Dazzling image left US press blind to the truth

Enron: The media

What went wrong? How did America's business press, with a few honourable exceptions, fail to latch on to the biggest and most lurid corporate scandal in a decade? A year after the bankruptcy of Enron, once the seventh- largest company in the US, the answers are becoming clear.

One reason, of course, was Enron's very size and its standing at the head of a new, bold American business establishment. A dodgy, fly-by-night operation is one thing. A blue-chip $75bn (£48bn) corporation, its name emblazoned on its city's major league baseball stadium, whose chairman is a friend of the US President, is another. And yet Enron, it emerged, was as dodgy as they come.

Investigative business reporting is a tricky and sensitive business, even in the US, where shady operators cannot so easily hide behind high court injunctions. The devil usually resides in the detail (often a Delphic footnote on a balance sheet), which often requires specialist training to understand. It involves real money which belongs to other people. A mistake can have costly consequences for share prices, companies and their investors. Articles have to be well researched, and correct.

Even by these standards, Enron was an especially difficult specimen: the secret debt-laden partnerships that led to its demise were not on its balance-sheet. As many a rueful business editor lamented afterwards, how can you nail down a scandal when a company publishes lies, its accountants sign off on those lies, and pricey law firms produce fancy arguments to vindicate those lies?

The company was riding on the back of the 1990s boom. One of Wall Street's hottest stocks, it had made many people millionaires and seemed to be the poster-child for deregulation – a cause championed by the editorial boards of The Wall Street Journal and others.

Enron benefited from financial and energy market deregulation, and paid an army of lobbyists and Congressmen to help. And it could always rely on investment bank analysts growing fat on Enron business to boost its cause (and share price).

But none of this excuses the gushing reporting that surrounded Enron in its prime. Take Rebecca Mark, a star executive before she was sacked in 2000, who made a reputed $79m from Enron stock sales. In 1998, Forbes Magazine was smitten: "With honey-blonde hair, big brown eyes and dazzling white teeth that offset a toast tan, Rebecca Mark could be taken for a movie star."

Reality by then had yielded to the virtual-reality world of Enron's former chief executive, Jeffrey Skilling, where every problem could be "securitised" and traded safely away. Only a few queried the Skilling version of events, most notably Fortune Magazine's Bethany McLean in a March 2001 piece headlined "Is Enron Overpriced?" But that went largely unread.

A chastened US financial press vows "never again", and promises to replace cheerleading with hardnosed, sceptical reporting. At least, until the next giddy boom turns wise men into fools.