WASHINGTON – An Arthur Andersen LLP partner was removed from monitoring Enron after he raised repeated objections about some of the energy trading company's financial practices that eventually sent it into bankruptcy, according to documents released Tuesday.
Internal Andersen e-mails detail the strenuous objections of Andersen partner Carl Bass, while handwritten notes by an Andersen executive reveal Enron's unhappiness with him.
"Client sees need to replace Carl," said one of the notes, which were released by the House Energy and Commerce Committee.
According to the documents, Bass questioned the accounting for Enron Corp.'s financial practices in 2000, when Enron wanted to show a $50 million gain on a transaction with Blockbuster Inc.
"Both you and I had expressed some concern about this deal," Bass recounted in an e-mail to a superior in Chicago last year. "The client's proposed accounting nonetheless was sustained."
Some of Bass's most serious objections dealt with special-purpose entities known as the Raptors, which kept hundreds of millions of dollars in debt off Enron's books.
"I will honestly admit that I have a jaded view of these transactions" involving the Raptors, Bass wrote.
"I understood that there was a $100 million loss on an Internet investment that otherwise should have been reported," wrote Bass.
He also wrote: "There appears to be some sort of assertion that I have a `problem' with Rick Causey or someone at Enron that results in me having some caustic and inappropriate slant in dealing with their questions." Causey was Enron's chief accounting officer. He was fired in February.
Some of the memos falsely state that Bass supported aspects of the Raptors, when in fact he didn't. The team of Houston auditors that wrote the incorrect memos amended them last fall with corrected versions that contained Bass's objections.
Recounting his objections about Enron in an e-mail, Bass said he didn't complain to Enron about the Raptors.
"I am perplexed as to how the client even knows I was consulted" about the Raptors "and how they believe I am too caustic and cynical with respect to" them, Bass wrote.
Of another transaction in December 1999, Bass wrote to his superior in Chicago, "I do not know if he knows how much we cannot support this."
Separately, the Overseas Private Investment Corp., a federal agency with financial exposure in the Enron scandal, is asking the Justice Department to look into whether the energy trading company misrepresented its financial condition.
The request could lead to withdrawal of federal support from some of the 10 international projects involving Enron that were approved by the agency between 1992 and 1999.
OPIC says it has $454 million in financial exposure from loans in the Enron debacle and $205 million in exposure from political risk insurance.
On Tuesday, OPIC released a Feb. 25 letter asking the Justice Department to review legal issues involving "any possible misrepresentations by Enron" about its financial condition.
The letter raised the possibilities of a lawsuit, termination of insurance coverage and declaration of default on loan guarantees.
Enron has stakes in power plants backed by OPIC in India, the Philippines, Turkey, Venezuela, Guatemala and other countries.
Sen. Charles Grassley, the ranking Republican on the Senate Finance Committee, asked the Export-Import Bank why it was not asking the Justice Department for a similar inquiry.
The Export-Import Bank is due $512 million from Enron-related projects.
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