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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (51047)	5/7/2002 2:11:28 PM
From: stockman_scott	Read Replies (1) \| Respond to of 65232

Lawmaker: Enron board knew of risks Board members claim company kept them in the dark By Matt Andrejczak, CBS.MarketWatch.com Last Update: 12:12 PM ET May 7, 2002 WASHINGTON (CBS.MW) - Enron's board knew 64 percent of the energy trader's assets were "troubled or not performing" in April 2001, Sen. Carl Levin, D-Mich, charged Tuesday at a congressional hearing into Enron's collapse. The board was also aware that 45 million Enron shares were at risk in two of the company's limited partnerships, Raptor and Whitewing. Accounting for the partnerships triggered Enron's massive half-billion earnings restatement six months later and led to the company's bankruptcy filing in December. "The board had ample knowledge of the dangerous waters in which Enron was swimming and it didn't do anything about it," said Levin, chairman of the Senate Permanent Subcommittee on Investigations, which has conducted lengthy interviews with 13 current and former Enron board members. In addition, Andersen, the company's one-time auditor, told Enron's audit committee and former chief executives Ken Lay and Jeffrey Skilling in February 1999 the company's accounting practices were risky and pushed the limits, according to documents collected by the committee. David Duncan, who headed Andersen's Enron audit team, told the board the accounting treatment for Enron's limited partnerships was aggressive. The failed energy giant used the partnerships to shift debt off the balance sheet in order to pump up profits. "Obviously, we are on board with all of these," Duncan told the group at a board meeting in London. "But many push the limits and have a high ... risk profile." Enron's board approved moving the $1.5 billion Whitewing venture off the company's balance sheet in December 1997. It was used to purchase assets Enron (ENRNQ) wanted to move off its books. The Raptor partnerships were designed to hedge Enron investments. The company used its own stock to backstop the hedge. At the hearing, five Enron board members denied they failed to carry out their fiduciary duties and claimed senior management duped them. They alleged internal controls the board had implemented to flag impending problems broke down because company executives withheld critical information from them. "I do not believe that Enron's fall would have been avoided had the board asked more questions, implemented more controls or avoided certain financing projects because they were too complicated or risky," said John Duncan, who until he resigned two months ago, was Enron's longest standing board member Herbert Winokur Jr., chairman of Enron' finance committee, testified that company management told them February 2001 the Enron's total liquidity was over $8.3 billion. At that time, key Enron managers were working to re-capitalize the Raptor partnerships, a restructuring that board members told lawmakers management failed to disclose. Improper accounting for the transaction forced Enron last October to reduce shareholder equity by $1.2 billion due to charges largely associated with the Raptor entities. ______________________ Matt Andrejczak is a reporter for CBS.MarketWatch.com in Washington.