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2002-02-05

Top Enron Executives Charge That Enron Corporation’s Collapse Was the Result of a "A Systemic and Pervasive Attempt" to Inflate Profits and Hide Losses

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In testimony before a Congressional panel yesterday, a member of Enron’s board of directors said that the companiescollapse was the result of a "a systemic and pervasive attempt" to inflate profits and hide losses, not of a fewrogue employees breaking company rules. The testimony from William C. Powers Jr., who is dean of the University ofTexas Law School and an author of a scathing report about the energy trading company released over the weekend, willmake it even more difficult for Enron’s former leaders to deflect blame for the company’s stunning collapse tolower-level employees or its auditor, Arthur Andersen. Powers testified before a House Financial Servicessubcommittee after Lay refused to appear before a Senate panel yesterday. Lay then resigned from Enron’s board,closing out his involvement in a company he helped to form in 1986.

The Powers report concluded that Lay and former chief executive Jeffrey K. Skilling were largely responsible for a"fundamentally flawed" decision to let Andrew S. Fastow, the company’s chief financial officer at the time, set upand run Enron-funded partnerships that made him tens of millions of dollars and allowed Enron to hide huge losses anddebts.

Fastow received at least $30 million from running partnerships — a fact that was never reported to shareholders. Oneof his colleagues, Michael J. Kopper, got at least $10 million from an initial investment of $125,000. According toPowers, Others received up to $1 million or more for doing virtually nothing.

Meanwhile, in other testimony, Harvey L. Pitt, the chairman of the Securities and Exchange Commission, told the Housepanel he cannot guarantee that other "Enrons" — companies with massive accounting irregularities — won’t emerge.Within hours after Lay’s testimony was to have begun, leaders of the Senate Commerce Committee and its subcommitteeon consumer affairs said they intend to subpoena Lay to testify next Tuesday.

The chair of the commerce committee also said the Justice Department should appoint an outside special prosecutor tohandle the case because Enron was a major contributor to President George W Bush’s campaign and had ties to an arrayof administration officials He cited, among other things, Attorney General John D. Ashcroft’s decision to recusehimself because of Enron campaign contributions. The Justice Department released a statement saying it "sees noreason to appoint a special counsel to investigate the Enron matter" because "no conflict of interest exists."

In the House, Rep. Richard H. Baker (R-La.), chairman of the subcommittee that heard testimony yesterday, said thepanel also would seek authority to subpoena Lay.

We are going to turn now to investigative reporter Greg Palast, whose been looking at Enron for years. The Britishtabloid the Mirror calls him "The Liar" and British Prime Minister Tony Blair says his reports contain "Notone shred of evidence." Gregory Palast’s undercover investigations of corruption within the Blair Government forBritain’s Observer have made him "New Labour’s Public Enemy Number One". He is an internationally recognizedexpert on the control of corporate power working with labor unions and consumer groups in the USA, South America andEurope. Greg Palast was named the BBC’s Guerilla News Networks Reporter of the Year this year for his work on theWorld Bank and the IMF. I spoke to him yesterday about Enron.

Tape:

  • Greg Palast, investigative reporter who writes for the BBC, the British Guardian and the British_Observer_.

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