An offer Enron's advisers could have refused

The detectives of 1930s pulp fiction had a nose for clients bearing gifts. Sadly, those consulted by Enron did not, says Amity Shlaes

The spotlight of the Enron investigators is moving to the company's outside help: the lobbyists, consultants and board members who lent the mantle of respectability to what turns out not to have been respectable.

The outcome is likely to be the usual: more laws. But it is not clear that even a mountain of legislation can prevent the sort of failure we see in the Enron case. The wrongness, and stupidity, of putting your reputation at risk in exchange for a big fee is the kind of gut knowledge that every professional should carry around in his or her head.

The same holds for recognising what constitutes a huge conflict of interest - especially if you are in a self-regulated field, such as accountancy. Indeed, over-reliance on legal structures and outcomes can have the perverse effect of encouraging unprofessional behaviour; if something is not banned, professionals may be tempted to tell themselves it is all right. One can imagine partners of Andersen - so revered, top of their field! - chafing at the constraints of unexciting audit work. They wanted the fees that would come from consulting. Even, it seems, when this new work conflicted with the essential duties of auditing.

They appear to have ended up ignoring what Michael Groom of Britain's Institute of Chartered Accountants calls "the sniff factor". When something is right by the books, but wrong by the nose, you have to trust the nose. Even your average lowlife knows that.

Indeed, the ethics of professional service were laid out by a lowlife: Philip Marlowe, the down-and-dirty detective of Raymond Chandler's novels. In The Big Sleep, Marlowe follows a three-stage process of client management that might have helped Enron's friends to avoid their own Big Sleep of inattention.

First, establish your fee. Make it standard. That is vital because it helps you to keep your independence. Consider Marlowe on his own rate card. "For twenty-five bucks a day and expenses, mostly gasoline and whiskey, I do my thinking myself, what there is of it; I risk my whole future, the hatred of the cops and of Eddie Mars and his pals, I dodge bullets and eat saps, and say: 'Thank you very much, if you have any more trouble, I hope you'll think of me. I'll just leave one of my cards in case anything comes up.'"

Second, beware your own greed. Life has not treated Marlowe the way he deserves. He has a small office, no secretary and an unhealthy fondness for cigarettes and double scotches. Like some of the advisers who served Enron, he nurses that most treacherous of resentments, the resentment of the underappreciated talent. What a life that talent could live if only it were paid what it deserved!

Marlowe is therefore sorely tempted when approached by the detective's equivalent of Enron: a millionaire's daughter in a pair of oyster-coloured pajamas. It does not help that those pyjamas come trimmed with white fur. He even dreams aloud about what he might do with her cash: "I could own a home and a new car and four suits of clothes," he tells her. "I might even take a vacation without worrying about losing a case."

Third, when someone wants to make you a generous payment - in Andersen's case, fees for consultancy as well as auditing - ask why. "Now you offer me 15 grand. That makes me a big shot," Marlowe says to Vivian Regan on her chaise longue. The exorbitant rate somehow confirms one's own dream of one's worth. But is it realistic? Marlowe is man enough to put down his cigarette and ask: "What are you offering it to me for?" And to collect his hat and walk out on the oyster-coloured pajamas.

"What are you offering it to me for?" is the big question, the one that many who connected with Enron as consultants or lobbyists failed to pursue sufficiently. The danger is that when we trade away something beyond our standard handiwork, that something is usually our professional reputation, our own future ability to declare, as Marlowe did: "I was neat, clean, shaved and sober, and I didn't care who knew it. I was everything the well dressed private detective ought to be."

That reputation is so precious - even to Marlowe - that he turns down a second wild lady, Vivian's sister Carmen: "It's a question of professional pride. You know - professional pride. I'm working for your father."

Useful corollaries to Marlowe's list might include: "If you don't know, find out. If you can't find out, say so." Jeffrey Skilling, Enron's chief executive, was a notoriously dismissive boss; in the public space of conference calls, he scolded investment analysts who queried his complex accounting methods. Enron made it so difficult and painful for analysts to research the company more deeply that most of them failed to do so.

It is important to emphasise that being brilliant does not always mean one has any better judgment on such matters than others. A number of the people in Enron's entourage were brilliant. They were just not highly qualified in understanding complex accounting, or aggressive enough in demanding more information.

Of course, no professional with a career behind him can say he did the right thing every time. Philip Marlowe certainly could not. Dashiell Hammett's Sam Spade was frank about this in The Maltese Falcon. "We didn't exactly believe your story, Miss O'Shaughnessy; we believed your two hundred dollars ...I mean, you paid us more than if you'd been telling us the truth, and enough more to make it all right."

Still, we can all always strive to do better, just like those bottom-feeders in the world of the 1930s detective (a "self-regulating" place if there ever was one). And when a too-luscious offer materialises before us, we could do worse than ask ourselves Marlowe's big question: "What are you offering it to me for?"

© Copyright 2002 Financial Times

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To book Amity Shlaes for a speaking engagement, contact Jamie Brickhouse at the Red Brick Agency, 646.281.9041.
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