and more specifically on corporate crime in the media suggests that the news media tend to distort images of corporate crime in ways that minimize corporate liability by: (1) concentrating on individual defendants (Marsh and Melville, 2009; Wright, Cullen and Blankenship, 1995; Morash and Hale, 1987), (2) attaching blame to secondary or spurious causes such as the failure of the appropriate regulatory agency or the criminal justice system (McMullen and McClung, 2006; Wright et al., 1995; Beckett and Sasson, 2000), (3) minimizing attention to the causes of corporate criminality in favor of the consequences of the activity (Burns and Orrick, 2002; Lofquist, 1997; Wright et al., 1995), and (4) ignoring or underestimating the costs of corporate crime (Kappeler et al., 2000; Reiman, 2004). Research on corporate crime in the news also suggests that journalists are reluctant to refer to the misbehavior as “crime” (McMullen and McClung, 2006; Wright et al., 1995; Bohm, 1993; Lynch, Nalla and Miller, 1989). Wright et al. (1995) observed that the news media are not proactive, but rather are reactive in defining corporate offending as criminal, often waiting until local prosecutors officially identify behavior as criminal. Indictments, adjudication, and sanctions come about just as media attention to an incident is declining, thus reducing a potential educative or deterrent effect (Wright et al., 1995). Friedrichs (1996) argues that news media treatment of business persons who are indicted for criminal violations demonstrates ambivalence reflective of the general public‟s ambivalence regarding the wealthy. Wealthy business persons are both admired and reviled. They are often portrayed in the same article both as highly respected citizens of the community to be admired and as ruthlessly greedy people to be despised for living a life of luxury through their misdeeds (Friedrichs, 1996). In addition, journalists appear not to grasp the complexity of crime by corporations (Randall, Lee-Sammons and Hagner, 1988; Randall, 1987). Finally, with very few exceptions, most media analyses involving corporate crime focus on social harms rather than on financial misconduct (Williams, 2008).



Crime News as Ideology An argument made by a number of researchers who have studied crime in the news media is that the ways in which crime, criminals, victims, and the justice system are represented in the news reflect ideologies that support dominant institutions (Cavender and Mulcahy,1998; Barlow, 1998; Lofquist, 1997; Ewick and Silbey, 1995; Barlow et al., 1995a & 1995b; Barlow et al., 1994; Gamson, Croteau, Hoynes and Sasson, 1992; Tunnell, 1992; Bohm, 1986; Hickman, 1982; Humphries, 1981; Hall, Critcher, Jefferson, Clarke, and Roberts, 1978). Lofquist (1997: 244) describes this tendency as one of journalists relying upon a “hegemonic narrative… composed of system-legitimizing assumptions and assertions.” One aspect of the hegemonic narrative is that it decontextualizes crime and criminals, separating them from the social, political and economic conditions of their formation. Crime is presented as simply a matter of pathological individual action (Lofquist, 1997; Barlow et al., 1995a). When crime appears simply as individual pathology, dominant institutions and the powerful people who run them are not held accountable for the role they play in producing the conditions that generate crime in society. Every day, decisions are made in news organizations about what events are newsworthy and what events are not. As Lofquist (1997) points out, decisions about newsworthiness are influenced by dominant ideological perspectives. Within this context, decision-making on newsworthiness has led to gross under-reporting of corporate crime as compared to the reporting on street crime in the news media. A distorted public discourse of dangerousness results in which fear of crime and an amalgam of punitive attitudes are directed toward those perceived to be most involved in street crime (i.e. young, black males), rather than toward corporate offenders, who in fact are responsible for a greater degree of harm to society (Barlow et al., 1995a; Barlow, 1995). When corporate wrongdoing does make the news, Cavender and Mulcahy (1998) argue, existing news frames still result in a tendency for the harm from corporate crime to be minimized. “News frames favor simple explanations for organizational and structural-level problems; they also facilitate, through denials, scapegoats, and resignations, efforts to wipe the slate clean so that the organization can continue with its good name intact” (Cavender and Mulcahy, 1998: 715). Decisions about which corporate crimes are newsworthy and should receive media attention also appear to be shaped by powerful interests. According to Calavita and Pontell (1994), the corporate crimes deemed worthy of media and enforcement attention are those that pose a serious threat to the normal functioning of business or to business confidence in the economy. Thus, the newsworthiness of corporate crime is not based on the seriousness of the offense, the amount of money stolen, the number of deaths, or the number of victims. It is based on whether the criminal action is likely to harm the business community. The primary concerns appear to be the preservation of a positive business climate and maintaining faith in the established political and economic institutions. Williams‟ (2008: 492) findings provide support for this perspective when he describes the “hegemonic modes of discourse” found in newspaper articles about the financial crises of 2001 and 2002.



Crime news, including news about corporate crime, is ideological, then, if it distorts the reality of crime in ways that support dominant social, political, and economic institutions. Marx argued that, in capitalist society, ideology is a particular form of communication that misrepresents social contradictions in the interest of the dominant economic class (Larrain, 1973). It is an inversion of the social reality of crime in capitalist society when the classes and racial groups most victimized within the capitalist social structure are portrayed as predators on society. It is also an inversion of the social reality of crime when the class that reaps the largest share of society‟s benefits and produces the greatest social harm through corporate crime are portrayed as victims. Crime news is ideological when it reinforces a class or racially biased image of crime, misrepresenting the most serious criminal threats and drawing attention away from the structural sources for crime. When the Enron story broke, journalists were given an enormous opportunity to debunk the myth that crime in U.S. society is primarily the work of those who are poor, young and black. A window of opportunity presented itself in which the news media could have helped to educate the public on the degree to which the social harm from the crimes of the powerful exceeds the harm from ordinary street crime. The purpose of the study reported on here was to investigate whether it is reasonable to conclude that news media coverage of the Enron case challenged the hegemonic narrative.

METHOD

We conducted a qualitative case study of news magazine articles on the story about the Enron Corporation appearing in Time (see Appendix A) and U.S. News & World Report (see Appendix B) magazines from December 2001 through January 2003. Time was selected because, as the oldest and most widely circulated weekly news magazine in the United States, it is one of the best available representatives of mainstream media as a repository of popular discourse on contemporary social issues. We examined U.S. News and World Report, a somewhat more conservative and business-oriented news magazine, in order to increase confidence in our findings. We used magazines rather than newspaper articles, because they often offer much more in-depth coverage and analysis. Because Arthur Andersen was intimately linked with the fraudulent practices that helped Enron executives carry out their apparent criminal activity, every article that made reference either to Enron or Arthur Andersen was included in our data collection process. The articles were identified through an electronic search using “Enron” and “Arthur Andersen.” This method was then double-checked with a page-to-page search of the magazines by hand. A total of 46 Time magazine articles and 41 U.S. News and World Report articles were collected. We included only major news articles, excluding the very short news briefs often found in the front of the magazines. Each article included in the study is at least a page long or is a sidebar article within a larger article on the subject of the Enron case.



