Speaking of "good accounting"...
reuters.com
Bush Reviews Pension, Disclosure Rules After Enron
January 10, 2002 12:07 PM ET
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By Arshad Mohammed
WASHINGTON (Reuters) - President Bush on Thursday ordered reviews of pension and corporate disclosure rules after Enron Corp.'s collapse, a step that appeared aimed at distancing his administration from the energy trading firm.
The Justice Department on Wednesday announced it had opened a criminal investigation into Enron, whose bankruptcy late last year threw thousands out of work, devastated some investors and wiped out the pension plans of some employees.
Bush, who worked in the oil industry and has known Enron's chairman since he was governor of Texas, told reporters he was deeply concerned about the company's collapse and the questions it raised about U.S. pension and corporate disclosure rules.
Enron's problems could prove to be a political liability for Bush, with Democrats in Congress raising questions about the company's ties to the White House and any influence it may have exerted over U.S. energy policy.
Houston, Texas-based Enron, once ranked No. 7 on the Fortune 500 list of large corporations, is also being probed by five congressional committees, the market-regulating Securities and Exchange Commission and the Labor Department.
Speaking to reporters after meeting with economic advisers on the issue, Bush placed the emphasis on workers and investors who suffered as a result Enron's troubles and ordered the two reviews to recommend how to better protect them in the future.
He said the first review, by the Treasury, Commerce and Labor departments, would analyze pension and 401(k) rules and recommend ways to reform them so that "people are not exposed to losing their life savings as a result of a bankruptcy.
The review of disclosure rules would be conducted by the Presidential Working Group on Financial Markets, which includes the Treasury Department, Securities and Exchange Commission, Federal Reserve and Commodity Futures Trading Commission.
DOWNWARD SPIRAL
Once the world's largest energy trader, Enron slid in mere weeks last year from Wall Street stardom to the largest bankruptcy filing in U.S. history on Dec. 2. Its downfall, after withdrawal of a rescue takeover bid by rival Dynegy Inc. threw thousands out of work and hammered investors.
The episode sapped the life savings of many Enron employees who held large amounts of company stock in their 401(k) retirement plans, while top executives allegedly pocketed fat profits by selling ahead of a dizzying plunge in Enron's share price.
"I have great concerns for ... (those) who put their life savings aside and, for whatever reason, based upon some rule or regulation, got trapped in this awful bankruptcy and have lost life savings," Bush told reporters at the White House, saying the groups would take a "good hard look" at the matter.
The president also appeared to try to put some distance between himself and the company, saying he had never discussed its problems with its chairman, Kenneth Lay, who served on a Texas state business council when Bush was governor.
Bush said Lay was appointed to the Texas Governor's Business Council by his predecessor, Democrat Ann Richards, and said he had simply kept the man on in that position.
"I have never discussed with Mr. Lay the financial problems of the company," Bush told reporters, adding that the last time he had seen Lay was last spring at a literacy fund-raising event organized by his mother, former first lady Barbara Bush.
At the heart of Enron's problems were complex financial partnerships -- known as special-purpose entities -- set up by Enron executives and used to keep debt off the company's highly leveraged books. After some deals involving the partnerships went sour, Enron in October had to take a $1 billion charge against earnings and cut shareholder equity by $1.2 billion.
Those moves drew market attention to the partnerships, triggering a crisis in investor confidence and credit-rating downgrades that ultimately led to bankruptcy court. |
