Enron Evidence Said To Implicate Treasury Secretary O'Neill
Citizen.org
1-20-1
WASHINGTON, DC - Public Citizen today called on Treasury Secretary
Paul O'Neill to explain evidence indicating that he helped Enron
continue hiding information about its financial condition and took
actions enabling it to funnel potentially billions of dollars
belonging to shareholders and employees into offshore tax havens.
In a letter to O'Neill, Public Citizen President Joan Claybrook said
she is "deeply concerned" about O'Neill's actions. She asked the
secretary to provide detailed information about his communications
with Enron executives and Bush administration officials about the tax
havens.
"The secretary owes the public an explanation," Claybrook said. "His
actions have created a tremendous appearance of impropriety. He has a
duty to taxpayers, Enron shareholders and Enron employees to clarify
this matter."
In 1998, the Clinton administration began making moves to crack down
on countries whose lax banking regulations permit U.S. companies to
hide money in offshore tax havens. Clinton threatened strict economic
sanctions on all nations with lax banking regulations, effective July
2001, in an effort to create a global trend toward increased
financial transparency.
But on Feb. 17, 2001, O'Neill announced that the Bush administration
was going to review the matter, effectively delaying it. As a result,
Enron and other companies could continue to hide money in the Cayman
Islands and other offshore accounts. Enron has 874 subsidiaries
registered in the Cayman Islands and other nations with weak bank
disclosure laws.
On Nov. 27, 2001, O'Neill's office announced that according to an
agreement with the Cayman Islands, that nation would not have to
tighten its banking laws until 2004. That would give enough time for
companies to move their assets and destroy their records.
O'Neill's efforts must be viewed in the context of the more than $1.1
million Enron contributed to Bush's presidential campaign and
inauguration, Claybrook wrote. She noted that O'Neill's
responsibility is to collect owed taxes -- not to facilitate tax
avoidance -- and that if Enron and other companies are hiding money
in the Cayman Islands, he has an obligation to end that abuse.
Public Citizen first raised questions about the offshore tax havens
in a report about Enron issued in late December, Blind Faith: How
Deregulation and Enron's Influence Over Government Lotted Billions
from Americans.
In the letter, Public Citizen asks O'Neill to answer detailed
questions about his decisions regarding the tax havens; provide a
comprehensive list of his contacts with Enron executives, President
Bush, Vice President Dick Cheney and their staffs about the issue;
explain the extent of his knowledge about tax havens being used by
terrorists to hide money; explain why he took the steps; and more.
http://www.citizen.org/pressroom/release.cfm?ID=1000
*****
Monday January 21 7:39 PM ET
Enron Probing Document Destruction
By PETE YOST, Associated Press Writer
WASHINGTON (AP) - Enron is looking into the reported destruction of
documents that allegedly took place at its Houston headquarters after
the federal government began investigating the company, an attorney
for the bankrupt energy giant said Monday night.
In an on-air interview with ABC News, a former Enron executive,
identified as Maureen Castaneda, said the shredding of documents took
place in an accounting office on the 19th floor.
Castaneda displayed one box of the shredded material which ``I
got ... when I was leaving work to basically use ... for packing
material.
``There were ... a lot more than this,'' she said, standing next to
the box. She said some of the shredding may have occurred as recently
as this month.
Castaneda said the destruction began after Thanksgiving and continued
to at least last week.
The Securities and Exchange Commission began looking into Enron in
mid-October.
``We are investigating the circumstances of the reported destruction
of documents,'' Washington attorney Robert Bennett, who is
representing Enron, said in a statement.
``In October 2001 the company issued several directives to all Enron
employees worldwide that all relevant documents should be preserved
in light of pending litigation,'' Bennett added. ``If anyone violated
those directives, they will be dealt with appropriately.''
The reported shredding at Enron follows revelations over the past
week and a half about document destruction at the Arthur Andersen,
Enron's accounting firm.
Some of the shredded Enron paper displayed in the ABC story contained
the word ``Jedi,'' one of the entities involved in an array of off-
the-books partnerships which kept hundreds of millions of dollars in
Enron debt off the company's balance sheet for several years.
Plaintiffs' attorney William Lerach, who is suing Enron's board and
officers, said he plans to take the box of shredded documents to
federal court.
