"Enron bosses deny 42 charges as complex fraud trial begins " Simon Bowers, Tuesday January 31, 2006, The Guardian http://www.guardian.co.uk/enron/story/0,,1698724,00.htmlThis article also has links to background information about the Enron debacle. I want to explain my personal experience in the early 1980s as a pension fund manager for a Forture 130 multinational corporation where I blew the whistle against serious corporate mismanagement at the highest levels. This experience reflects the elements which emerged in the Enron collapse and also reflects my current experience with which I am dealing in this web journal. In early December 1981 I went to the CEO (Chairman of the Board and President was one man who was the CEO) about the fact that there was to be no presentation to the Audit Committee of the Board of Directors about substantial changes to the pension fund management. At the same time the annual planning review meeting for me and my department was cancelled. The CEO along with the CFO, planning department and the top corporate officers attended these planning reviews on an annual basis. I had as usual prepared a five page document with a one and five year outlook against the background of all that I was doing and going to do for the management of all the employee benefit assets including the pension funds for the US, UK and Canada. I also had a budget that was over one million dollars although most of this was spent on outside investment managers and the bank custodian/master trust for all the employee benefit assets and a foundation. It was exceedingly important that these annual planning reviews take place which is why the CEO attended them along with the planning department. In my case the Pension Board was there which consisted of the four top corporate officers: the CFO (Executive VP for Administration and Finance), Corporate Counsel VP, Human Resources VP and Treasurer VP. I was first told that there would be no presentation of the changes to the Audit Committee in a conversation between the VP for Auditing and Information Systems and the Treasurer VP while I was present. Then I was informed that my annual presentation for the planning review would be eliminated as well. As a result, I went to the CEO Chairman of the Board and President to inform him about these abrogations of corporation responsibility which involved keeping information from himself and the Audit Committee of the Board of Directors. I did this on the morning of 7th December 1981. I had a very short meeting with him for only a few minutes. I went in with three things listed on a piece of paper. I cannot remember what the third item was. A couple of years before in early 1980 when the reorganisation programme had begun, there was a meeting with the Pension Board and the CEO regarding my proposals for the reorganisation. At that time the CEO had stated clearly in response to a question that the Audit Committee of the Board of Directors had oversight responsibility for the employee benefit assets. Management could make any decisions regarding their management without informing the Audit Committee beforehand for approval, but it was necessary to report the changes to the Audit Committee afterwards. This was not being done. Furthermore, the planning review meeting had been cancelled which directly impacted the CEO himself. There were very important issues which needed discussing, and these were effectively being suppressed by those at senior management level just under the top and Board of Directors. As it happened, Institutional Investor magazine was writing an article about me which had been in progress since June 1981 and had been directly approved by the CFO. This was due to come out in December 1981. The failure to report the changes in the Pension Fund management would reach the Board of Directors and its Audit Committee through the media and not through corporate management. This would make the CEO who was Chairman of the Board and President look bad. After my few minutes of comments, the CEO said that he would see to it that I had my planning review meeting but the Board of Directors and Audit Committee meetings were occurring or had occurred and nothing could be done. The CEO said that he would take care of that. The Audit Committee of the Board of Directors consisted of three men: the President of Carnegie Melon University, the President of Lehigh Portland Cement and a transition from the former President of US Steel to the head of a prestigious Wall Street firm. I went to the CEO not only to protect him against manipulation but also to protect these members of the Audit Committee who were certain to read that December 1981 issue of Institutional Investor magazine which finally came out in very late December that year. Most certainly the head of the Wall Street firm was going to read it. A copy of this Institutional Investor magazine article can be found at http://www.garydchance.com. Click on the "biography" side bar link to the right. Shortly after my visit to the CEO, we had my planning review session with all present as described. Some very important items came up for discussion which directly involved the CEO and CFO each of whom had a connection with the management of the money centre bank which was employed as the custodian and master trust for the employee benefit assets. Although one of the top banks in the US and the world, it had always had difficulty in accomplishing its job, and I wanted to change banks to one that was fully automated and could provide all the services and accuracy which were