I don't think that we have to worry about the DOJ. Andersen made itself an easy target and the indictment will just give them more incentive to provide assistance. When the hammer comes down on the Enron executives it will come down hard. In the meantime:
msnbc.com
<Enron got partnership warning in ’99
Top company official began sounding alarm, was rebuffed
By John R. Emshwiller
THE WALL STREET JOURNAL
March 18 — Nearly three years ago, a top Enron Corp. risk-management official began warning top executives of the improprieties of some of the company’s off-balance-sheet partnerships. By last September, the official, Vince Kaminski, was arguing that the partnership arrangements had gone from being merely “stupid” for Enron and its shareholders to being fraudulent.
DR. KAMINSKI SAID that in response to his criticisms, he and his research group were for a time cut off from certain financial information about the partnerships by top management, including then Enron President Jeffrey Skilling.
Dr. Kaminski’s statements give new evidence that outside partnerships run and partly owned by Enron executives were matters of concern and controversy within the company well before they became a focus of public and government scrutiny beginning last October. Write-offs stemming from the partnerships were a major factor in Enron’s collapse into bankruptcy proceedings in December.
Dr. Kaminski’s role at Enron was as head of a research group that did analysis for Enron’s vast and sophisticated risk-control and trading operations. His concerns about the outside partnerships are contained in a nine-page, single-spaced memorandum of an interview done with him by attorneys for a special committee of Enron’s board, which investigated the collapse of the Houston energy-trading company. Some of Dr. Kaminski’s concerns were mentioned in the 200-page report issued last month by the special committee.
But the full memorandum of his interview, which hasn’t previously been available, presents a more detailed and troubling picture. Dr. Kaminski said other Enron officials agreed with his concerns about the executive-run partnerships as early as 1999. He told of how his own mounting worries last fall caused him to refuse to let his research team do further work on partnership-related transactions. Dr. Kaminski said that when he tried to pass along his concerns last October to Enron’s outside auditor, Arthur Andersen LLP, he was told by a senior Enron official to stop such communications, according to the memorandum.
Dr. Kaminski also recounted telling Enron Chairman Kenneth Lay and other top managers at a meeting last Oct. 22 that the partnership arrangements were “terminally stupid” and “improper.” He was so adamant and persistent at the meeting that another senior executive told him “Enough, Vince,” according to the Kaminski memorandum.
A spokeswoman for Mr. Lay didn’t have any comment.
Dr. Kaminski resigned as an Enron managing director earlier this year. His attorney, Nathan Hochman, said the interview memorandum accurately reflects his client’s concerns and efforts to raise them within Enron. Mr. Hochman said Dr. Kaminski has been contacted for information by federal civil and criminal investigators and is cooperating with them.
In the interview memorandum, Dr. Kaminski said he first raised questions about a partnership-related deal in 1999 when Mr. Skilling and others asked his group to do some financial analysis of the deal. Mr. Skilling told Dr. Kaminski that it was an urgent task and took the extremely unusual step of personally visiting Dr. Kaminski’s office to discuss the matter, according to the memo. Dr. Kaminski and his researchers concluded that the transaction was a bad deal for Enron, but the transaction went forward anyway.
Subsequently, Dr. Kaminski and his research team were reassigned and for a time not asked to do financial analysis on further partnership-related deals, said his attorney, Mr. Hochman, in an interview Sunday. When Dr. Kaminski asked Mr. Skilling the reasons for the reassignment, the Enron president said there had been complaints that the research group was acting more like “cops” than people trying to help transactions get completed, said Mr. Hochman.
Neither Mr. Skilling nor his attorney could be reached for comment.
The special board committee prepared dozens of interview memoranda in the course of its investigation. Many, such as Dr. Kaminski’s, haven’t previously been available. Over the weekend The Wall Street Journal reviewed those memos. One recounted an Enron in-house lawyer telling of the existence of a group of individual investors, known as the “friends of Enron,” who had been available to quickly invest in outside projects, such as power plants, when the company needed funds to complete transactions. The size of this group and identity of its members wasn’t disclosed, though it appeared to include some prominent Houstonians. A question that hangs over the Enron scandal is whether outsiders, including possibly public officials, were given investment opportunities in company-related entities, some of which produced extremely large returns.
An Enron spokesman said he didn’t have any information on such a group and therefore couldn’t comment.
Though many of Dr. Kaminski’s interview statements couldn’t be immediately corroborated, some Enron officials give him high praise. One such person describes Dr. Kaminski as “brilliant”, “honorable” and “honest.” Dr. Kaminski, who has a doctorate in economics, joined Enron in 1992.
In his interview, Dr. Kaminski said he initially viewed the partnerships as simply bad deals for Enron and its shareholders. But as time went on and the use of the partnerships expanded, he acquired a darker view of them. By last fall, he said he came to believe that some of the partnership-related transactions constituted an illegal scheme to hide losses and improve Enron’s reported earnings. The interview memo quotes him as saying that in some cases Enron management was attempting to get his research group to sign off on deals that had been done. Dr. Kaminski said he told management he wouldn’t take part in such sign-offs — even if it meant being fired.
Dr. Kaminski’s concerns apparently came to a head at the management meeting on Oct. 22, when the problems were beginning to surface publicly. He said Mr. Lay had little response to his complaints at the meeting. In early November, Enron restated its financial results for the previous four years as a result of problems at some of the executive-run partnerships. This contributed to a drop in investor confidence that pushed the company into bankruptcy proceedings. |
