Panel Accuses Enron’s Lawyers of a Cover-Up
U.S. lawmakers accused Enron Corp.’s lawyers Thursday of covering up an employee’s allegations that the world’s largest energy trader hid debt and losses in partnerships before its financial collapse last year.
Members of a congressional panel investigating the largest corporate bankruptcy in U.S. history questioned why Enron limited the lawyers’ inquiry into Vice President Sherron S. Watkins’ allegations that many transactions were improper and benefited Chief Financial Officer Andrew S. Fastow.
They asked why Enron told its lawyers at Vinson & Elkins not to examine the transactions or auditor Andersen’s accounting decisions.
“In what ways would your preliminary investigation look different than a cover-up?” asked Rep. James C. Greenwood, a Pennsylvania Republican who heads the House oversight and investigations subcommittee.
“My integrity is not for sale,” former Enron general counsel James V. Derrick Jr. said. “I wouldn’t participate in a cover-up.”
Joseph C. Dilg, Vinson & Elkins’ managing partner, acknowledged that the law firm didn’t interview investment bankers Watkins identified who could support allegations that Fastow was pressuring Deutsche Bank, Merrill Lynch & Co. and other firms to help underwrite the partnerships he managed.
Dilg said the matter was dropped when Fastow denied allegations that he threatened to cut investment banks out of future Enron business if they didn’t invest in the partnerships.
“Didn’t that raise any red flags with you?” Greenwood asked. Dilg said the firm didn’t interview people outside Enron because the August resignation of Enron President Jeffrey K. Skilling had caused “a great deal of speculation in the market.”
“We were trying to develop the facts that we could by talking with people inside the company so as not to create lots of speculation and rumors,” Dilg said.
In other developments, a House committee passed legislation Thursday to tighten pension laws, the first action on any of the bills being considered to prevent the kind of problems brought to light by Enron’s collapse.
The bill, approved 36 to 2 by the House Ways and Means Committee, adopts several principles outlined by President Bush, such as requiring notice of 30 days to participants in 401(k) plans to temporarily suspend account activity and mandating that participants get quarterly account statements instead of yearly.
The bill imposes an excise tax penalty of $100 per person for failing to comply with the notice requirements. The maximum would be $500,000 a year.
The pension bill probably will be merged with other proposals awaiting action in other House committees, and the House could consider a final version next month.
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Bloomberg News and Associated Press were used in compiling this report.