Enron's inquiry into shredding at its headquarters came as
congressional investigators pressed for public testimony by an
Andersen auditor fired over the destruction at the accounting firm.
``This whole sorry affair keeps getting uglier by the minute, and
we're determined to get to the bottom of it.'' said Ken Johnson,
spokesman for the House Energy and Commerce Committee, which has been
investigating the destruction of documents at Andersen.
``Making bad business decisions is one thing, but trying to cover up
bad business decisions is another,'' said Johnson when told of the
reported shredding at Enron.
Fired Andersen auditor David Duncan told investigators that Andersen
had ample information when it evaluated the controversial partnership
arrangements at Enron that were a big factor in its bankruptcy.
Duncan ``did not sit there and say 'Enron hid all this information
from us and therefore we couldn't count right,''' said Rep. Jim
Greenwood, R-Pa., who heads a House panel investigating the collapse.
``It was more of ... 'we made mistakes.'''
Rather than giving a ``mea culpa,'' Duncan gave ``a wea culpa; he did
not point the finger at Enron,'' Greenwood said Monday,
characterizing the comments the fired auditor made last week to
congressional investigators.
Duncan's lawyers sought to delay his public testimony, scheduled for
Thursday before the House Oversight and Investigations Subcommittee,
arguing that Duncan needs more time to prepare.
But Greenwood, who chairs the subcommittee, rejected the request,
saying Duncan ``doesn't really need to recall every detail of what he
did for Enron. We're focused on the destruction of documents. We'll
subpoena him if we have to.''
Andersen chief executive Joseph ``Berardino is saying that the
company found fault with Duncan's destruction of documents. He
(Duncan) needs to defend himself,'' said Greenwood.
If Duncan testifies, the hearing will pit him against Andersen's
legal department and company management in Chicago.
Appearing Sunday on NBC's ``Meet the Press,'' Berardino criticized
Duncan and defended attorney Nancy Temple, who advised the Houston
office by electronic mail on Oct. 12 about the firm's document
destruction policy. That was just four days before Enron announced
more than $600 million in third-quarter losses and took the first
step in disclosing details of the partnerships.
Berardino said Duncan displayed ``at the least ... extremely poor
judgment'' for his part in discarding the documents in October and
November.
Berardino said Temple reminded the Houston office of the policy to do
away with some documents ``because accountants are pack rats ... We
save lots of stuff that's not relevant.''
But Duncan told investigators ``it was unusual'' for a company lawyer
to emphasize the document-destruction policy.
Meanwhile, a lawyer for Kenneth L. Lay, Enron's chairman and chief
executive, said Lay disposed of millions of dollars in Enron stock
before the company's collapse last year because he needed to raise
cash to repay loans, not because of concerns about the health of his
company.
Attorney Earl J. Silbert said Lay had put up shares of his Enron
stock as collateral for other investments. On at least 15 occasions
between February and October last year, Lay returned shares to the
company to repay $4 million he had received through a credit line.
However, Silbert also said that Lay held onto some stock, detailing
one transaction in which Lay exercised options to purchase 68,000
shares of Enron stock on Aug. 21.
``He continues to hold that stock today,'' Silbert said.
In other developments:
-The State Department disclosed that Secretary of State Colin Powell
referred to Enron's problems regarding a power plant in India in a
discussion with India's foreign minister last April 6. Enron was
trying to collect a $64 million debt on the project. According to the
State Department, Powell said failure to resolve the matter could
have a serious deterrent effect on other investors.
-New Jersey's two U.S. senators, Democrats Robert Torricelli and Jon
Corzine, urged the federal government to inspect Enron's natural gas
pipelines to ensure against accidents. Enron spokesman Mark Palmer
said ``our pipelines are inspected continuously and the hardworking
men and women who have devoted their lives to the safe operations of
these pipelines would have it no other way.''
-Sen. Barbara Boxer, D-Calif., said accounting firms should be barred
from providing management consulting services to the companies they
audit. ``These conflicts have led to the kind of hide-the-debt shell
game that took place at Enron,'' said Boxer, who will introduce a
bill to ban the dual role.
