Thursday, April 21, 2005

What do Enron, Iraq, and the Social Security Administration have in common?

Do you know why the Enron scandal happened? I’m going to oversimplify it but here it is. It happened because Enron was publicly held. Their stocks could be bought and sold on the stock market.

Here’s how I arrive at that conclusion. One of the best ways for stock brokers tell how strong or weak a company is is to look at their financial statements. A person that knows what she’s doing can, assuming that the financials are true, figure out how much growth the company experienced, what major assets they’ve bought and sold, how well they pay their bills and collect the money owed to them, how much the owners have invested, how profitable they are, how likely they are to continue to be profitable – well, let’s just say that there’s little you can’t tell about a company from accurate, complete financials. This is why companies issue long reports with their financials explaining every little nuance. They want investors to know why profits were down or the net worth of the company has fallen. They want to explain away each and every negative.

So, what does this have to do with the scandals? Well, I work at a publicly held company. I work in the accounts receivable department. Before the end of each quarter there’s a big push to collect as much money as possible so that our numbers will look better for that financial period. Ultimately my numbers will wind up on the financial statements issued to the SEC and published publicly. My company wants investors to feel confident in their progress so they put pressure on me to collect all the money I can. There’s nothing wrong with this, almost all publicly held companies do it. But it’s this kind of thinking that can be the first step down a long road to breaking some major laws. A company that becomes too obsessed with those quarter end numbers will cross the line at some point and begin hiding losses and exaggerating gains on their financial statement. Usually they expect to make these little white lies up on the next set of numbers but, when they don’t it can quickly snowball.

What’s my point? Stay with me, I do have one.

Now, when lying company gets tight with their auditors they don’t have to work so hard to hide the negatives because the auditors are the ones that are supposed to catch these improprieties. Once they’ve partnered up in their lie the skies the limit. That’s why Enron got so bad. I like to think of it as a papier-mâché skyscraper. A little financial lie, like a little papier-mâché creation, is easy to maintain and protect from breakage. But, the bigger it gets the more likely it is to break and crumble. By the time that Enron collapsed, their lie was like a huge 100 story papier-mâché skyscraper – brittle with no supporting structure on the inside. From the outside, on the financial reports everything looked fine. But it took very little to break it and make it crumble.

Now, let’s shift gears a little and look at another bunch of important people that got too caught up in reaching a stated goal.

It’s a familiar story about the weapons of mass destruction that failed to turn up in Iraq. Despite what the administration says now, we remember that this was the overriding factor in the latest Gulf War. They all believed it. After months of listening to one interpretation of the data coming out of Iraq, they all eventually came to that same conclusion. Saddam had WMDs and he must be stopped.

But theirs weren’t the only voices during those days. Go back and search for any newspaper articles with the name Hans Blix in them from any time during the six months leading up to the invasion of Iraq. He was the Chief UN weapons inspector and had scoured through Iraq looking for these things. Read those articles and you’ll find that he was saying over and over to anyone that would listen, “there are no weapons.”

At the time he might have been wrong or he might have been right. But he should have at least been listened to. He wasn’t and unfortunately, in a manner of speaking, he was right. Only one side of the story, the one that supported the administration’s goal of invading Iraq was heard by those in power. I’ve never known why, we probably never really will, but it seems obvious that they wanted, more than anything, to go in there.

What does one have to do with the other? I’m not just listing recent scandals here. These two incidents I think are clear cut reasons why any social security reform should not included privatizing social security.

The WMD story clearly shows that the government is as susceptible to the same flawed thinking that led to the fall of Enron. Until now the government and big business have been relatively separated, at least at the level that worries me. Going back to the Enron structure of reporting, the auditors check the financial statements which they’re supposedly certified to do in an honest and fair way. Then the numbers are given to the SEC and, because the SEC assumes the numbers are right since the auditors say so, they are published as gospel. When the auditors, in their role as representatives of the regulator of business in this country, were compromised, the whole system collapsed.

So, what happens when the regulator itself, the government, begins to take a vested interest in the success or at least in the reporting of successful businesses? This is what will happen when social security money begins to be tainted by the presence of big business. We know from the WMD fiasco that the government is susceptible to believing skewed data. How could we possibly believe that social security office won’t force the SEC to accept erred numbers from Microsoft, GM, Wal-Mart, or GE in the interest of keeping the stock market propped up? Just like the business owner that believes his erroneous numbers will be corrected in the next period, the government might decide to take the leap of faith with the business that they believe so strongly in and let them slide for a quarter, waiting until the next for the benefit. And so the snowball starts rolling.

Thursday, April 14, 2005

Finger Food for Thought

Have you been following the story about the woman that found a finger in her bowl of chili in Las Vegas? I swear this isn’t a joke. She went into her local Wendys restaurant - you know, Dave Thomas, adopt a kid and all that - ordered a bowl of chili from the Wendys menu, sat down, dipped her spoon in, and lifted out a finger.