The collection process was stopped in January of 2003 because the storyline had developed a sense of closure at that point and articles on the subject in the two national magazines no longer continued to appear. Both magazines had special January/December issues that largely summed up the Enron story and a couple of other related news items from 2002. Time‟s “Persons of the Year” were the Enron “Whistleblowers,” including Sherron Watkins, the Vice President of Corporate Development at Enron who helped make public “accounting irregularities” within the company. U.S. News and World Report‟s article on “The Worst CEOs” also provided closure to the Enron scandal and a few related news articles from 2002. To some extent the apparently negligible role that the Enron scandal played in the November elections, and the passage of the Sarbanes-Oxley Act, which substantially increased the oversight and regulation of corporate governance and auditing, signaled the end of Enron as a political issue. The stories had begun to slow down to the point that the November indictment of one of the primary targets of the prosecutors, former chief financial officer Andrew Fastow, warranted only one small paragraph in the very front of each of the magazines where minor stories of the week are briefly summarized. After the December/January issues, articles on the Enron story were nearly non-existent. Did coverage of the Enron story in Time and U.S. News and World Report distort the reality of this particular form of crime in ways that can be said to support dominant social, political, and economic institutions? Did the coverage of Enron portray criminal offenders in ways that diminished their culpability, or even depicted them as victims themselves? Or, did journalists take the opportunity presented by the Enron case to debunk prevailing stereotypes about crime and criminals? Did they use the case to illustrate the degree to which the social harm from the crimes of the powerful exceeds the harm from ordinary street crime? We examined the articles on Enron in Time and U.S. News and World Report to explore these questions.

FINDINGS

Who Speaks? One of the key observations to be made in the study of crime news concerns who speaks. Answering the question of whose voices and concerns are represented in stories about crime and justice tells us a great deal about whether particular perspectives are privileged in relation to others. The State The category of voices that dominates the articles we examined is that of the State. Reporters relied heavily on official governmental sources to describe and interpret events related to the Enron case. They relied most heavily on representatives of the Bush administration and its regulatory agencies, such as the Federal Regulatory Energy Commission and the Securities and Exchange Commission. For the most part, State sources spoke with one voice as they expressed their primary concern, which was to



maintain business confidence, a strong economy, and a positive image of U.S. businesses. In a radical departure from the “get tough” posture assumed by government officials in news stories about street crime, the government sources who appeared in news stories on Enron did not call for increased regulation or enforcement, or for the toughening of penalties. In fact, they appeared to be much more concerned about preserving a climate of deregulation or the reduction of government of oversight over business activities, than about punishing guilty parties. Not hurting business appeared to be a higher priority than apprehending and convicting offenders. Notable exceptions were federal prosecutors and representatives of the U.S. Attorney‟s office. These agencies are more independent from the presidential administration than are regulatory agencies and they spoke directly about the investigation and possible prosecution of suspected violators of the law. It is important to note, as evidenced by the articles examined for this project, that many of the members of the Bush administration and individuals within this administration‟s regulatory agencies had very close ties to Enron and to Arthur Andersen. Prosecutors interviewed for the articles articulated the strategies and difficulties of investigating and prosecuting corporate crimes. Another group of State sources includes former government officials who had once been involved in government regulation and lawyers who represented or prosecuted business executives. For the most part, such experts discussed procedures involved in investigating, prosecuting and, in a couple of articles, punishing corporate offenders. One article went so far as to discuss the major differences in investigating and prosecuting corporate criminals compared with street criminals, along with discrepancies in their treatment by authorities and the punishment they receive. This article was notable as an exception to the more typical treatment of the Enron case as qualitatively different from ordinary crime. A final group of official sources heard from in the articles includes members of Congress. Members of Congress primarily engaged in political maneuvering as they approached mid-term elections in November of 2002. The question most often posed by reporters to a member of Congress was “Who will control the House and Senate?” The other most common question was “What are you going to do?” Similar to representatives of the White House, members of Congress struggled to secure the public‟s confidence in business. At the same time, though, they did not want to be seen as being opposed to corporate reform. Although several ideas were offered, by the summer of 2002, comments by members of Congress centered almost exclusively on campaign finance reform. Eventually, however, the U.S. Congress did pass one major piece of corporate reform legislation, the Sarbanes-Oxley Act. Academic Experts Academic experts were used as sources throughout the articles on a regular basis. These experts included university professors of corporate law, economics, business, and accounting. The most telling omission among the academics in the Enron articles



is criminologists. At no point were criminologists, sociologists, or psychologists engaged by reporters to explain the behavior of these corporate criminals. One article in July 2002 used the phrase, “corporate criminal” and asked questions about why the executives did what they did. But the questions were posed to an accounting professor rather than to a criminologist or sociologist. In an article in November 2002, a law professor was consulted as an expert on legal issues, but there was still no effort to explain behavior. The types of experts included implied that, not only was the behavior not crime, it needed no explanation as it was rational and logical. Such a depiction served to establish the fundamental humanity of these criminals, suggesting that their behavior was understandable and simply opportunistic. The Public Although the perspectives of the general public did not receive much attention in the articles, advocacy groups who attempted to speak on behalf of the public were cited on a few occasions. In the 87 articles, a few spokespersons for advocacy groups were asked to comment on events and asked what should be done to correct the problem, but only a few lines were devoted to their points of view. Although one government watch group, Common Cause, was given a voice in one article, most of the advocacy groups represented stockholders, investors, and taxpayers. Therefore, the groups included mainly gave voice to a very specific segment of the population, those in the upper-middle class and above. The concerns expressed by these groups focused primarily on corporate reform, with a specific focus on removing conflicts of interests within corporate boards of directors, the auditing of corporations, and the analysis of stock by investment bankers. The only direct effort to learn the perspectives of those in the general public was a poll taken by Time magazine. Even here, though, the questions focused on the public as potential investors, as it asked questions about the public‟s confidence in business. Also meaningful was a question asking respondents whether they thought that Enron executives did anything illegal. The reluctance of journalists to label the behavior of Enron corporate executives as “crime” was evident at every turn. The only other area of public interest addressed in the poll was how these events would affect voting in the midterm elections. Attention to the general public within reporting on Enron was primarily focused on the political impact of the case. The final group that could be placed under the category of the public includes those who were specifically and directly harmed by the crimes, i.e. the victims. However, victims were largely absent from the Enron story as told in the news magazines. The only times that victims appeared were in the very first articles about the Enron collapse and the final stories summarizing observations on the previous year. Of note concerning the first articles on the Enron case is the degree to which they blamed the victims for contributing to their own victimization, claiming that they should have known better than to place so much of their money through their 401Ks into the company for which they worked. It was not until the final summary articles at the end of the year that we heard from those most directly harmed by the crimes – Enron employees and investors. The



concerns that they expressed were about losing their jobs, their life savings, and their retirement funds. They also expressed anger about the injustice of seeing the Enron executives who victimized them continuing to enjoy the “good life” while they were struggling to find employment and rebuild their retirement accounts. Corporate America Although it is common for news about street crime to include the perspectives of official government sources (the police), academic experts (criminologists), and even, at times, the general public (the community), previous research suggests that the business community is typically absent from the picture (Barlow, Barlow and Stojkovic, 1994). Rarely do news accounts of crime suggest that leaders of business and industry make decisions that produce the conditions that generate crime in our society, or that they could do anything that might reduce crime. In the Enron story, corporate America was directly implicated and, therefore, could not distance itself from the case. A large number of businesspersons were consulted for the stories, including the defendants‟ peers, industrial analysts, investment experts, and representatives of various business organizations. The concerns expressed by representatives of the business community were remarkably similar to those expressed by the Bush administration and its representatives in the executive branch. They expressed grave concern about maintaining business confidence among consumers and investors in order to ensure a growing economy. They were concerned about maintaining a positive image of corporate America. Also like the Bush administration, they were particularly concerned about preserving the deregulation movement and resisting increased government regulation. They advocated for the business community solving its problems through self-regulation. Not only is it extremely uncommon for reporters to connect the issues surrounding street crime to business decisions and strategies, it is also uncommon for crime news stories to give voice to a suspect‟s peers to provide insight into his or her world view. In the reporting on Enron, presenting honorable businesspersons as sources of information supported an image of defendants as fundamentally human and undermined any potential for stereotyping white businessmen as corrupt or evil. The Suspects and Their Supporters While news about crime typically includes an occasional quote from a suspect or their lawyers, reporting on the Enron case gave extensive coverage to the suspects and their wide variety of supporters. These suspects, unlike those in ordinary crime stories, were allowed to tell their side of the story, and they did not do it alone. The defendants, their lawyers, and professional “spinners” or spokespersons were allowed to plead their innocence and, in many cases, their ignorance. They were allowed to suggest that the activities of the company had moved beyond their control. Perhaps most importantly, they were allowed to argue that their actions were not illegal. Giving this kind of depth to the point of view of the defendants in the Enron case cast doubt upon their guilt, especially on their criminal culpability. As a result, their behavior appeared less