-Consumer advocate Ralph Nader said a special counsel should
investigate Enron rather than the Justice Department's criminal
division. Nader also said Bush administration officials should have
alerted the Justice Department and the Securities and Exchange
Commission last fall when contacted by Enron Chairman Ken Lay about
the company's growing problems.
*****
Enron, Chase, Citigroup and Bush (The right relationship is
everything)
1/18/02
Robert Lederman
robert.lederman@worldnet.att.net
Chase, Citigroup, Bush and ENRON (The right relationship is
everything)
Hey, what a surprise. the most corrupt President (Bush) is linked to
the most corrupt corporation (Enron) which is financed by the
Rockefeller's two main banking groups (JP Morgan/Chase and
Citigroup). Bush gets all his ideas (as does Giuliani) from Chase
Banks' Manhattan Institute, founded by CIA director William Casey...
who funded, armed and trained bin Laden and the Afghan terrorists we
are fighting. Ken Lay, Enron CEO and Bush's top contributor is a
member of David Rockefeller's Trilateral Commission. It's a small
world after all!
See http://baltech.org/lederman/ for details on the
Chase/Bush/Nazi/CIA connection behind much of modern US history. None
of these connections are allowed to be reported on in US newspapers.
For example, name one paper since 9/11 that has reported that David
Rockefeller built the WTC. Too unimportant a detail to mention? -
Robert Lederman
--------
London Financial Times
Editorial comment: Enron and the role of the banks
Published: January 16 2002 20:34 | Last Updated: January 16 2002
20:38
"The more that is learnt about the collapse of Enron, the wider the
ramifications become. Failures in the audit process and the
vulnerability of many employees' pensions have now been joined by
concerns over the actions of the banks. The Enron debacle has
highlighted fundamental weaknesses in the US system of financial
regulation, which has failed to keep pace with changes in the
industry.
The latest concern centres on the role of JP Morgan Chase, one of
Enron's two main bankers. It was involved in an offshore company used
by the energy trader to move risk off its balance sheet. The
disclosure of the existence of such off-balance-sheet arrangements
accelerated the downward spiral in the company's share price and led
to its eventual bankruptcy.
The Securities and Exchange Commission is now investigating whether
JP Morgan has also misled its shareholders by making loans to Enron
in the form of oil and gas trading contracts. Insurers who face a
claim from the bank on surety bonds that guaranteed the contracts
allege that they were loans dressed up as trades to keep them off the
bank's balance sheet. JP Morgan has already revised its estimate of
its Enron exposure from $900m to $2.6bn (£620m to £1.8bn.)The SEC
probe is adding to the criticism of risk control procedures at the
bank, formed in 2000 by the merger of Chase Manhattan with the
venerable House of Morgan.
JP Morgan and Enron's other lead bank, Citigroup, are the largest of
a new generation of banking groups formed by combining commercial
banks and investment banks to provide a one-stop shop for big
corporate clients. The theory is that companies will give the
lucrative investment banking mandates for mergers and acquisitions
advice, share issues and bond finance to the banks that put loans on
the table.
Enron was, until the past few weeks, the sort of case study used to
justify the creation of investment banks with big balance sheets. By
being prepared to make hefty loans to Enron, Citigroup and JP Morgan
beat less well endowed competitors in last year's race to advise it
on restructuring and refinancing options. They worked hard -
unsuccessfully - to persuade the credit rating agencies not to
downgrade Enron.
That they are able to do both investment banking and commercial
banking is a consequence of the repeal of the Glass-Steagall Act that
had separated the two since the 1930s. It was meant to stop conflicts
of interest that had contributed to the Great Crash of 1929 but
proved increasingly unworkable as commercial banking, investment
banking and the insurance industry converged.
The Gramm-Leach-Bliley Act that repealed the old legislation in 1999
did nothing to rationalise financial regulation, however. The old
regulators continued to do their work - the SEC as securities
industry watchdog, the Federal Reserve on banking and the Commodity
Futures Trading Commission on derivatives. The result is that no
single regulator has an overall view of large financial
conglomerates, leaving them free to organise their businesses in ways
that have consequences for clients as well as investors. The
weaknesses of this approach will have to be dealt with when the dust
has settled around Enron."
