"Washington -- A key congressional panel
began an investigation yesterday into Enron's
business practices, and other committees
intend to hold hearings on everything from the
company's heavy use of pension funds for
stock purchases to pitfalls in energy
deregulation.
Congress' inquiry adds another layer of
review to an investigation begun last month
by the Securities and Exchange Commission.
Enron, the Houston company that until this
month had been the world's largest energy
trader, saw its stock value drop from a high of
$90 in August 2000 to a close of 36 cents yesterday.
"Enron went from the No. 7 company on the
Fortune 400 to a penny stock in a stunning
three weeks because it apparently lied for
years in its financial statements," said Rep.
John Dingell of Michigan, the ranking
Democrat on the House Commerce Committee.
The company's collapse is expected to cause
a dramatic ripple effect. For example,
politicians lose a generous donor. The
company, which made $2.4 million in political
contributions last year, was one of President
Bush's top 10 contributors and gave money
to nearly half the members of Congress.
In addition, the energy business could see
tighter regulations as a result. And banks that
loaned Enron money may not be repaid,
causing instability among lending institutions.
"Where was the SEC? Where was Enron's
audit committee? Where were the
accountants? Where were the analysts?
Where were the institutional investors?
Where was common sense?" asked Dingell,
who had received $9,000 in campaign
contributions from Enron since 1989. "These
are a few of the questions I intend to pose to
the appropriate suspects over the next few
weeks."
The government is not talking of a bailout at
this time. But lawmakers are focusing on
what led to the dramatic corporate collapse.
House Commerce Committee Chairman Billy
Tauzin, R-La., instructed his staff counsel
yesterday to immediately begin investigating,
"with the expectation of holding congressional
hearings in the near future,"
said committee spokesman Ken Johnson.
"Our committee has jurisdiction over
accounting practices, and we're very
interested in knowing how the company
handled its financial books," Johnson said.
"Additionally, we will be keeping a close eye
on our energy markets and any disruptions
related to the company's collapse. The last
thing we want is to be confronted with another
California down the line."
Tauzin has said Enron's problems were the
result of the company operating in a new and
unregulated market. He was among the top
10 recipients of campaign contributions from
electric utilities, which had clashed with Enron
over deregulation of the electricity industry.
Tauzin's committee intends to hold hearings
in either December or early next year.
Enron's auditor, Arthur Andersen, may also
be called in for an explanation of why it failed
to detect problems in Enron's apparently fatal
investment strategies.
"This problem is not limited to Enron," Dingell
said. "There are likely other ticking time
bombs out there with smoke-and-mirror
earnings. Our accounting and auditing
system and its oversight are seriously broken
and need immediate reform."
The Senate also intends to take actions that
may trigger a debate over the merits of
energy deregulation. Enron Chairman and
Chief Executive Officer Ken Lay led the
efforts to deregulate the natural-gas industry
a decade ago. The electric industry is in the
process of being deregulated.
"We're certainly going to try to find answers to
the questions involving the collapse of
Enron," Senate Majority Leader Tom
Daschle, D-S.D., said yesterday. He has
received $6,000 from the energy giant since 1989.
"I think we need to find as much information
as is possible and make some assessment
about whether it's indicative of energy in a
larger context," he added. "Clearly it raises
some very serious questions."
Sen. Jeff Bingaman, D-N.M., chairman of the
Senate Energy and Natural Resources
Committee, said his staff has started
preparing for hearings.
"The consequences for energy markets of
Enron's collapse are unclear, but highlight the
importance of issues such as data
transparency and competition in the
natural-gas and electricity markets," he said.
Bingaman received more than $14,000 in
campaign contributions from Enron, making
him the eighth- largest Senate recipient.
Unlike the collapse of other major industries
that have been bailed out by the government
-- such as savings and loans firms during the
banking crisis of the 1980s and, more
recently, the airline industry -- Enron's does
not appear to be causing the kind of ripple
effect that would warrant intervention.
Federal officials have said there's no
evidence that Enron's demise will disrupt
trading on the futures market monitored by
the Commodity Futures Trading Commission.
But the effect on employee stocks,
particularly pension plans, has concerned
many Houston lawmakers and triggered
lawsuits against the company.
"I think it would be premature for Congress to
look into what happened because the story is
still unfolding," said Rep. Ken Bentsen,
D-Houston.
"But down the road, there would be room for
Congress to look at it, specifically with regard
to pension plans and whether there might
have been too much concentration of the
company's stock in employee pension plans,"
he said.
Bentsen, who is running for the Senate to
replace retiring Republican Sen. Phil Gramm,
has received nearly $43,000 in campaign
contributions from Enron, making him the No.
1 House recipient.
In fact, many Texas lawmakers could suffer
from the fall of Enron when it comes to their
campaign chests. Republican Sen. Kay
Bailey Hutchison topped the list of the
company's favorite senators, receiving a total
of nearly $100, 000 since 1989. Gramm was
a close second with just over $97,000.
On the House side, Rep. Sheila Jackson
Lee, D-Houston, came in second with
$38,000 from Enron. Republican House
Majority Whip Tom DeLay got nearly $29,000.
sfgate.com.
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