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ENRON MINNEAPOLIS-STYLE
   

The Enron scandal has shaken the foundation of trust in commerce and politics at the national level. Clearly numerous innocent investors were hurt by Enron’s misleading financial statements. The accounting profession either lacked adequate reporting standards for the insider-controlled partnerships or the particular CPA firm, Arthur Andersen, failed to meet them. Tales of shredded documents added lurid detail to the scandal.

Congressional committees were quick to investigate the Enron mess and point fingers at the perpetrators so that this type of abuse would not happen in the future.

In July 2001, the city of Minneapolis had a scandal involving City Council member Brian Herron’s solicitation of a bribe. The City Council, through the City Attorney, hired an independent investigator, Chicago attorney Joe Duffy, to see whether this event indicated a broader problem. Mr. Duffy’s verdict, issued in late February, was essentially that it did not. In fact, he concluded that city inspectors, city council members, and others potentially implicated in the scandal were “outstanding” public servants.

I believe that the city’s handling of the scandal raises interesting parallels to the Enron case.

First, we have the situation of the investigated appointing the investigator, an apparent conflict of interest. Enron, like other corporations, appointed its auditors, Arthur Andersen, who, besides auditing, did consulting work for the corporation. Joe Duffy was appointed by Jay Heffern, the City Attorney, who answers to the City Council, some of whose members were under suspicion. Duffy’s softhearted conclusion, for which the city paid more than $120,000 in legal fees, makes it somewhat more likely that he will receive similar lucrative legal gigs in the future.

Second, we have the fact that he investigated mainly what was legal or illegal - and City Council members make the laws. Only the most careless among them would patently break the law as Herron did. But what the city really needs is an assessment of ethics. It needs an assessment of structures and practices that invited a Council member’s bribery.

Third, even the paper-shredding at Enron has a parallel to the Minneapolis scandal. On February 27th and 28th, KSTP-TV ran stories about how defeated City Council members Jackie Cherryhomes and Joan Campbell destroyed their office files, both computer and paper, leaving their successors little continuing record for constituent service. Though these destructions were both illegal and unconscionable, I have seen no indication that the perpetrators will be prosecuted. The Star Tribune did not even run an article on this incident.

At this point, the public should be less interested in punishing individuals than in changing structures which invite future abuse. Herron’s hands-on dealing with inspections was, obviously, not limited to him. Other Council members have done the same and, though they apparently did not solicit bribes, their interference with the inspections process may have had equally damaging consequences for innocent parties.

The system is, indeed, broken. An editorial in NorthNews recently put it this way: “The Minneapolis City Hall scandal ... is an almost-inevitable result of a system that needs fundamental changes ... The problem arises from the sense that each council member is a ‘mini-mayor’, with substantial governing authority in the area they represent ... When politics enters the city’s day to day operations .. it creates a downward ethical spiral ... City services should be delivered as needed, fairly and impartially, irrespective of current political climates or the influence of a given council member.”

Duffy, to his credit, made a few recommendations for reform, but he did not touch the larger question raised in the NorthNews editorial. This, plus the apathetic reaction of prosecutors and the press, makes it less likely that Minneapolis will learn much from the Herron scandal than, nationally, we are deriving from the Enron case.

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