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Enron, Andersen must now tread carefully

Sunday, January 20, 2002

WASHINGTON -- Clearly, in the pinched language of damage control, "mistakes were made."

Now comes the time for Enron's executives and the accounting firm that allowed its creative bookkeeping to explain sudden bankruptcy, wiped-out retirement savings, shredded documents. Meanwhile, the politicians who loved the energy giant's campaign money -- and will investigate its collapse -- are scrambling for cover.

A lot of their words may sound familiar. For corporate chiefs and politicians alike, there's an art to weathering this sort of storm.

And countless ways to blow it.

The goal "is to survive, not to win," says Eric Dezenhall, co-founder of a Washington public relations firm that specializes in managing crises.

Won't be easy

The strategy that professional image-fixers prescribe for the leaders of Enron and accounting firm Arthur Andersen won't be easy:

Publicly repent, yet avoid accepting blame as long as lawsuits and criminal investigations loom. Make peace with government regulators and lawmakers, even if you feel persecuted. Don't complain that everybody else does the same things -- just be the first to fix the problems.

And put your CEO out front to take the heat.

"The solution is not just to improve the company's behavior, but to do so in a way that shows the company is visibly agonizing," Dezenhall said.

For politicians, the traditional but oft-forgotten advice is to get any embarrassing facts out quickly, before political enemies can put them to use or claim a cover-up.

As Henry Kissinger put it, "Anything that will be revealed eventually should be revealed immediately."

Still, lesser strategies persist:

"Kenny Boy" who? Suddenly no one in Washington wants to know Enron Chief Kenneth Lay, though he and his company gave hundreds of thousands of dollars of campaign money to Republicans and Democrats.

Lay is President Bush's biggest financial benefactor, and helped his father, too. Bush now refers to the fellow Texan he has playfully called "Kenny Boy" simply as "a supporter."

Giving back money

Some Congress members and party committees are returning Enron's past donations or sending the money to charities to help Enron's laid-off employees, many of whom lost their 401(k) retirement savings when company stock plunged.

Details drip, drip out: First, the White House reveals that Lay called two of Bush's Cabinet officers to seek help staving off bankruptcy (but didn't get any). Then Attorney General John Ashcroft recuses himself from the investigation because Enron contributed to his Senate bid.

Next the White House adds chief economic adviser Larry Lindsey -- an Enron adviser before joining the government -- to the list of those who mulled the impact of the failure before the company filed for bankruptcy last month.

Now congressional Democrats are hunting for evidence that Enron unduly influenced the Bush administration's energy policy last year. The White House denies any such influence.

Buck passing: Enron has tried to shift responsibility to Andersen, making a dramatic gesture Thursday by firing the accounting firm. Andersen fired a lead auditor it blames for shredding documents sought by the government. The fired auditor suggested Andersen's lawyers were behind the shredding.

It's reminiscent of Ford and Firestone arguing over who was to blame when tires came apart on Explorer sport utility vehicles.

With Enron already bankrupt and selling off parts, Andersen may have the most at risk in the court of public opinion.

One of the respected "Big Five" accounting firms, Andersen must convince federal regulators, politicians and its clients -- including the many government agencies it serves -- of its integrity.

In a full-page ad in major newspapers last week, managing partner Joe Berardino acknowledged "an error in judgment" by Andersen personnel and promised to make comprehensive changes and "do what is right."

That's the first salvo, said Marina Ein, who advised Rep. Gary Condit, D-Calif., on public relations last summer as police investigated his relationship with missing federal intern Chandra Levy.

Now comes the tough part.

"They want to be creating an image of an organization that is open and is cooperating and at the same time they want to be careful about what they provide," Ein said, because of the lawsuits and criminal probes. "It is extremely tricky."

Yet companies have withstood the hue and cry, even when customers died.

Jack in the Box restaurants served tainted hamburgers in 1993; Johnson & Johnson suffered when someone mysteriously laced Tylenol capsules with poison in 1982. Both cases led to industrywide reforms and tougher federal rules.

"Catastrophe leads to change," said Carol Cookerly of Atlanta, who advised the University of Virginia Medical Center during the uproar over two babies switched at birth. "Progress is the silver lining."


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