And just look at the timing of some of these meetings to events. Gosh Boys, sounds like we got a gold ring on this one. LMAO!!! 1. One of the staff meetings occurred six days before Enron announced actions that reduced its shareholder equity by $1.2 billion. 2. Session two months before the energy trading company made the largest corporate bankruptcy filing in American history. 3. Bush released his energy plan on May 17, and Enron filed for bankruptcy protection on Dec. 2. Addington's letter said Cheney's National Energy Policy Development Group existed from Jan. 29 through Sept. 30, 2001. 4. Addington said the group's staff met with Enron representatives on Feb. 22 and March 7. 5. staff met with about two dozen representatives of various utilities, including one from Enron. Cheney aides met with officials of a German subsidiary of Enron on Aug. 7 and with Enron representatives on Oct. 10. Enron announced huge losses on Oct. 16. 6. Bush told reporters on Dec. 28: "I have had no contact with Enron officials in the last six weeks," Bush said. [That is just prior to NEPDG formation.]
CEO Sought Intervention on Bond Rating By Dana Milbank and Peter Behr Washington Post Staff Writers Friday, January 11, 2002; Page A1 Bush administration officials yesterday disclosed that the top official of Enron Corp., one of President Bush's biggest campaign donors, sought help from the administration to avoid bankruptcy in the weeks before the giant energy concern collapsed last year, wiping out the pensions of thousands of workers. Enron chief executive Kenneth L. Lay had conversations about his company's dire finances with Treasury Secretary Paul H. O'Neill and Commerce Secretary Donald L. Evans. Lay told Evans, Bush's former campaign manager, that he would welcome help stopping a private credit-rating agency from downgrading Enron debt – an event that could force Enron into bankruptcy. Administration officials said yesterday that Evans did not intervene. Enron filed for bankruptcy protection on Dec. 2, the largest in U.S. history. Also yesterday, Enron's auditor, Arthur Andersen, informed the government that employees at the accounting firm had destroyed a "significant" number of Enron-related documents – thousands of records, according to congressional investigators. The Securities and Exchange Commission took the unusual step yesterday of saying it is widening its investigation of Enron Corp. to include the destruction of records by Arthur Andersen. As the controversy grew yesterday, Attorney General John D. Ashcroft and one of his top aides recused themselves from the Justice Department's just-announced criminal investigation into Enron's collapse. Ashcroft's political committees had received $57,499 in the last election cycle. The entire U.S. attorney's staff in Enron's hometown of Houston also recused themselves because of Enron ties. The drumbeat of developments significantly expanded the controversy over Enron and its ties to the administration at a time when the White House has been seeking to limit the political damage. Earlier this month, the White House disclosed that the energy task force met six times with Enron officials but said the company's finances were not discussed. Until yesterday, the White House spokesman had said he had no knowledge of contacts between Bush officials and Enron about the events leading to its demise. The White House said O'Neill and Evans, who was Bush's campaign manager, did not notify Bush until yesterday of their contacts with Lay about Enron's trouble. Bush yesterday commissioned task forces to provide recommendations to reform pension laws "to make sure that people are not exposed to losing their life savings as the result of a bankruptcy" and "to analyze corporate disclosure rules and regulations." On Capitol Hill, Republicans joined Democrats in calling for probes into Enron. The Senate Governmental Affairs Committee will hold hearings on Jan. 24 and the Senate Commerce Committee will begin hearings on Feb. 4. The House Energy and Commerce Committee, whose investigators discovered that Andersen had destroyed Enron documents, will also have hearings in "early February," a committee spokesman said yesterday. The White House faces increased pressure from Congress to disclose all meetings its energy task force had with energy industry officials when it developed the administration's energy policy last year. Congress's General Accounting Office said that it would decide within the month whether it would take the administration to court over its refusal to provide information on which groups it met with to develop the energy policy. Lay, whose name appeared on early lists of possible Bush cabinet secretaries, was one of the Bush "Pioneers" who raised at least $100,000 for the presidential campaign. According to the Center for Public Integrity, a watchdog group, Lay contributed $44,000 to Bush's presidential campaign, part of $220,700 in contributions to Bush's presidential efforts by top Enron executives. Between 1999 and 2001, Enron made $1.9 million in unregulated soft-money contributions, mostly to Republicans. The president yesterday said he "never discussed with Mr. Lay the financial problems of the company." Bush added that his "administration will fully investigate issues such as the Enron bankruptcy to make sure we can learn from the past and make sure that workers are