threatening and more understandable. Family members were given the opportunity to ask for sympathy as they explained how much the accusations were hurting them personally. In addition, friends, acquaintances, and former colleagues were granted the chance to voice their strong opinions about the integrity of the defendants. Pastors, rabbis, and other benefactors told us that those charged with crimes were basically religious, kind, and generous human beings. Describing the Crimes In the articles we examined, reporters went to great lengths to avoid the use of the word “crime” or any of its derivatives. The list of euphemisms used by reporters and their sources is exhaustive, though as the year progressed the terms did become somewhat more negative or accusatory. In the early articles, the terms used to describe the suspects included “brash,” “innovative,” “creative,” and “rogue operator.” The case was referred to as a “drama,” an “accounting debacle,” a “series of innovations,” a “huge mistake,” “inappropriateness,” and an “epidemic of misstated corporate earning reports.” It was also described as the creation of “complicated private partnerships,” “synthetic leases,” and “murky off-the-books enterprises.” Some of the terms used to describe the suspects‟ criminal activities included “dubious accounting,” “hyper aggressive rogue accounting,” “unusually aggressive accounting practices,” “taking liberties with the numbers,” “cooked its books,” “management hubris,” “company manipulations,” “innovative energy trading,” “financial gaming,” “shuffling assets,” “questionable business practices,” “conflicts of interest,” and “gross mismanagement.” Rather than saying that the executives committed a crime or that the Boards of Directors aided and abetted in the commission of crimes, it was said that there was a “systematic failure” with “directors suspending their ethical guidelines,” “accountants and lawyers studiously looking the other way,” and “Wall Street analysts failing in their principal duty.” In other words, the Board of Directors at Enron did not aid and financially benefit in the commission of a crime; they simply “waived the company‟s ethics code.” By April of 2002, there was some suggestion that criminal behavior may have occurred, but the reporters continued to go to great lengths to avoid labeling the behavior “criminal” themselves. For example, one article suggested that the employees of Enron “may have been victims of a crime” and asked the question, “How much of what Enron did was illegal?” The answer suggested within the article was that the behavior was not illegal, even suggesting that the individuals involved simply did what anyone else would “naturally” do in their situation; they took advantage of an opportunity to make a lot of money. In May, when substantial evidence emerged that Enron was involved in illegal activity in relation to California‟s energy crisis, reporters continued to write about “market manipulation,” “megawatt laundering,” “California scheming,” “gaming the market,” and an “alleged scheme to game California‟s deregulated energy market.” Particularly telling is the following quote in a May article: “Experts are divided on whether Enron‟s behavior amounted to criminal wrongdoing. Most agree, however, that the company appeared to run afoul of the California grid operator‟s board, weakly enforced prohibition against market manipulation but not necessarily criminal.” The reporters went on to say that the deregulation of California‟s market assumed that the



“providers would play nice.” In June, the euphemisms continued with reports of Enron executives “exploiting complex rules,” “bending rules,” “ignoring the rules,” and engaging in “creative tax avoidance” and “creative financing structures.” One article attempted to distinguish between the different levels of corporate wrongdoing by analogy, discussing differences among actions that were “a little fishy” and those that had a “strong stench” or were “thoroughly rotten.” Still there was no reference to “criminal” behavior. The harshest criticism of the corporate executives at Enron occurred in the month of July, just as articles about Enron began a rapid decline. A couple of editors began to refer to the executives in noticeably more negative terms such as “sleazy, deceitful, and out-and-out criminal.” One article used the term “corporate criminals,” though it made no reference to any specific person or activity in the case. The criminal intent of the defendants in the Enron case continued to be downplayed in most of the articles, though, as they were referred to as “bad boys” and “corporate sleaze,” and their criminal behavior was called “corporate excess” and “shenanigans.” About as strong as the accusations got occurred in July when one article described Enron executives who participated in “corporate malfeasance” as “corporate muckety-mucks acting as though the rules don‟t apply to them.” Still, this editor used the term “rules” not “laws.” Journalists did not use terms like “wire fraud,” “money laundering,” “conspiracy,” “insider trading,” or “crime,” except when directly quoting the few government sources who used these terms to specifically describe the indictments or pleas of the Enron executives. Journalists for Time and U.S. News and World Report were completely dependent on the government to define the situation and to inform them as to whether or not a crime had been committed. Rather than engaging in proactive investigative reporting that might have challenged the government to prosecute these suspects, journalists were notably cautious, waiting for the government to hand down indictments before they dared to imply criminality. As one reporter put it, “The courts will decide if those people broke the law. But for now, the only crime that has been committed is that of hubris.” A notable exception was a March article in U.S. News that compared the “possible crimes” of Enron to street crime. However, the focus of this was on how much more complicated it is to investigate and prosecute people for this type of “wrongdoing,” than it is for street crime. The article was very informative and explicitly mentioned some “possible” crimes with which the Enron executives could be charged, including “mail and wire fraud,” “securities fraud,” “insider trading,” “obstruction of justice,” “tax fraud,” “money laundering,” and “racketeering.” On the other hand, the article did not identify specific people and acts as criminal and it emphasized that these were “possible” crimes. Nonetheless, the article exposed many of the complexities involved in the case and identified a number of circumstances that make prosecution difficult: complicated, confusing, and lenient laws, the obfuscation of evidence by burying them into piles of documents, and the ability of defendants to buy the best possible defense. As critical as this article was of the law and the system of prosecution surrounding corporate crime, it did not suggest that any changes in the law or its enforcement were needed or likely to improve the situation. The final January 2003 article in U.S. News and World



