Senate Probes Enron Cash Stash
thedailyenron.com
Senate Uncovers Enron Offshore Cash Stash
Just when you thought all of Enron's dirty little secrets were out, a new outrage emerges from the trash heap. Senate investigators say they have now uncovered what appears to have been a massive tax evasion scheme involving top Enron officials.
According to sources close to the investigation Enron executives withdrew massive bonuses from the troubled company, did not report them to the IRS and then "parked" the money in offshore accounts. Whatever monies were in those accounts disappeared shortly before the company declared bankruptcy.
"The committee is interested in whether or not Enron officials were able to place bonuses in accounts offshore and then withdraw them just before the company went under," Senate Finance Committee spokesman Mike Siegel said.
Senate investigators say the practice of hiding large bonuses offshore to avoid US income taxes may have started several years before Enron's collapse.
The Democrat-controlled Senate is actively probing Enron's offshore tax evasion activities, in sharp contrast to the GOP-controlled House, which has actively fought attempts to tighten laws covering US companies moving offshore to avoid taxes.
"If money was taken out of accounts, including offshore accounts, without being reported (to the IRS) that would be not only be an abuse of the system, it could violate tax laws," Siegel said.
When asked if the FBI is following up on the Senate's findings, Justice Department spokesman Bryan Sierra responded, "I wouldn't be able to comment on what is or what isn't within the purview of our investigation."
There have been no federal criminal charges filed in an investigation of Enron that began early this year.
This week Enron filed papers in federal bankruptcy court in New York admitting that its 140 top managers were paid $680 million in salaries, bonuses and other compensation in 2001. In all the company paid out over $741 million to top executives just before the company went bust in December. Whether that sum includes the offshore funds just discovered by Senate investigators is not yet known. Investigators say they have not been able to account for the huge bonuses paid to a handful of executives.
"We are looking at the bonuses paid to very senior-level executives amounting to many millions of dollars," an investigator said.
Among those being probed include former Enron Chairman Ken Lay, former CEO Jeffrey Skilling and former Chief Financial Officer Andrew Fastow.
----------------------------------------------------
Former Enron Worker: "They Have Raped Us "
The news of secret offshore bank accounts stuffed with money and massive pre-bankruptcy bonuses are fueling the anger of former Enron employees. Many of those workers lost not only their jobs but also their entire retirement savings when Enron collapsed.
"I'm livid, absolutely livid," Sandra Stone told the Houston Chronicle. Stone is a former Enron executive assistant who says she lost $150,000. "I have lost my entire friggin' retirement to these people. They have raped all of us."
"Every time you think you've heard it all about injustice at Enron, there's another bombshell," said Damon Silvers, associate general counsel for the AFL-CIO, which helped win severance pay for former workers.
Former Enron CEO Ken Lay - who can still apparently afford a personal official spokesperson - bristles at accounts that his compensation was excessive. Lay spokeswoman, Kelly Kimberly, said that the numbers being cited in the press are wrong.
Kimberly said Lay's compensation actually fell "far short of $67 million." Just how far short, she would not say. During a sometimes-tearful television interview in January, Lay's wife Linda said the couple was facing personal bankruptcy. Yesterday Kimberly admitted that in fact, the Lays are not facing bankruptcy.
As one further mitigating factor, Kimberly said, Ken Lay was out of the compensation loop.
"Mr. Lay's compensation was determined by outside consultants as an appropriate amount for his role as chairman and CEO of a Fortune 500 company," she said in a written statement.
At the end of her statement, Kimberly added that her boss was comforted by the knowledge that a higher judge knows he is innocent and is in control of events.
"Mr. Lay... is a strong believer in God and believes everything will work out."
Former Enron employees are not buying any of it.
"A lot of people worked hard to build up this company," said Debbie Perrotta, who was a senior administrative assistant. "And they left everybody with nothing. I hope they throw them all in jail."
----------------------------------------------------
Pitch Battle Set in Senate for Accounting Reform
When the smoke cleared from the fierce, well-financed rearguard battle fought by the accounting and corporate lobbies, Senator Paul Sarbanes' bill was still standing. Less than a month ago few gave the Maryland Democrat's measure any chance of passage. House Republicans had already successfully watered down such changes in their bill and Senate Republicans were certain they could either kill or at least neuter Sabanes' measure as well.
Sarbanes, chairman of the Senate Banking Committee, now hopes to get that panel to endorse his sweeping accounting reform bill, widely seen as one of the last chances for congressional changes in accounting regulation this year.
If his measure passes in its current form, it would represent the only real accounting reform to address the crisis in public accounting.
Maintaining relentless pressure on his committee, Sarbanes called a Tuesday session after rewriting parts of his plan to win over a handful of wavering members. The fine-tuning pumped new life into the bill. Sarbanes now says he believes he can get the bill to the Senate floor on an 11-10 party line vote.
"I think the Andersen decision adds the impetus for us to get something done this year," said Darius Goore, a spokesman for Sen. Jon Corzine, a New Jersey Democrat and former investment banker who is co-sponsoring Sarbanes' bill.
Until now lobbyists for the accounting industry had rounded up enough opposition to bottle up the earlier Sarbanes' proposal in committee. They are now broadening their lobbying to head off full Senate action on the measure.
On Monday, the U.S. Chamber of Commerce shot off letters to members of the committee urging them to oppose the new proposal, saying it "is not only excessive, but to a great extent unnecessary and harmful."
The letter stated that "a legislative 'solution' should only be used as a last resort." The letter did not describe how bad things had to get before "last resort" status was achieved.
The chief lobby for accountants, the American Institute of Certified Public Accountants, employed apocalyptic terms to describe Sarbanes' measure, describing it as a "de facto government takeover" of the accounting profession.
The AICPA urged its members to contact Senators and ask that they support the 47 Republican-backed amendments to the Sarbanes bill.
The GOP amendments would affectively water down Sarbanes' bill and reflect similar changes that passed in the Republican-controlled House. Of the 47 Senate amendments, the two staunch conservative Republican senators -- Phil Gramm of Texas and Mike Enzi of Wyoming, authored 32.
Texas senator, Phil Gramm has warned that if Sarbanes' measure makes it to the Senate floor he may launch a filibuster as a last-ditch effort to kill the measure. Democrats have a razor thin one-vote majority in the Senate.
If the bill survives the filibuster and clears the Senate, it would then have to be reconciled with the House's accountant-friendly version authored by Ohio Republican Rep. Mike Oxley and passed by the House of Representatives.
Sarbanes describes the Oxley measure as "a hoax on the investing public, who would think the issues were dealt with."
--------------------------------------------------
Quote of The Day
"It frankly never would've occurred to me to say there's something big going on in my company and I don't know about it," Secretary of the Treasury Paul O'Neill exclaimed to reporters yesterday. "What kind of integrity is that?"
But, when asked what he would do about it O'Neill stopped short of supporting calls for new rules to improve disclosure and tighten accounting rules.
----------------------------------------------
Got Thoughts? Send them to:
Editor@thedailyenron.com |