protected." Administration officials said Lay discussed Enron's plight with O'Neill on Oct. 28 and Nov. 8, and Evans on Oct. 29. On Oct. 16, Enron reported a $638 million loss and the first in a series of damaging errors in its accounting. White House press secretary Ari Fleischer said Lay called O'Neill "to advise him about his concern about the obligations of Enron." Lay suggested the case of Long-Term Capital Management LP could be a model. In 1998, that firm, a hedge fund, benefited from a government-coordinated bailout by other financial institutions after losing more than $4 billion in derivatives, a complex securities transaction. "Long Term Capital was unable to meet its obligations and headed to bankruptcy, and he wanted Secretary O'Neill to be aware of that, the Long Term Capital experience as a guide," Fleischer said. "Secretary O'Neill then contacted Undersecretary [Peter R.] Fisher, Undersecretary Fisher looked at that and concluded there would be no more impact on the overall economy." Fisher had been involved in the Long-Term Capital bailout as a Federal Reserve official. O'Neill said he considered his two conversations with Lay to be "business as usual." O'Neill told CNN: "I get calls every day from the big players in the world. Enron was the biggest trader of energy in the world." In addition, Fleischer said Lay brought to Evans's attention "the problems with the obligations and the bankruptcy. He was having problems with his bond ratings and was worried about its impact on the energy sector." Commerce spokesman Jim Dyke said Lay indicated "he would welcome any support the secretary thought was appropriate" persuading Moody's Investor Services not to downgrade Enron's debt. Evans talked to his general counsel and conferred with O'Neill over lunch on Oct. 29 and decided not to take action, Dyke said. At the time Lay approached Evans, Moody's Investors Service was considering downgrading the credit rating on billions of dollars in Enron debt, an action that was certain to drive Enron's stock down further and cut deeply into its trading business, financial analysts had warned. On Nov. 28, Moody's and other rating services did downgrade Enron's bond to junk status, forcing it into bankruptcy. Enron's attorney, Robert Bennett, said Lay believed he had an obligation to alert the administration to Enron's increasingly precarious condition and the possibility that the nation's largest energy trader could fall into bankruptcy. "He asked them for nothing," Bennett said. Federal and congressional investigators are probing whether senior Enron executives exaggerated its profits and concealed rapidly-mounting debts through a labyrinth of hundreds of investment partnerships and offshore corporations, thus making the company appear stronger than it really was. Andersen's disclosure of destroyed records, which led the firm to hire former senator John Danforth to examine Andersen's records management, infuriated lawmakers. Sen. Carl Levin (D-Mich.), who heads a Senate Governmental Affairs subcommittee investigation of Enron, said the destroyed records would be a new priority. "This a deeply troubling development," House Commerce Chairman Billy Tauzin (R-La.) said of the lost documents. "Anyone who destroyed records simply out of stupidity should be fired. Anybody who destroyed records to try and subvert our investigation should be prosecuted." Investigators for the House Energy and Commerce committee first requested the records on Dec. 13. But Enron's lawyer, Bennett, said Enron was unaware that Andersen was destroying records. "The first they heard of it was today," Bennett said, after checking with a senior Enron executive. Andersen promised "all appropriate remedial and disciplinary action. Rep. Henry Waxman (D-Calif), who has been pressing for more information on White House ties to the energy industry, said Bush should have intervened – not to help Enron but to help its workers. "I am deeply troubled that the White House stood by and let this happen to thousands of families," he said. Waxman sent a letter to Ashcroft yesterday asking the attorney general to recuse himself before Ashcroft did just that. The White House sought to preempt congressional inquiries. Fleischer warned Democrats against investigations into the Bush administration's dealings with Enron. "The American people are tired of partisan witch hunts and endless investigations," he said. Fleischer said there was no need for a special prosecutor to investigate. "The president has full faith and confidence in the professional prosecutors of the Department of Justice," he said. But Republican officials on Capitol Hill said privately that they had little desire to defend the administration and suggested the White House should make fuller disclosures of contacts with energy officials. "I don't know why they're sitting on it," said a GOP official on the House Government Reform committee. "By not getting it all out, it makes it look like they're covering something up." © 2002 The Washington Post Company