Report echoed this same message, pointing out the difficulties in proving intent and defeating the corporate lawyer dream teams. This article even referred to the difficulties of working with “corporate-friendly law written by Congress.” Among the very few articles that mentioned the difficulties of prosecution, none identified reforms that could make investigation, apprehension, prosecution, or punishment of corporate offenders any less complicated. The statements about difficulty of prosecution seemed primarily geared toward explaining to the public why arrests and prosecutions had not yet been made. Other articles emphasized not only how complicated the prosecution of corporate crime is, but also the complicated nature of the corporate criminal act. At times, reporters came across as overwhelmed by the complexities of trying to understand how the operations took place. One journalist, as late as September, wrote that the “mind-numbing complex financial morass at Enron has been slower going” to explain why fewer indictments were being handed down for Enron executives than for many of the other corporate offenders exposed in 2002. Perhaps one of the reasons reporters were so reluctant to declare an act to be criminal was precisely because it was so hard to understand exactly what took place. Some of the articles were very difficult to read, suggesting that reporters had a difficult time telling readers what had taken place. The message was that these corporate “wrongdoings” were complicated. In July, President Bush added to the confusion as he commented on some of his own company‟s actions before he took office: “In the corporate world . . . sometimes things aren‟t exactly black and white when it comes to accounting procedures.” Explaining the Crimes Commentator John Leo of U.S. News and World Report wrote a column in which he argued that the “intellectual liberal elite” were to blame for the Enron scandal. For Leo, the root causes of the Enron debacle, as for most of society‟s ills, are to be found in the “radical relativism” promoted by the liberal elite. Most of the articles in Time and U.S. News suggested more plausible culprits and causes. The Victims Ironically, the first to be blamed in news accounts for losses suffered by the victims of this corporate crime were the victims themselves. One of the very first articles on the collapse of Enron stated that the “victims must accept some responsibility for their troubles.” Enron employees and stockholders who lost their retirement and life savings were criticized for not properly diversifying their 401Ks. Calls for “individual responsibility” were made with respect to the victims more frequently than to the perpetrators of the crimes. Major financial incentives had been offered by Enron executives to encourage stockholders and employees to put more and more of their money into the company‟s stock. Yet the earliest articles on the Enron case suggested that investors should have taken personal responsibility to resist such suggestions and manage their funds more carefully. An article in April 2002 continued the victim blaming trend by criticizing legislation designed to force employees to diversify their



401Ks, stating that the legislation was proposed to “save us from our greedy selves.” The journalist who wrote this article also referred to those most victimized as “Enron diehards” who had relied heavily on Enron stock to support their 401Ks. The Regulators In another irony, the second group deemed potentially blameworthy within the articles was comprised of those responsible for regulating the activities of the Enron Corporation, including those government officials who were responsible for regulating the industries involved. However, lax regulation did not last long as a theme, presumably because the political climate at the time was one in which deregulation was a highly favored approach in general. Fairly early on, attention was directed to Arthur Andersen, the company responsible for auditing Enron. Initially, personnel at Arthur Andersen were criticized not for illegal activity, but for having a legal conflict of interest in that they acted as both regulators and promoters of Enron. Later, Arthur Andersen was exposed as a willing partner in the illegal activities of the Enron Corporation and the two stories became intertwined. The group of regulators that received the most attention was Enron‟s Board of Directors. Yet, even though some board members were apparently more than just negligent, in that they received substantial benefits from the criminal activity, the descriptions of their behavior in the articles generally downplayed their culpability. When it was reported that board members knew something was wrong but did not ask the questions that their positions as regulators demanded that they ask, they were described as having a “failure of character” and as having “lost their moral compass.” When it was discovered that members of the Board of Directors were in illegal partnerships with clear conflicts of interests, they were said to have been caught “napping.” When it was discovered that the Board‟s executive committee provided a million dollars in loan guarantees to Chewco, a phantom company established to facilitate fraud, journalists reported that the Board “waived the company‟s ethics code.” Board members were described as being “too cozy with management” and for being too willing to approve proposals without scrutiny. In July, one of the articles included a quote from the Senate‟s Permanent Subcommittee on Investigations, stating that member‟s of Enron‟s Board “knowingly allowed Enron to engage in high-risk accounting” and “were aware of everything from extensive off-the-books deals to conflicts of interests and executive compensation. --- and did little or nothing.” That same month, President Bush was reported to have made a speech calling on corporations to “do a better job of regulating themselves.” Nothing was said about holding those who engaged in illegal activity accountable for conspiring in these operations or about punishing those who committed crimes. Wall Street Analysts The third group suggested as partly to blame was Wall Street stock analysts exposed as having a major conflict of interest with the Enron Corporation. Many of these stock analysts were inflating the value of Enron stock while simultaneously gaining huge profits from Enron through consulting, investment banking, and owning Enron stock. A



major conflict of interest was exposed as the same banks and people who were supposed to objectively evaluate Enron stock were making a great deal of money as long as they gave Enron the rating that the executives wanted. News accounts raised questions about this conflict of interests. By the end of the year of reporting on the Enron case, the same banks that had been identified as participants in the conflicts of interests were identified as victims of the Enron scandal as well. Enron Executives Although it would be reasonable to assume that responsibility for criminal activity would naturally fall on the individuals who committed the crimes, Enron executives received only sporadic attention for their part in the malfeasance. When it came to searching for causes of the crimes, news accounts included almost no effort to explain the behavior of Enron executives. One article questioned, “Did they really think they would not be caught?” but still offered no attempt to determine the causes of the illegal behavior. No criminologists, sociologists, or psychologists were quoted giving their opinions about why those involved engaged in criminal activity. The articles included some discussion of the lack of integrity and greed of Enron executives, but did not present their actions as deviant or even particularly harmful. In fact, the behavior of Enron executives was identified as normal and rational human behavior. One article stated, “Wherever and whenever there is a chance to make a dishonest buck, someone will take it.” The use of this particularly humanizing version of rational choice theory as an explanation for the illegal behavior of Enron executives was perpetuated both by the whistle-blower, Sherron Watkins, and by President Bush who explained the behavior as “human nature.” President Bush was quoted as saying, “human nature is the culprit,” sending the message that these offenders are really no different than the rest of us. One article‟s effort to place the Enron case into historical context did so in a way that implied that perhaps we were all overreacting. The article explained that corporate criminal scandals have been going on for a long time and that we have survived these events with little damage. Worse scandals have occurred and we survived them. In one of the very few instances in which the behavior was even indirectly labeled as criminal, the article went as far as to say that “[w]hite collar crime is as American as apple pie, as old as the original European settlements on these shores.” Company Culture The closest that any of the articles came to offering an explanation for the behavior of Enron executives or anyone else involved in the scandal was a couple of articles focusing on the culture of the Enron Corporation. The article cited many examples suggesting that the culture of the company encouraged risky and illegal behavior. As far back as 1986, Enron employees were found to have been involved in manipulating company earnings, doctoring bank statements, and opening accounts with forged documents. Rather than punishing or firing these employees, CEO Kenneth Lay stated



to them, “Please keep making us millions.” Intense competition within the company created incentives to make bigger and bigger deals at any cost, to inflate profits, and to hide debt. Enron was described as a “pressure cooker” that had severe disincentives for those who operated carefully or questioned the activities of their bosses. Every year, those employees who were rated at the bottom 20 percent by their immediate supervisors were fired. The culture of Enron reflected the personal characteristics of its personnel: ego, pride, competition, excitement, and masculinity. One article stated, “Enron is about a band of pretty smart people who thought they had found a way to defy the laws of business physics.” Focusing on the fact that Sherron Watkins is a woman, one article observed that “females seem overrepresented [among whistleblowers] relative to their numbers in the business world . . . the ranks of corporate rogues notably lack the feminine touch . . .[women] lack the corporate clout needed for big-time bamboozling . . . they feel like outsiders.” Watkins‟ lack of involvement in illegal behavior was attributed not to her integrity, but to her gender, and to the fact that she was not welcomed into the “boys‟ club.” There was some suggestion that the problems are endemic to capitalism, or at least capitalism gone bad, with reporters frequently referring to “crony capitalism.” One journalist wrote, “By now people know that capitalism is a spectacle of hope and guts and guile, all racing toward the bottom line. That is its genius, but without guardrails, the whole contraption can take us over a cliff.” The suggestion was that there is a need for minor reforms or regulations, but no one was calling for a radical overhaul of the system, or even for punishment of the offenders. Enron was depicted as simply a company that went a little too far and the executives went along for the ride. Characteristics of Offenders Boys will be Boys One news article summed up the Enron scandal in the following statement: “A band of cocky inexperienced young MBAs was left alone to do whatever it took to structure a deal, regardless of the circumstances.” Statements such as this one tend to give an image of the offenders as bad boys rather than real criminals. Another article described the Enron company itself as a “swaggering, rule-breaking, deal making cult that ultimately mislaid its analytical skills and perhaps its moral compass.” Sherron Watkins was quoted as saying that CEO Kenneth Lay was “duped by underlings,” even though he sold off his stock, $100 million in 2001 and $20 million after Watkins sent him a memo exposing the accounting irregularities at Enron. A common theme in the articles is that Enron executives were working on the edge of a new economic system and that the borders of what is legal and what is illegal are somewhat vague. Just as unclear was whether we should revile Enron executives or admire them. For example, the suspects were referred to both as “arrogant jerks” and as “bad guys,” as “corporate honchos,” and as “corporate rogues who did not play nice.” They were described as “confident” and as “visionaries.” Journalists took pains to emphasize that at least some aspects of the suspects‟ behavior may not have been



