Late to the Party

Enron World, the media amusement park, has been packed lately, as everyone tries out all the fantastic rides and games. The lines have been especially long at Who's to Blame?—a funhouse where laughing journalists race around pointing fingers in all directions and throwing pies at the Enron players of their choice.

The New York Times won a plush teddy bear for hitting 15 different Enron clown—figures—including Dick Cheney, Larry Lindsey, Marc Racicot, Karl Rove, and Texas Gov. Rick Perry—with one 785-word shot, all names in bold. And Time magazine hasn't missed out on the thrills: "Huge questions loom as to how widespread the damage will be, who is to blame, and what is going to be done about it.... John Dingell, ranking member of the House Energy [and Commerce] Committee, said it best: 'Where was the SEC? Where was the Financial Accounting Standards Board? Where was Enron's audit committee? Where were the accountants? Where were the lawyers? Where were the investment bankers? Where were the analysts? Where was common sense?' "

Dingell's list of culprits had one notable omission. But he probably didn't want to spoil the fun by asking the question that floats over the Enron story like a big, silent blimp: Where were the journalists?

We are talking, after all, about a huge public corporation, one that was required by law to release reams of data about itself on a regular basis. While top Enron executives appear to have worked hard to conceal the company's true financial condition, the public record has long contained hints of trouble. They were exactly the kinds of hints that journalists are supposed to be good at noticing: numbers that didn't quite add up, vague references to odd-sounding business arrangements. But in order to see them, you had to be looking hard. To get at their meaning, you had to be willing to dig.

In early November, with Enron's slide well under way, The Wall Street Journal published a story about a New York money manager named James Chanos. It appeared in a Heard on the Street column by Cassell Bryan-Low and Suzanne McGee, and though it has since been recycled here and there in other outlets, the story is not broadly known. As the scandal grows larger by the day, and journalists glory in its delights, it's worth taking a quick look back at Chanos. His story should be a stunning rebuke to the media, for it suggests we could have had the Enron story long ago, if only we had wanted it.

When Enron's annual report came out in the fall of 2000, Chanos went through it carefully, The Journal reported, "underlining complicated passages and scribbling exclamation points and question marks." One curious section caught his eye. It said a top Enron executive was the "managing member" of a "private investment company" called LJM Cayman. This company had "entered into a series of transactions" with Enron, transactions that the report briefly and murkily described.

Chanos didn't understand what this meant, but he thought it was interesting. So he did more homework in the public record. "Over time, he would build up an 18-inch stack of regulatory filings and other material about Enron," the paper reported. He also hit the phones, quizzing expert Enron-watchers about the company's operations and health. In the end, Chanos concluded that Enron was a "hedge fund in disguise"—a very risky enterprise in which he didn't believe it was wise to own stock.

Now Chanos was not doing all this legwork out of high-minded intellectual curiosity or in the interest of the public good. He is well-known in investment circles as a "short-seller," one who makes money by identifying weak companies and betting that their stocks will decline. But when he was poring over all those documents, calling people and begging for information, trying to drag the truth out of a stonewalling organization, Chanos was behaving an awful lot like a reporter. (Indeed, when another short-seller made a stink about Enron's refusal to release a balance sheet, the CEO cussed him out, using the same word that George W. Bush once applied to a pesky New York Times reporter.)

In one sense, it's kind of stunning that some ambitious business journalist didn't do exactly what Chanos did, then write up a big splash about Enron's coming demise. The word "Cayman" alone should have rung bells for anyone who has covered financial shenanigans.

But in another sense, the media's Enron failure isn't surprising at all. The democratization of Wall Street has given most Americans a huge stake in the stock market. Millions of middle-class families have their college and retirement savings—their futures—riding on the health of public companies such as Enron. Yet most American media companies haven't recognized that they have a gigantic opportunity, and arguably a duty, to cover these companies with the same sort of hard-core accountability journalism they apply to government.

The fault doesn't really lie with individual reporters. Just digging up the information for routine business stories is hard work, mainly because business people have little incentive to help the media. Daily beat reporters can't be expected to be crusading investigators, too: All their sources would dry up. But if every American news outlet would send its investigative aces—the types who love political dirt—out into corporate America for a few years, I bet they'd find a lot more Enrons. And prevent a lot more ruin.

"There's much to learn when a stock loses $67 billion in value," observes Money magazine in the headline over an Enron story. There sure is.