WASHINGTON – Lawmakers heaped criticism Wednesday on executives of collapsed Enron Corp., saying they enriched themselves through inside trading and slick financial gimmicks while running the energy-trading company into the ground.
Accounting firm Arthur Andersen LLP, Enron's longtime auditor, defended its work for the company but acknowledged that financial reporting practices must change.
As Congress opened its investigation of one of the biggest corporate failures in history, no Enron officials attended the hearing of the House Financial Services subcommittee on capital markets.
Kenneth Lay, the chairman and chief executive who is a friend of President Bush and a big campaign contributor, declined an invitation to appear. He said in a letter that he had to be at Enron bankruptcy proceeding Wednesday.
Enron's swift descent into federal bankruptcy court left countless investors burned and thousands of employees out of work and with decimated retirement savings.
``Many people have been deeply hurt,'' said the subcommittee chairman, Rep. Richard Baker, R-La.
Enron executives were ``just having too much fun,'' he said. They cashed out more than $1 billion in company stock while ordinary employees were barred from selling it from their Enron-heavy 401(k) accounts as share prices plunged, Baker said. Worth more than $80 a year ago, Enron's stock has tumbled to less than a dollar a share.
As a result, many employees were left ``penniless,'' AFL-CIO official Richard Trumka said at the hearing.
Amid the company's strife, nearly 600 employees deemed critical to its operations received more than $100 million in bonuses last month as Enron faced a merger that unraveled and then bankruptcy.
The politically connected company, which gave millions in campaign contributions to Bush's campaign and the Republican Party, was vilified by some Democratic lawmakers for exercising what they said was unwarranted influence over U.S. energy policy.
Houston-based Enron, which only months ago was the nation's seventh-biggest company in revenue, has acknowledged it overstated profits for four years.
The Securities and Exchange Commission, which is investigating Enron and Andersen's auditing of its books, warned Wednesday that all company executives and auditors must use accounting policies that are ``appropriately reasoned.''
``Investors increasingly deserve and demand full transparency,'' the SEC said.
The agency itself faced questioning by some lawmakers of its handling of the Enron case. They asked Robert Herdman, the SEC's chief accountant, why the agency did not become concerned early this year when Enron executives dumped millions of dollars of stock.
The SEC's first action came on Oct. 17 -- a letter to Enron requesting more information after it reported big third-quarter losses, Herdman noted.
He said recent accounting irregularities by big corporations ``may shake investors' confidence in our system of financial reporting and our capital markets.'' Herdman said the SEC plans next year to adopt rules tightening disclosure requirements for companies.
The SEC is examining Enron's use of questionable partnerships that allowed the company to keep some $500 million in debt off its books and let executives profit from the arrangements.
Joseph Berardino, Andersen's chief executive, said the accounting firm ``will have to change ... the accounting profession will have to reform itself. Our system of regulation and discipline will have to be improved.''
Enron also is under investigation by the Justice Department. The Labor Department is looking into Enron's handling of its employees' retirement benefit plans.