Posted on 01/14/2002 4:07:13 PM PST by sarcasm
Filed at 7:34 p.m. ET
WASHINGTON (AP) -- An Enron (news/quote) employee warned company Chairman Kenneth Lay last August that ``we will implode in a wave of accounting scandals'' unless the company halted practices that eventually sent it into bankruptcy.
Two Republican congressmen, including the chairman of the House Energy and Commerce Committee, on Monday demanded all records relating to a review of the employee's allegations five months ago.
The unidentified Enron employee relayed her concerns in a letter to Lay and met with him for an hour to supply documentation, said Reps. Billy Tauzin of Louisiana, the committee chairman, and James Greenwood of Pennsylvania.
Around the time of the employee's warnings, Lay was telling Enron employees that growth of the energy company ``has never been more certain.''
``I am incredibly nervous that we will implode in a wave of accounting scandals,'' the employee warned Lay in the letter last August. A ``veil of secrecy'' surrounded Enron's partnerships, which were keeping huge amounts of Enron debt off the company's books, she said. The congressmen released excerpts from the letter.
``It sure looks to the layman on the street that we are hiding losses in a related company,'' the employee wrote. The woman worked in Enron's global finance division, said a House committee source who demanded anonymity.
She said several senior Enron employees ``consistently and constantly'' questioned the corporation's accounting methods to senior Enron officials, including CEO Jeffrey Skilling. Skilling resigned in August.
Tauzin and Greenwood said senior Enron officials instructed the law firm of Vinson & Elkins to review the employee's allegations, but instructed the outside attorneys not to second-guess accounting advice and not to analyze the questioned transactions in detail.
The Vinson & Elkins review concluded that the concerns expressed by the Enron employee did not warrant further widespread investigation by independent counsel and auditors, Tauzin and Greenwood said. The review said the employee's information raised no facts that had not been known or disclosed by company officials and auditors.
But the Vinson & Elkins review noted that ``there is a serious risk of adverse publicity and litigation'' from the partnership transactions, according to the congressmen.
In its limited review, Vinson & Elkins interviewed Andrew Fastow, Enron's chief financial officer who was the lead architect of complex partnerships that allowed Enron to keep debt off its books. Vinson & Elkins also interviewed David Duncan, the partner-in-charge of the Enron account at Anderson, the outside auditor of Enron's books.
On Oct. 16, Enron announced hundreds of millions of dollars in third-quarter losses and a writedown of more than a billion dollars relating to the partnerships. The company filed for bankruptcy Dec. 2.
In another development, Enron's outside accounting firm, Arthur Andersen LLP, said an in-house lawyer spelled out Andersen's document destruction policy for auditors on Oct. 12, four days before Enron announced the huge losses. The Andersen lawyer, Nancy Temple, e-mailed the policy to a partner in the firm's office in Houston where Enron is based.
Andersen is under scrutiny for destroying thousands of documents related to Enron last fall.
``She (Temple) never told the audit team that they should destroy documents for past audit work that was already completed,'' Andersen said in a statement.
The firm's policy prohibits document destruction under some circumstances and authorizes it under other circumstances.
Poor, naive woman. Just another well-meaning person thinking that the top dog can't be aware of the wrongs and he'll listen to her because he's a good man and he'll save the company, etc., etc.
Kenneth Lay (Texas Bidniss wizard): “Ten be five? How kin ten be five?”
Kenneth Lay’s new lawyer: “No, sir, it’s 10b5, sir, Rule 10b5. It’s a securities rule.”
Kenneth Lay (Texas Bidniss wizard): “Ten be five? Yew sayin me and my boys is goin to prison cuz we dint know dat ten be five?”
Kenneth Lay’s new lawyer: “Yes, sir, I’m afraid that’s correct, sir.”
Kenneth Lay (Texas Bidniss wizard): “Where’s GW? Did he know dat ten be five?”
Kenneth Lay’s new lawyer: “I assume so, sir. The President went to Yale, sir, and I’m confident that he didn’t commit any securities fraud. ”
Kenneth Lay (Texas Bidniss wizard): “Why dint GW tell us dat ten be five?”
My take: This Enron mess is just a sneaky way to get more Federal funds for Texas schools.
Does anyone with a brain think this company could have been saved last summer by making some changes?
This company has been in trouble for years. The brass kept hiding it for at least 3 or 4 years.
When a company has bet on everthing going up and everything goes down, changing accounting practices is worthless. If there had been a way to save this mess a year ago, Law would have done it.
In a doomed company the top management knows its doomed. They keep hoping to ward it off until they figure out how to fix it. The problem is there ain't no fix. So they hang on and hide the truth until they can't hide it any more. Hoping against hope that a miracle will happen.
Miracles only happen in movies.
By Jason Leopold Of DOW JONES NEWSWIRES
LOS ANGELES (Dow Jones)--The letter to Enron Corp. (ENE) Chairman and Chief Executive Ken Lay last August, warning that irregularities relating to Enron's off-balance sheet partnerships could bring about the company's demise, was written by Sherron Watkins, the company's vice president of communications in charge of corporate investigations, employee relations and policy, Enron confirmed late Monday.
The existence of the letter was disclosed Monday afternoon by the House Commerce and Energy Committee, which is investigating the one-time market leader's collapse.
Watkins had worked for former Chief Financial Officer Andrew Fastow, whose involvement with some of the off-balance sheet partnerships raised questions of conflicts-of-interest.
Enron removed Fastow from his position in October after reporting losses related transactions involving the Fastow partnerships.
The letter released by the House Committee raised questions about secrecy and accounting treatment related to the off-balance sheet partnerships.
"I am incredibly nervous that we will implode in a wave of accounting scandals," the letter said.
She said in the letter that other Enron officials "consistently and constantly" had questioned the accounting methods to senior Enron officials, and directly to Jeff Skilling, Enron's former president and chief executive, regarding the partnerships.
"Mr. Skilling flatly denies the allegations in the letter related to him," said Judy Leon, a spokeswoman for Skilling.
Messages left at Watkins' home in Houston and at Enron's offices weren't immediately returned.
On Oct. 16, Enron announced hundreds of millions of dollars in third-quarter losses and a writedown of more than a billion dollars relating to the partnerships. The company filed for bankruptcy Dec. 2.
(MORE) DOW JONES NEWS 01-14-02 08:06 PM- - 08 06 PM EST 01-14-02
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