---------------------------------
Check out Citigroup's board of directors
>From : http://www.responsiblelending.org/citidir.htm
Citigroup, Inc. Board of Directors
C. Michael Armstrong, Chairman and CEO, AT&T
AT&T, 32 Avenue of the Americas, New York, NY 10013 tel 212-387-5400
Alain J. P. Belda, President and CEO, Alcoa
Alcoa, 201 Isabella Street, Pittsburgh, PA 15212 tel 412-553-4545
Kenneth J. Bialkin, Partner, Skadden Arps Slate Meagher & Flom
Skadden Arps Slate Meagher & Flom, Four Times Square, New York, NY
10036 tel 212-735-2130 fax 212-735-2000 kbialkin@skadden.com
Kenneth T. Derr, Chairman and CEO (retired), Chevron
Chevron, 575 Market Street, San Francisco, CA 94105
John M. Deutch, Professor, M.I.T.; former Director of CIA
M.I.T. Dept. of Chemistry, Room 6-208, 77 Massachusetts Ave.,
Cambridge, MA
02139, tel. 617-253-1479 fax 617-258-5700 jmd@mit.edu
Ann Dibble Jordan, Consultant
2940 Benton Place, Washington, DC 20008
Robert I. Lipp, Citigroup
Citigroup Inc., 399 Park Avenue, New York, NY 10043 tel 212-559-1000
Reuben Mark, Chairman and CEO, Colgate-Palmolive
Colgate-Palmolive, 300 Park Avenue, New York, NY 10022 tel 212-310-
2000
Michael T. Masin, President and Vice Chairman, Verizon Communications
Verizon Communications, 1095 Avenue of the Americas, New York, NY
10036 tel 212-395-2121
Dudley C. Mecum, Managing Director, Capricorn Holdings
33 Khakum Wood Road, Greenwich, CT 06831
Richard D. Parsons, President, Time Warner
Time Warner, 75 Rockefeller Plaza, New York, NY 10019 tel 212-484-8000
Andrall E. Pearson, Chairman and CEO, Tricon Global Restaurants
Tricon Global Restaurants, 1441 Gardiner Lane, Louisville, KY 40213
Tel. 502-874-8300
Robert E. Rubin, Chairman of Executive Committee, Citigroup
Citigroup Inc., 399 Park Avenue, New York, NY 10043 tel 212-559-1000
Franklin A. Thomas, former President, Ford Foundation
TFF Study Group, 595 Madison Avenue, 33rd Floor, New York, NY 10022
tel: 212-753-3200, fax: 212-753-6703, email f.thomas@tffsg.org
Sanford I. Weill, Chairman and CEO, Citigroup
Citigroup Inc., 399 Park Avenue, New York, NY 10043 tel 212-559-1000
Arthur Zankel, General Partner, Zankel Capital Advisors
20 E. 68th Street, New York, NY 10021 212-734-4173
Gerald R. Ford, former President of United States
P.O. Box 927, Rancho Mirage, CA 92270
*****
BusinessWeek.com
1-18-2
Enron's Hero - With A Smoking-Gun Letter
By Wendy Zellner, with Stephanie Forest Anderson, in Dallas and with
Laura Cohn in Washington
http://www.businessweek.com
Sherron Watkins' memo to CEO Ken Lay spoke volumes about the
company's behavior. So did the higher-ups' tepid response
At last, someone in the sordid Enron scandal seems to have done the
right thing. Thanks to whistle-blower Sherron S. Watkins, a no-
nonsense Enron vice-president, the scope and audacity of the
accounting mess is becoming all too clear. Her blunt Aug. 15 letter
to Enron CEO Kenneth L. Lay warns that the company might "implode in
a wave of accounting scandals." And now that her worst fears have
been realized, it is also clear that Watkins' letter went far beyond
highlighting a few accounting problems in a handful of off-balance-
sheet partnerships. Watkins' letter lays bare for all to see the
underbelly of Enron's get-rich-quick culture.