By Mike Allen Washington Post Staff Writer Friday, January 11, 2002; Page A01 It's too soon to say whether Enron Corp.'s spectacular collapse will become a bona fide Washington scandal, but the classic elements suddenly burst into view yesterday -- disclosures of destroyed documents, phone calls to the White House from a big political contributor, an attorney general's recusal and damage control efforts by the president. Aides to President Bush, whose approval ratings have soared in the war on terrorism, are bracing for months of inquiries into his relationship with Enron Corp., now under bankruptcy court protection. Democrats, aching to recapture the House in this year's elections, dismiss the White House's sudden counterpunches as a tardy response to the administration's greatest controversy thus far. The Enron case has two main elements, financial and political. Each has the potential to bloom into a full-scale scandal or to fizzle out in a string of unproven allegations. On the financial front, Enron and its accountants will have to explain what happened to $30 billion in shareholder value, and why top executives were able to sell their company stock while employees watched helplessly as their retirement funds vanished. The Justice Department's probe into possible criminal violations may delay the other investigatory fronts -- congressional hearings and civil lawsuits filed by Enron workers and investors. As happened in the Iran-contra case and other scandals, some witnesses may demand immunity from prosecution before testifying before Congress. Politically, Bush administration officials will have to explain how much influence Enron executives had on administration policies after contributing more than $500,000 to Bush's various campaigns. Bush, like Vice President Cheney, once headed an energy production company, and the president has personal and political ties to Enron. Enron has made donations to many Democrats, but the Center for Responsive Politics estimates that Republicans received 73 percent of the contributions from company executives over the past 12 years. Bush reimbursed Enron for the use of its corporate jet during his presidential campaign, and was feted by company officials at Enron Field, home of the Houston Astros, seven months before the election. The Houston Chronicle has reported that Bush conferred a series of nicknames on Enron chief executive Kenneth L. Lay, including "Kenny Boy." Now, the White House faces questions about the six meetings Cheney or his staff held with Enron representatives last year, and the phone calls Lay made to Cabinet members as the company collapsed. White House officials said they are not worried about long-term damage from the controversy, in part because they did nothing to rescue the Houston-based energy trading company as it spiraled toward the largest bankruptcy filing in U.S. history. They said reporters and Democrats are hyperventilating, exercising scandal muscles that began to atrophy after Bill Clinton left office. Dan Bartlett, the White House communications director, said the administration "is leading the investigation, not being resistant." "We believe that by leading the investigation, we will get to the facts quickly and responsibly and will not distract from the priorities of our nation," Bartlett said. History suggests, however, that the Enron saga could dog Bush even if his administration has done nothing illegal or unethical. Senior administration officials said this week's flurry of activity wasn't part of a grand strategy. But after six months of resisting congressional inquiries, the administration clearly was trying to be more aggressive. "Drip, drip, drip," said John D. Podesta, chief of staff to President Bill Clinton. "Everyone has to learn from their own mistakes." As midterm elections approach, the investigations might keep a long, intense focus on a topic that Democrats see as a key GOP weakness: the perception by many voters that the Bush administration gives special access and help to wealthy people and big corporations. The probes, likely to include televised congressional hearings, will provide a backdrop for the debates over cuts in federal programs that could follow the disappearance of the budget surplus -- which Democrats blame at least partly on the huge tax cut that Bush championed. "When you have George Bush, Enron, bankruptcy, Texas and campaign contributions all mixed together, it's a huge political problem for this administration," said Democratic Party spokeswoman Jennifer Palmieri. "Attorney General [John D.] Ashcroft's decision [to recuse himself] shows just how spooked they are." Lanny J. Davis, who counseled the Clinton White House on scandal management, warned Democrats against overreaching. "I don't think there's any shred of evidence that the White House has any connection to what went wrong with Enron," Davis said. "Democrats should not go down the road of focusing on innuendo." Yesterday marked the White House's first overt effort to dampen the controversy. Officials portrayed the Enron fiasco as a financial tragedy in which they had no involvement. Instead of focusing on Enron, Karen Hughes, Bush's counselor, held two meetings with him on his Jan. 29 State of the Union speech. A senior administration official said the White House is not conducting an internal inquiry to determine all of the Enron contacts with the administration. "There's no indication that there needs to be one," the official said. For all the professions of nonchalance from the West Wing, Clinton administration officials pointed out, from bitter experience, the debilitating effects that a series of congressional inquiries can have on an administration's morale and agenda. "Every