WASHINGTON - During a lengthy academic career, Robert K. Jaedicke taught Stanford University students how to be responsible and ethical while succeeding in business.
Today, his name is linked with a company whose tangled finances are the subject federal investigations: Jaedicke, 73, has led the Enron Corp. board of directors' audit committee, the last line of defense against accounting problems, since shortly after Enron formed in 1985.
``He's an expert, but this is a big one to have missed,'' said Charles Elson, director of the Center for Corporate Governance at the University of Delaware. ``He didn't have to be an expert to understand what was going on here.''
What was going on, in part with the blessing of directors, was a pattern of low-key partnerships between Enron and a few executives, notably former chief financial officer Andrew Fastow, that hid millions of dollars in debt.
The board had to waive the company's code of ethics so Fastow's partnership could do business with his employer.
``We put in place multiple controls, involving numerous parties, because we are aware that one check may not be sufficient,'' Jaedicke told an investigative panel of the U.S. House Energy and Commerce Committee this past week. ``We could not have predicted that all controls would fail.''
Jaedicke did not return calls seeking additional comment at a telephone listing for him in Bozeman, Mont.
No one has suggested Jaedicke was behind the bookkeeping contortions and hidden debt that led to Enron's bankruptcy in December. They just wish his accounting acumen had come to the rescue.
``One of the things I've learned is that people who appear to be very qualified may have the education, but may not have the spine,'' said Nell Minow, a boardroom expert with The Corporate Library, an information service on corporate governance. ``They may know everything about accounting and not know how boardrooms operate.''
The professorial, soft-spoken Jaedicke was unlike the slick corporate go-getters who ran Enron, contrasting sharply with the self-assured former chief executive Jeffrey Skilling, who sat beside him at the hearing table in Washington last week.
But his background was perfect for a company seeking an accounting expert for its board.
He has served on a number of corporate boards, including those of Wells Fargo Bank, Boise Cascade, State Farm Insurance and Homestake Mining. He has resigned from most, quitting the California Water Service Group board just last month.
``Our perspective is that Dr. Jaedicke was an excellent member of our board, brought his expertise to the table and performed his duties in exemplary fashion,'' water company spokeswoman Shannon Dean said.
Jaedicke joined the Stanford faculty in 1961 and students rated him highly on evaluations. He was associate dean for academic affairs at the Graduate School of Business during 1969-81, then dean from 1983 until he retired in 1990.
He focused on teaching corporate responsibility and management ethics, two hot issues in the wake of the Enron flameout.
``I don't think I have known anybody more forthright, more honest or a nicer person to deal with,'' said economics professor David Kreps, who arrived at Stanford in 1975. ``You always knew where he stood.''
Unfortunately, it wasn't as easy for Jaedicke and other directors to figure out where Enron stood.
A report by a special board committee chaired by University of Texas School of Law dean William C. Powers concurred with Jaedicke's assertion that Enron management hid crucial details of the partnerships and Enron's actual debt liability.
Still, Jaedicke took issue with the report.
``The special committee concluded that the audit committee and the board failed in their duties to oversee these transactions and that we were insufficiently vigilant,'' Jaedicke told Congress. ``I do not agree with that conclusion.''
Like many other current and former Enron directors and executives, Jaedicke is a defendant in several lawsuits because he sold stock before the meltdown. He testified that his sale of 8,000 shares in May at $61 per share, yielding $431,760, was required by stock option rules.
Enron's stock price has plummeted since to pennies.
Investigators are probing to see if Enron or its managers violated more than the company's ethical code in what could be one of the biggest criminal cases on Wall Street since the Ivan Boesky insider trading scandal in the 1980s.
Still a dean when that scandal came to light, Jaedicke described his perception of the difference between ethical violations and lawbreaking.
``People don't necessarily go to jail for poor ethics,'' he said. ``They go to jail for breaking laws. You shouldn't have to go to business school to learn you ought to do business within the law.''
Friday
January 10th, 2025
11:51AM
