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Non-Tech : The ENRON Scandal -- Ignore unavailable to you. Want to Upgrade?

To: Baldur Fjvlnisson who wrote (968)	1/22/2002 2:26:30 PM
From: Mephisto	Respond to of 5185

Enron and Al Qaeda's Shared Link Lucy Komisar, Pacific News Service nuary 21, 2002 How did top executives of Enron do it? How did they cause the world's biggest bankruptcy while making off with millions of dollars? They used the same financial tools as Osama bin Laden. To attack the Osama bin Laden financial network, the Bush administration knew right where to look -- in "offshore" secrecy havens, including the Bahamas, Switzerland, Luxembourg, Dubai and Panama. Investigators know that the world's bank and corporate secrecy system was set up to move money for people with something to hide. Sometimes they are terrorists. Sometimes they are financial swindlers. They are welcomed in "offshore" centers that promise to keep ownership of companies and bank accounts secret, even from law enforcement. To uncover the al Qaeda money trail, U.S. investigators had to use muscle. When a Nassau bank refused to open records, the U.S. had it cut off from the world's wire transfer systems. The bank changed its mind in two hours. Now, with Enron, U.S. investigators and the lawyers suing the firm's executives are turning "offshore" again. Before they finish, their revelations should make lawmakers and the public question the continued existence of the world's financial services system for criminals. We know a lot about how Osama bin Laden used the system. Here is how Enron used it. Andrew Fastow, the company's chief financial officer until October 2001, was known as a master of international offshore banking laws. The key to the Enron swindle was the company's 3,000 corporate subsidiaries and partnerships. A fourth of them were registered in Grand Cayman or Turks and Caicos, two notorious offshore centers. Why put company ownership records in secrecy jurisdictions? So that regulatory authorities, investment analysts and stockholders won't know about self-dealing or other improper activities. If authorities don't know who the owners are, they can't know if Enron managers or associates secretly own a partnership. They can't check the books to see if the offshore company is dealing with another insider-owned company that is siphoning off its wealth. That's how Russian oligarchs looted their country. The offshore system was central to Enron's collapse. Frank Karam, an attorney at Milberg Weiss Bershad Hynes and Lerach who is working on a suit against top Enron executives, explained that Enron used offshore partnerships "to borrow at least $10 billion from banks. Enron guaranteed these loans with its own stock. They traded with themselves and reported the money as income -- as revenue and profit." Two offshore partnerships were set up in 1999 simply to move debt off Enron's balance sheet and hide losses, Karam said. And Enron moved its "profits" to offshore subsidiaries to avoid paying U.S. taxes in four of the last five years. Enron officials also used the offshore system to hide their own exorbitant pay. "We hear of middle-level executives making $10 or $20 million," Karam said. "If shareholders knew this..." Records of Arthur Anderson's contribution to this offshore system were very likely in the files the accounting firm shredded. "Aggressive accounting" is a common euphemism for using offshore companies to juggle the books and evade taxes. Accounting firms get consulting fees to set up such systems and then "audit" them. The Clinton administration was working with European allies to rein in the offshore system, but was blocked in the Senate by Republican Phil Gramm, whose wife, Wendy, is an Enron director, and by Republican House leader Dick Armey. At first, the Bush administration also fought reforms. Treasury Secretary Paul O'Neill weakened an Organization for Economic Cooperation and Development (OECD) strategy against tax havens. But Sept. 11 compelled the Washington to change its tune somewhat. Legislation adopted in October, for example, bans American banks from opening accounts for "shell" banks with no physical presence and thus no clear purpose but money-laundering. It requires banks, securities and insurance firms to verify the identities of customers. But U.S. banks lobbied successfully against requiring additional "due diligence" rules for American banks dealing with offshore banks. It's time for another step forward. Congress should ban U.S. institutions from dealing with banks that don't list owners' real names on accounts or cooperate with international law enforcement. The OECD is developing proposals for dealing with shell companies. Washington should support an agreement to end recognition for companies registered in secrecy jurisdictions where they don't do business. Imagine if Enron subsidiaries had been forced to reveal who their owners were and to keep their books where they operated and where they could be examined. Imagine if U.S. law-enforcers could demand to see bank accounts of Enron "partnerships" and top officials, rather than tracking them through the murky swamp of offshore secrecy. U.S. lawmakers and officials should work to plug up the offshore financial black hole. Lucy Komisar is a New York journalist who investigates international crime and corruption. alternet.org

