“Fear of criminal prosecution trumps any fear of public humiliation.” – Mark Palmer, former Enron managing director of Corporate Communications

“The longer you indulge in the practice of maintaining a cosmetic shell, the harder it is to recover when the shell eventually cracks.” — Len Brooks, University of Toronto

“Thanks to the Enron implosion and the subsequent rash of accounting and corporate-governance scandals, the credibility of any corporation is no longer assumed. It must be earned.” – Matthew Boyle, Fortune Magazine

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Growing up, I repeatedly followed the mantra that winners never quit, and quitters never win.

But mumsy always said: “If you are in a bad situation get out of it.”

These two adages seem to be in direct conflict with each other, which brings me to the question that I posed to my students this week: If you were Mark Palmer, the former Enron managing director of Corporate Communications, what would you have done?

Would you quit?

Would you try to stop the sinning?

Would you become a whistle-blower?

Would you continue to drink your own bath water?

The answers to these questions and many more are not easy, considering that the staggering tales of criminal intent of the Smartest Guys in the Room story did not become clear until it was too late…way too late

Securing Palmer’s six-figure job as the head of PR for Fortune’s Magazine’s Most Innovative Company — the darling of Wall Street’s financiers, analysts and investors — would have been universally seen as a coup.

Chairman Kenneth Lay, President Jeffrey Skilling and CFO Andrew Fastow were regarded as business rock stars. The company could do no wrong as the stock price continued to rise even after the Internet bubble burst.

Business Week, Fortune, Forbes, Wall Street Journal and other influential business pubs couldn’t say enough good things about the Holy Trinity, and Enron. Life was presumably good for Palmer and his team…until the nightmare unfolded.

As we all know a decade later, it was all a lie. For the longest time, the Enron PR team didn’t know it was telling a lie.

In the documentary, The Smartest Guys in the Room (a.k.a. Lay, Skilling, Fastow), Enron Energy Services public relations director Mark Eberts recalled repeatedly hearing internal rumbles that the company was not doing well. And then…magically every quarter just like clockwork the company always exceeded its quarterly projections…and the stock continued to rise.

When something is too good to be true, isn’t that usually the case?

The first shot across the bow came in the form of a call from Fortune reporter Bethany McLean in 2001, who merely asked how the company made its money. Sounds like a softball question, but it wasn’t for Enron. Skilling told McLean that he wasn’t an accountant. Why does one need an advanced accounting degree to answer the most simple of business strategy questions?

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The subsequent story wondering whether Enron (NYSE: ENE) was overvalued started the downward pressure on the stock. That would not be enough to cause an experienced PR team to panic.

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However, when Skilling suddenly resigned on August 14, 2001 for “personal reasons” the alarm bells started going off. Did he want to spend more time with his neglected family?

These warning signals intensified when the following evening the PR team was waiting unusually long, until 2 am for management to produce the income statement, the balance sheet and the cash-flow statement that normally accompanies a SEC-required quarterly earnings release.

Enron’s Karen Denne remembered the scene all-too-well: “I remember at the time there were sections in the press release that didn’t make sense, that I had questions about,” she said.

When she asked the executives to provide more information, she was told that everything was fine and there was nothing to worry about. Ultimately, though, the sections that concerned her were “the very quotes and phrases” that drew the attention of the reporters at the Wall Street Journal, she said.

It all came to an end on Dec. 2, 2001, when the nation’s seventh largest corporation filed for Chapter 11 bankruptcy protection with $63.4 billion of assets on its balance sheet.

Lay was sentenced to 45 years in the slam (he died of a heart attack); Skilling, 24 years (currently serving his term in Colorado) and Fastow, 10 years (He served five years).

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For the public relations team, their shares in Enron were worthless. Thousands of Enron employees loaded up on the stock for their retirement, and for far too many ENE was their nest egg. The team members also carry the Enron imprimatur on their resumes.

For Palmer, he appears to be doing well according to LinkedIn as he is a Brunswick Group Partner in Dallas.  For Enron PR expert Karen Denne, she is the chief communications officer for the Broad Foundation in Los Angeles.

For each and every member of the Enron public relations team, Almost DailyBrett wishes them the best in their respective careers. One must wonder if they still wake up in the middle of the night thinking about the Smartest Guys in the Room.

http://www.savvypr.com/iabcethicscolumn3.html

http://www.bizjournals.com/houston/stories/2003/06/30/newscolumn5.html?page=all

http://annenberg.usc.edu/News%20and%20Events/News/111110Enron.aspx

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