Lessons From the Enron Debacle

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Lessons From the Enron Debacle

By Rabbi Eli Teitelbaum

 

Probably, the most important lesson to be learned from the Enron scandal, the biggest and perhaps the most scandalous bankruptcy in US history, is the corruption and fraud that can occur when there is much money to be made and when it involves a conflict of interests. When those who supposedly inspect a company’s net worth make a lucrative income by offering it their accounting services, we may be in for some shocking surprises. While it may take years to learn exactly what happened at Enron, since most of their documents were destroyed, their accounting practices reads like a road map of corruption, subterfuge and manipulation. When supposedly honest accountants, lawyers, bankers, legislators and regulators get paid for what they do from the company they are in charge of supervising and checking, there is always the possibility of corruption and fraud. Obviously, if the money to be made is large enough, their integrity will be compromised. This of course should raise some very serious concerns as to the way our kashrus monitoring system works.

 

Imagine what would happen if each restaurant would be allowed to hire its own health inspector to certify that it meets the government health code, or each business would be able to pay its own tax examiner to inspect its own books. It doesn’t take much imagination to figure out what would happen. It’s an open invitation to dishonesty and scandal. The potential to cheat would be irresistible. Yet, this is the very method that we use to check the quality of kashrus.

 

Every restaurant or food producer is free to pay and choose any rabbinical supervisor to give him his seal of approval and endorsement. Sometimes an establishment will have the seal of an organization, or an individual rabbi. There is big money to be made in the hashgocho field and therefore there is always the danger that a supervisor or inspector may be tempted to overlook certain criteria in order not to lose a lucrative deal. After all, if he drops the hashgocho because of some impropriety, there are always plenty of others that are ready to grab it. The game of musical chairs is unfortunately quite common.

 

A friend of mine owned a bakery for which he was in search of a hashgocho. One rabbi was willing to provide it to him for over $4,000 per year since he felt that he had to hire a Jew to go there each night in order to take challa from all the goods baked during the night when no Jew was on premises. Another rabbinical organization was willing to provide him with a hashgocho for only $1,000 a year since they did not require a Jew to be present in the bakery during the evening and relied on a non Jew separating a piece of dough from each prepared batch and the Jew would take it and declare it as challa the next morning. I’m sure you realize that he took the cheaper hashgocho. After all, he tried to save every dollar he could, and the public would certainly not be any the wiser.

 

A store that was owned by a non-Jew and that needed a full time around the clock hashgocho that would cost a fortune, settled for a rabbi that only required him to have a part time mashgiach and he thereby saved a fortune. Just like there are many different accounting practices, so too, there are many different levels of hashgochos, yet the public has no way of knowing the standards these different hashgochos are based on.

 

The ideal situation would of course be if the public would support its own independent rabbinical inspectors and all kashrus certifications would then be given FREE OF CHARGE as it was done in certain kehilos in Europe. The prices of many products would in fact become lower since the store would not have to pay the very high price necessary to receive a hashgocho. The money saved could be used to support a free kehilah hashgacha. But for this, I’m afraid we will have to wait for Moshiach. Yet the present system is as riddled with holes as is Swiss cheese (without supervision). There is something drastically wrong here. The community should be protesting and rebelling against this anarchy posing as a system. Yet this is the way it is, and this is the way it will probably remain – unless the community decides to make the necessary changes.

 

It was for this very reason that a group of over one hundred rabbonim in the Flatbush community decided more than ten years ago that they owed it to their congregants to look “over the shoulder” of the supervisors and get an unbiased and objective opinion of the standards of kashrus being offered in the community. They called their organization the ‘Kashrus Information Center” (KIC). Its job was to visit establishments and gather information, which would then be turned over to the rabbi-members. K.I.C. does not declare establishments to be kosher or non-kosher – neither does it set any standards. It only looks, listens, and reports. Since different supervising rabbis adhere to different standards of kashrus, the KIC reports the standards they find to the rabbi-members of the KIC. Congregants can then turn to their own rabbis with their questions. If a store does not use cholov Yisroel, K.I.C. will say so, and then it is up to the rabbi to make his evaluation, based on the standards of his congregants. K.I.C. will not inspect a place of business whose owner is not Shomer Shabbos. Nor will it inspect an establishment that has no supervision at all – because the field of kashrus is so complex nowadays that even the best-intentioned proprietors cannot keep up with developments. Neither will it give any supervision. This way there are no conflicts of interests.

It was not an easy task. After all, which businessman wants another rabbi snooping over his shoulder and looking into his pots and pans? Can’t his rabbi be trusted? Does the rabbi need another rabbi over him?

 

Yet, despite some initial resistance and even threats of non-cooperation, the K.I.C. (Kashrus Information Center), was determined to inspect the “cholent pot” and see what is cooking inside. Fortunately for them, the Flatbush community has become one of the finest Torah communities and is fully supportive of its rabbonim and their demands for honesty and integrity in the field of kashrus. It is the consumer’s dollar that speaks loudest, and the rabbonim knew that this would be a store’s ultimate consideration.

 

The K.I.C. works in a wise and tactful manner, trying its best not to step on any toes and to do its job as efficiently as possible. One person is a paid monitor and coordinator, while everyone else volunteers his time and services. As the inspections progressed, the rabbonim themselves were in for some major surprises. They made some discoveries that seemed incredible. It was only then that it became obvious as to how important their work was. To their credit, instead of maligning and hurting the establishments, they helped them make the proper corrections so that things would be conducted properly in the future. The purpose of the K.I.C. is to improve the standards of kashrus and not to ruin businesses that are willing to improve.

 

I’d rather not go into the details of some of the problems that were sometimes found, since this is not the purpose of this article. What is important is for the rabbonim in every community to follow the lead of the K.I.C. and establish independent groups to act as watchdog committees for their own neighborhood stores. Only then can we be sure that our kashrus standards are better than Enron’s financial statements. Certainly the “honest” rabbonim will not mind if anyone “looks over their shoulder,” As for the rest of them, who cares! Let them beware and take their shoddy hashgochos elsewhere.

 

Boruch Hashem, the Boro Park community has now followed the K.I.C.’s example and has now formed its own organization called the KIS (Kashrus Information Service), which is doing the same in Boro Park. We are happy to report that the rabbonim and establishments are giving them their full cooperation. For any questions they can be reached at 718-436-8188

Only with the community’s full support will they succeed in insuring that kashrus standards are strictly adhered to and all is in order in our kitchens.

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