Text of Morning Session of Hearing on Enron
The New York Times
February 7, 2002
The following is the text of the morning
session of a hearing of the oversight
and investigations subcommittee of the
House Energy and Commerce Committee on
the findings of Enron's special investigative
committee as recorded by the Federal News
Service.
Witnesses:
o Andrew Fastow, former chief
financial officer of Enron
o Michael Kopper, former managing
director of Enron
o Richard Buy, chief risk officer, Enron
o Richard A. Causey, chief accounting officer, Enron.
o Jeffrey K. Skilling, former chief executive, Enron.
o Herbert S. Winokur Jr., chairman and chief executive of Capricorn Holdings.
o Robert K. Jaedicke, chairman of Enron's audit committee.
The committee is chaired by Rep. James Greenwood.
REP. GREENWOOD: (Sounds gavel.) Good morning. This hearing of the Oversight
and Investigations Subcommittee of the House Energy and Commerce Committee
will come to order. And the chair recognizes himself for purposes of an opening
statement.
We hearing this morning will be a painful one. We have met to continue our
investigation into the collapse of the Enron Corporation. And as our investigations
show, and as was borne out by Dean Powers's testimony two days ago, a number of
our witnesses today were members of the corporate leadership team at Enron who
must bear the greatest weight for its collapse.
Four of the witnesses here today will appear only brief. Messrs. Fastow, Kopper,
Causey and Buy will all seek the protection against the danger of
self-incrimination guaranteed by the Constitution to every citizen in the Bill of
Rights. The duty of this subcommittee is to investigate the facts of the matter
surrounding the collapse of Enron to determine what went so horribly wrong that
the nation's seventh largest corporation had to seek protection from its creditors by
filing for bankruptcy.
And once we have established those facts, we have an
obligation to determine how our financial laws and
regulations can be improved, so that in the future
publicly-traded companies faithfully and completely report
their financial actions and their true financial health. This
is the only way to ensure that our investor confidence is
restored, and that future investors will not suffer the fate
of the many thousands who watched with horror as the
work of a lifetime was swallowed up, and their life savings
disappeared.
The facts uncovered to date seem clear enough. Two days
ago we heard extensive and informative testimony from
William Powers, dean of the University of Texas School of
Law, and chairman of the special investigative committee
of Enron's board of directors, who joined the board this past October solely to
investigate the transactions between Enron and various partnerships.
Our own investigations into these transactions, along with Dean Powers's
illuminating report, carefully detail the complex workings of these related party
entities, as they were called. As the workings of these entities and associated
schemes, such as Chewco, LJM1, LJM2, the Raptor transactions and Jedi become
clearer, they also become more disturbing. In Dean Powers' words, "What we have
found is nothing short of appalling."
Mr. Fastow, aided by a number of those witnesses subpoenaed here today, shared
in huge fees totaling tens of millions of dollars to arrange and participate in bizarre
transactions that were at the least imprudent, and at worst contrary to the very
interests of the company, shareholders and investors they were duty bound to
serve, apparently plundering millions at the expense of the company and its
shareholders. In furthering these transactions, we have also learned they failed to
follow the most basic rules of accounting. They also failed to adhere to any of the
business tenets designed to avoid conflicts of interests.
In putting numerous deals together, Mr. Fastow and his subordinates managed
apparently to represent both sides to a transaction. The Powers report and the
dean's personal testimony on Tuesday could not have been any clearer or more
firm in conclusion that these transactions were not designed to improve Enron's
economic health. On the contrary, these deals magnified Enron's risks, hastening
the day of collapse.
Sadly, it is increasingly clear that this collapse was not brought about by the
isolated acts of rogue employees. A disaster of this magnitude requires the
complicity of far more than a few bad apples. From senior managers to corporate
directors to outside counsel and accountants, almost no one who had the power to
sound the alarm, correct the situation, or prevent this debacle, did so.
As I stated earlier, four of the individuals who are at the center of these schemes
will not testify today. Andrew Fastow, who was Enron's former chief financial
officer; Michael Kopper was the former managing director of Enron Global Finance.
While both of these individuals have provided some documents to committee
investigators, they refused to be interviewed or provide all of the documents in
their possession. They also have refused to come before us this morning
voluntarily. They have come here under subpoena.
Rick Causey was Enron's chief accounting officer and Rick Buy was Enron's chief
risk officer. We received word yesterday that neither of these individuals will testify
today. Fortunately, committee investigators have had the opportunity to interview
both Mr. Causey and Mr. Buy about these matters over the last month.
But reluctant witnesses will not keep us from getting at the truth. Again, the facts
are investigation and Dean Powers' report appear to confirm that Mr. Fastow
essentially masterminded the transformation of this company into the derivatives
trading giant it was. He devised the transactions that were ostensibly aimed at
moving volatile holdings off of Enron's books -- deals we understand now to have
been fraudulent.
Mr. Kopper served as his chief lieutenant. He became the general partner of
Chewco, whose mysterious dealings accounted for the single largest portion of
Enron's financial restatements last November. Mr. Kopper also served as general
manager of Mr. Fastow's two LJM partnerships.
Even without the testimony of Fastow, Kopper, Causey and Buy, we will still be
able to get some important answers today. To this end, other witnesses today will
include Enron officials who had dealings with Fastow and Kopper, and who
attempted to alert others in Enron's senior management about the danger these
deals represented to the company. We will also hear from Tom Bauer, the
Andersen audit partner who worked on the Chewco transactions, who is expected
to describe what Enron did and did not disclose about this highly troubling
transaction.
nytimes.com
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