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Financial Collapse of Enron Corp
Subcommittee on Oversight and Investigations
Prepared Statement of The Honorable Billy Tauzin Thank
you Chairman Greenwood. And, once again, allow me to express my gratitude to
you, the ranking member, Mr. Deutsch and my good friend, Mr. Dingell, the
ranking member of the full Committee, for all your cooperation and effort these
past two months: The hard work of the staff, on both sides of the aisle, is
paying off. We
are getting closer to the bottom of the Enron collapse and, I believe, our solid
progress this week will help us tremendously as we determine what happened, and
as we then turn to what we can do to assure something like this doesn't happen
again. I
look forward, this morning, to this second portion of our hearing into the
fraudulent transactions that brought this corporation down. This past Tuesday we
heard a devastating report from the chairman of Enron's own investigative
committee. This report outlined an extraordinary story of self-dealing,
deception, bogus statements, irresponsible management and, indeed, outright
fraud. I
say outlined because Dean Powers' report did not have the ability, as
this Committee does, to compel the production of documents or testimony, and it
was limited in scope. But it certainly reinforced the very troubling information
we've been unearthing in our own investigation. Despite
all the complicated dealings and cross-dealing, and self-dealing, we are
learning, I believe, that what we have before us is a story of simple,
old-fashioned theft - and the inexplicable acts, or lack thereof, that allowed
the crooks to get away and to destroy a company. We
know now that senior Enron employees who controlled these transactions -- Chewco,
LJM1, and LJM2, the Raptors, and so many others - participated in
self-enrichment schemes at the expense of the company and its shareholders.
Yet these schemes could have been stopped with proper oversight by
certain senior executives, a few of whom are before us today. Absent their
taking action, matters could have been put right by the Enron directors, who
were ultimately responsible for the health of the company, and the interests of
the shareholders. But
they didn't step up. They allowed the CFO to work both sides of the
negotiating table. They enabled him to participate in his own risky, high-return
transactions, but effectively insulated him from the risks. This assured his
ability to take away tens of millions of dollars, and ensured that Enron would
be on ever more shaky ground as it insured these risks. They
allowed sweetheart deals - literally, as we've recently discovered - to
take place among senior employees. And they allowed a fraud to be perpetrated on
the shareholders. They told shareholders the company was making money that it
was actually losing so the stock price would remain high, so the senior insiders
could continue to make off with their millions, while the vast majority of
workers would be left holding empty bankbooks. To
be sure, the accountants and legal advisors assisted, wittingly and unwittingly,
in the sham transactions. We'll have opportunity to see how we might resolve
the perverse incentives that allowed this to happen as our investigation
continues. (Our Full committee hearing yesterday certainly helped to shine an
informed light on some of the questions that we must address on that front.) This
morning, however, we have an opportunity to question several of the principals
who could have prevented this collapse; they have a lot to answer for. We also
have a couple of senior officers who attempted to alert those charged with
policing these deals, to no avail. We'll be able to explore why they failed
today. For
example, we have before us Jordan Mintz, current General Counsel for Enron
Global Development. He attempted to get then Enron President and CEO, Jeff
Skilling, to sign deal approval sheets, as was required, but Skilling wouldn't
sign. We can ask Mr. Skilling about that, who's before us today as well. We
have Enron board members and can query them about their oversight of these
transactions. And,
finally, we have former CFO Andrew Fastow and former Managing Director of Enron
Global Finance Michael Kopper, who, any way you look at it, stood at the very
center of these schemes. And we have Richard A. Causey, who was chief accounting
and compliance officer at the time of these deals, and Richard Buy, who was
chief risk officer. These two should have known the risks the company was being
subject to, and also had to sign off on the various transactions. We'd like to ask them a lot of questions, but learned yesterday that they now plan to invoke their Fifth Amendment rights. Even so, this hearing promises to be informative. I look forward to learning more about the people who brought this company down.
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