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Harold Meyerson on Enron

The Washington Post's Harold Meyerson ("Enron's Enablers", May 9) correctly identifies the litigation against Enron's investment banks as a place where money was stolen from shareholders, but blames the wrong party. The real scandal is that trial lawyers were able to extort $7.3 billion dollars from shareholders of companies that violated no law by threatening dozens of innocent bystanders (many of whom also lost money in the Enron collapse) with bankrupting liability. If William Lerach and his crew thought they had a legitimate chance of winning their suits, they breached their fiduciary duty to their clients by settling for pennies on the dollar and leaving tens of billions of dollars on the table. While Meyerson bemoans the damage to some 401(k)s from Enron's bankruptcy (and overinflates the real damage by using the overinflated price of Enron stock to calculate it), he ignores the damage done to many other investors' 401(k)s that held stock in these innocent victims of Lerach's protection-money scheme, or the fact that the trial lawyers will be taking home hundreds of millions of dollars that formerly belonged to innocent investors.

Meyerson singles out the Nigerian barge deal as an example of supposed Merrill Lynch wrongdoing but fails to note that the Justice Department was forced to drop all criminal charges against Merrill Lynch officials for lack of evidence of any illegality. If Meyerson is looking for Nigerian-barge-related injustice, perhaps he should inquire about the Merrill Lynch executives who spent nearly a year in prison over trumped-up charges that were vacated by the court of appeals, and about the journalists baying for blood who contributed to that rush to judgment while failing to note that the government's conspiracy theory made no economic sense and would have had no material effect on Enron's balance sheets.

Finally, Meyerson's article fails to note that no Enron employee was required to hold his entire 401(k) investment portfolio in Enron stock. Charles Prestwood has only himself to blame for the fact that his entire 401(k) was wiped out; if he had followed basic investment principles of diversification, his pension fund would still have several hundred thousand dollars even after Enron's collapse.



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.