- The Washington Times - Tuesday, January 15, 2002

Congressional investigators examining the collapse of Enron Corp. have focused on e-mails sent by company executives that they said appear to mislead employees into believing the company's plummeting stock would rebound.
The e-mails, according to one investigator, could be "a road map to illegal activity" involving high-ranking Enron officials and others.
Rep. Henry A. Waxman of California, ranking Democrat on the House Government Reform Committee, whose staff has been investigating the Enron failure since December, said the e-mails appear to have deceived Enron employees about the value of their investments in the firm and the security of their jobs.
In a letter Friday to Enron Chairman Kenneth L. Lay, he described the previously undisclosed e-mails as "a gross betrayal of your employees' trust, as well as possibly illegal conduct."
Enron's attorney, D.C. lawyer Robert S. Bennett, said he was "troubled" by Mr. Waxman's release of what he described as "selective information," saying it was too soon to draw conclusions of what Enron did concerning its financial problems.
"I'm very troubled that people are rushing to judgment," he told The Washington Times. "If you're going to use a broad brush, people are going to get hurt. The company is in bankruptcy, but it can get out of bankruptcy and protect its 15,000 employees and stakeholders.
"But if they're going to gang up, that's not going to happen, the damage will be done," he said. "If you politicize this case, the legitimate issues of a business failure will not be addressed."
Investigators said one e-mail sent Aug. 14 to all employees by Mr. Lay announcing the resignation of Jeff Skilling as the firm's chief executive officer said Mr. Lay "never felt better about the prospects for the company." It said one of Mr. Lay's "top priorities" would be to "restore a significant amount" of the company's stock value.
The e-mail also proclaimed that the firm's ongoing performance had "never been stronger" and said its future growth "has never been more certain."
A second e-mail sent Aug. 21 by Mr. Lay to employees who received stock-option grants said the chairman was looking to "restore investor confidence in Enron" and those efforts would lead to "a significantly higher stock price."
By the time the second e-mail had been sent, Enron's stock was selling at $37 a share, down from a high of $85. Mr. Lay had sold $40 million in Enron stock during 2001, and more than $100 million since October 1998.
The price of Enron stock eventually dropped on Nov. 26 to 26 cents a share and the Houston-based firm which at one time had earnings of $100 billion filed for Chapter 11 bankruptcy protection in New York on Dec. 2 to keep creditors and lawsuits at bay. The company listed 50 pages of creditors in its bankruptcy filing.
Last week, the Justice Department began a criminal investigation of Enron to determine if company executives violated federal law in blocking employees from selling billions of dollars in falling shares from their 401(k) retirement accounts and of concealing those losses from investors.
The probe has targeted accusations that Enron executives concealed staggering losses to cash out $1 billion in stock options.
Justice Department investigators also want to know if Enron hid behind complex energy partnerships to keep some $500 million in debt off its books and mask its financial problems.
Enron has admitted overstating its profits by more than $580 million since 1997. Following a disastrous third quarter last year, in which Enron lost $618 million, the company filed a statement with the Securities and Exchange Commission in October saying its financial reports dating back to 1997 "should not be relied upon."
Meanwhile, Sen. Joseph I. Lieberman, Connecticut Democrat and chairman of the Senate Governmental Affairs Committee, yesterday questioned the timing of an accounting firm's memo in October directing the destruction of Enron documents. He said it raised serious questions of a possible obstruction of justice.
The Senate committee is investigating whether Arthur Andersen & Co. destroyed documents at a time when Andersen and Enron executives knew Enron was in financial trouble and about to collapse.
Andersen disclosed last week that some Enron records had been destroyed, but the firm has not said why. The company said in a statement there were "internal communications that raise questions" in connection with the Enron documents.
"Andersen is committed to getting the facts and taking appropriate actions in the Enron matter," the statement said, adding that it would be "inappropriate to comment further."
Mr. Lieberman has scheduled a hearing for Jan. 24. The committee has issued 51 subpoenas in the probe to officials at Enron and Andersen. Mr. Lay is scheduled to give testimony to Congress on Feb. 4.
Separately, House Energy and Commerce Committee Chairman Billy Tauzin, Louisiana Republican, and oversight and investigations subcommittee Chairman James C. Greenwood, Pennsylvania Republican, yesterday asked for additional records from Enron, Andersen and the Houston law firm of Vinson and Elkins.
In letters to Mr. Lay; Joseph F. Berardino, chief executive officer at Andersen; and Joseph C. Dilg, managing partner at Vinson & Elkins, the congressmen asked for an Oct. 15 memo that they said "raises troubling questions about the extent to which you and other senior officials were aware of the controversial financial transactions and accounting practices that would ultimately contribute significantly to Enron's demise."
They said an investigation found that Enron requested and received a legal review of pending financial matters one day before it announced its third-quarter earnings and the $1.2 billion reduction in shareholder equity owing to losses later associated with various partnerships involving Enron officials.
The congressmen said questions were raised in August on the propriety of Enron's accounting treatment of several financial transactions and they challenged the ownership interest of Andrew Fastow, Enron's chief financial officer, in several energy partnerships.
An unidentified Enron employee, they said, advised Mr. Lay that she was "incredibly nervous that we will implode in a wave of accounting scandals," and the employee recommended investigations by an independent law firm and an independent accounting firm.
The congressmen also said Enron executives told Vinson & Elkins to conduct a general review of pending accusations to determine if they "raised new factual information that would warrant a broader investigation," and that the executives told the law firm not to "second-guess the accounting advice and treatment provided by" Andersen.
They said the Vinson & Elkins review concluded that the Enron employee's concerns did not warrant a further, widespread investigation given that they raised no facts that had not either been known or disclosed by company officials and auditors. The law firm did express concern that there was a serious risk of "adverse publicity and litigation."
Mr. Bennett called Mr. Tauzin's release of the Enron documents "unfair."
"It is unfair to selectively release documents with their own spin until all the evidence is in," he said. "This is not a way to proceed if you are going to be objective."

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