If you're angry that Enron's ex-CEO might get out of jail early, keep this in mind: At least he went to jail.
The decade-old Enron scandal returned to the headlines on Wednesday with the news that federal prosecutors and former Enron CEO Jeffrey Skilling had struck a deal that could let him out of prison as early as 2017, instead of 2028. It could be seen as yet another craven move by a weak-willed Justice Department, letting one of history's most corrupt corporate leaders walk in order to end years of legal wrangling. But it is also a reminder that, once upon a time, financial misdeeds had real consequences.
Skilling was convicted and sent to prison in 2006 on several counts, including charges that he had lied to investors and regulators about the financial viability of the once high-flying energy company Enron. The deal with prosecutors means Skilling could still spend 11 years in prison, more than any other Enron executive (founder Kenneth Lay died in 2006, just before his sentencing -- OR DID HE?)
The Enron conspirators were quickly charged, convicted and sent to prison for years for their crimes. So were the perpetrators of other financial frauds of the era, including WorldCom's Bernie Ebbers, Tyco's Dennis Kozlowski and many other former titans of industry. Congress moved quickly to enact the Sarbanes-Oxley Act of 2002 to prevent future accounting scandals. The former Big Five accounting firm Arthur Andersen was charged, tried and convicted of a crime, resulting in its destruction as a going concern.
The memory of Arthur Andersen is often cited as one reason why prosecutors have been afraid to charge banks with any crimes in connection with the financial crisis or the Libor market-manipulation scandal: Prosecutors don't want to cost innocent people their jobs by destroying an entire company over the misdeeds of a few. And in the case of the too-big-to-fail banks, the innocent victims of a criminal charge could include entire economies, frets Attorney General Eric Holder.
So instead, banks walk, and so do bankers. No one has been convicted of a crime arising from the financial crisis, and no one likely will, as the infuriating Frontline documentary "The Untouchables" showed recently. Bankers involved in crafting and selling toxic subprime mortgage securities have moved on to new lucrative jobs. A few traders have been charged with crimes in the Libor scandal, but top executives will almost certainly dodge any responsibility.
Meanwhile, in contrast to Sarbanes-Oxley, the Dodd-Frank financial reform law has been lobbied into submission in the years since the financial crisis. Less than half of its rules have been implemented. While Enron and other lawbreaking companies were laid waste after their scandals -- and these were some very big companies, recall -- the banks go on making record profits, helped along by the knowledge that the government will never let them fail. The biggest U.S. bank, JPMorgan Chase, has even been accused by the Federal Energy Regulatory Commission of engaging in Enron-like energy market manipulation, a charge the bank denies.
The frauds of a decade ago were arguably easier to spot and explain to a jury than the frauds of the financial crisis or Libor. Many have argued that bankers committed no crimes at all ahead of the crisis, or in the Libor scandal. The regulatory solutions were probably simpler, too.
Still, the stark contrast between outcomes in the two eras helps explain why so many people are still so angry about the financial crisis and its repercussions. We may also look back to this contrast when we go looking for the causes of the next round of financial scandals.