staff meeting starts with who's going to testify today, and how you're going to spin what's coming out of this or that committee," the official said. "God bless the Bush people, because no one's ever been through a hell like September 11th. But they've never faced anything like this, either." White House officials dismissed that as wishful thinking on the part of Democrats. One administration official called it "scandal envy" and said, "They've taken it on the chin for eight years, and now they think they've found their Whitewater." White House officials said there is no comparison because there is no indication that Bush took any action on Enron's behalf. "We're happy to air this because there's nothing to hide," a senior administration official said. Other Republican officials said Democratic inquiries will be hampered by the lack of any illegal or surprising actions by the White House. Rich Galen, a Republican strategist who writes a political newsletter on the Web called Mullings, compared Enron's input into Bush's energy policy with "a Democratic White House consulting the AFL-CIO for a revision of labor policy." © 2002 The Washington Post Company
Counsel: Energy Policy Was Topic By Mike Allen Washington Post Staff Writer Wednesday, January 9, 2002; Page A03 The White House told Congress in a letter released yesterday that Vice President Cheney or his aides met six times with Enron Corp. representatives last year, including a session two months before the energy trading company made the largest corporate bankruptcy filing in American history. The meetings continued after President Bush released the energy policy that Cheney's staff had developed, according to the letter. Five of the meetings were with Cheney aides, and one was with the vice president. One of the staff meetings occurred six days before Enron announced actions that reduced its shareholder equity by $1.2 billion. Cheney met for half an hour on April 17 with Kenneth L. Lay, Enron's chairman, according to a Jan. 3 letter by David S. Addington, the vice president's counsel. The letter was written in response to a Dec. 4 request by Rep. Henry A. Waxman (D-Calif.), ranking minority member of the House Committee on Government Reform, who released the correspondence. Addington wrote that Cheney and Lay "discussed energy policy matters, including the energy crisis in California, and did not discuss information concerning the financial position of the Enron Corporation." Cheney's office has resisted inquiries into the operations of his energy policy task force by the General Accounting Office, the investigative arm of Congress, and by Senate Democrats who are hoping to measure Enron's influence on policy. The Houston-based company has longtime personal and financial ties to Bush. Waxman said the letter "shows that the access provided to Enron far exceeded the access provided by the White House to other parties interested in energy policy." Bush released his energy plan on May 17, and Enron filed for bankruptcy protection on Dec. 2. Addington's letter said Cheney's National Energy Policy Development Group existed from Jan. 29 through Sept. 30, 2001. Addington said the group's staff met with Enron representatives on Feb. 22 and March 7. On April 9, the staff met with about two dozen representatives of various utilities, including one from Enron. Cheney aides met with officials of a German subsidiary of Enron on Aug. 7 and with Enron representatives on Oct. 10. Enron announced huge losses on Oct. 16. "Enron did not communicate information about its financial position in any of the meetings with the Vice President or with the National Energy Policy Development Group's support staff," Addington wrote. He noted that Cheney and Lay served on a panel at the American Enterprise Institute World Forum on June 24. "The panel was widely attended and addressed energy matters," the counsel wrote. "There was no discussion of information concerning the financial position of Enron Corporation." A White House official said the meetings reflected the "open and inclusive" approach of Cheney's energy task force. Bush told reporters on Dec. 28 that he is "deeply concerned about the citizens of Houston who worked for Enron who lost life savings" when its stock value collapsed. He said he supports moves by Congress and the Securities and Exchange Commission to look into that issue. "I have had no contact with Enron officials in the last six weeks," Bush said. © 2002 The Washington Post Company
By Dan Eggen Washington Post Staff Writer Friday, January 11, 2002; Page A7 One week before John D. Ashcroft suffered the biggest defeat of his political career, a $25,000 donation arrived at the Ashcroft Victory Committee, one of the Missouri senator's fundraising committees for the 2000 race. The donor was Kenneth L. Lay, head of a rapidly growing Houston energy company called Enron Corp., whose executives contributed more than $50,000 to Ashcroft's Senate campaign in 1999 and 2000. The contributions prompted Ashcroft to recuse himself yesterday from a criminal investigation into Enron's collapse by the Justice Department, which he heads as attorney general. Ashcroft's decision was based on "the totality of the circumstances of the relationship between Enron and the attorney general," and Ashcroft "has not been involved in any aspect of initiating or conducting any