When board members and managers need answers to questions, they should forfeit "collegiality" in lieu of the prospects of another "C" word-co-defendant-according to Hal Degenhart, a district administrator for the Securities and Exchange Commission in the Dallas-Fort Worth office. Degenhart addressed upstream senior financial officers and other E&P executives at Oil and Gas Investor's inaugural Senior Financial Officer Executive Forum in New York in December. He advised corporate officers to ask many questions and be unrelenting in their pursuit of answers. When answers eventually don't come, fire someone, he said. "I'm not suggesting you become rapid in these meetings." But being prosecuted for corporate fraud is even less desirable. Degenhart was a litigator against the SEC for 23 years when tapped seven years ago to join the SEC. "I don't necessarily agree with some of the things that come out of Washington," he added. But, he supports the Sarbanes-Oxley Act. "Yes, Sarbanes-Oxley came from anger, haste and politics, but we needed it...We needed to send a message." Can the law be improved? Yes, he said. Will it be changed? "I hope so." He criticized "bankers who never met a conflict they could not ignore" and lawyers who turned a blind eye to unlawful corporate activities. "There are some problems with the lawyers...[who] sat in the room and they knew what was happening...Half the practice of law is to tell the clients they're damn fools and they ought to stop." Too often, that wasn't happening in boardrooms or in management meetings, he said. "A breakdown and betrayal by the regulators" is also to blame for deviant corporate-governance behavior in so many leading companies. "We too share the blame," he said. Understaffing and other shortages of resources are no excuse, he added. At one time, he would have looked at Enron and seen that its accounting firm and law firm were both highly respected, and the fact that it was a Fortune 500 company. He likely would have given its SEC filings the benefit of the doubt. That no longer happens, he added. If questioned by the SEC and federal prosecutors, however, he advised against obstruction. If really wanting to make either mad, "lie to us or obstruct our investigation. What do [investment-banker] Frank Quattrone and Martha Stewart have in common? Martha Stewart would not be where she is today if not for lying." U.S. attorneys love lying-to-the-regulator cases more than the actual fraud cases, he said; the former are much easier to prove. In China recently, four bankers were executed for fraud. "We asked for that [penalty] in Sarbanes-Oxley but we didn't get it," Degenhart quipped. Another "C" word is key to continued corporate success: cooperation. "There are a number of companies we gave a walk to because of their cooperation." Royal Dutch/Shell was a model cooperator, for example, he said. It was still fined $120 million over its reserves reporting "to send a message." Randy Foutch, chief executive officer of privately held E&P company Latigo Petroleum Inc., was a presenter on the same panel and had earlier said he would consider taking Latigo public. When asked after Degenhart's comments if he still planned to, he emphatically joked, "No." -Nissa Darbonne

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