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American Morning

Former Chairman of Enron Supposed to Appear Before Congress Today

Aired February 04, 2002 - 10:18   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BILL HEMMER, CNN ANCHOR: Folks that make it all happen here on CNN in the morning here. As we told you earlier, the former chairman of Enron was supposed to appear before Congress today. He has canceled. The move comes amid criminal investigations into the collapse of the former energy giant. Ken Lay will not talk today.

Let's talk more, though, about the latest chain of events with Mike Franz of "Business Week" magazine.

Mike, good morning to you.

MIKE FRANZ, "BUSINESS WEEK": Good morning.

HEMMER: Did it surprise you at all Ken Lay backed out, given the tough talk of politicians over the weekend on talk shows?

FRANZ: Not a bit. The only thing that really surprised me is that he would agree to speak talk in the first place. I think if this is going to be criminal, and there is very a strong chance this is going to be, you only want it tell you your story one time. And you want to get it right that time.

It seems he had absolutely nothing gain by telling the story right now in front of Congress.

HEMMER: But that was voluntary. Perhaps they saw something they might be able to get out in terms of a message from the company, perhaps or not?

FRANZ: Perhaps, but I think even on a PR front, if they had a sensational story to tell, then it would have been risk free. And maybe he thought there was a chance. There must have been a level of detail in this report that gave them the sense that they weren't going to be able to slide anything by.

HEMMER: Curious, Mike, in the near term, does it hurt him more to back out, or is this basically a wash, no change eventually?

FRANZ: Well, it hurts from a publicity standpoint, because he seems as if he's vacillating. Vacillation seems like guilt. But I think from a criminal standpoint, if this does ultimately go that route, this is absolutely the right move to make from his narrow perspective of his exposure. HEMMER: If that's the case then -- and certainly he has some pretty smart lawyers out there -- why even agree in the first place, as you agreed to in your first answer.

FRANZ: Well, I think it's -- I don't understand it. I think me and a lot of people agree with me that it was not a particularly wise thing to ever agree to do it in the first place. There might have been a chance that they thought the level of detail that would connect this to the people at the top would never arise. They might have underestimated the level of whistle blowers. They might have counted on the idea that pure documentary evidence, linking people at the top, would never come out.

HEMMER: What about later in the week here, the former CEO, the former CFO, also on the docket on Capitol Hill. Is this another case of backing out, or eventually are all these men simply going to plead the Fifth and that window of opportunity for testimony is closing.

FRANZ: I will be very surprised if any of them actually speak. The one giving indication that he might is Jeff Skilling (ph), who is the executive that most people put at the center of this. He has taken this very defiant tone, and he is saying he is going to go out there and tell the truth. I think that's mistaken from several perspectives. In the first place, defiance about all of this money he made won't necessarily be a great PR gain. And in the second place, at this point, if appears there are so many facts linking him into this, and linking his culpability in it, just I think it would be suicidal. But he is a risk taker. We'll see.

HEMMER: How real can you believe the threat of jailtime is facing these leading executives?

FRANZ: I think it's real. I think over the long-term, the history of this type of white-collar crime has been they get very light sentences, three years, and they serve even less, 11 months. But now that his has received this level of public exposure, you can bet the prosecutors are going to go the distance, and I think there will be jailtime.

HEMMER: Last week, as you well know in the stock market, they were talking about Enron-itis. Looking at the market today, it is already about 50 minutes old. The Dow is down about 90 point. Nasdaq off about 27. How much of this, what we are seeing right now, this sell-off in New York, can be directly tied to Enron, Mike?

FRANZ: I think part of it. I think there is a lot of discomfort right now with the way companies are reporting their earnings, and there is no sense whatsoever that people have gotten to the bottom of this. There are still quite a few people in different industries where people don't understand what balance, statement and income statements are about. And until that happens, this level of uncomfort will drive the market even lower.

HEMMER: That microscope has gotten even more precise, too.

FRANZ: Yes. HEMMER: Mike, thanks. Come on back, OK?

FRANZ: OK.

HEMMER: Pleasure talking with you. Mike Franz from "Business Week" this morning.

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