Thursday, May 25, 2006

Dumb and Dumber

CNBC anchors are discussing the convictions in the Enron case. One of the anchors just said that the fraud brought down a company that was one of the largest in the country (in terms of market cap) at one time, the fraud wiped out the enormous pension balances of the employees and cost (I think she said) 6000 people their jobs.

How damn dumb can you get?!

Without the fraud, the company stock would have been worthless from the beginning. Therefore, all the company stock in the pension plan -- awarded as profit sharing -- would never have had any value in the first place. And of course, without fraud there wouldn't have been any fake profits to share!

Without the fraud, most of the employees would never have had the jobs in the first place. And how many of them knew, or should have known that something was wrong? After all, part of the fraud was setting up entire fake floors of trading activity to fool analysts. Are we to believe that all the people who helped set up the fake activity thought that normal companies do such things?!!

Feel bad for investors who got defrauded. But don't feel bad for those who were awarded counterfeit money to represent a share of counterfeit profits when the counterfeits are finally revealed as fraudulent. Since the employees never produced a legitimate profit and the company never had any profits to share, the employees never should have had the huge stash of "counterfeit" stock in the first place.

They "lost" something that never would have existed, but for the fraud.


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