investigation involving Enron," the Justice Department said in a statement. Chief of Staff David Ayres, who ran Ashcroft's failed reelection bid, also will divorce himself from the Enron probe, officials said. In Houston, U.S. Attorney Michael Shelby said his entire office has removed itself from any matter involving Enron because he and other prosecutors have relatives affected by the company's collapse. The Justice Department had named Houston on Wednesday as one of three U.S. attorney's offices that would participate in the investigation. Ashcroft and his aides have determined that no other top Justice officials in Washington, including several who have played prominent roles in Republican politics, had direct involvement with Enron, officials said. Deputy Chief of Staff David Israelite and new Communications Director Barbara Comstock came to Justice after working at the Republican National Committee, which received more than $700,000 from Enron and its executives in 1999 and 2000, records show. "It was determined that all the people [from] RNC, including David and Barbara, had no involvement with Enron," an official said. The Ashcroft campaign received $57,499 in 1999 and 2000 from Enron and its executives, according to records compiled by the Center for Responsive Politics, a campaign finance watchdog group. Rep. Henry A. Waxman (D-Calif.), in a letter to Ashcroft yesterday, complained that Lay's $25,000 gift "was many times greater than the maximum allowable contribution by individuals to federal candidates" and said the gift may have "thwarted the intent of election laws." The Ashcroft Victory Committee, like many similar committees formed by parties and candidates in the last election, was structured to avoid rules that limit individual contributions to $2,000 and bar corporate donations. The Enron probe will be overseen by Deputy Attorney General Larry Thompson and the Justice Department's criminal division chief, Michael Chertoff, officials said. © 2002 The Washington Post Company
U.S. Said to Focus On Whether Firm Deceived Investors By Peter Behr and Dan Eggen Washington Post Staff Writers Thursday, January 10, 2002; Page A01 Justice Department officials confirmed yesterday that they have begun a criminal investigation of Enron Corp. Sources said the probe is focusing on whether the company defrauded investors by deliberately concealing crucial information about its finances. Officials said the investigation will be run by a task force based in the criminal division at Justice Department headquarters in Washington and will include federal prosecutors from New York, San Francisco and Enron's home city of Houston. The Justice action marks a new escalation in a many-sided investigation of Enron, which filed the largest corporate bankruptcy in U.S. history on Dec. 2. Four congressional committees, the Securities and Exchange Commission, and the Labor Department have begun separate investigations. Justice Department prosecutors first began a tentative inquiry into the Enron case several weeks ago. Additionally, a host of civil suits have been filed against current and former Enron executives and directors and its accounting firm, Arthur Andersen LLP, by attorneys for Enron employees, investors and retirees who lost billions of dollars when Enron's stock price collapsed late last year. "I think this is a positive development," said Enron's Washington attorney, Robert Bennett. "It appears they have centralized the investigation" at Justice headquarters, he said. "I hope people will suspend judgment" until the investigations have been completed, Bennett added. Arthur Andersen chief executive Joseph F. Berardino testified before Congress last month that the energy-trading company may have committed "illegal acts" by withholding critical financial information from auditors. The information, he said, concerned one of the many outside partnerships established by Enron with which Enron swapped stock, energy assets and financial contracts. Enron replied that its own internal investigation had uncovered the withholding and that it gave the information to Andersen. Congressional investigations are looking into whether Enron used the partnerships to exaggerate its revenue and conceal the full dimensions of billions of dollars in debts from failed investments in overseas power and water projects. Enron acknowledged in October, after an internal investigation, that it had overstated profits by $586 million over the past four years because of what it called accounting errors. Plaintiffs in civil suits contend that senior Enron executives and directors took advantage of the company's high stock price a year ago to sell hundreds of millions of dollars in stock before share prices began to slide. Enron contributed company shares to employees in a retirement program but barred them from selling the shares until age 50, and many employees' savings were ravaged. Enron's chairman and chief executive, Kenneth L. Lay, is scheduled to testify for the first time about his company's collapse at a Feb. 4 hearing before the Senate Commerce Committee. Lay and other Enron officials met six times with Vice President Cheney or his aides last year, before and after the release of the administration's energy plan, the White House said this week. Lay and his company have been leading financial supporters of President Bush as well as a long