Rating Firms Say Enron Misled Them

Officials of Wall Street credit-rating companies told Congress on Wednesday that Enron executives misled them about partnerships used to conceal massive debt. Senators criticized the firms for not more closely questioning Enron’s finances.

Two of the officials said Enron’s former chairman, Kenneth L. Lay, called them when the energy trading company was seeking a higher credit rating.

One reported calls to his agency from former Clinton administration Treasury Secretary Robert E. Rubin, a top executive of Citigroup, one of the banks that lent hundreds of millions of dollars to Enron, and from Richard Grasso, chairman of the New York Stock Exchange.

Nothing came of the calls, said John Diaz, a managing director of Moody’s Investors Service, during testimony before the Senate Governmental Affairs Committee.

Leah Johnson, a spokeswoman for Citigroup, said later that investment bankers at Citigroup might have tried to include Rubin in a call to Moody’s, but he was never connected.

Lawmakers and regulators are examining why the big credit-rating companies, such as Moody’s, Standard & Poor’s and Fitch Ratings, maintained high ratings for Enron until a few days before its bankruptcy filing Dec. 2.

“We now know that material information was missing” and that Enron failed to disclose the existence of three of the partnerships, Diaz testified. Furthermore, he said, “Much of the information that was provided was inaccurate.”

The Securities and Exchange Commission also is examining the role of the credit-rating firms as it pursues a civil investigation of Enron and its former auditor, the Andersen accounting firm.

At a separate hearing before the House Financial Services Committee, SEC Chairman Harvey L. Pitt urged lawmakers to delay passing any bill that would bar auditors from offering consulting services to clients.

Pitt, in detailing his views for the first time, staked out a position at odds with Republican and Democratic lawmakers as well as business and accounting leaders, who favor some new constraints on consulting by accounting firms.

Pitt, a Republican who represented the accounting industry as a lawyer in private practice, called for Congress to wait until an SEC conflict-of-interest rule adopted in November 2000 is phased in before considering new consulting restrictions on auditors.

“The SEC, 18 months ago under my predecessor, adopted a series of rules to define what could be done and what could not be done,” Pitt told the committee. “I believe that those rules should be given a fair chance to see if they solve the problem or not.”

House Financial Services Committee Chairman Michael G. Oxley, an Ohio Republican, has proposed barring auditors from doing technology and internal-audit consulting for clients.

Bills sponsored by Democrats would stop all or nearly all consulting services.

Associated Press and Bloomberg News were used in compiling this report.