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16 Jul 2008
No action is to be taken against Lord Wakeham for his role as a non executive director and member of the audit committee at Enron when it collapsed.
But the Joint Disciplinary Scheme said that there was a need to clarify the role of non-execs and has written to the ICAEW and ICAS asking for guidance.
Chris Dickson, executive counsel of the JDS, this week announced his decision to take no action against Lord Wakeham, a former Tory chief whip in Lady Thatcher’s government, concluding that further investigations would not be ‘practicable’.
‘To investigate the matter further against Lord Wakeham would entail finding, almost certainly in the US, evidence which has not been discovered by the authorities there. The executive counsel considers that it is not practicable to undertake such a search, and is conscious that he has no power to compel any witness in the US to co-operate with him. He does not believe, therefore, that it is in the public interest for him to enquire further into the matter,’ the statement said.
Following the 2001 collapse of Enron, its directors have been extensively investigated in the US resulting in CFO Andrew Fastow, being sentenced to six years imprisonment and a $24m (£11.9m) fine, while the auditors, Andersen, were fined $500,000 and given a five-year probation sentence. though the conviction was quashed.
But the US authorities did not see fit to take action against non-executive directors such as Lord Wakeham.
The JDS began inquiries into Lord Wakeham on the basis of the key role he played as he was the only professional accountant on Enron’s audit committee. ‘It does not appear that Lord Wakeham had a sufficient understanding of these transactions,’ the JDS said.
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Passing the Buck
Yet again the UK authorities show that they have little appetite for enforcing decent standards of corporate governance especially when the alleged miscreant is an establishment figure. Do they really believe that there is a need to clarify the role of non execs or are they simply passing the buck? You could paper the walls of both the ICAEW and ICAS with the good practice guidance that has been issued in the past decade. We don?t need more guidance, we simply need enforcement of that which already exists.
The JDS have failed badly by simply giving up the ghost because it was too hard or, as they put it, not ?practicable?. This decision sends out a message that non execs who do not challenge management and who do not bother to build up an appropriate understanding of the business have nothing to fear. No wonder the public is cynical about the accountancy profession.
Posted by: Martin Williamson, 16 Jul 2008 | 00:00