To: Baldur Fjvlnisson who wrote (968)	1/22/2002 8:20:57 PM
From: Mephisto	Read Replies (1) \| Respond to of 5185

Congress Gears Up for Enron Hearings By MARCY GORDON The Associated Press WASHINGTON (Jan. 22) - Congressional investigators will subpoena senior officials of the Arthur Andersen auditing firm, including the chief executive and a fired auditor, in an effort to force their testimony Thursday in the Enron controversy. Ken Johnson, spokesman for the House Energy and Commerce Committee, said the panel's chairman, Rep. Billy Tauzin, R-La., would sign the four subpoenas Tuesday night. Subpoenas are going to Andersen CEO Joseph Berardino, fired auditor David Duncan, attorney Nancy Temple and risk manager Michael Odom. Duncan was dismissed by Andersen last week for his role in the extensive destruction of Enron-related documents after federal regulators began investigating possible irregularities in the failed energy company's accounting. Through his lawyers, he has asked for a delay in his testimony to review documents and prepare for the congressional hearing. Duncan already has talked to committee investigators. Robert Giuffra, one of his attorneys, said Tuesday evening that no decision had been made on whether Duncan would testify. ''We have not received a subpoena,'' he said. Temple and Odom, while expressing willingness to testify, have raised concerns about protecting confidential information relating to the investigation, Johnson said. He noted that the firm's chairman had been interviewed over the weekend on television. ''Mr. Berardino found the time to brief the American public on 'Meet the Press' on Sunday,'' Johnson said. ''He should be able to find the time to appear at a congressional hearing.'' Patrick Dorton, an Andersen spokesman, said, ''We have not received a subpoena. We have told the committee that we would testify but the only question is when.'' News of the planned subpoenas came as FBI agents and federal prosecutors entered Enron's Houston headquarters to investigate allegations that massive document destruction took place at the company tarting after Thanksgiving and continuing until as recently as last week. The Securities and Exchange Commission started looking into Enron's accounting in mid-October, after the company reported a third-quarter loss of more than $600 million. The SEC's inquiry eventually included demands for financial documents from Enron and Andersen. Enron entered the largest bankruptcy in U.S. history on Dec. 2. The Energy and Commerce panel is one of two committees holding Enron hearings on Thursday. The Senate Governmental Affairs Committee is calling officials from the SEC, the Federal Energy Regulatory Commission and the Commodity Futures Trading Commission to determine whether regulators missed signs of trouble at Enron. In another development Tuesday, Sen. Phil Gramm, one of Congress' biggest recipients of Enron campaign donations, has decided to remove himself from part of the wide-ranging congressional investigations. Gramm will be absent from hearings focusing on what went wrong at Enron but will take part in more general inquiries into accounting standards, investor protection issues and other matters, spokesman Larry Neal said. In a sprawling inquiry with both financial and political overtones, 11 House and Senate committees are investigating the Enron debacle, while the Justice Department and the SEC pursue their own less visible probes. President Bush urged Congress on Tuesday not to be distracted by the Enron investigation. ''I'm confident that all the facts will come out on Enron. And I'm also confident that if Congress has the right attitude, we can get a lot done,'' Bush said in a pitch for his economic revival plan. He said his mother-in-law, Jenna Welch, had lost about $8,000 on an investment in Enron stock. ''A lot of the stockholders didn't know all of the facts. And that's wrong,'' said Bush. The president has received large political contributions over the years from Enron Chairman Kenneth Lay, who is expected to testify before two congressional committees on Feb. 4. Bush said Tuesday that officials in his administration had done ''the exact right thing'' in response to Enron's pleas for help as the company was collapsing last year. Treasury Secretary Paul O'Neill and Commerce Secretary Donald Evans have said they received calls from Lay but took no action. AP-NY-01-22-02 1817EST