Lawyer: Lay Will Appear Before Congress
Wed Feb 6, 8:25 AM ET
ABCNEWS.com
Faced with a pair of subpoenas one day after angering lawmakers by his failure to testify in Congress, former Enron CEO Kenneth Lay has now agreed to appear on Capitol Hill.
This afternoon, the House Financial Services Committee sent a subpoena to Lay's lawyer, Earl Silbert, asking that Lay testify at a hearing on Feb. 14. Silbert now says Lay will appear before Congress.
Earlier today, the Senate Commerce Committee, the other panel spurned by Lay on Monday, voted unanimously to send its own subpoena to the former head of the failed energy firm. Lay has agreed to accept it as well.
The House panel had attempted to serve Lay with a subpoena on Monday, but a committee spokeswoman said Silbert told them he could not accept it because he didn't know where Lay was.
Kelly Kimberly, a spokeswoman for Lay, said this morning that Lay was currently in Houston, having flown back from Washington on a private aircraft Monday.
But a subpoena cannot force the former head of Enron to talk. He could still exercise his Fifth Amendment rights and refuse to answer questions.
Lay, who resigned as CEO on Jan. 23, announced Monday he was also resigning from Enron's board of directors, saying he did not want to be an unnecessary distraction for the now-bankrupt company.
Andersen CEO in the Line of Fire
Amid a wave of hearings on Enron in Congress this week, the House Financial Services Committee today grilled Joseph Berardino, CEO of Enron's now-fired accounting firm, Arthur Andersen.
Berardino unveiled a series of proposed reforms for his firm and the accounting business in general, including a change from the current system, in which an accounting firm simply approves a publicly held company's financial report. Instead, Berardino suggested that accountants give grades to the risks taken by the companies they audit.
"The whole system needs to be looked at," said Berardino, who also proposed that it should be a felony to lie to or withhold facts from an accounting firm. He added, "I'm embarrassed by what happened at my firm."
And in the face of repeated hostile questions from the committee, he sought to minimize Andersen's responsibility for Enron's murky financial practices, insisting Enron did not disclose crucial documents to top managers at Andersen.
"Information was withheld from us," Berardino said, later adding that Andersen's own internal investigations are continuing: "We are still getting the facts. You want me to give you conclusions without all the facts."
But the committee members were unsatisfied with Berardino's explanations.
"You have squandered the integrity of your company," said Rep. Gary Ackerman, D-N.Y.
In a separate dvelopment today, the Connecticut Board of Accountancy decided to subpoena documents from Andersen concerning Enron, as a possible first step toward revoking Andersen's state license.
The October Surprise
Andersen has been in the eye of the Enron storm since October, when Enron announced a $618 million third-quarter loss and declared it was worth $1.2 billion less than it had previously stated. Andersen, as Enron's auditor, had approved the earlier financial reports overstating the energy firm's worth.
Enron had masked its large debts and losses by attributing them to investment partnerships that did not have to be included in the company's financial reports. Such partnerships can be kept off a company's books if outside firms own at least 3 percent of them.
That was not the case for at least one of the Enron partnerships, Chewco, which was founded in 1997. Berardino has said Andersen only found out last fall that an outside investor did not own 3 percent of Chewco, thus making the arrangement a violation of accounting rules.
Enron fired Andersen soon after the accounting firm's Jan. 10 admission that it had shredded documents pertaining to Enron last fall.
Investigations Roll On
In addition to questions about Enron's use of investment partnerships to hide its losses, seven congressional committees are holding hearings this week about issues of corporate governance, accounting standards, retirement plan reforms, and the Bush administration's many connections to the Houston-based company.
The Senate Governmental Affairs Committee heard testimony this morning for former Enron employees who lost tens of thousands of dollars after the company went bankrupt. Enron's stock, which constituted the bulk of the 401(k) plans for many employees, is now virtually worthless.
One former Enron employee, Deborah Perotta, told senators she can no longer afford to pay for her daughter's wedding.
"As a mother, this is something I always dreamed of doing for my daughter," Perotta said, breaking down in tears. "Today that burden has fallen on her shoulders."
In addition to Congress' hearings, the Department of Justice is performing a criminal inquiry into the Enron case, while the Department of Labor and the Securities and Exchange Commission are also investigating.
And with the release of the internal report, some members of Congress are increasingly suggesting that criminal charges could ultimately be pressed against some of the principals.
Said Rep. Billy Tauzin, R-La., chairman of the House Energy Committee, "Maybe somebody ought to go to the pokey for this."
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ABCNEWS' Ariane DeVogue, Linda Douglass and A.B. Stoddard contributed to this report. |