illegal and may actually have been positive for the economy. One article stated that the ideas of speculation and deregulation were “New Economy chic, and to some extent retain currency.” Human Beings Journalists went to great lengths to present the offenders as human beings. When describing the corporate executives, the reporters identified their ages, college degrees, hobbies, religious activities, and charitable contributions. Identifiers such as “trombone-playing MBA,” “son of a Missouri minister,” and a “high-voltage intellect” were common. Extensive personal histories were provided on the suspects, including discussions of their schools, awards, charities, recognitions, and contributions to the community. One article stated that Fastow had recently “helped coach his son‟s tadpole baseball team and taught Hebrew at the local synagogue.” The articles often expressed sympathy for the Enron offenders. An article in July 2002 explicitly expressed concerns that the public might dehumanize the suspects: “many people may soon be looking for someone to blame. And the targets for public wrath are easy to demonize: corporate fat cats.” Several articles described all the trouble that the investigations and accusations were causing the suspects personally. The final articles of the year described at length how the exposure and investigation process had affected the suspects. The amount of space devoted to putting a human face on the offenders is remarkable in contrast to the very limited attention give to the victims in the Enron case. A number of victims were identified: employees, stockholders, the stock market, the energy business, several large banks, and the city of Houston. However, with the exception of the employees and stockholders, the suffering of victims was said to be the result of the exposure and investigation of the crimes, rather than the crimes themselves. In addition, as previously noted, employees and stockholders were not presented as truly innocent victims because it was said that they should have taken precautions to protect themselves from this crime. Ironically, the “human” victim who received the most attention from the media was President Bush‟s mother-in-law, Jenna Welch, who “got soaked” by the “Enron collapse.” She lost $8,000. Newsworthiness How reporters shaped the story of Enron and the context in which they placed it tell us a lot about what they perceived to be most important about the case. One factor contributing to the newsworthiness of the case is that it involved big losses. Enron was the seventh largest firm in the United States and its bankruptcy was the largest in U.S. history to that date. The collapse shocked the government, the business community and the general public as thousands of employees lost their jobs and/or their life savings. The impact on the economy was dramatic. However, the hook that kept the articles coming until the Fall of 2002 was the political story.



Although the economic impacts of the Enron crimes were substantial, it was the political consequences that were given the largest amount of attention in the news magazines. Initially, the primary political story was about the political connections and the influence that members of the Enron Corporation had with the Bush administration, with law enforcement agencies, and with the U.S. Congress. For example, 212 of the 248 government officials involved in the Enron hearings had taken money from Enron or from Arthur Andersen. The interconnectedness of the Bush administration and Enron was extraordinary; however, the story that came to dominate the articles was the potential impact of the Enron scandal on the midterm elections of November 2002. In July, reporters wrote that the Republican Party was afraid of the “irritable voter” who might have lost their retirement fund. One article stated: “For Democrats, the political beauty of the corporate scandals is that they „play into what people already believe‟ about Republicans -- „that these guys are in the tank with corporate special interests.” The Democrats sought to use this edge to push through legislation that had been stalled by the Republican controlled Congress. They also hoped to use the relationship between the Bush administration and Enron to defeat the Republicans in the mid-term elections. Another July article stated that: “All this is good political news for the Democrats....Democrats believe now they have a lethal weapon to use against Republicans this fall -- linking the White House to corporate excesses and portraying the president as insensitive to the „little guy‟....Corporate excess could hurt the GOP in the midterm elections.” The Republicans used the articles to suggest that the Enron scandal was a business problem and not a political problem. Apparently, the Republican message was strong because they triumphed in November. Only two pieces of legislation were passed through Congress on the energy generated by the Enron Corporation. One was on campaign finance reform and the other was the Sarbanes-Oxley Act, which substantially increased the oversight and regulation of corporate governance and auditing.

POLICY IMPLICATIONS AND OUTCOMES The articles about the Enron case contained implicit and explicit policy implications concerning what should be done about the illegal actions of the executives of Enron and Arthur Andersen specifically, and about white collar crime more generally. Harm Reduction In contrast to the tough on crime stance characterizing discourse on street crime since the late 1970s in the United States, the articles on Enron contain policy suggestions much more in line with harm reduction or restorative justice than with punishment, retribution, or deterrence. Policy discussions in the articles reflect the intense debate that occurred on the potential effects of possible official responses to the criminal behavior. The position taken most often was that there is a need to “rein in” the behavior of a few bad apples, but to do so in a way that will not hurt the company or the industry too much. Considerable attention was given to the need to restore the “public‟s confidence” in business, corporations, and the economy. The debate was not



about how best to catch and punish corporate offenders, but how best to “clean up the corporate books,” or to “fix” or “restore” the public‟s confidence in the industry. The assumption that the government must support innovation and business was unchallenged. White House Press Secretary, Ari Fleischer stated: “It‟s not good to bash business” and journalists and politicians alike appeared to take this sentiment to heart. One journalist noted that: “[n]o legislator wants to appear to be blocking reform now, especially in an election year.” Thus, the debate centered on what is best for the economy: more regulation or less regulation. Another journalist suggested that investors were concerned about the ability of “lawmakers to distinguish between reforms that are needed and those that will cramp the recovery even more.” A prime example of this curious debate was exemplified by “Wall Street‟s Top Cop,” “the enforcer,” “the Sheriff of Wall Street,” New York Attorney General Eliot Spitzer. Spitzer became famous for his “aggressive pursuit” of Merrill Lynch and a dozen other Wall Street firms. He was referred to in the media as one of the only players who was really going after corporate criminals. Corporate leaders criticized Spitzer as an aggressive, harmful, self-promoter, who was “pushing the law for social change” and “taking on Wall Street.” What did he win with his aggressive prosecution? Merrill Lynch agreed to pay a fine, apologize, and reform. Spitzer himself said that he “never sought crippling penalties . . . I began this with the premise that we did not want to challenge the financial viability of Merrill or any of the others.” Reflective of a family model approach to criminal justice, offenders in the Enron case were viewed as needing discipline, not punishment. A U.S. News and World Report article in July illustrated the contradictory path on which the government was proceeding as it described Bush‟s goal in resolving the scandal. Bush‟s objective, the article claimed, was to “balance seemingly contradictory goals --- to signal to his corporate backers that he will not become their enemy and to tell the wider electorate that he will not let business run amok.” The “bad apple” theory emerged again as the article explained that Bush “wants to weed out the bad actors without undermining public faith in the business community and the overall economy.” The preferred, though contradictory policy direction of reining in the industry while preserving a climate of deregulation was repeated throughout the articles. Increase Regulation Political Debate Although both Democrats and Republicans agreed on the need to rein in the industry, they were clearly divided along party lines about the extent of the changes to law or policy, particularly in reference to the level of government intervention, oversight, and penalties. The Bush administration pushed mostly for greater self-regulation and faster, more accurate reporting practices. Democrats argued for increasing the powers of prosecutors to fight corporate fraud, adding new penalties, and more aggressive, government-centered oversight of the inter-relationships of corporations. Overall, the



