Enron 10 Years After -- From Bad to Worse

NEW YORK (TheStreet) -- Now that Jeff Skilling has settled into his jail cell, with the former Enron CEO's appeal of his fraud conviction and 24-year sentence rejected by the Supreme Court, this is a good time for a retrospective on the biggest corporate scandal in recent history.

After all, we're "celebrating" the 10th anniversary of Enron, WorldCom and the other early 2000 scandals. On the surface, I have to admit, it doesn't look good. The financial crisis of 2008 didn't exactly promote confidence in corporate America. But I'm going to try to be as upbeat as possible:

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* Sarbanes-Oxley. In hindsight, the primary legislative reaction to Enron was a remarkable piece of legislation. In one sweeping legislative initiative, Congress addressed a number of long-festering issues related to corporate accounting and set up a Public Company Accounting Oversight Board to supervise auditors of publicly traded companies. In retrospect, it's remarkable that SOX was passed at all -- a fete that would be pretty much impossible today. Its provisions on auditor independence were decades overdue. Section 404, requiring management to assess and personally certify internal controls, took aim at one of the primary issues that arose in the Enron scandal.

That's the bright side. The downside is that SOX has been pretty much a paper tiger -- and it was even before the JOBS Act eliminated Section 404 provisions for startups that need top-notch internal controls the most. As one CPA Journal assessment of Section 404 pointed out in 2006, "internal control was not conceptually designed to be a panacea for corporate ills." And if a company complies with Section 404 and confesses that it has poor internal controls, what of it?

American International Group was reporting deficient internal controls as far back as 2004. So when the massive insurer made the same disclosure in February 2008 for its derivative operations, all those SOX-mandated disclosures didn't do a thing to prevent AIG from careening toward disaster.