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Enron lessons unheeded in New Zealand

Enron lessons unheeded in New Zealand

The lessons of the Enron financial scandal have gone unheeded – and the same potential for fraud exists in New Zealand, says the journalist who first broke the story.

New York journalist Bethany McLean told the Journalism Education Association conference at the university’s Wellington campus, that the Enron collapse is a symbol of what is still wrong with corporate America.

“In corporate America, things haven’t changed since Enron’s bankruptcy in 2001.”

She says there is a belief among some businesses that the rules don’t apply to them.

“Accounting systems are only as good as the people who use them. Where there is greed, there is potential for abuse.”

She says that American banks use the same secret off-balance sheet transactions that led to Enron’s collapse.

Last month it became public that Citigroup is involved in the Terra Securities scandal, which involved speculative investments by seven Norwegian municipalities in hedge funds in the United States bond market.

“The Enron story is about a company that twisted the rules to falsely inflate its earnings. Where financial innovation gets ahead of regulation, some will take advantage and stretch the rules.”

She says the key lesson for journalists is to keep asking “why?”

Ms McLean says that despite not having journalism training, her degree in maths allowed her to analyse Enron’s finances and not to be intimidated by Enron executives who sought to stop publication of her work.

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Keynote speaker Bethany McLean is generally regarded as being the first journalist to raise doubts about Enron in a national publication. Covering the story for Fortune magazine in 2001, she challenged Enron over its accounting practices and questioned whether it was the powerhouse many assumed it to be. In fact, the company was heading for collapse, going bust a few months later.

Ms McLean co-wrote the book The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron, later made into an Academy Award-nominated documentary, in which she appears.

The Journalism Education Association conference is hosted by the University’s Department of Communication and Journalism.

For more information: http://communication.massey.ac.nz/jeanz.html

ENDS

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