This ought to throw a little gas on it also.
Enron Told O'Neill of Troubles; Auditor Admits Document Destruction
10 Jan 09:47
WASHINGTON -- The Bush administration has confirmed that Kenneth L. Lay,
chairman and chief executive of Enron Corp., contacted two top officials last
autumn and warned that the Houston-based energy trader was headed toward
bankruptcy, White House spokesman Ari Fleischer said.
He noted the government rebuffed Mr. Lay's appeal for help with Enron's
financial situation. Mr. Fleischer previously told reporters Wednesday he
wasn't aware of anyone in the White House who discussed Enron's finances.
Separately, Enron (ENE) auditor Arthur Andersen LLP said in a statement
Thursday that individuals at the firm "disposed of a significant but
undetermined amount" of documents relating to its work for Enron. The
documents, which include paper documents and e-mail correspondence, had been
sought by federal law-enforcement officials.
Chicago-based Arthur Andersen said it has notified the Justice Department,
which has launched a criminal investigation into Enron, as well as the
Securities and Exchange Commission. Enron was one of Andersen's largest
clients, generating $25 million a year in audit fees and $27 million of fees
for consulting.
Arthur Andersen has asked former Sen. John Danforth (R., Mo.) to conduct "an
immediate and comprehensive review" of the company's policies on document
handling and recommend improvements.
The company said the destruction of the Enron documents occurred "in recent
months" by individual employees involved in auditing Enron.
Michael Donovan, a Philadelphia attorney whose firm has filed a class-action
lawsuit against Arthur Andersen on behalf of Enron shareholders, said document
destruction by an audit firm is shocking.
"Auditors save everything," including all work papers for audit clients, he
added.
Meanwhile, Attorney General John Ashcroft and his chief of staff, David
Ayres, recused themselves from the Justice Department's investigation of Enron,
citing "the totality of the circumstances of the relationship between Enron and
the Attorney General."
The department's statement Thursday didn't elaborate further, but the Center
for Responsive Politics, a group that tracks campaign-finance filings, said
Enron and Mr. Lay made more than $50,000 in campaign contributions toward Mr.
Ashcroft's bid for re-election to the Senate in 2000.
Deputy Attorney General Larry Thompson will oversee the investigation in Mr.
Ashcroft's absence, the Justice Department said.
Mr. Ashcroft's recusal is another indication of the company's ties with the
Bush administration. Enron also contributed to President Bush's election
campaign, and the White House has acknowledged that Vice President Cheney or
his aides met six times with Enron representatives on energy issues last year,
with the final meeting held six days before the company's financial condition
was revealed.
Earlier Thursday, President Bush said he wants to see a thorough
investigation into the sudden collapse of Enron, and has ordered a review of
the U.S. laws governing pensions. The president's comments came during a
hastily arranged event in the Oval Office as the political heat mounted over
Enron's collapse.
The Justice Department Wednesday said it is forming a special task force to
combine the efforts of prosecutors nationwide who are investigating Enron. The
nation's largest energy trader filed for protection from creditors under
federal bankruptcy law after its market value plunged upon disclosures that it
apparently misrepresented its financial condition.
In trying to plead his case to the administration, Mr. Lay compared Enron to
Long-Term Capital Management, a hedge fund that nearly failed in 1998 and
sparked fears that its troubles could cause a shock to the financial system.
Mr. Fleischer said, "What was told to me this morning was
Secretary Paul O'Neill said that he had been contacted by Mr. Lay in the fall
of last year, and Mr. Lay brought to the secretary's attention his concerns
about whether or not Enron would be able to meet its obligations. And he
expressed his concern about the experience that Long-Term Capital went through
when Long-Term Capital went bankrupt.
"Secretary O'Neill then contacted Undersecretary [Peter] Fisher to
ask him to evaluate whether the comparison was apt, and the Department of
Treasury was advised that it was not apt as a result of Secretary Fisher's
review," Mr. Fleischer said.
Enron and Mr. Lay have been leading contributors to Mr. Bush, as well as to a
long list of Democratic and Republican candidates. The president Thursday
called Mr. Lay "a supporter."
Democrats on Capitol Hill have begun hearings to see to if there was any
impropriety in Enron's ties to the White House.
Further complicating the situation is that fact that many Enron employees
held company stock in their 401(k) plans. Enron prevented the employees from
selling their shares while the company collapsed, wiping out their savings in
some cases, a situation Mr. Bush said he found "deeply troubling."
As a result, the president on Thursday said he has requested that the Labor,
Commerce and Treasury Departments "convene a working group to analyze pension
rules and regulations to look into the effects of the current law on
hardworking Americans." Specifically, Mr. Bush said, the group will study ways
to prevent workers from losing their life savings if their companies go belly
up.
Also in light of Enron's bankruptcy, Mr. Bush said he was asking the Treasury
Department, the Federal Reserve, the Securities and Exchange Commission and the
Commodities Futures and Trading Commission to convene a working group look at
corporate disclosure rules and regulations.
"There needs to be a full review" of the events at Enron, Mr. Bush said.
The president said the two working groups would complement the Justice
Department's criminal investigation into Enron's dealings. Thedepartment is
forming a national task force headed by lawyers at the department's criminal
division that will include prosecutors in Houston, San Francisco, New York and
several other cities, a Justice Department official, speaking on condition of
anonymity, told the Associated Press.
As a follow-up, the Treasury's Mr. O'Neill will head a review of laws and
regulations to determine if they can be tightened to protect worker pension
plans. A senior official involved in discussions on the issue said the Justice
Department will determine whether Enron broke any laws and the Treasury
Department will study whether Enron's conduct, although potentially legal,
exposed loopholes in the system.
The Center for Public Integrity, a nonpartisan watchdog agency in Washington,
says Enron's executives contributed nearly $800,000 to Mr. Bush, members of
Congress and the two national political parties from 1999 to 2001.
Mr. Bush said Thursday that he hadn't met with Mr. Lay personally, but that
the Enron CEO did come to the White House early in Mr. Bush's term as part of a
delegation of businessmen who discussed the economy. The president said former
Texas Governor Ann Richards, a Democrat, named Mr. Lay the head of the state's
Governor's Business Council, and that as governor of Texas, he had allowed Mr.
Lay to stay on in that position.
-- This article was compiled from reports by the Associated Press and Dow
Jones Newswires.
Copyright (c) 2002 Dow Jones & Company, |
