Enron Emails Shed Light on Blackout

Over the weekend, Representative Henry Waxman (D-California) asked Lay to respond this week to a series of questions relating to email messages sent to Enron workers last August. 

Waxman, the senior Democrat on the House Government Reform Committee, said he received copies of the emails as part of his investigation of the collapse of the troubled energy-trading firm.  Waxman, whose state was caught in an energy crunch a year ago, has been a vocal critic of the energy-trading firm and the White House’s energy task force.

On Saturday, Waxman asked Lay to verify whether he sent the e-mails and, if so, whether he was aware at the time of Enron’s ‘financial vulnerabilities.’  The text of the emails was also released by Waxman’s office. 

Misleading Message?

In an August 14 email, the Enron CEO reportedly said the firm’s growth ‘has never been more certain.’  The email went on to say ‘Our performance has never been stronger; our business model has never been more robust. … We have the finest organization in American business today.’ 

That was just two months before the firm’s financial problems surfaced – and on the day that former Enron CEO Jeffrey Skilling resigned – after just six months with the firm.  Waxman expressed concerns that Lay might have known that the firm was in trouble at that time, rather than issuing a mere message of assurance to workers.

‘If it is true that you sent these e-mails, then it appears that you misled your employees into believing that Enron was prospering and that its stock price would rise,’ Waxman wrote in his letter to Lay.

Second Opinion

Just two weeks later, a second email announced the details of an employee stock option program and referenced confidence about ‘a significantly higher price’ for the stock of the energy trader in the future.  The email, which carried Lay’s return address, offered a stock grant of $36.88/share.  On Friday, Enron closed at 68 cents a share.

Waxman also asked Lay to provide records of Enron communications assessing the value of Enron’s stock price or financial condition, as well as the decision to ‘prevent participants in Enron’s 401K plan from accessing their retirement accounts and selling their plummeting Enron stock.’

Solid Support

However, on Saturday, Enron spokesman Mark Palmer told the Associated Press that the company was solid in August and that financial problems didn’t become clear until later. The Enron spokesman said problems with the partnerships were brought to light ‘as the result of our investigation. We found there were accounting problems with one of those partnerships, and we fixed that by restating those earnings and that was not knowledge we had in August.’

On October 16, the company acknowledged hundreds of millions of dollars in third-quarter losses and a billion-dollar writedown of its equity. Going back to 1997, the company had kept huge amounts of debt off the company’s books in partnerships that had been set up by Enron executives, who in turn collected millions of dollars from the partnerships.

Waxman has an Enron Tip Line on his web site at http://www.house.gov/waxman/index.htm.