list of other Republican and Democratic officeholders. Bennett said the federal criminal probe "is not going to change whether Ken Lay or several other people testify" on Feb. 4. "We are still going to cooperate." Meanwhile, U.S. District Judge Lee Rosenthal in Houston said she may consider freezing financial assets of 29 current and former Enron officers and directors but added that lawyers for pension plans that lost money on Enron stock have not yet persuaded her to do so. The suits seek to recover trading profits of Enron insiders. White House press secretary Ari Fleischer said last night that as a result of Enron's collapse, Bush is likely to propose new federal policies aimed at protecting people's pensions and ensuring that financial reports are more revealing. "The president thinks it's important to explore new policies so that lessons from this collapse can be learned and people can be protected," Fleischer said. "The president believes that all allegations of wrongdoing need to be thoroughly and fully investigated by all the relevant agencies of the government." Staff writer Mike Allen contributed to this report. © 2002 The Washington Post Company David Callaway is executive editor of CBS.MarketWatch.com Unlike the financial sideshow over a 20-year-old failed land deal that dogged the Clinton administration, the collapse of the nation's largest energy trader into the nation's largest bankruptcy last month is set to go straight to the heart of exposing what is wrong with the way the Bush administration is conducting itself these days. Once a buyer for Enron's (ENE: news, chart, profile) energy-trading business is announced Thursday in New York, this story is going to shift in dramatic fashion to Washington, D.C., where there are already eight separate congressional probes into the collapse, one Justice Department investigation and scores of unanswered questions. Many of them concern the White House. No smoking gun Don't expect to see either Bush or Vice President Cheney directly linked to the financial shenanigans that brought Enron down. They won't be. This is not about finding a smoking gun, as much as some Democrats might wish it were. What it is about, and what the public will get to hear and read about in wrenching detail over the coming months, is how business gets done down in Texas. How a small group of business leaders exert enormous clout over Bush and his team in getting the rules changed to their benefit. It will explain why Bush has locked up presidential records, locked out any voices opposed to his pro-business agenda and rammed through an expensive economic plan that wiped out the budget surplus but to date hasn't had any positive effect on the economy. It will explain what influence Enron Chief Executive Ken Lay and his advisers had with Cheney and his energy task force when they met six times last year while the vice president was putting together the administration's energy policy. And it will explain why Bush is now thinking about acting on a proposal from that very task force that seeks to roll back a key provision of the Clean Air Act that helps keep factory pollution down by requiring new controls when old plants are upgraded. A history of seeking favor Business leaders have always sought favors from politicians. That's nothing new. But in the case of Enron and Lay, a night in the Lincoln Bedroom was never going to be enough. Enron cultivated Bush from the time he first decided to run for governor of Texas, with executives donating a total of $623,000 to his two gubernatorial campaigns and presidential campaign, according to the Center for Public Integrity. The company played a major role in Bush's decision to deregulate the Texas energy markets in 1999. Enron executives played a major role in Cheney's energy task force last year, meeting with the vice president's staff right up until a week before the company's stunning October announcement that it was slashing shareholder equity by $1.2 billion to cover losses in its off-balance-sheet partnerships. And Lay, who donated $100,000 to the Bush inaugural, remains mired in a controversy about whether a curious phone conversation he had with Federal Energy Regulatory Commission head Curtis Hebert last May had anything to do with Hebert's replacement by Bush last summer with the head of the Texas Public Utility Commission. This is just the beginning of what is going to come out once investigators do a little more digging, and once Lay and his minions are required to testify before Congress. Expect a steady diet of revelations about the extent of the energy giant's influence -- at the state, federal and even international levels. Enron won't bring down Bush. He remains enormously popular for his handling of the war and the rebuilding of the country's psyche after the Sept. 11 terrorist attacks. But it will be a major thorn in his side through the rest of this presidential term, and it might even play a role in the next election, depending on what comes out. Enron, the company, will soon be gone. But Enron, the symbol of how big business and big politics sometimes conspire to fix the game, is just starting to dawn on the national consciousness. It's an ugly story. One that explains a lot about what's going on in our nation's capital right now. And it's only just beginning. David Callaway is executive editor of CBS.MarketWatch.com.
