Enron boss 'knew partnership details'

FT.com ^ | 3/21/02 | Andrew Hill and Peter Spiegel

[GeneD]

Jeffrey Skilling, former Enron chief executive, was unhappy at efforts by directors to obtain more details of the failed energy group's controversial off-balance sheet partnerships, according to one board member.

The Financial Times has learnt that, although Mr Skilling told congressional investigators he did not know the details of partnerships, several board members have said he gave quite detailed board presentations about them.

Mr Skilling has acknowledged his own involvement in overseeing the partnerships, but has said he relied on accountants and lawyers for advice on the propriety of the off-balance sheet structure.

The unravelling of the partnerships helped precipitate Enron's collapse into bankruptcy in December.

A summary of eight non-executive directors' discussions with an internal Enron investigation, obtained by the FT, shows the board relied on Mr Skilling and other top Enron managers, backed by professionals from Andersen, the auditor, and Vinson & Elkins, the law firm, to oversee and review partnerships.

One director, Norman Blake, said he had suggested in October 2000 that Enron's finance committee, of which he was a member, should review transactions related to LJM - one of the key partnerships - quarterly rather than annually. He said this was because there was a potential conflict of interest with Andrew Fastow, Enron's chief financial officer. Mr Fastow set up and ran a number of the partnerships.

There was one such review - in February 2001 - but Mr Blake said "follow-up on the review was terrible". He added: "Skilling wanted to reduce the board's involvement in day-to-day aspects of Enron. He did not oppose the finance committee reviewing the transactions, but he was not happy about it."

Mr Skilling's spokeswoman pointed out that, in more than 800 pages of summaries of the investigators' interviews, this was the only reference to any reluctance on Mr Skilling's part.

[laconic]

Sorry, as much as an overpaid buffoon as Skilling was, the Board had an obligation to oversee all aspects of Enron's business. They were being paid a fortune in director's fees and many of them had highly technical business and financial skills; why on earth would any one of them have been put off by the hostility of a CEO involving partnerships where 40 percent of the debt of the company was being moved off the balance sheets?

[thatsnotnice]

…why on earth would any one of them have been put off by the hostility of a CEO involving partnerships where 40 percent of the debt of the company was being moved off the balance sheets?

Because it was perfectly legal?

That’s all I can figure. I have only followed articles posted here, mainly, but everything I have read has indicated that while Enron may have violated the spirit of the law, they obeyed the letter of the law.

And if that is the case, it is the result of a poorly written law… I’d guess.

I worked for a grocery store as a kid that required males to wear a tie. They didn’t say you had to wear it around your neck, or with a shirt that had a collar; you can imagine what happened next. So when the convenience clerk showed up wearing his tie as a headband, and protected by a union, it was agreed that he WAS wearing a tie – just not AS a tie. So a clarification and a rewritten policy was in order. That is important because Enron will have their lawyers acting as their union, and will be enthusiastic to demonstrate that they wore their tie, just not around their neck, IMO.