November 22, 2006
Katrina as the fed’s Enron
While I’ve been down on Sarbanes-Oxley (see my Sarbox archive, and this summary) maybe I’ve got the whole thing wrong. Maybe we should keep SOX and apply it to the federal government.
This W$J roundup of Katrina screwups left me wondering what the SEC would do under the SOX 404 internal controls provision if we had been similarly surprised by the performance of a private company (think Enron). Of course it’s not all the feds, but I pick on the feds because, after all, they enacted SOX.
Consider the federal government’s nondisclosure of the following internal controls failures:
- Inadequate preparation for the application of security measures in the event of an evacuation. (There were delays in evacuating residents from the N.O. airport because FEMA couldn’t round up TSA screeners and air marshals and couldn’t power up X-rays and metal detectors).
- Inadequate coordination of supplies and transport in the event of an emergency. (A FEMA contractor said when he sent his trucks to a staging area in Dallas there were no personnel to unload the supplies).
- No plan for getting the troops to an emergency on time. (Though the 82nd Airborne Division in Fort Bragg can deploy anywhere in 18 hours they took days to get to Louisiana).
- No plan for getting information to the relevant officials. (As the nation watched reports on TV that Nola would fill up with water from a broken levee, Bill Lokey, FEMA’s onsite rep, said, “That’s just not happening.”)
- No publicly available “catastrophic hurricane disaster plan.” (There was a July, 2004 exercise to plan a response to a Category 3 storm with 120 mph winds and a storm surge that went over the levees. Though the plan didn’t expect the levees to give way (?), it still anticipated destruction of 500,000 buildings in New Orleans and displacement of 1 million residents. The group planned for evacuation and construction of an 800-worker “command structure.” FEMA has the report of January 5, 2005, but has not disclosed it.)
I wonder if we’ll see the sort of government response to this mess that we saw to Enron.
Originally posted by Prof. Larry Ribstein on Ideoblog