New congressional investigation of Enron collapse
WASHINGTON (CNN) -- Two key senators on Wednesday announced a new congressional investigation into the collapse of Enron Corp., the largest corporate bankruptcy in history.
"Something was very rotten in the state of Enron," said Sen. Carl Levin, D-Michigan, the chairman of the Senate Permanent Subcommittee on Investigations.
Subpoenas for documents dating back to 1991 will go out within a week to Enron executives, members of its board of directors and its auditors, Arthur Andersen, Levin said.
What is known so far, said Levin, indicates "layer upon layer of conflicts of interest."
Levin's colleague, Sen. Joe Lieberman, D-Connecticut, said the collapse has shaken the public's confidence in the stock market, particularly because so many employees of the once-high-flying energy trading company lost most of the value of their 401(k) retirement accounts.
The investigation is of "great public interest, not partisan interest," said Lieberman, the chairman of the Governmental Affairs Committee, which includes Levin's subcommittee.
The new investigation comes at a time when Enron already is under investigation by the Securities and Exchange Commission, the Justice and Labor departments, and by congressional committees in the House of Representatives.
Lieberman conceded that some top Enron executives and members of its board were advisers to the Bush administration. There is no doubt that the full Governmental Affairs Committee will want to talk to Enron's executives, including President Ken Lay, Lieberman said.
Enron's collapse was as spectacular as it was unexpected. On December 2, Enron, which was once valued at $77 billion, filed for bankruptcy protection. Its stock, which had traded as high as $90 a share, quickly dropped to 26 cents a share.
Lawmakers' will look at how Enron was run -- both by its executives and its board of directors -- as well as how it was audited, Lieberman said.
One question senators want answered, Lieberman said, is whether the advice on energy that Enron managers gave the Bush administration "was self-serving." Another point of inquiry will be what, if anything, federal agencies should have done to prevent Enron's collapse, he said.
Other questions the committees want answered, Lieberman said, are:
-- Why did Enron lead investors to believe it was still strong weeks before its collapse?
-- Why did analysts, who Lieberman said should have known Enron's difficulties, continue to recommend its stock to investors?
-- Why did auditors let Enron overstate profits for four years?
-- Why did Enron's directors allow financial arrangements that hid some of Enron's debt from public view?
-- Why did Enron prevent employees from selling Enron stocks in their 401(k) plans while the stock still had some value?
-- Is the Enron case is unique or does its collapse have wider implications for energy deregulation?
The subpoenas will attempt to gather information about the role of Enron's board of directors in the collapse of the company, the appropriateness of the actions of Enron executives and board members, and the board's stock trading, Levin said.
He said the subpoenas will help his investigations committee determine how Arthur Andersen applied accounting rules when it conducted Enron's audits.
Levin called the Enron collapse an "enormous debacle" and said he wants to look into how Enron used off-shore entities, special entities, and limited partnerships to assume its debts, thereby making Enron look like a much stronger company than it was.
What senators want to know, said Levin, is whether new laws and regulations are needed to prevent another collapse or whether "laws and regulations were violated" in Enron's collapse.
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