OLD Media Moves

Defense attorney blames Wall Street Journal for Enron's demise

January 31, 2006

Mike Ramsey, who represents former Enron Corp. CEO Ken Lay in the current conspiracy and fraud trial by the government against Skilling and Lay over the energy company’s demise, made his opening statement in court today, and he blamed the company’s problems on Wall Street Journal reporters talking to shortsellers, according to Houston Chronicle columnist Loren Steffy’s witty and insightful blog from the trial.

Steffy writes: “Mike Ramsey continues to try to make the Wall Street Journal a culprit in Enron’s collapse. Journal reporters talked to short sellers.

“Short sellers are ‘vultures’ who set out to destroy companies for their own quick profit, Ramsey said. They ‘sponsored’ the Journal stories, he said, which is both insulting and wrong. They were a source. Ken Lay would have been a source, too, except his crack PR team advised against it.

“When the Journal called to asked about the LJM partnerships and Andrew Fastow’s role in running them, Enron’s PR people’s reply, according to Ramsey, was:

“If you call them back, it’s a two-day story. If you don’t call them back, it’s a one-day story.

“Now, there’s some advice that worth it’s weight in Enron stock.”

“As for short sellers, they’re easy demons. Shorts make money when stocks fall. Since markets tend to rise over time, clearly they aren’t popular. And some of them are sleazy. But many of them spend hours digging through company finances — more time, in fact, than many Wall Street analysts did in the days before the global settlement on tainted research.

“To say short sellers destroy companies by planting false stories is like saying executives build companies by planting false press releases. The market is pretty efficient about sorting out bogus claims.”

If I were the Wall Street Journal reporters — Rebecca Smith and Johm Emshwiller — who wrote most of the newspaper’s Enron coverage in the fall of 2001, then I’d be “insulted,” to use Steffy’s word. And to say that my stories were “sponsored” by short sellers shows that Ramsey doesn’t understand the processes involved in reporting when it comes to business journalism.

I hope the jury saw through his attempt to place the blame on journalists for Enron’s problems.

Earlier in the day, Ramsey mentioned Smith by name, saying he would call her to testify that she didn’t listen to a conference call in which Lay disclosed a $1.2 billion cut in shareholder equity.

Steffy’s comment on this: “Well, as someone who’s covered public companies for a good long time and done far more earnings stories than I’d like to remember, let me first say that not listening to a conference call isn’t, to use the defense’s lingo, a crime. Nor does it signify laziness, ignorance or not doing a job. The job often requires you to listen to multiple calls for multiple companies in a single day. Sometimes, you have to make choices. I don’t know what Rebecca Smith did or didn’t do, but I don’t think Kenny Boy is going to beat this rap by trashing the press, revered tactic though it may be.

“Smith wrote her story from the company’s press release, which is supposed to be the official communication of the company’s financial health, at least until its 8-K is filed with the Securities and Exchange Commission. Dropping a bomb like that on a conference call with analysts is selective disclosure.”

Sounds like the business press is in for a rough ride.

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