WASHINGTON – A GOP House committee chairman is publicly accusing Enron executives of criminal wrongdoing in the firm's investment, accounting and business practices.
"This investigation has found substantial evidence of illegal activity," Rep. Bill Tauzin, R-La., chairman of the House Energy and Commerce Committee, said Wednesday during a hearing on accounting industry regulations.
Referring to transactions with partner companies whose only assets were shares in the collapsed energy trading firm, Tauzin said executives lied about the values of their partners.
"This was not a hedging transaction. Enron was merely issuing shares and calling the issuance earnings. This clearly violated existing law and the most basic norms of corporate behavior," Tauzin said.
On the policy front, Labor Secretary Elaine Chao urged lawmakers to pass President Bush's proposal to revamp pension laws and strengthen retirement account protections for millions of workers.
Bush is asking Congress to give workers greater flexibility to diversify their company savings accounts, in hopes of preventing another Enron-style meltdown. Thousands of Enron employees lost their retirement savings as the company stock plummeted and they were barred from selling it from their investment accounts.
"We must strengthen the confidence of the American workforce that their retirement savings are secure," Chao testified at a hearing by the House Committee on Education and the Workforce. "We must accomplish this without unnecessarily limiting employers' willingness to establish and maintain plans for their workers or employees' freedom to direct their own savings."
Rep. John Boehner, R-Ohio, the committee's chairman, said the Enron debacle "has provided tragic confirmation of the need for modernization of America's pension laws."
However, he cautioned, Congress shouldn't go too far and make changes that would discourage employers from continuing to contribute company stock.
Rep. George Miller of California, the committee's senior Democrat, said the Enron case shows how workers' retirement savings can be jeopardized if employees' rights and protections are inadequate. "Today's outdated pension rules are putting employee nest eggs at risk," he said.
Although some changes in pension laws are needed, the system is in fact a great success story, Chao claimed.
The president's plan also would require employers to give workers quarterly statements with detailed information on their accounts and their rights to diversify holdings, Chao noted.
Chao spoke as subpoenas multiplied and hearings mushroomed in Congress' investigation into the collapse of Enron Corp., a once-powerful company transformed into a symbol of corporate failure.
More Disclosures, Less Greed
Across the Capitol, the Senate Judiciary Committee heard testimony from legal and labor experts on how to prevent similar future scandals. Proposals included requiring more disclosure from accountants and capping the amount of money that bankrupt corporations can shield from creditors.
Such changes would require vast revisions to bankruptcy and other laws, and there was disagreement early in the hearing over how best to do that. "You can't legislate against greed, but you can stop greed from succeeding," said Sen. Patrick Leahy, D-Vt., the panel's chairman.
Washington state Attorney General Christine Gregoire told the panel that Enron's conduct amounted to "a perfect storm" that rained financial loss and fraud on thousands of investors.
"They assumed the seventh largest company in America was playing by the rules," Gregoire said. "In the end, they found themselves ripped off just like the naive person who lost money in a pyramid scheme."
On Tuesday, Sen. Joseph Lieberman, D-Conn., announced plans to issue a subpoena to get information about bonuses paid to Enron executives in the run-up to its Dec. 2 bankruptcy filing. "The thought of employees sustaining huge losses while executives were able to sell stock for millions is infuriating," Lieberman said.
Lieberman spoke after a laid-off worker tearfully described losing $40,000 from her retirement account last fall as Enron slid toward collapse.
Enron's human resources executives said employees were frozen out of their accounts for 11 trading days while the company switched 401(k) plan administrators.
As the lockout period approached and Enron's stock continued to plummet, Enron managers considered delaying the switch and the lockout period so employees would not be frozen out of their accounts.
"We considered postponing, but found it was not feasible to notify more than 20,000 participants in a timely fashion," Mikie Rath, Enron's benefits manager, told the Senate Governmental Affairs Committee on Tuesday.
An employee "told me my timing was horrible, which I agreed with," Rath said.
Enron's stock peaked at $82 a share on Jan. 26, 2001. It was selling for $15.40 at the close of trading on Oct. 26, the day the lockout began, and had fallen to $9.98 on Nov. 13, the day it ended.
Also Tuesday, Joseph Berardino, chairman of the accounting firm Arthur Andersen, drew the wrath of House members over Andersen's handling of Enron and the shredding of documents.
"You have squandered the integrity of your company," Rep. Gary Ackerman, D-N.Y., told him.
Berardino's response to the criticism: "At the end of the day, we do not cause companies to fail."
Senate Committee Approves Lay Subpoena
As no less than four congressional panels met on the Enron debacle, the Senate Commerce Committee approved a subpoena for Kenneth Lay, the former head of Enron who canceled plans to appear voluntarily Monday. "We have no choice," said Sen. Byron Dorgan, D-N.D.
Rep. Michael Oxley, head of the House banking committee, signed a subpoena for Lay to appear before his panel on Feb. 14, two days after the Senate appearance.
Lay's attorney Earl Silbert dismissed any suggestion that Lay was "making himself scarce" to avoid investigators.
Lawmakers predicted Lay would invoke his Fifth Amendment right against self-incrimination when he appears.
A dozen committees are investigating Enron, along with the Justice Department and Securities and Exchange Commission. The energy-trading company has deep political ties in Washington, and politicians in both parties have scrambled to distance themselves from Enron.
The Associated Press contributed to this report.
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