Watkins, 42, a former Arthur Andersen accountant who remains Enron's
vice-president for corporate development, put her finger on the rot:
top execs who, at best, appeared to close their eyes to questionable
accounting maneuvers, a leadership that had lost sight of ordinary
investors and the basic principles of accounting, and watchdogs --
the outside auditors and lawyers whose own involvement may have left
them too conflicted to query the nature of the deals. Perhaps the
question shouldn't be how Enron collapsed so quickly -- but why it
didn't implode sooner.
A REVEALING REPLY
Lay's response to Watkins' complaints is nearly as damning as her
letter itself. Yes, he talked to her for an hour. And, yes, he
ordered an outside investigation. But contrary to Watkins' advice, he
appointed the company's longtime Houston law firm, Vinson & Elkins,
despite the obvious conflict: V&E had worked on some of the
partnerships. And Enron and V&E agreed there would be no "second-
guessing" of Andersen's accounting and no "detailed analysis" of each
and every transaction, according to V&E's Oct. 15 report. The inquiry
was to consider only if there was new factual information that
warranted a broader investigation. V&E declined comment.
Surprise: V&E concluded that a widespread investigation wasn't
warranted. It simply warned that there was a "serious risk of adverse
publicity and litigation." And Watkins' letter reveals the inadequacy
of Lay's response in the months following CEO Jeffrey K. Skilling's
sudden Aug. 14 resignation for "personal reasons." His departure
triggered the letter.
Lay never fully disclosed the partnerships or explained their impact
to investors, even as he vowed there were no accounting issues
and "no other shoe to fall." Even after Enron revealed on Oct. 16 a
$1.2 billion hit to shareholder equity related to the partnerships,
Lay continued to express ignorance about details of these deals and
support for Chief Financial Officer Andrew S. Fastow, who managed and
had stakes in certain partnerships. On Oct. 24, Fastow was removed
from his job and promptly left the company.
TENACIOUS AND COMPETENT
Watkins, an eight-year Enron veteran, is not some disgruntled
naysayer who is easy to dismiss. Her lawyer, Philip H. Hilder, says
she became familiar with some of the partnership dealings when she
worked in June and July in Fastow's finance group. Her position
allowed her to review the valuation of certain assets being sold into
the partnerships, and that's when she saw "computations that just
didn't jibe," says Hilder.
Former executives say the Tomball (Tex.) native was tenacious and
competent. "She wasn't really an alarmist," says one former Enron
employee. Her mother, Shirley Klein Harrington, a former high school
accounting teacher, calls her daughter "a very independent,
outspoken, good Christian girl, who's going to stand up for principle
whenever she can." Watkins had previously worked at Andersen in
Houston and New York and then for Germany's Metallgesellschaft.
At those companies, she befriended Jeffrey McMahon, whom she helped
recruit. Now the CFO at Enron, McMahon "complained mightily" about
the Fastow partnerships to Skilling, Watkins told Lay in the
letter. "Employees question our accounting propriety consistently and
constantly," she claimed. McMahon didn't return calls. Skilling has
denied getting any warnings about accounting.
RED FLAGS
Watkins didn't stop there. Five days after she wrote to Lay, Watkins
took her concerns directly to an Andersen audit partner, according to
congressional investigators. He in turn relayed her questions to
senior Andersen management on the Enron account. It's not known what,
if any, action they took.
Of course, Skilling and Andersen execs shouldn't have needed a letter
and a phone call from Watkins to figure out something was seriously
amiss. Red flags abounded. And Watkins, for one, had no trouble
putting her finger on questionable accounting practices. She wondered
if Enron was hiding losses in off- balance-sheet entities while
booking large profits from the deals.
At the same time, the outside partnerships were backed with Enron
stock -- a tactic sure to backfire when it was falling -- and no
outsiders seemed to have any capital at risk. Was Enron creating
income essentially by doing deals with itself? "It sure looks to the
layman on the street that we are hiding losses in a related company
and will compensate that company with Enron stock in the future," she
wrote.
In the end, Watkins grasped one thing that Enron's too-clever- by-
half dealmakers didn't: Enron's maneuvering didn't pass the smell
test. Even if Enron and its high-priced auditors and lawyers can
ultimately show that they followed the letter of the law, it matters
little. As Watkins herself wrote, if Enron collapses, "the business
world will consider the past successes as nothing but an elaborate
accounting hoax." And that seems destined to become Enron's epitaph.
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