magazine articles appeared to suggest that the regulatory system was broken and that the economy needed the government to respond aggressively in order to rebuild business confidence among the general public. In July, an article stated that “politicians can no longer afford to treat the accumulating scandals as anomalies in an otherwise healthy system.” However, in reference to the offenders themselves, the dominant message was that they were simply a few bad apples who were taking advantage of a flawed system. One of the few legislative reforms that actually materialized regarding the corporate scandals of 2002 was campaign finance reform. Campaign finance reform was a highly politically charged issue. Legislation was deadlocked by the Republican controlled Congress. The exposure of all the political connections and campaign financing by the corporate executives involved in the Enron scandal helped to break the logjam and the Campaign Finance Reform Act was passed into law. The Sarbanes-Oxley Act in 2002 was another important piece of legislation passed in the wake of the Enron and related scandals. It reflected a political compromise forged by a government largely dominated by Republicans and watched carefully by a large number of investors and corporate executives. It was described as the most sweeping securities regulation in nearly 70 years; however, it fell far short of what Democratic legislators wanted. This legislation established rules for boards of directors and audit companies, imposed earlier deadlines for disclosure of insider trades and material events, and enhanced penalties for fraudulent activities. In addition, Congress made it illegal for companies to lend money to their own executives. It also called upon the Securities and Exchange Commission to write formal rules detailing the regulations it puts into place and placed greater pressure on SEC lawyers to be more aggressive and faster in their enforcement of corporate fraud. Conflicts of Interest The magazine articles identified several areas of concern about the corporate scandals taking place in the U.S. and high on their lists were the conflicts of interest among auditors and boards of directors. The relationship between Enron and Enron‟s auditing firm, Arthur Andersen, exemplified the concerns. Arthur Andersen was hired by Enron both to audit its books and to serve as a consultant to the company; thus, Arthur Andersen benefited financially by conducting insufficient oversight. In fact, the company was awarded more money for consulting than it earned as an auditor. Several articles suggested that auditing laws should be changed to prohibit accounting firms from doing both activities with the same client. The former SEC Chair, Arthur Levitt supported this prohibition, while the SEC Chair at the time of the articles, Harvey Pitt, opposed the prohibition. It is interesting to note that Harvey Pitt served as a lawyer and lobbyist for the accounting industry for over 20 years and had represented both Arthur Andersen and Merrill Lynch. While serving in that capacity, he led the fight against the Clinton Administration‟s SEC Chair, Arthur Levitt, in his effort to prevent accounting firms from both auditing and consulting the same client.



The articles also suggested that there should be greater disclosure of the conflicts of interest among board members for corporations. Enron exemplified this problem because many of the members of its Board of Directors were also receiving substantial financial benefits in consulting fees from Enron and through participation as partners with Enron executives on side investments. Similar to Arthur Andersen, the Board‟s negligence regarding mismanagement played a major role in allowing the executives at Enron to essentially steal millions of dollars from the stockholders through a series of illegal and unethical operations. The Sarbanes-Oxley Act had provisions to address such conflicts of interest, but it relied primarily on self-regulation and greater exposure of the conflicts rather than prohibiting the relationships that produced the conflicts. One article in Time magazine actually predicted this outcome in early February 2002 when the reporter stated that “Senators may be talking about stricter regulation in televised hearings, but they‟re not proposing any bills.” In other words, the Senators were talking tough to the media to impress the public, but they were not willing to put that tough talk into legislation. A couple of articles actually criticized the Sarbanes-Oxley Act, stating that it had too many loopholes, too few restrictions, and did not provide enough funding for the SEC. Criminal Prosecution Criminal prosecution as a method of reining in the industry was very rarely discussed. Only a couple of articles focused on it, and that focus was on the difficulties of prosecuting the cases. It appeared that journalists were preparing the public for government‟s failure to convict corporate offenders: “The public may want jail time, but need to realize that long sentences are rare and convictions are very difficult.” One article offered advice to the prosecutors when it said that they should not take shortcuts, ignore smaller crimes, engage in turf wars, or pile on charges. It also suggested that the prosecutors should offer immunity early, follow the money, build momentum, and exploit divisions. The RICO statute, used so dramatically against corporate criminals in the past, was removed from the prosecutors‟ arsenal, under heavy lobbying by those who were now being prosecuted. Another article suggested civil forfeiture as a means to seize assets purchased with the proceeds of criminal activity in order “to create a deterrent effect.” The money from these forfeitures, however, would normally go to the stockholders or the banks supporting the companies rather than to employees who lose their livelihood. Target Hardening In line with the victim-blaming stance taken with respect to the causes of the Enron crimes, several articles suggested that those in the general public should take action to protect themselves. Government representatives were cited as recommending that the public mix diversified stock and bond market funds, hold as little as possible in one‟s own firm, and avoid company shares in the same industry as that in which one is employed. Eventually, legislation passed placing limits on the amount of employer‟s



stock one can have in their 401K and eased restrictions on when an employee can sell company stock.

Decrease Regulation Although policy suggestions to increase government oversight occasionally appeared, a strong message throughout the articles was that deregulation must be preserved as a strategy for economic success. One could easily argue that the deregulation movement was specifically to blame for Enron and other corporate scandals. Nonetheless, the “bad apple” theory appeared to insulate the deregulation movement from criticism. In a few instances, reporters criticized executives and politicians for placing blame on scapegoats, such as when, despite the existence of a company memo encouraging shredding, executives at Arthur Andersen blamed David Duncan for shredding subpoenaed documents. Overall, though, reporters seemed to accept that scandals were caused by a few bad apples rather than by systematic corruption encouraged by deregulation. By and large, the authoritative voices presented in the articles declared emphatically that deregulation was an important and viable economic strategy, and any effort to address these scandals should be careful not to disrupt it. The capstone article in U.S. News & World Report ended the coverage on the scandals of the previous year with the message that we do not want to stop the innovative ideas of Enron and that they are still valid. The most remarkable policy suggestion to emerge in the articles was that the government should eliminate the laws that were violated by corporate offenders in order to prevent corporations from violating them. Treasury Secretary Paul O‟Neil and Council of Economic Advisors Chairman R. Glen Hubbard championed this approach when they argued that the best way to stop corporations from violating U.S. tax laws was to eliminate the corporate income tax, making tax havens and loopholes unnecessary.

DISCUSSION

CRIME NEWS AND EDUCATING FOR DEMOCRACY: THE MISSED OPPORTUNITIES OF THE ENRON STORY

To the extent that most people think of crime as street crime and criminals as young racial minorities from urban ghettos, they are buying into divisive and extremely damaging stereotypes that undermine democracy. The news media play a major role in creating these stereotypes. Commonly held beliefs notwithstanding, it is not true that the greatest threats to public safety and economic well-being come from the poor. The Enron case provided the media with an opportunity to expose commonly held myths and stereotypes about crime and criminals. It was a perfect teachable moment and there was much to learn about crime and the realities of class bias in civil and criminal justice within our capitalist democracy.



