It was Dec. 3, 1999. Internet stocks were higher for the third straight session and the Nasdaq finished at another record high. The Dow Jones Industrial Average closed just shy of its 11,326.04 record.
I was invited to write for the Web page of a new dotcom company with promises of a big future. I would be paid in company stock and as a "charter member" could buy shares at a large discount. Dividends would be paid when the company showed a profit.
I declined the stock offer, accepting small cash payments for my essays instead. The company folded the following year. I lost nothing.
That experience came to mind when the Enron scandal broke. Top management appears to have behaved immorally, perhaps illegally, when they cashed in their Enron stock for maximum profits, while prohibiting most employees from selling their stock during a crucial company downturn. Many employees lost their life savings.
While Democrats hope the Enron business scandal can be converted into a political scandal to taint the Bush administration, one question has been largely ignored: Were Enron employees responsible for the financial decisions they made that put their savings and future financial security in jeopardy, or were they powerless victims?
A good financial adviser would have told Enron employees -- as mine told me regarding the Internet start-up company -- that they were foolish to put all their financial eggs in the Enron basket. Diversification is an investor's best protection. Instead, many Enron employees believed that past earnings were an indication of future performance. They bet the works and many lost their shirts.
Among those who got in trouble were Cathie and Wayne Stevens, of St. Helens, Ore. The Washington Post chronicled their sad story on Jan. 20. The Stevenses worked a combined 28 years for Pacific General Electric. Enron bought the company in 1997. The couple had built up a retirement fund of $720,000 in company stock through a 401(k) plan in which they could invest up to 15 percent of their income. PGE matched their contributions with company stock. The stock "never moved a lot but you could count on it," said Wayne Stevens. The Stevenses traded relative security for a try at the brass ring.
Dazzled by Enron stock (it was trading at $85 per share in 2000, compared to PGE's stock price of $27 per share), Wayne Stevens thought he could leap on the gravy train that would take him to lifestyles of the rich and famous. The Stevenses decided to invest 100 percent of their 401(k) money in Enron stock. They bought an additional $600 in stock each month.
Like many other investors, they lost most of their money.
While Enron management deserves to be fully investigated (their practices are being looked at by 10 congressional committees and several law enforcement agencies), no employee was forced to invest all of his or her retirement funds in Enron stock. People who took the advice of financial planners and diversified lost far less money than those who cast their fate to the shifting Enron winds.
We can sympathize with those who've lost everything. If it is possible to tap some of the millions made by management who unfairly sold their stock and give it to employees prohibited from selling theirs, this should be done. But people who were seduced by the prospect of unending riches were ultimately responsible for what they did with their money. In an age when everyone is a victim and no one is responsible for making bad decisions -- whether about the consequences of cigarette smoking or financial behavior -- most of those suffering from the Enron disaster put themselves at risk.
It may sound cruel but they were done in by their own greed. For the Stevenses, $720,000 in a relatively safe retirement account was not enough. They wanted more -- fast -- and what they got was much less. It's very sad, even tragic, but the real tragedy is that this could have been prevented if their decisions had been based on sound financial principles rather than emotion and greed. Some Enron investors were given that advice but ignored it. Is that Enron's fault or their own?