For many business leaders, what starts out as ambition often turns to plain old greed. Multi-million $ salaries (plus bonus plus options) are typical for top positions. People live the life-style - expensive homes in several locations, condos on the beach, ski-chalets in Aspen, expensive cars for the family, world travel to the best resorts. This high living is usually at company expense. The property purchases are seldom paid for in cash, and most-often leveraged with bank-loans and mortgages, with deals made on the golf course and the ski-slopes. People actually begin to think that this is the way money is made, that they deserve it because they are better and smarter than most. They hobnob with Presidents and politicians, make large contributions to their campaigns and lobby at the highest levels - they become part of crony capitalism.

All this sounds plausible—until growth and profits falter. Most executives have already changed their lifestyles to accommodate their wealth. It's fun to scale up, but not easy to scale down. This is when deceit begins.

People get used to extrapolating growth and success, especially when it works for a while When growth stops many start to fudge (stretch the truth) hoping that the dip is temporary and can be made up tomorrow. The fudging can quickly turn to lying, and then extends to cheating and stealing. Few people start off dishonestly - most drift into increasingly dubious behavior through insidious wealth addiction.

Here's how creeping criminality occurs for senior executives with bonus plans based on growth and profit goals. During a growth period, goals are met and bonuses are earned consistently. This sets the standard and conditions the life-style. Inevitably, a quarter (stock markets results are announced quarterly) comes up short. Sales that are close (only a matter of a few signatures, the big order will arrive next week) are "booked". Shipments waiting for just a few late components are "shipped-in-place"—print the invoice and pretend that they went out the door. The bonus is in the bag!

But then, the big order is cancelled and the late components never arrive. Now the proverbial "feces hits the fan". The orders and shipments must be "de-booked". But this means that all the already-spent bonuses will need to be refunded. Problems escalate and only a cover-up can save the day—hopefully to be corrected with a boost next quarter. Now the cover-ups have to be covered up and the disease extends quickly to all parts of the business —cash-budgets are met by holding up vendor payments, inventories are boosted by keeping obsolete goods, etc. Cover-ups become part of the culture.

Honest employees (usually at lower than executive level) are usually an unwilling part of the process. In the old days, there wasn't much they could do except complain upwards (where the problem originated). But today, email is the "electronic conscience". At Enron - the current, still unfolding classic chronicle of crony capitalism—emails became the "smoking gun". Beyond the now famous email written by an accounting supervisor to the CEO, now part of congressional testimony, there were literally thousands of emails flying back and forth electronically between employees who were no longer unwitting dupes.

The annual audit is supposed to straighten out the mess. But, it turns out that auditors have lots of leeway in their interpretations. Enron fired their regular auditors (Deloitte & Touche) for not being "aggressive" enough and hired Andersen in their place (both are big-5 auditors). On the golf course among friends, the agreement to be more aggressive seemed simply like agreeing to be smarter than the other old-fashioned, fuddy-duddy bean counters. With potential auditing fees in several tens of millions, Andersen made the deal, innocently enough at first though it quickly turned nasty. The accountants had caught the disease. Now Global Crossing, another big Andersen client appears to be suffering from the same ailment.

The words "aggressive" and "smart" are much admired in modern business. "Aggressive" accounting is mooted as being "smart" enough keep up with the latest legal loopholes and knowing the fine line between avoiding and evading taxes. Most accounting firms (including the Big 5) promote their ability to assist clients in constructing off balance sheet financing within the limits of the law. The use of offshore corporate structures not only to hide these activities, but also to avoid paying US taxes is unethical even if it is legal. The closer they are to the limits of legality, the more they are admired for being able to get away with it. When they start producing results they are recognized as "smart". And the CEO and CFO were "smart" to have hired them. This is exactly how Enron got away with making big profits in some years, not only without paying any taxes, but actually receiving not insignificant cash rebates.

It turns out that the recent Enron debacle—the single largest bankruptcy in history—is only the tip of the iceberg. Off book accounting is not something that was invented by Enron—it is disingenuous for the press and congress to present it as an evil that was invented by them. The big accountants, aided and abetted by large financial institutions, consistently look for tax and legal loopholes and actively market their ability to do just that.

This disease, now called 'Enronitis', is endemic in our system. There are many other companies that have large hidden liabilities off their books a la Enron. Once Pandora's Box is opened all hell could break loose with disastrous consequences to our economy.

You make your list of deceitful-accounting candidates. I have my own. Send me an email….