Many on Wall Street Still Under Enron's Pall

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Some of Wall Street's biggest investment firms were ensnared in Enron's accounting scandals. Prosecutors charged some firms with helping Enron hide losses with sham deals. Some paid hundreds of millions of dollars to settle. Others are still negotiating.

JIM ZARROLI reporting:

This is Jim Zarroli.

When the Enron scandal erupted, the company's stock value plummeted to earth with dazzling speed. Almost over night, $70 billion worth of market capitalization disappeared. In the years since then, regulators and investors sued some of the banks, law firms and auditors they say allowed the scandal to happen. Houston securities lawyer Thomas Agime(ph) says some of the biggest banks, like Citigroup, have settled and so far about $6 billion has been collected.

Mr. THOMAS AGIME (Securities Attorney, Houston): It sounds like a lot of money, but it's really not when you look at how much was lost. So shareholders might be lucky to get three to five cents for every dollar that they lost.

ZARROLI: For the business world, the ripple effects of Enron continue to this day. Enron was the first in a series of big accounting scandals at major companies, like WorldCom, Tyco, Adelphia Cable and Global Crossing. Even Martha Stewart was convicted of lying about a stock sale.

The scandals painted a disturbing picture of the ties among companies, banks, auditors and Wall Street analysts. President Bush blamed the problem on a few bad apples. Maryland Senator Paul Sarbanes said it went further.

Senator PAUL SARBANES (Democrat, Maryland): All those bad apples ought to be punished and punished very severely. And I certainly agree with the president when he makes that statement. But it seems to me we have to move beyond that in terms of trying to address this incredible loss of investor confidence that's now taking place.

ZARROLI: With the political pressure rising, Congress passed the Sarbanes-Oxley bill, which imposed new regulations on the way companies operated. Corporate executives had to personally vouch for the accuracy of their companies' books.

Critics pointed out that much of the conduct at Enron and elsewhere was already illegal and that the bill did nothing but make a lot of new work for accounting firms. Since Sarbanes-Oxley, there's been a big new scandal involving backdating of stock options by companies and another account scandal at Fannie Mae. But Thomas Agime says he thinks the reforms have had some impact.

Mr. AGIME: Sarbanes-Oxley and the new regulations are not going to stop corporate fraud 100%. They just won't. All we can hope is that they stop some of it and that we take further and further steps to make sure that these businesses are operating honestly.

ZARROLI: But whatever the affects of these reforms, one thing is certain. For shareholders at companies like Enron, steps like these came much too late.

Jim Zarroli, NPR News, Houston.

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