Patrick's Rants


Design By Humans

1/7/2007

24 Days

Filed under: Books,Reviews — site admin @ 7:41 pm

Updated: 1/08/07 11:10 am


No, this is not the book that inspired the Sandra Bullock film with a similar title (“28 Days”). Instead 24 Days: How Two Wall Street Journal Reporters Uncovered the Lies that Destroyed Faith in Corporate America is a third person narrative written by Rebecca Smith and John R. Emshwiller that reminds me of Inside Job: The Looting of America’s Savings and Loans.

This is a facinating tale that follows the implosion of Enron from just before the collapse through the destruction of Arther Anderson. The authors painstakingly try to follow the complexities of off balance sheet financing and do a pretty good job. Through the course of the book we see Ken Lay, Andrew Fastow and Jeffrey Skilling, among others, as money-driven individuals who reaped millions from a company that inflated its earnings and hid its losses all while ripping off its employees and the citizens of California.
The authors could have enhanced their descriptions with diagrams that they stated they received in the course of their reporting, but chose not to, leaving the details just a little weaker for doing so. It is much harder to visualize the intricate web of inter-relationships without these visual aids.

With such bizarre sounding names as Chewco, JEDI and Raptor, it is only a small leap to realize that the financing and reporting methods used by Enron were as fanciful as the names of the companies they used to hide their losses and inflate their earnings. About the only thing that we didn’t hear from Enron was the Chewbacca Defense.

In the end the greed that festered inside Enron engulfed their accounting and advising firm Arther Anderson whose fear of lost revenue kept them from advising against the increasingly outlandish schemes to make money out of thin air. It also lead to reforms in the accounting industry that forces companies to rotate the accounting firm that provides book auditing services presumably in an attempt to catch irregularities in financial accounting. And in the long run, it increased the fees that accounting firms will ultimately collect by requiring more and more auditing and disclosure1. If accounting firms were disallowed from offering advising services to clients whose books they also audited perhaps a fiasco could have been prevented. Firms of this type are often conflicted when they serve too many roles. The role of independent auditor is to scrutinize the transactions of a business to determine if they pass the smell test. That becomes difficult when they are reaping in large advisory fees for recommending the transactions in the first place.

Unfortunately for the book its 2003 publishing date means that recent events, such as the conviction and death of Ken Lay2 and Jeff Skilling’s cooperation and subsequent jail term are not included, and contribute to a lower rating on the recommended list. If one is making a collection of the exposé type books this is one to have on the shelf.

1 – This is a huge windfall for accounting firms, especially the “big four” but may cause smaller companies to remain private as well as encourage some businesses to “go private” instead of remain in the public sector.

2 – Allowing him and his estate to beat the rap on having to actually serve a jail sentence and pay restitution.

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