Senate to probe Enron's collapse

Committee to look at White House ties

January 03, 2002|By Laura Sullivan | Laura Sullivan,SUN NATIONAL STAFF

WASHINGTON - A Senate committee announced plans yesterday to investigate what its chairman called the "troubling and precipitous" collapse of Enron Corp. to determine whether the company swindled stockholders and employees with shaky deals and hidden debt.

The investigation by the Governmental Affairs Committee will also look into whether Enron's close ties to President Bush allowed it to avoid proper oversight by the Securities and Exchange Commission and other agencies, said Chairman Joseph I. Lieberman, a Connecticut Democrat.

The inquiry, with hearings beginning Jan. 24, is the latest of nearly a half-dozen investigations into Enron, including those by the SEC, the Justice Department and other congressional panels.

Enron, which just three months ago was a darling of Wall Street and the seventh-largest U.S. company as measured by revenue, plunged into bankruptcy in early December. Its stockholders were devastated, and thousands of employees were laid off or left with decimated retirement savings.

The Governmental Affairs Committee's investigations subcommittee said it planned to subpoena documents this week from Enron's officers, its board and its main auditor, Arthur Andersen. A lawyer for Enron said the company would voluntarily turn over all relevant documents.

Lieberman said: "The more you read, the more you get angry. When a $77 billion company losses nearly all of its market value and plunges into bankruptcy in a matter of weeks - to the surprise, apparently, of everyone, including those whose business it is to know better - the public's confidence in the stock market is shaken.

"It affects millions of middle-class investors who want to participate in the larger American dream of growth and prosperity without fear of being swindled."

At the heart of the investigation are allegations that Enron executives hid more than $500 million in debt, doctoring their books with misleading language to cover up off-shore companies and paper partnerships that helped conceal the scope of the company's debts. Government investigators are also looking into whether board members held personal stakes in those partnerships.

Top company officials cashed out nearly $1 billion in Enron stock as the share price plunged, while hundreds of employees were barred from selling it from their 401(k) retirement accounts.

Enron attorney Robert S. Bennett said yesterday that congressional leaders and federal agencies were unfairly rushing to judgment.

Bennett said Enron's board of directors had begun an independent inquiry into some of the "special entities" and partnerships the company had become involved in. He also said Chairman Kenneth L. Lay would cooperate fully in the investigations. Lay is scheduled to testify before a Senate subcommittee Feb. 4, Bennett said.

Enron, whose stock peaked at $90 a share in 2000, has been trading at less than a dollar since December.

Sen. Carl Levin, a Michigan Democrat and chairman of the investigations subcommittee, said he would use his subpoena power to "investigate what appears to be layer upon layer of conflicts of interest, including the transfer of debt to paper partnerships, in which Enron officials had personal financial interests, to make Enron look financially better."

The Wall Street Journal, citing company documents, reported yesterday that top Enron officials knew about partnerships involved in the downfall and were aware of possible conflicts of interest.

Levin's panel will try to determine what company officers and board members knew and what role Arthur Andersen played.

Appearing before a House panel last month, Andersen's chief executive, Joseph F. Berardino, acknowledged that the company erred in how it handled one of Enron's special-purpose entities but said its intentions were in "good faith."

The Governmental Affairs Committee as a whole will investigate how the largest corporate bankruptcy in U.S. history could have resulted without warning from the SEC, the Commodity Futures Trading Commission or the Federal Energy Regulatory Commission. All have some oversight authority over the company.

Lieberman said the committee will also look at what role Enron's connections to the Bush administration might have played in hiding its precarious finances and whether it was able to unduly influence energy policy.

Lay, a friend of the president's, and company employees have been major contributors to Bush's political campaigns.

"It's a matter of public record that executives of Enron had close relationships with people who are now in the Bush administration," Lieberman said. "They also had close relations with some Democrats."

Lay "and others played an active role in the formulation of energy policy by the Bush administration," Lieberman said.

He said that while the response from Republicans in Congress so far has been positive, he said his committee is seeking to determine, "What advice were Enron leaders giving to the administration, and was it self-serving? We're going to go wherever the search takes us."

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