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Waxman wants explanation of Enron e-mail

Waxman: An explanation is owed to "thousands of families that are facing financial ruin."  

WASHINGTON (CNN) -- A Democratic congressman investigating the collapse of Enron Corp. demanded Saturday that the company's chairman explain two e-mail messages to employees that talked up the company's prospects, even as it was sliding toward bankruptcy.

In a letter to Kenneth L. Lay, Enron's chairman and CEO, Rep. Henry Waxman, the ranking Democrat on the House Government Reform Committee, also asked for an explanation as to why Enron employees were prevented from selling Enron shares in their 401(k) plan as the energy industry giant's stock plunged.

Waxman, of California, also wants Lay to explain why the chairman continued seeking a $60 million severance package, even after speaking with Treasury Secretary Paul O'Neill about the company's financial predicament. Lay eventually chose not to take the severance package amid a torrent of criticism following Enron's collapse.

"I think it is essential that this information be provided so that there is a clear public accounting of this matter," Waxman wrote. "We all owe that to the thousands of families that are facing financial ruin from the Enron bankruptcy."

Waxman said he obtained the e-mails during his Enron investigation.

The first e-mail under question was allegedly sent by Lay to employees on August 14, 2001, after Jeff Skilling resigned as president and CEO. Lay assumed his duties.

"All of you know that our stock price has suffered substantially over the last few months. One of my top priorities will be to restore a significant amount of the stock value we have lost as soon as possible," the e-mail said. "Our performance has never been stronger; our business model has never been more robust; our growth has never been more certain."

Two weeks later, another e-mail, allegedly sent by Lay to employees who received a stock options grant, said: "One of my highest priorities is to restore investor confidence in Enron. This should result in a significantly higher stock price."

At the time of the second e-mail, Enron's stock price was $37, Waxman said. It closed Friday at 67 cents and has been as low as 12 cents.

In his letter, Waxman demanded to know whether Lay sent the e-mails, and if he did, whether Lay was aware of Enron's financial difficulties at the time.

"If it is true that you sent these e-mails, then it appears that you misled your employees into believing that Enron was prospering and that its stock price would rise," Waxman wrote. "At a minimum, they create the appearance that you misled Enron employees about the value of their investments in Enron and the security of their jobs."

"If this were accurate, it would be a gross betrayal of your employees' trust, as well as possibly illegal conduct," Waxman added.

A spokesman for Enron, who did not want to be identified, said Lay's comments at that time correctly mirrored the company's assessment of itself.

"It is no surprise that Mr. Lay's comments to employees in August would have reflected the same views that the company was expressing publicly at the time," the spokesman said. "That was in fact Enron's view of its condition in August. We had 21 consecutive quarters of earnings growth behind us."

The congressman also requested that Lay provide information regarding Enron's decision to "lock-down" its 401(k) plan on October 17, 2001, the day after the company first revealed its financial difficulties.

The move prevented employees from selling Enron stock in their retirement funds. As a result, many employees saw their retirement savings wiped out as the stock price plunged.




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