Wendys launched an investigation. They followed the trail of that bowl of chili all the way back to the guy that harvested the beans and found nothing. Everyone involved has ten fingers and ten toes and swore that they left their human body part collections at home that day. This bowl of chili should have been like any other that they serve and, according to their conclusions, there will have to be no change to the Wendys nutritional information sheet, “May contain up to 10% of the following…”

Yeah right, you say. We love a David and Goliath story. I know I do. Anytime it’s the little person v. the big corporation, even if it’s one that seems relatively untarnished like Wendys, most people seem eager to agree with the little person. I mean, for pity’s sake, the corporation has a team of lawyers and accountants all working to protect its ass while the little person is just a little person. A hapless victim, shouting for mercy as the storm of corporate malice buffets her poor soul about.

So when I read the first installment of this story a few weeks ago I naturally sided with the patron. How could this be anything but the corporation’s fault? And I don’t care if they followed the line back. Fingers freeze and kids, who populate the kitchens of these places, play practical jokes. Is there beef in Wendys chili? I don’t know Wendys chili recipe. But if there is any meat there’s all sorts of ways that a finger could make its way from the meat packing industry to the bowl and there’s no way that they could have exhausted EVERY possibility.

Then the next installment came out. This lady, Anna Ayala, isn’t unfamiliar with this sort of affair. According to Ken Ritter with the Associated Press this isn’t the first time that she’s been in court, always as a complainant. In 1998 she dragged an ex-boss through the system on charges of sexual harassment and in 2000 she went after an auto dealership, claiming that the wheel fell off of the car that they’d sold her. The wheel suit was dismissed when she fired her lawyer claiming that he’d threatened her. She even has a history with restaurants. Last year she accepted money from El Pollo Loco restaurant, claiming that their food made her daughter sick. I wonder how many fingers her daughter is sporting these days.

OK, these are all terrible things and if they all really happened to this woman, my heart goes out to her. But talk about a string of bad luck! She really should hire a body guard because at the rate she’s going something really bad is going to happen. Again, that’s assuming that all of these things are true.

And to one degree or another, they might have. If you’re looking for trouble or a reason to sue, you’ll find it. Maybe her boss once asked her to collate some papers and she honestly thought that he said “I’d like to fondle you inappropriately.” Maybe the wheel on her car did fall off because she believed that the finance guy at the auto lot told her to make sure to loosen all of the lug nuts when he was actually saying that her payments would be due on the fifteenth starting in June.

It could happen.

But, I really don’t think so.

She’s a kook looking for a free meal.
Which brings us back to the finger in the chili - it’s been announced that she’s dropping the suit. Yes, the police investigation, which has included a search of her house and DNA testing, not to mention the publicity, has proven to be more than she can bear. This is according to her currently unfired Attorney, Jeff Janoff.

One more cryptic detail: A woman in Nevada lost her finger in a leopard attack recently. The lawyer wouldn’t comment.

Wednesday, April 13, 2005

World Health Organization worries about H2N2 virus causing influenza pandemic

When Celeste starts to feel a flu coming on she tries to psyche it out. She repeats three times throughout the day, “I will not get sick.” Sometimes, after a few days of this healing practice she announces that she beat it. Most of the time after a few days I’m getting out the humidifier, heating up the chicken soup, stocking up on cough drops and Nyquil, and looking forward to my own round with the bug for we share everything.

Why do I tell you this? Well, it might be the only defense that many of us, myself included, have against a potential pandemic influenza virus that is threatening the world. Something stewed up in the poverty stricken villages of central China or in one of those nasties that we hear about coming from a chicken coop in Vietnam? No, this isn’t a new pestilence, the oft predicted avian flu pandemic; it’s one we’ve known about for at least 50 years, probably much longer.

Emma Ross with the AP reports that the World Health Organization (WHOops) announced that Meridian Bioscience Inc. near Cincinnati has shipped out strains of a previously isolated virus to almost 5000 labs. Most are in the US but many aren’t, vials were sent to eighteen countries altogether.

This strain caused epidemics for many years and the virus caused a pandemic in 1957 that killed 1 to 4 million people. Klaus Stohr, the WHOops influenza chief or the Big Sneeze, says that the decision was “unwise” and “unfortunate.”


If we’re familiar with this bug then why worry about it? Well, the vaccine hasn’t been included in flu shots since 1968. Anybody born later, like me, has no immunity whatsoever against it. And we know from the flu shot shortage last year that it takes time for inoculations to be prepared. I guess somebody decided in 1969 that enough’s enough and the bug had been defeated. Plus, they probably told themselves, nobody would be stupid enough to ship this out to 18 countries.

Rest assured, though. The folks that made the mistake are rushing to rectify it. They are working to destroy the vials and don’t expect that this will spread. Given their track record I’m certainly reassured.

My prediction? If no one gets sick, this small article on the last page of section A of our local paper will be the last I hear of this. If somebody does get sick, then we’ll worry about it. In the meantime it’d be better to spend time doing things like wringing our hands over Terri Schiavo or calling special Congressional hearings over steroid drug use among professional ball players than trying to do something to prevent this kind of mistake in the future.

If the word pandemic doesn’t make your blood run cold, if just for a second, either it already got you or you’re a politician worried about the latest public opinion polls.

It probably will blow over but in case it doesn’t, remember Celeste’s cure: “I will not get sick, I will not get sick, I will not…” It might be your only defense.