By MARCY GORDON AP Business Writer WASHINGTON (AP) - Lawmakers charge executives of Enron Corp. enriched themselves through inside trading and slick financial gimmicks while running the energy-trading company into the ground. Accounting firm Arthur Andersen LLP, Enron's longtime auditor, defended its work for the company Wednesday before a House panel, but acknowledged that financial reporting practices must change. Andersen's chief executive said the firm notified Enron's audit committee on Nov. 2 of "possible illegal acts within the company." As Congress opened its investigation of one of the biggest corporate failures in history, no Enron officials attended the hearing of the House Financial Services subcommittees on capital markets and oversight. Chairman and CEO Kenneth Lay declined an invitation to appear, saying he had to be at a bankruptcy proceeding Wednesday. Lay said in a statement that "it has always been Enron's policy to be open with its accountant." The Securities and Exchange Commission, which is investigating Enron and Andersen's auditing of its books, filed an action in federal court Wednesday seeking to compel Enron's former chief financial officer, Andrew Fastow, to comply with a subpoena. Fastow was the lead architect of complex partnerships that allowed Enron to keep some $500 million in debt off its books and let executives profit from the arrangements. Fastow did not show up for a scheduled meeting with SEC attorneys on Wednesday, but did appear at a news conference in New York beside his lawyer, David Boies. Boies said Fastow would meet with the SEC once the two sides can set a date. Enron's swift descent into federal bankruptcy court left countless investors burned and thousands of employees out of work and with decimated retirement savings. "Many people have been deeply hurt," said the chairman of the capital markets panel, Rep. Richard Baker, R-La. Enron executives were "just having too much fun," he said. They cashed out more than $1 billion in company stock while ordinary employees were barred from selling it from their Enron-heavy 401(k) accounts as share prices plunged, Baker said. Worth more than $80 a year ago, Enron's stock has tumbled to less than a dollar a share. Amid the company's strife, nearly 600 employees deemed critical to its operations received more than $100 million in bonuses last month as Enron faced a merger that unraveled and then bankruptcy. Houston-based Enron, which only months ago was the nation's seventh-biggest company in revenue, has acknowledged it overstated profits for four years. The SEC itself faced questioning by some lawmakers of its handling of the Enron case. They asked Robert Herdman, the SEC's chief accountant, why the agency did not become concerned early this year when Enron executives dumped millions of dollars of stock. The SEC's first action came on Oct. 17 - a letter to Enron requesting more information after it reported big third-quarter losses, Herdman noted. He said recent accounting irregularities by big corporations "may shake investors' confidence in our system of financial reporting and our capital markets." Herdman said the SEC plans next year to adopt rules tightening disclosure requirements for companies. Joseph Berardino, Andersen's chief executive, said the accounting firm "will have to change ... the accounting profession will have to reform itself. Our system of regulation and discipline will have to be improved." Enron also is under investigation by the Justice Department. The Labor Department is looking into Enron's handling of its employees' retirement benefit plans. To solicit information about alleged misconduct at Enron, the senior Democrat on the House Government Reform Committee has set up an Internet tip line at http://www.house.gov/waxman/index.htm