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

To: Mephisto who wrote (3988)	5/8/2002 12:42:54 PM
From: Mephisto	Respond to of 5185

Enron Board Members Rapped on Capitol Hill Tue May 7, 6:44 PM ET By Susan Cornwell WASHINGTON (Reuters) - Saying Enron's board of directors fiddled while its company burned, a Senate panel castigated five past and present board members on Tuesday for not acting to stop the energy trader's collapse. Brushing aside excuses from board members that they learned too little, too late about the company's problems, the Senate Permanent Subcommittee on Investigations charged the directors had facilitated Enron Corp.'s financial shenanigans while enjoying the lucrative rewards of board membership. Subcommittee chairman Sen. Carl Levin, a Michigan Democrat, said the board was "obsequious" to Enron management while failing shareholders. He produced documents that said some directors were told over three years ago that Enron's high-risk accounting pushed the limits of accepted practice. The company filed the largest bankruptcy ever on Dec. 2 amid revelations about off-balance-sheet partnerships that were used to hide debt and inflate profits. "The board of directors didn't just fiddle while Enron burned, some of them toasted marshmallows over the flames," said Sen. Joseph Lieberman, a Connecticut Democrat who chairs the main Senate Governmental Affairs Committee (news - web sites). "To me, the directors' lack of diligence is even more troubling in light of the fact that they profited so much from their positions as board members," Lieberman said. In stock sales alone, some made hundreds of thousands of dollars, and a few netted over a million dollars, he added. The committee produced a chart showing the average board member's compensation in the year 2000, including cash, stock and options, was $329,465. Levin is proposing legislation to direct the Securities and Exchange Commission (news - web sites) to issue stricter rules governing board- member conduct and compensation. BOARD SAYS LEARNED TOO LATE At a table facing the committee, the two current and three former board members countered with a now-familiar line from other witnesses called to Capitol Hill over the Enron debacle -- that they had depended on Enron's senior management and its auditor Andersen to tell them the truth about the company. "We had no cause for suspicion until it was too late," said Robert Jaedicke, who chaired the Enron board's audit committee and is a former dean of Stanford University Business school. Directors said they were shocked and angered by the behavior of some of Enron's senior managers -- such as when they learned that former Enron chairman Kenneth Lay had repaid $77 million in loans from the company with Enron stock. "It would be impossible to feel anything other than outrage," current board member Herbert Winokur, chair of the finance committee, said of Lay's loan repayments. Andersen [ANDR.UL], fired by Enron in January, is on trial in federal court in Houston for destruction of documents sought by federal investigators in connection with their Enron probe. But the Senate panel said the directors had ignored a number of warning signs about Enron over the years. Senators were especially contemptuous of the way the board had allowed Enron former Chief Financial Officer Andrew Fastow to engage in business deals with the company through a complex series of transactions -- and then had no idea how much money he made from them until reading estimates in the newspaper. "Rather than raising a red flag, the board gave a green light to Mr. Fastow," Lieberman said. Charles LeMaistre, who chaired the compensation committee, said the board would have never approved Fastow's participation in partnerships had it known how much he would make from them. He said he was angry when Fastow told him last year he had made $45 million from transactions known as the LJM partnerships, and said Fastow was fired the next day, Oct. 24. But LeMaistre also revealed that the board decided to ask Fastow about his LJM earnings only after an article appeared in the Wall Street Journal reporting that the CFO had raked in at least $7 million from the enterprise. PUSHING THE LIMITS Levin held up one February 1999 document presented to the board's audit committee and carrying the handwriting of David Duncan, Andersen's lead Enron auditor. It said many Enron transactions "push limits" of accepted accounting practices. David Duncan has pleaded guilty to obstruction of justice in the Enron case and agreed to cooperate with prosecutors. Former audit committee chairman Jaedicke did not remember verbal warnings from David Duncan, but acknowledged he had been aware that some Enron's accounting practices were high-risk. "I don't remember the words, 'push limits,"' he said. Levin's subcommittee has interviewed 13 former and current members of Enron's board and gone through over 300 boxes of documents obtained with 50 congressional subpoenas. In addition to Jaedicke, Winokur and LeMaistre, the panel heard testimony from current Enron board member Norman Blake, a member of the finance and compensation committees; and John Duncan, who formerly chaired the executive committee. story.news.yahoo.com