Enron Chief Lay Warned of Troubles
By PETE YOST
Associated Press Writer
WASHINGTON (AP) - An Enron employee warned company Chairman Kenneth Lay
last August that ``we will implode in a wave of accounting scandals'' unless the company
halted practices that eventually sent it into bankruptcy.
Two Republican congressmen, including the chairman of the House Energy and
Commerce Committee, on Monday demanded all records relating to a review
of the employee's allegations five months ago.
The unidentified Enron employee relayed her concerns in a letter to Lay and met with him
for an hour to supply documentation, said Reps. Billy Tauzin of Louisiana, the committee chairman,
and James Greenwood of Pennsylvania.
Around the time of the employee's warnings, Lay was telling Enron employees that
growth of the energy company ``has never been more certain.''
``I am incredibly nervous that we will implode in a wave of accounting scandals,''
the employee warned Lay in the letter last
August. A ``veil of secrecy'' surrounded Enron's partnerships, which
were keeping huge amounts of Enron debt off the company's
books, she said. The congressmen released excerpts from the letter.
``It sure looks to the layman on the street that we are hiding losses in a
related company,'' the employee wrote.
She said several senior Enron employees ``consistently and constantly'' questioned
the corporation's accounting methods to senior Enron officials, including CEO Jeffrey Skilling.
Skilling resigned in August.
Tauzin and Greenwood said senior Enron officials instructed the law firm of Vinson
& Elkins to review the employee's allegations, but instructed the outside attorneys
not to second-guess accounting advice and not to analyze the questioned transactions in
detail.
The Vinson & Elkins review concluded that the concerns expressed by the Enron employee
did not warrant further widespread investigation by independent counsel and auditors,
Tauzin and Greenwood said. The review said the employee's information raised
no facts that had not been known or disclosed by company officials and auditors.
But the Vinson & Elkins review noted that ``there is a serious risk of adverse publicity and litigation''
from the partnership transactions, according to the congressmen.
In its limited review, Vinson & Elkins interviewed Andrew Fastow, Enron's chief financial officer
who was the lead architect of complex partnerships that allowed Enron to keep debt off its books.
Vinson & Elkins also interviewed David Duncan, the
partner-in-charge of the Enron account at Anderson, the outside auditor of Enron's books.
On Oct. 16, Enron announced hundreds of millions of dollars in third-quarter losses
and a writedown of more than a billion dollars
relating to the partnerships. The company filed for bankruptcy Dec. 2.
In another development, Enron's outside accounting firm, Arthur Andersen LLP, said an in-house
lawyer spelled out Andersen's document destruction policy for auditors on Oct. 12,
four days before Enron announced the huge losses. The Andersen lawyer,
Nancy Temple, e-mailed the policy to a partner in the firm's office in Houston where Enron is based.
Andersen is under scrutiny for destroying thousands of documents related to Enron last fall.
``She (Temple) never told the audit team that they should destroy documents for past audit
work that was already completed,'' Andersen said in a statement.
The firm's policy prohibits document destruction under some circumstances and authorizes it under other circumstances.
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