Sarbanes-Oxley Five Years Later: Hero or Villain.

= 1012970 [hereinafter Corporate Corruption]. 5. See JOHN C. COFFEE, GATEKEEPERS: THE PROFESSIONS AND CORPORATE GOVERNANCE (2006) (explaining the rise and development of gatekeepers, those who advise and inform boards of directors, and how their failure to raise red flags about questionable practices contributed to corporate scandals). 6. NewsHour with Jim Lehrer: Newsmaker Paul Volcker (PBS television broadcast Mar. 12, 2002), transcript available at http://www.pbs.org/newshour/bb/business/jan-june02/volcker312.html. [Vol. 39 HeinOnline -39 Loy. U. Chi. L.J. 526 2007-2008 Sarbanes-Oxley Five Years Later involved in major corporate frauds involving Waste Management, Sunbeam, the Baptist Foundation of Arizona, and, of course, Enron. 7 Thus, within about a decade, the firm went from a conservative accounting firm to one that was operating on the edge, leading to its indictment and felony conviction. 8 Pushing the envelope like Arthur Andersen did is risky business. Justice Brandeis acknowledged the dangerous, yet common, tendency for humans to test the limits: [Y]our lawyers.., can tell you where a fairly safe course lies. If you are walking along a precipice no human being can tell you how near you can go to that precipice without falling over, because you may stumble on a loose stone... ; but anybody can tell you where you can walk perfectly safely within convenient distance of that precipice. The difficulty which men have felt . . . has been rather that they wanted to go to the limit rather than they wanted to go safely. 9 Reams of paper have been written about Enron and Arthur Andersen,10 so that matter will not be belabored here. Instead, let's look at just one transaction that illustrates the "envelope pushing" that Arthur Andersen and Enron management engaged in under the nose of a supine board of directors. The transaction which ultimately brought Enron down is depicted in the following illustration. 1 If it looks complicated, that's because it was-crooks seldom operate on the "KISS" principle. 12 7. SUSAN E. SQUIRES ET AL., INSIDE ARTHUR ANDERSEN: SHIFTING VALUES, UNEXPECTED CONSEQUENCES 113 (Jim Boyd ed., 2003). 8. Id. (explaining the shifting values at Arthur Andersen that led to their ultimate undoing with the Enron scandal). 9. Hearings Before S. Comm. on Interstate Commerce, S. Res. 98, 62nd Cong. 1161 (1911) (statement of Louis D. Brandeis). 10. See, e.g., ENRON: CORPORATE FIASCOS AND THEIR IMPLICATIONS (Nancy B. Rapoport & Bala G. Dharan eds., 2004) (a collection of articles about Enron, the business world, the legal environment, and ethics). 11. The information in the diagram and accompanying text is derived from WILLIAM C. POWERS, JR. ET AL., REPORT OF INVESTIGATION BY THE SPECIAL INVESTIGATIVE COMMITrEE OF THE BOARD OF DIRECTORS OF ENRON CORP. (2002), available at http://www.broadbandcspan.org/downloads/powersreport.pdf [hereinafter THE POWERS REPORT]. 12. See Charles W. Murdock, The Attorney as "Creator" or "Author": Attorney Liability Under Enron, CBA RECORD, Apr. 2003, at 34 (the "KISS" principle stands for "keep it simple stupid," which is what an honest person does; in this article, the author coined the acronym "MICI," which stands for "make it complex idiot," which is what crooks employ). 2008] HeinOnline -39 Loy. U. Chi. L.J. 527 2007-2008 Loyola University Chicago Law Journal