Text of Morning Session of Hearing on Enron
February 7, 2002
(Page 9 of 22)
The American people have lost faith in
the stock market, because they don't
know if they can believe what
publicly-held companies and their
auditors are telling them about profits
and losses. Enron's earnings weren't
real, because they used financing and
accounting sleights of hand so complex
that even sophisticated analysts could
not read them. Some of the people most
responsible for this disaster are before
us today and will take the Fifth
Amendment. They are the ones who
violated their fiduciary duty to Enron shareholders. But apparently they are seeking
even more. According to the press yesterday, Mr. Causey and Mr. Buy are currently
negotiating their severance packages from Enron, as is Kenneth Lay, the former
president.
Let's review for a moment how some of these people have already benefited from their
Enron stock, in addition to their most generous salaries. Mr. Causey, who was the
chief accounting officer, has cashed out to the tune of $13.3 million. Mr. Buy received
over $7 million in proceeds in 2001 alone. Kenneth Lay, Enron's former chairman and
chief executive officer, made $18 million in salary and compensation in 2000, and
received over $100 million in stock sale proceeds. He promised last year that he would
give up his 60.6 million (dollars) severance package. But now he wants a severance
package also it seems. Mr. Skilling, who took out 67 million in profits, plus his
generous salary, got a consulting contract with Enron when he left. We will want to
know more about his severance package today. Mr. Fastow got only 30 million (dollars)
in stock proceeds from Enron, but he took another 30 million out with his side deals.
Mr. Kopper got at least 10 million (dollars).
Over 4,000 former Enron employees who lost their jobs in the
Enron debacle were given for the most part $4,500 in
severance pay to get through the transition period. Some of
them are in dire straits, as are a number of people with
pension plans heavily invested in Enron stock. I think it
would be appropriate to provide Mr. Lay, Mr. Causey and Mr.
Buy each with $4,500 in severance pay to help them through
the transition period. Any additional claims they may have
should be part of the thousands of claims of the uninsured
creditors that the bankruptcy court will handle. One cent on
the dollar might be an appropriate recovery.
Whether the actions we've uncovered are illegal or legal will
be determined. But we do know they were certainly
unethical and immoral. Now, perhaps that's not important to
the Enron business executives who have tried to walk away,
embarrassed but rich. But it is important to the American people, and it must be
important to those of us who were elected to represent the people. Consequently, we
must do everything, Mr. Chairman, to see that whatever is necessary is done to see
that such happenings never happen again. Thank you.
REP. GREENWOOD: The chair thanks the gentleman, and now calls forward our first
witness. Our first witness is Mr. Andrew S. Fastow, former chief financial officer,
Enron Corporation. Mr. Fastow is here pursuant to a subpoena served earlier this
week. Mr. Fastow, if you will please be seated at the table. Mr. Fastow, you are aware
that the committee is holding an investigative hearing, and when doing so has had the
practice of taking testimony under oath. Do you have any objection to testifying under
oath?
MR. FASTOW: No, sir, I do not.
REP. GREENWOOD: Thank you. The chair then also advises you that under the rules of
the House and the rules of the committee you are entitled to be advised by counsel. Do
you desire to be advised by counsel during your testimony today?
MR. FASTOW: Yes, Mr. Chairman. My counsel, Mr. John Keker, is seated next to me.
REP. GREENWOOD: Okay. For the record, could you spell Mr. Keker's name for us?
MR. KEKER: K-E-K-E-R.
REP. GREENWOOD: Thank you, Mr. Keker. In that case, would you please rise and
raise your right hand, and I will swear you in? Do you swear that the testimony you
are about to give is the truth, the whole truth and nothing but the truth?
MR. FASTOW: Yes, sir.
REP. GREENWOOD: In that case, will you please -- you are now under oath, and you
may give a five-minute summary of your written statement. Do you have an opening
statement, sir?
MR. FASTOW: No, sir, I do not.
REP. GREENWOOD: Okay. In that case the chair will then recognize himself for
questions to the witness. Mr. Fastow, you are the CFO of a Fortune Ten company, a
full-time job to be sure. Yet somehow you managed to also run two private equity
funds, using your insider status at Enron to attract investors, and enrich yourself by
tens of millions of dollars by doing deals, and highly questionable deals at that -- with
your own company. You also, we have learned, used your power, position and influence
to threaten and pressure Enron employees in an attempt to obtain favorable terms for
your private partnerships. The question, Mr. Fastow, is how could you believe that your
actions were in any way consistent with your fiduciary duties to Enron and its
shareholders, or with common-sense notions of corporate ethics and propriety? How do
you answer, sir?
MR. FASTOW: Mr. Chairman, I would like to answer the committee's questions, but on
the advice of my counsel I respectfully decline to answer the question based on the
protection afforded me under the Constitution of the United States.
REP. GREENWOOD: May we be clear, Mr. Fastow: Are you refusing to answer the
question on the basis of the protections afforded you under the Fifth Amendment of the
United States Constitution?
MR. FASTOW: Again, Mr. Chairman, on the advice of my counsel, I respectfully decline
to answer the questions based on the protections afforded me under the United States
Constitution.
REP. GREENWOOD: And will you invoke your Fifth Amendment rights in response to all
of our questions here today?
MR. FASTOW: Yes, sir, Mr. Chairman.
REP. GREENWOOD: Okay, we regret that, but it is your right. It is therefore the chair's
intention to dismiss the witness. But the committee of course reserves all of its rights
to recall the witness at any time. Mr. Deutsch, do you agree with our decision?
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