Enron Aggressively Bent Tax Code

Reuters, via Yahoo ^ | Feb. 13 2003 | Susan Cornwell

[coloradan]

The study by the Joint Committee on Taxation said Enron's management viewed its tax department as a profit center and was assisted by outside advisers that included major accounting firms, investment banks and lawyers.

Now-bankrupt Enron also paid just $325 million in federal income taxes for the period 1990 to 1995 and $63 million for the 2000 to 2001 period.

Sen. Max Baucus of Montana, the ranking Democrat on the Senate Finance Committee which requested the report, said the Internal Revenue Service (news - web sites) was "kept in the dark and out maneuvered."

"Enron not only engaged in accounting gimmicks to boost stock prices but Enron repeatedly abused the tax code," Baucus said in a statement.

The Finance Committee, chaired by Iowa Republican Sen. Charles Grassley, will use the Enron tax report as it considers legislation to curb corporate tax abuses.

Grassley warned at the start of a hearing on the report that he and Baucus wanted to make any new law effective today -- Feb. 13, 2003. "Today's date will not move, it will not slip," he said.

The report said Enron profited from 12 large tax deals from 1995 to 2001 that saved the corporation over $2 billion.

Among those named in the report as aiding Enron's tax deals was former Enron accounting firm Andersen, convicted last year of obstructing the government probe on Enron's collapse.

Also mentioned were accountants Deloitte Touche, investment banks Chase Manhattan, now part of J.P. Morgan Chase & Co Inc. (NYSE:JPM - news), and Bankers Trust and Deutsche Bank AG (DBKGn.DE), now merged.

Law firms who blessed the legality of the deals included Vinson & Elkins, Shearman & Sterling, King & Spalding, and Akin Gump Strauss Hauer & Feld.

"Enron's behavior illustrates that a motivated corporation can manipulate highly technical provisions of the law to achieve significant unintended benefits," said a statement by Lindy Paull, chief of staff of the Joint Committee on Taxation.

"The report's detailed analysis of Enron's structured transactions reveals a pattern of behavior showing that Enron deliberately and aggressively engaged in transactions that had little or no business purpose in order to obtain favorable tax and accounting treatment," Paull said.

Enron filed for bankruptcy in December 2001, amid revelations of previously secret off-the-books partnerships that hid debt and enriched certain executives.

Enron's former Chief Financial Officer Andrew Fastow, the highest ranking company official indicted so far in the government's probe, faces 78 counts of fraud, money laundering and other offenses. Fastow has pleaded not guilty.

[coloradan]

What is the legal meaning of "abusing the tax code?" Either the law was complied with, or it wasn't. Is the Senator now bitching about someone actually able to understand the "code" and using its full advantage?

Well, boo hoo. This sort of thing would be avoided with wiggle-free flat tax, or the NRST.

[coloradan]

This shows what sorts of things are possible under the present tax "code" - Tax and spend dems miffed that someone was able to duck billions of taxes, simply by understanding the whole steaming code.

[Uncle Sausage]

Bent?? Abused??

For a minute I thought this was about Clintoon.

[coloradan]

The alleged bending occurred under his watch.