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Enron faces congressional prove over its tax returns

Wednesday, January 16, 2002

WASHINGTON -- Enron Corp., which led a lobbying campaign to repeal a corporate tax as it neared collapse, will undergo scrutiny in Congress of its own tax returns to determine if shelters or other practices may have concealed its financial condition.

Repeal of the alternative minimum tax sought by Enron was included by President Bush in an economic stimulus package and passed by the House, which added a provision that would have given Enron a $254 million infusion of cash. The package ultimately failed.

Now, Senate Finance Committee investigators are "interested in whether Enron has been complying with federal tax laws" said the panel's spokesman, Mike Siegel.

Whether Enron used any shelters viewed by the Internal Revenue Service as set up mainly to avoid paying taxes is one key point. Sen. Charles Grassley of Iowa, the top committee Republican, said the issue is "whether Enron used certain tax vehicles that might have masked the company's financial condition."

Enron, the Houston-based energy conglomerate, faces investigations from a growing list of congressional committees, the Justice Department and the Securities and Exchange Commission following its collapse late last year in the nation's biggest corporate bankruptcy. The Finance Committee is one of two congressional panels with access to Enron's tax records.

Lobbying efforts

Even as its failure loomed last fall, Enron maintained a high-profile lobbying effort on a variety of tax issues. Enron led the AMT Coalition for Economic Growth, a business group dedicated to repeal of the corporate alternative minimum tax, which is intended to guarantee that companies pay at least a minimal amount of income taxes.

Bush also pushed for repeal in his economic stimulus package, arguing that the provision hits corporations hardest in down years.

The administration disclosed Tuesday that Enron Chairman Kenneth Lay telephoned Mitch Daniels, director of the White House Office of Management and Budget, in early October to discuss prospects for passage of the stimulus measure.

The two had a general conversation about the legislation and discussed the overall outlook for the economy, said OMB spokeswoman Amy Call. Repeal of the alternative minimum tax was not addressed, she said.

Enron stood to gain handsomely from language added to the stimulus package by Rep. Bill Thomas, R-Calif., chairman of the House Ways and Means Committee. Under the original House-passed bill, billions of dollars in alternative minimum tax credits built up over past years by dozens of corporations would have been immediately redeemed -- handing Enron a $254 million infusion of cash.

Focused on repeal

Several corporate lobbyists say Enron was focused on prospective repeal of the tax, not the immediate refund of past credits. Thomas endured fierce criticism from Democrats for proposing the refunds, which he contended would enable struggling corporations to hire more people or boost investments. Other companies, including IBM and General Motors, would have gotten much larger refunds than Enron.

David Wyss, chief economist at Standard & Poor's Co. in New York, said in any event the money would have done little to help Enron overcome its sinking credit rating and sliding stock price.

"Maybe they could have staved off bankruptcy for another month," Wyss said. "But it would not have solved their problem."

Senate Democrats blocked the Republican stimulus package. A second version, again passed by the House and endorsed by Bush, did not include the alternative minimum tax repeal or the immediate refund.

Enron sought numerous other tax breaks from Congress, according to lobbyist disclosure records. Among them was a five-year extension of a tax credit for electricity generated by wind; Enron is a major producer of wind-generated power.

An Enron affiliate, Enron Wind, provided a sample letter on its Internet site that people could send to members of Congress advocating extension of the credit.

Like the stimulus package, however, extension of the wind credit failed to clear Congress and expired on Dec. 31. Lawmakers of both parties say it will be renewed for at least another year and probably made retroactive to the beginning of 2002.

Enron would also have benefited from provisions of a House-passed energy bill involving oil and gas transmission lines, including tax breaks for certain transmission transactions. Those items would have helped the bottom lines of many other companies, too -- and the bill also languishes in the Senate.


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