Newspaper - Enron kept profits off books during energy crisis

NEW YORK -- Houston-based Enron Corp. used undisclosed reserves to keep up to $1.5 billion in trading profits off its books during the California energy crisis, The New York Times reported.

The reserves, which would have doubled the company's reported profits, were hidden in late 2000 and early 2001, as energy prices soared in California, the newspaper reported in a story to be published on Sunday.

The Times quoted six former managers and executives who handled or reviewed the accounts and who spoke on condition of anonymity.

The former executives said Enron manipulated the reserves to help it report steady profit growth to Wall Street and credit rating agencies.

Spokeswomen for top Enron executives, including longtime chairman Kenneth L. Lay and Jeffrey K. Skilling, the company's president and later chief executive, said last week that they were aware of the reserves but considered them proper.

Skilling spokeswoman Judy Leon siad that money was set aside mainly in credit reserves to insulate Enron from the risk that California utilities could go bankrupt.

"At no time did Mr. Skilling have any knowledge of inappropriate or illegal activity in the reserve account," she said.

The Securities and Exchange Commission and the Justice Department have interviewed witnesses to determine whether the practices violated securities laws by creating a kind of corporate slush fund to doctor quarterly earnings reports, according to people who have been interviewed by investigators.