Until Enron sulked its way into the nation’s spotlight in the fall of 2001, few could define it or even spell it. Had the revelations and accusations of boardroom shenanigans not extended beyond the embattled energy trader in 2002, that might still be the case.

But as the year wore on, familiar fashion and retailing names, such as Kmart Corp. and Warnaco Group, also had their 15 minutes of malfeasance fame as federal scrutiny was brought to bear on bankrupt firms with restated earnings, questionable accounting practices and other elements of the scandals du jour of 2002.

Of course, corporations and corruption have never been mutually exclusive, but this year’s rash of suspicious bankruptcies, combined with the bear market, took a toll on the public, which turned to politicians, police and even the press to try to even the score that had the bad guys winning and good, hard-working taxpayers losing their pensions.

Investment houses, whose analysts are, in part, charged with monitoring those who control the purse strings, have also come under fire for breaching the Chinese wall that’s supposed to separate advice to investors from banking interests. New York State attorney general Eliot Spitzer has been leading the charge against analysts’ impropriety.

The new suspicions directed at ceo's as well as the financial community certainly contributed to the public’s skittishness about investing in the stock market throughout 2002, and it’s likely that additional bankruptcies and scandals will leave Wall Street with a massive public relations task ahead of it next year.

Most recently, LVMH Moët Hennessy Louis Vuitton entered the fray but, luckily for the luxury firm, it’s on the offensive. LVMH, in a $100 million lawsuit, charged Morgan Stanley with bias and alleged conflict of interest. The suit, filed last month in Paris commercial court, also singles out Morgan Stanley’s chief luxury goods analyst Claire Kent, claiming an anti-LVMH bias in her research and ratings. The first hearing is tentatively scheduled for Jan. 21.

Sources told WWD that LVMH’s suit charges Kent and Morgan Stanley with factual errors in its reporting of the French group’s financials and of distorting its performance and prospects.Morgan Stanley categorically rejects LVMH’s claim and stands by the integrity of its research. The bank said it plans to defend the suit vigorously.

It is believed LVMH lawyers will present evidence suggesting Morgan Stanley favors clients its investment banking side advises, including Burberry, Bulgari and LVMH’s archrival, Gucci Group. Whatever the suit’s outcome, implicit in the accusations is a notion that’s gained traction through the last few years — investment bankers can’t be objective when analyzing the results and prospects of their clients.

Many observers characterize the lawsuit as simply another stage of the long-standing battle between LVMH and Gucci.

After the largest bankruptcy filing ever in January, Kmart Corp. was also beset by probes into its past accounting practices. In the post-Enron world, trouble with "accounting practices" is as large a red flag as can be raised over a company. Any bankrupt firm’s image can be said to be tarnished, but the filing helped shield the discounter from the immediate ire of investors and at least have a shot at a fresh start.

Kmart expects the internal investigation into its former stewardship to be finished this month. Chairman and chief executive officer James Adamson said he hopes the independent Federal Bureau of Investigation and Securities and Exchange Commission probes are on the same timetable as Kmart’s. Another issue that Kmart needs to clear up is how to handle loans made to current and former employees under the reign of Adamson’s predecessor, Chuck Conaway.

The discounter has been touched by scandal in another way, too. Martha Stewart, who licenses a branded line of housewares to the discounter, has been under the microscope of prosecutors for possible insider trading. She sold nearly 4,000 shares of ImClone a day before the Food and Drug Administration rejected its experimental cancer treatment. She is friends with Samuel Waksal, ImClone’s former ceo, who’s already been arrested on charges of insider trading.

Stewart’s sales are crucial to Kmart’s success, but they reportedly have been hurt by the taint of scandal.

Warnaco Group, which is also bankrupt, has seen its share of troubles since having to restate its earnings and enduring a Securities and Exchange Commission probe in 2001. In its annual report, the firm said the SEC staff intended to recommend "an enforcement action against the company and certain persons who have been employed by or affiliated with the company since prior to Jan. 3, 1999, alleging violations of the federal securities laws."Through legal documentation, Warnaco still has a chance to convince the SEC staff that it should not recommend any action against the firm, but it is still not known which individuals are the focus of SEC scrutiny. It’s also filed a plan of reorganization and has been the subject of numerous takeover rumors.

Political and economic conditions took their toll on consumer confidence in 2002, and those factors certainly played a key role in this year’s bear market which, through Thanksgiving this year, saw the Dow Jones Industrial Average drop 10.9 percent. The capital markets have also been squeezed, making it difficult for firms to undertake initial public offerings or access other means of generating cash.

This summer, Prada pulled the plug on its highly anticipated initial public offering for the third time, owing to poor market conditions. The firm still intends to list shares,but ceo Patrizio Bertelli recently said it is more likely to occur in 2005, when about $700 million in company bonds reach maturity.

"I believe the IPO is very important," he said. "It’s basically a question of timing. We just need the right window of opportunity and we will definitely float the company."

Burberry was one fashion company that did take the IPO plunge, though. On July 12, the firm made its debut on London’s Stock Exchange and fell 2 percent in its first day of trading. The launch came during one of the most volatile sessions of the year with Britain’s FTSE 100 index slumping 8.5 percent over that week and the luxury share price average down 8 percent. Through the end of November, though, the firm’s managed to drive the price of its shares up 8 percent, a hard-fought reward for going public in such an uncertain climate.

Another important IPO for the world of fashion was necessitated by the pall of scandal. On July 1, Tyco International spun off CIT Group, a key factor for apparel firms.

While CIT fetched $4.6 billion, enough to register as the fourth-largest IPO in U.S. history, the business went at a fire sale price, as Tyco had paid $9.5 billion in cash and stock for it just a year earlier. Tyco, though, had a truckload of debt that needed to be paid off and was embroiled in several scandals that made it difficult to do so. At the time of the IPO, former Tyco ceo Dennis Kozlowski was freshly indicted by the Manhattan district attorney’s office for scheming to avoid $1 million in sales tax on artwork that he purchased.In all, fashion firms escaped the worst of the corruption scandals in 2002, but the world of investing is forever changed: Even among the most squeaky-clean firms, the call for corporate transparency will continue to sound from now on.

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