Despite the wide open window of opportunity provided by the Enron case, the Enron story as told in the articles examined for this study provided no critique of popular myths about crime and criminals. Only one article deviated from this and came close to being the exception that proved the rule. This particular article discussed the higher financial costs and the lighter penalties for white collar crime, focusing on the dramatic differences in the difficulty of prosecuting corporate criminals compared to prosecuting street criminals. Even here, though, an opportunity was missed to educate the public on the class biases that contribute to the difficulties of prosecuting the rich and powerful compared with the relative ease of prosecuting the poor and powerless. At no point did any of the articles in the two magazines mention class or race in their analysis of the crimes and criminals of Enron. To do so would have gone a long way toward debunking the myths that make palatable a criminal justice system that directs nearly all of its coercive power to controlling the crimes of the poor. Not only did journalists reporting on Enron miss an opportunity to debunk popular myths and stereotypes about crime and criminals, they generally handled the corporate suspects with kid gloves and offered explanations for their behavior that served to distinguish them from ordinary street criminals. For instance, the particular way in which rational choice theory was used to explain the criminal behavior of Enron executives tended to humanize the offenders and rationalize their behavior. When rational choice theory appears in news about street crime, it is typically used to dismiss consideration of mitigating factors for crime and to justify proposals to strengthen punishments for the purpose of deterrence. In the Enron story, rational choice theory was invoked to suggest that the offenders in this case were not so different from the rest of us. The Enron offenders were also humanized by the manner in which they were presented in the articles. Descriptions of the suspects included their personal histories, hobbies, education, social activities and other information that appeared to encourage some degree of sympathy for the offenders by showing us all that they had lost, or how far that they had fallen from grace. There were no discussions of criminal intent, no use of animal analogies, and no efforts to establish that the offenders were by nature criminal. News about street crime is typically framed in ways that separate the criminals (them) from the law-abiding (us). Journalists who went to great lengths to show us the humanity of the Enron offenders could have gone further. They could have pointed out that, if corporate offenders are not so very different than the rest of us, neither are the gang members, drug dealers and other ordinary street criminals whom we regard with such fear and loathing. The failure of reporters to identify criminal intent among the Enron executives or to search for causes of their criminal behavior was part and parcel of the overall avoidance of labeling the individuals involved as criminal. Reporters went to great lengths to avoid the criminal label, using many very creative euphemisms. The reticence of journalists to label the criminal behavior of corporate executives as criminal is not without consequence, as it serves to rationalize a dual system of justice in which criminality is a status reserved for the poor. It was not the case, however, that the journalists who told the Enron story, and the sources on whom they relied for information, conveyed that no one did anything wrong. Wrongdoing by corporate executives was, after all the foundation for the story.



Throughout the articles, the bad apple theory was the main explanation offered for what went wrong at Enron. The losses suffered were said to be largely due to the actions of a few rogue operators who went too far. There was some debate in the articles about deregulation and some suggestion of a need for greater oversight of the energy and accounting industries, and corporations in general, but the dominant message was a call for self-regulation. Support for aggressive government action or the passage of new legislation to regulate the energy and accounting industries was very weak. The focus of calls for reform stayed on ways to rein in rogue operators, who were not really criminals, just overzealous and arrogant. The overriding message was that these violators needed to be brought under control while causing the least amount of harm to the company, to the industry and to business in general. Not only was the Enron story an excellent opportunity for the media to debunk the myth that crime is the work of the poor, it was an opportunity to expose the criminogenic nature of the limited-liability corporation. When making profits for stockholders is elevated above all else, corporations encourage excess, greed, avarice and cutting corners by any means necessary to increase dividends. At Enron, the result was that those members of the corporation who were able to raise the value of the company‟s stock were lavishly rewarded without anyone being concerned about how they did it. In fact, even those convicted of criminal violations were rewarded as long as their convictions did not negatively impact the stock. In 1986, when several employees at Enron were convicted of manipulating earnings, doctoring bank statements, and opening accounts with forged documents, no actions were taken by the company to discipline these employees. The limited-liability corporation is also criminogenic because of its multiple layers of operation, responsibility, and oversight and its inherent conflicts of interests between executives, board members, stockholders, and auditors. It is difficult to determine who is actually accountable for any action or inaction, and it is nearly impossible to obtain effective self-regulation to rein in those who are driven to cut corners in order to make profits. The articles suggested that Enron‟s company culture had taken the avarice a little too far, but did not question the broader system that encourages and supports the wrongdoing. A final missed opportunity in the Enron story was the opportunity journalists had to at least question, if not challenge the emergence of paper entrepreneurism as the dominant form of profit making in the United States. The executives of Enron, led by Kenneth Lay, set out to create a no-asset corporation. Enron was a company that built its wealth on nothing, building nothing, making nothing, producing nothing, just trading, buying and selling deals. This new form of capitalism, as exemplified by Enron, was extremely vulnerable to any loss of public confidence in the economy. Williams‟ (2008: 483) research suggests that it is on the basis of investor confidence that the “effects of the [Enron] scandal are gauged and the various legal and regulatory responses are rationalized and legitimized.” Deregulation is an important part of the new economy, because corporations must have extraordinary flexibility in order to keep their profits ahead of the fact that nothing of value is being produced. The concept of building a company with no assets and making large profits without producing anything was never seriously questioned by those who told the story of Enron in the news magazines. The



articles we examined never critiqued this fundamental shift in the U.S. economy and, in fact, repeatedly suggested that the new economy is good and valid, and must be preserved at all costs.

CONCLUSION

Our research question as we began this study was whether news about the Enron corporate crime case challenged the hegemonic narrative on crime and justice in the United States. Journalists could have used the Enron case to educate the American public on the degree to which the social harm from the crimes of the powerful exceeds the harm from ordinary street crime. At the very least, journalists could have used the facts of the Enron case to discredit the ideological notion that crime is the work of the poor. Our examination of news magazine articles about Enron and Arthur Andersen in the year after the Enron story broke indicates that news about Enron did not challenge the dominant narrative on crime and justice. Instead, the story of Enron as told by journalists for Time and U.S. News and World Report between December 2001 and January 2003 strengthened that narrative. The research findings reported here, combined with the findings of previous research on crime in the news media, suggest that the news media perpetuate the notion that crime is the work of the poor, not the rich, and that threats to public safety and wellbeing come from below rather than above. Coverage of the Enron case provided ideological support to dominant social, political and economic institutions by the many ways in which it conveyed the message that the offending corporate executives were not really criminals and their actions were not really crimes.

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APPENDIX A:

TIME MAGAZINE ARTICLES

Date Title Reporter(s) Page #s

12/3/01 “Don‟t Bet it All on Your

Employer”

Sharon Epperson *

12/10/01 “Power Failure” Daniel Kadlec *

12/24/01 “An Enron Link to Energy

Policy?”

Adam Zagorin *

12/31/01 “Power‟s On - - But the

Cost!”

Laura A. Locke *

1/14/02 “Democrats: Don‟t Gloat

About Enron”

Michael Weiskopf *

1/21/02 Sub-Cover Story: “Enron

and Bush”

“Who‟s Accountable” Daniel Kadlec 29-35

“Bush in the Glare” Karen Tumulty 36

1/28/02 Cover Story: “You‟re On

Your Own”

“What did they know . . .