required to management hundreds of millions of dollars in invested assets. The problem had become so serious with the investment managers that the President of one of the investment management firms took me to lunch to talk about the problem which he thought was adversely impacting his ability to do his job. As it turned out, the subject of this bank came up at the management review meeting. The CEO just happened to sit on the Board of Directors of this major money centre bank and was also a member of its Trust Committee. The CFO was on a special finance committee of this bank as well. The Treasurer VP had hired this bank originally just before my arrival because the Senior VP in charge of its Trust Department was a neighbour of his in Short Hills, NJ. This went against the recommendation of my predecessor in my job who had resigned. There was a significant reason why this administration information was being suppressed in order to protect the bad decision which had been made by the Treasurer. It all came out at the planning review meeting to everyone's amazement. I was able to change bank custodian/master trustee shortly thereafter, and this money centre bank got out of this business altogether. Earlier it could not administratively manage this business and had to call in auditors to reassure clients. When the transition was made to the new bank custodian/master trustee, a half a dozen or so asset certificates could not be located. They were that out of control and could not provide the basic function of holding the assets securely and properly. They had to make good on their loses. Thank goodness I was able to change to get this administratively under control, but it took a trip to the CEO to do this when those who wanted to cover up the problem had tried to do so by eliminating the planning review meeting. Also, at the same time in early 1982 I made a presentation to the Audit Committee of the Board of Directors about the changes in the management of the pension fund. I believe that this also included the change in the bank custodian/master trust. The President of Carnegie Mellon University pressed me on the economic reasons for making these management changes. As was usual in these presentations, it had been reviewed by senior management. I would provide a slide outline of what I was going to say so they would be fully briefed. This time my page on the economic reasons for having made the changes was removed, and I was told to leave it out. Now it emerged why this presentation was originally suppressed. The CFO had the economic outlook that inflation was going to continue forever. I had the opposite view, and all the changes to the pension fund management carried out during 1980 and 1981 reflected this anticipation of a secular trend change in inflation and interest rates. The CFO had also acted on his own outlook and floated a $100 million bond issue during 1981 when interest rates were at their peak. The corporation really didn't need this money for any particular project. It was obtained strictly on the basis of a "market timing" decision that was completely wrong. Long term interest rates actually peaked in the US in October/November 1981 and have never been back to those extraordinary high levels since. They have come down and down over the subsequent two decades. While the coporation was floating a debt issue (borrowing money), the pension fund was buying long term bonds (US Government long term 25-year call protected bonds) based upon an overall total pension fund management economic and financial analysis and risk and return strategy. I even made the comment that if it were legal, I would like to buy the whole $100 million bond issue for the pension fund. What was happening is that the pension fund went up to a 50% cash and long bond position with over $100 million of that inhouse under my management. The same strategy was adopted in the UK and Canada since the economic scenario was the same worldwide. The maladministration of the UK pension fund management was as bad as that of the US. I worked in the UK equally hard for years to reorganise that management effort in a very difficult economic and business environment with extraordinary difficulties in dealing with the local company management. This is another story which I will address another time. Suffice it to say that the results in the US, UK and Canada were spectacular because I was right for the right reasons. The US pension fund was up by over 30% (over $100 million). The UK pension fund was up some 40% and ranked as number two in an actuarial firm's fund performance analysis universe. I do not know what the Canadian results were, but they had to be better than the US given the amount of bonds the owned. I did not know what they did because I was sacked in September 1982 after the market exploded upwards in August, and it was obvious that I had done the right thing all along. Once again those who were out to hide the truth made every effort to try to do so once again, and I took a stand this time to present all that had happened for the prior three years in a comprehensive report with exhibits that filled two notebook binders. The issue once again revolved around maladministration when I was asked in July 1982 to make an illegal transfer of funds. I refused and was ultimately sacked. This is another story too to be dealt with later. What happened at Enron should be no surprise to anybody. I have a lot more to say about all of this then and now and will be doing so in due course. It is all also a matter of the public record. .