Monday, Oct. 9, 2006 | My friend and colleague Andrew Donohue finally succeeded in his year-long quest to get me to read the book “Conspiracy of Fools” – the story of Enron’s dramatic rise and ugly fall.

What a great book. I haven’t had much time to read these days, but I’m so stuck on this one that if I find myself with a few minutes here or there, I look around for it – even if I only have time to read a page or two. Now, I’m about two-thirds of the way through.

It’s an incredible story that reads like a novel with characters so arrogant, so obsessed with their own greatness, you find yourself hopelessly committed to finding out what happens to them.

Even though you already know.

Andrew Fastow, Enron’s former chief financial officer, after all, just recently found himself sentenced to six years in prison for his role. Jeffrey Skilling, Fastow’s boss, awaits his own sentencing Oct. 23.

The story of how they got to this point is amazing. But as author Kurt Eichenwald goes through the narrative, he comes to the same point, over and over again: Fastow and Skilling and the rest of the Enron crew kept dreaming up new schemes (many of them that smelled like, looked like and quacked like frauds), but each time they had to get them approved by Enron’s board of directors.

Almost every single time, without question, the Enron board would sign off on the deal and praise its star staff. Eichenwald points out that, each time, it was clear the board didn’t have a clue what kinds of risk it was taking on – what kind of efforts it was approving.

The board just trusted its managers, asked a few curious questions but stopped short of standing strong against anything. Then, of course, they smiled as the money came rolling in.

You might think I’m setting this up for an easy segue to a discussion about the city of San Diego, which earned itself the moniker Enron by the Sea. Or perhaps you know me better and think I’d use the chance to leap into a discussion about the county of San Diego’s pension board – more focused on the investment performance of its past than on the risks its staff might be taking now and in the future.

Well, you’re right, but there’s a much broader lesson.

Everything around here is run by boards. The water authority, the port commission, the City Council, the county Board of Supervisors, the United Way, the Red Cross; on and on and on the list goes. All boards, all overseeing staffs with different missions. I mean, even I have a board of directors to whom I report.

(Really great board of directors by the way. Top notch.)

As long as it works, the board system – a group of overseers meant to ensure that staff takes actions that complete the mission of an organization – is a good one. Board members, with diverse backgrounds can provide valuable insights and ideas to their staffs. They can individually work on projects with staff members and they can help represent an organization to the public.

But by far the most important thing they can do is provide approval or opposition to major initiatives. There is a reason that the City Council gets to vote on the projects brought before it. There is a reason that the county’s pension board must authorize major investments.

We, in San Diego, have been particularly vulnerable to failings of boards, commissions and councils as they forfeited their oversight responsibilities while either overly trusting their staff, or doing the exact opposite: pursuing an agenda with the staff merely enabling them.

Whether it was the Red Cross, or the San Diego City Council, we have watched as those charged with providing oversight have found it much more expedient and easy to blindly approve major initiatives. Not understanding a deal was too often not enough to convince a board member that he or she shouldn’t vote for or against it. Forget the pension crisis, or the securities fraud or the sewer rates chicanery, one need only look at one of the biggest issues the city is facing now: what to do with the Navy Broadway Complex.

A couple of members of the San Diego City Council now say they didn’t know what they were really voting on when they approved a development agreement that mandates construction of such dense and unattractive buildings on one of the city’s most valuable plots of land.

They didn’t know much about it. But they voted yes anyway.

And then, of course, there’s the county pension system. The board that oversees that investment portfolio has never been presented an investment it didn’t like. Now, an incredibly risky bet on a hedge fund came out sour – causing the county to lose $105 million, at least, of the public’s and the employees’ investments in just a matter of days.

When they approve investments like this, they do so based on the knowledge that their staff has not let them down yet. They don’t investigate the risks themselves. That kind of blind loyalty to staff isn’t good even if you have the greatest staff ever known to walk the pension world.

Question. Criticize. Board members of all kinds in San Diego need to show some spine and dare to vote no if they’re not sure of something or don’t understand. It may ostracize them from the group of which they are a part right now, but they will have to trust themselves as much as they trust their colleagues and staffers.

It’s worth it. They will want to be on the right side when the history plays out. There are only a few people who functioned in the upper echelon of Enron who can look back at their actions with pride. They look like geniuses. While it’s easy for me to sit on my couch and read about the horrible decisions the Enron leaders made, I can’t minimize how hard it must have been for some of them to avoid the temptation to go along to get along.

In San Diego, right now, boards, councils and commissions are making dozens of decisions. The wrong choice may not land them in prison, but their attention and scrutiny on every vote is vital.

After all, those decisions will help shape the kind of neighborhood, city, state and country we live in. If they don’t understand what their voting on, they shouldn’t vote.

Please contact Scott Lewis directly with your thoughts, ideas, personal stories or tips. Or send a letter to the editor.

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