When Did They Know it?”

Michael Duffy 16-22

“What $6 Million Can Buy” Karen Tumulty

Michael Weiskopf

20-21

“Your Money: Old Safety

Nets Are Gone. Here‟s

What to Do.”

Daniel Kadlec 26-28

2/4/02 Cover Story: “The Enron

Mess: How Sticky Will it

Get.”

Running Title: “The Enron

Spillover”



“Enron Spoils the Party” Michael Weiskopf

John F. Dickerson

19-24

“Enron Takes a Life” Cathy Booth

Thomas

20-21

“The Enron Players” Eric Roston 20-21

“Can Lawmakers Now

Afford to be Obstacles to

Reform?”

24

“The Incredible Shrinking

Businessmen”

Michael Elliott 26

“Under the Microscope” Daniel Kadlec 27-30

“Blame Enron Eric Roston 29




2/18/02 “Ignorant & Poor?” Daniel Eisenberg 37-39

“Speak No Evil” Bill Saporito 34-39

“The Plot Thickens” Michael Orecklin 39

“The Trail Out of Texas” Adam Zagorin 41

“Houston: The Enron

Tour”

Roy B. White *

2/25/02 “Enron: The Scandal That

Keeps on Giving”

Daren Fonda

Adam Zagorian

*

3/18/09 “Will the Big Five Go Down

One”

Unmesh Kher 26

4/1/02 “When One Stock is

Enough”

Bill Saporito *

5/20/09 “California Scheming” Chris Taylor 43-44

“When Enron‟s Auditors

Sing”

Cathy Booth

Thomas

44

“A Taste of Rummy‟s Way” Michael Duffy 45

6/12/02 Sub-Cover: “Behaving

Badly”

“Dennis the Menace” Daniel Eisenberg 47-49

“8 Remedies” Daniel Kadlec 51

6/24/02 “Called to Account” Cathy Booth

Thomas

52

7/8/02 “Is Pitt‟s SEC a Toothless

Watchdog?”

Karen Tumulty 25

7/15/02 “Enron‟s Board Games” Adam Zagorin 16

7/22/09 “Summer of Mistrust” Melissa August

James Carney

16-20



John F. Dickerson

“The Rap on Bush and

Cheney”

Bill Saporito 22

“Do As I Say, Not As I Do” Mitch Frank 22

7/29/02 “More Reform and Less

Hot Air”

Julie Rawe

Eric Roston

Adam Zagorian

24-25




7/29/02 “Seven Top Executives

With No Retirement Woes”

Melissa August

Barbara Burgower-

Horden

Daren Fonda

Jyoti Thottan

Laura Koss-Feder

Betsy Rubiner

Mary Sutter

Leslie Whitaker

31

9/2/02 “Enron Payback” Cathy Booth

Thomas

20

11/11/02 “Indicted” No Author 3

12/30/02 –

01/06/03

Cover Story: “The

Whistleblowers” Persons

of the Year

“The Year of the

Whistleblower”

James Kelly, Editor

“The Party Crasher” Jodie Morse

Amanda Bower

53-56

“Enron: Picking Over the

Carcus”

Daren Fonda 26

“The Interview” 58-60

“Wall Street‟s Top Cop” Adi Ignatius 64-72

46 Articles, 3 Cover Stories, 2 Sub-Cover Stories

* No page number is available. These articles were obtained from the internet.



APPENDIX B

U.S. NEWS & WORLD REPORT MAGAZINE ARTICLES


12/10/01 “The Biggest Bust” Marianne Lavelle

Matthew Benjamin

30-36

12/24/01 “The 402(k) Stumbles” Paul J. Lin

Matthew Benjamin

30-32

1/21/02 Sub-Cover Story: “Bush‟s

Business Ties: The Enron

Mess.”

“Back to Business” Kenneth T. Walsh 14-20

“Farewell to All That” Christopher H.

Schmitt

Julian E. Barnes

Megan Bennett

22-25

1/28/02 –

2/4/02

“Man on the Hot Seat” Christopher H.

Schmitt

Julian E. Barnes

Megan Bennett

20-22

2/11/02 “The First Wives Club” Gloria Borger 29

“A Question of Values” David E Gergen,

Editor at Large

72

“One Cozy Bunch” Christopher H.

Schmitt

Julian E. Barnes

Megan Bennett

*

“Washington vs. Wall

Street, Again”

Editors *



2/18/02 “Conflicts Come Back to

Bite”

Christopher H.

Schmitt

*

“Confidence Lost” Noam Neusner

Paul J. Lin

James M.

Pethokoukis

32-34

3/11/02 “Payback Time?” Marianne Lavelle 36-40

3/18/02 “How a Titan Came

Undone”

Julian E. Barnes

Megan Bennett

Christopher H.

Schmitt

26-36

“Andersen Clients Bolt –

and Legal Risks Mount”

Kit R. Roane 34

“Practicing the Art of

Secrecy”

Gloria Borger 24


3/25/02 “Accounting Chaos?” Marianne Lovelle 37

4/8/02 “Cardboard Board” Matthew Benjamin 28-30

5/13/02 “Bad CEO! Got to Your

Room”

Kim Clark 39

5/20/02 “Power Plays” Marianne Lavelle 38-39

“Everybody Doesn‟t Love

Harvey”

Kim Clark 39

5/24/02 “Time to Crack Down” Mortimer B.

Zuckerman, Editor-

in-Chief

68

7/1/02 “The Age of Excess” Jay Tolson 24-30

“Distrust of Business Roils

Market”

Joshua Kurlantzick 30



“Chief Entertainment

Officer”

Randall E. Stross 31

7/22/02 Sub-Cover Story: “Will

Angry Investors Blame

Bush”

“Professors Who See No

Evil”

John Leo 14

“Bush and the Bear” Kenneth T. Walsh 20-28

“Cleaning Up the

Corporate Books”

Kim Clark

David D‟Addio

26

“Bush & Cheney‟s Not-so-

Excellent Adventures, a la

Enron.”

Christopher H.

Schmitt

28

“A Weary Watchdog” Megan Barnett

Julian E. Barnes

Joellen Perry

30

“Takin‟ Care of Bidness” Randal E. Strass 31

7/29/02 “Are Cooked Books a

Recipe for Democrats?”

Terrance Samuel 20

8/19/02 “The Tax Man Goeth” Leonard Wiener 30-32

“In the Cross Hairs” Marianne Lavelle 33

9/23/02 “The Feds Get Tough” Marianne Lavelle 44-46

10/14/02 “Feisty Fastow” Marianne Lavelle 48

10/21/02 “Oh, To Slay a Dragon” Megan Barnett 40-42

“Do Loans by Ay Other

Name Smell as Sweet”

Pamela Sherrid 42




12/30/02 Sub-Cover Story: “The

Worst CEOs”

“Rogues of the Year” Marianne Lavelle

Megan Barnett

Matthew Benjamin

Kim Clark

Thomas K. Gross

Richard J. Newman

Joellen Perry

James M.

Pethokoukis

Pamela Sherrid

Christopher H.

Schmitt

Betsy Steisand

32-45

“Ha! You Call This

Reform”

Kim Clark 40

“Women Who Blow

Whistles . . .”

Jodie T. Allen 48

“Scandal as Usual” Mitchell Stachell 49

41 Articles, 3 Sub-Cover Stories

* No page number is available. These articles were obtained from the internet.

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