- Obama shortens sentence of inmate from Cape (1/19/17)9
- Two subjects of interest in 1992 homicide to take polygraph tests (1/15/17)8
- Business notebook: Jackson salon owner also opens a clothing store (1/16/17)
- Area hospitals hope a box helps prevent infant deaths (1/19/17)6
- Cape SportsPlex contractor offers a look at the project (1/15/17)14
- Meat-processing plant faces $70K penalty for Clean Water Act violations (1/17/17)4
- Southeast to lose $3.5 million from state in budget cuts (1/18/17)21
- Local students to perform with choir at inauguration (1/19/17)3
- Subjects of interest in 1992 killing take polygraph tests; results not revealed (1/18/17)2
- Governor cuts $146 million, colleges take hit (1/17/17)
Blunt Enron executive willing to testify
WASHINGTON -- Enron executive Sherron Watkins warned Chairman Kenneth Lay on Oct. 30 that "We need to come clean" and disclose the heavy financial losses from the company's complex web of partnerships.
Watkins' warning came a little more than a week before the company reported the huge losses, which prompted an investigation by federal regulators. Within a month, the big energy-trading company collapsed into bankruptcy.
Watkins' memo outlining her appeal to Lay was released Wednesday by a congressional panel investigating Enron.
Watkins is to testify today before a House investigative subcommittee about her efforts to bring the company's accounting problems to light. Lay has refused to testify before Congress, invoking his Fifth Amendment privilege against self-incrimination.
Watkins first alerted Lay in August to potential "accounting scandals."
In the memo she gave Lay in October, Watkins said Lay should "admit that he trusted the wrong people."
"He relied on ... Skilling, as well as ... Fastow and ... Causey to manage the details," Watkins wrote.
Jeffrey Skilling was Lay's handpicked successor for chief executive officer, Andrew Fastow was the chief financial officer who ran the partnerships and Rick Causey was the chief accounting officer.
Warned of problems
In her Oct. 30 meeting with Lay, Watkins told investigators, the chairman promised her he would fire longtime auditor Arthur Andersen and the Vinson & Elkins law firm. Lay reversed himself the next day, telling Watkins a special committee would be established within the company to investigate.
Watkins told investigators in a four-hour meeting Wednesday "how her efforts to raise red flags were ignored," said Ken Johnson, spokesman for the House Energy and Commerce Committee. Watkins said "she literally was shocked to learn that nobody seemed to care," according to Johnson.
Fastow and Causey invoked their constitutional right and refused to answer lawmakers' questions last Thursday.
Federal regulators, meanwhile, ordered a nationwide investigation into wholesale power and natural gas markets Wednesday, focusing on whether manipulation by Enron or other energy traders caused soaring price in the West a year ago.
Pat Wood, chairman of the Federal Energy Regulatory Commission, said the agency would conduct "a full-bore investigation" of both physical energy transactions and financial trades such as those dominated by Enron's online trading division before the company sank toward bankruptcy.
Wood said in an interview that the investigation could take as long as six months and, while focusing on trading activities of Enron, would include wholesale gas and power trades of other energy companies as well.
After the staff findings, the commission will decide whether to start a second round of investigations into whether to require changes in long-term power contracts "whose prices may have been influenced by any inappropriate Enron activities," said Wood.
A memo obtained by Senate investigators, meanwhile, illustrates Enron's quest for influence and its desire to have an effect on accounting rules.
The Feb. 23, 2001 memo, written by Enron lead auditor David Duncan to his colleagues at the Arthur Andersen firm, says that former Federal Reserve chairman Paul Volcker had asked then-Enron chairman Kenneth Lay for an Enron contribution of $500,000 over five years to the International Accounting Standards Board.
The board is one of the industry-funded entities that administer accounting rules. Duncan wrote that Enron chief accounting officer Rick Causey was inclined to favor an Enron contribution "given Enron's desire to increase their exposure and influence in rule-making."
However, according to Duncan, Causey also "is interested in knowing whether these types of commitments will add any formal or informal access to this process."
Volcker recently was brought in by Andersen to lead an effort to revamp the big accounting firm's business practices.