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AFL-CIO wants corporations to boot any directors who also serve on Enron's board. Meanwhile: Is Kmart headed for an accounting scandal of its own?
Stephen Taub, CFO.com | US
January 28, 2002
Apparently, the scarlet letter is now "E."
Late last week, the AFL-CIO began urging companies to not renominate Enron directors for election to their respective corporate boards.
The reasons for the boycott? The financial ruin Enron caused its 21,000 employees, and the financial loss caused to millions of workers who were invested in Enron through their pension funds and retirement accounts.
"The future retirement security of practically every American worker was hurt by the collapse of Enron," said Richard Trumka, secretary-treasurer of the AFL-CIO, in a statement. "In our opinion, directors who permitted the accounting deception that led to the collapse of a company worth over seventy billion dollars are not suited to serve on other boards."
The nation's largest labor union cited these failures of the Enron directors:
Many of these directors' terms expire at their companies' annual meetings this spring, says the AFL-CIO.
"Enron's directors need to be held accountable for their record," added Trumka. "Barring Enron's directors from future service at other companies will hopefully prevent this type of catastrophic loss for workers from happening again and will help restore investor confidence in the corporate governance system."
Enron directors who sit on other corporate boards currently include:
Baxter Death a Suicide
J. Clifford Baxter, who resigned as Enron Corp. vice chairman last May, died from a self-inflicted gunshot to the head, according to the autopsy. Baxter, 43, was found dead Friday morning in his car near his suburban Houston home.
He had reportedly raised questions about Enron's accounting practices months before the company filed for bankruptcy. "Cliff Baxter complained mightily to (then-president Jeff) Skilling and all who would listen about the inappropriateness of our transactions with LJM," Enron employee Sherron Watkins reportedly wrote in a letter to chairman Kenneth Lay last August. LJM was one of many partnerships set up by Enron which enabled the company to keep much of its debt of its balance sheet.
Baxter was one of 29 employees named as a defendant in a federal lawsuit against Enron, according to published reports. Baxter sold 577,436 Enron shares for $35.2 million, according to wire service accounts, citing an Amalgamated Bank lawsuit.
According to the current issue of Newsweek, Baxter's friends say he was devastated by the company's demise and stressed that his name had become prominent. "Cliff was just climbing the walls," one longtime friend and former Enron colleague tells the magazine. "He was extremely concerned about what was happening, about the long-term implications for him, for his family, for his children, for his life."
"We are deeply saddened by the tragic loss of our friend and colleague, Cliff Baxter." Enron management said in a statement. "Our thoughts and prayers go out to his family and friends."
Kmart Launches Accounting Inquiry
Will Kmart be the next accounting scandal to dominate the headlines?
On Friday, the bankrupt retailer said it had received an anonymous letter expressing concern regarding unspecified accounting matters. It didn't provide any other details, however.
The letter, which was addressed to Kmart's board of directors, the company's auditor, PricewaterhouseCoopers, and the Securities and Exchange Commission, purports to come from employees of the company, Kmart management said in a statement. "The letter has been referred to the Audit Committee of the Board of Directors, which promptly engaged outside counsel and accounting consultants to conduct an independent investigation," it added.
Kmart said it contacted the SEC, which has subsequently authorized a private investigation. Kmart said it advised the SEC of the independent investigation in progress and that the company intends to cooperate fully with the SEC.
PwC spokesman David Nestor confirmed that the company also received a copy of the letter, according to the Associated Press. He said the auditor was cooperating with Kmart and its outside counsel in the investigation, it added.
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