Wednesday, October 23, 2002

There was news on Enron the other day --- Tim Belden, the Enron trader who plead guilty to fraud in the California energy markets, is now apparently naming co-conspirators not just among his higher-ups at Enron, but at other companies as well. Rumors are circulating that Enron's erstwhile competitor Dynergy dumped both its energy trading business and its trading-savvy CEO to stay one step ahead of the Justice Department, and prosecutors are now dropping hints of a conspiracy so vast that Patrick Ruffini and Jane Galt may yet be embarrassed by it.

So, that's what the Justice Department is doing about corporate fraud, after the fact. What about the SEC, which is supposed to keep it from happening? Things were bad, scandals happened, heads must roll, and prominent heads too. And the head that will roll off the cherry wood guillotine, into its woven wicker basket, is Martha Stewart's. The SEC's investigation into her insider trading on ImClone stock has reached a fever pitch, and even if there are no criminal complaints, the SEC is still very likely to force her to step down from her post as head of Martha Stewart Living Omnimedia.

Yet for some reason, the press just keeps looking for bad things to say about the agency. Its head, Harvey Pitt, is in the thick of things, having done work for latter-day SEC target AOL, and may have been personally involved in some of the deals now under investigation. Which has resulted in, perhaps, some tittering comment, especially since he initially denied having worked for AOL at all. But he's still copacetic, viewing the recent $200 million cut in his agency's budget with equanimity. And he's not about to let a little thing like that shame him into, say, reinstating the job offer he made to John Biggs, who was going to head a new accounting review and investigatory board until it became clear that Biggs actually wanted to review and investigate.

These bagatelles have led to carping criticism of Pitt's stewardship of the agency, which is surely undeserved. Because its important business is still going forward. Martha Stewart will be brought down. So the people who really run corporate America will have their cover, and the public will have its scapegoat. That's a good thing.

Besides, she was a pushy, showy arriviste, and nobody in the Hamptons really liked her anyway.

To be pedantically precise, what actually happened to the SEC budget was a reduction in the scheduled increase, which the administration boosted earlier this year to great fanfare, then cut back to nearly nothing much more quietly, when they thought no one was looking. If a reduction in a scheduled tax cut is a tax increase --- as Republicans preach to the skies anytime anyone proposes altering the bulk of the Bush tax cuts which are not yet in effect --- than a reduction in a scheduled budget increase is a budget cut.

Some links via Atrios.


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