On Friday, the White House ordered a review of $70 million worth of federal contracts with both Enron and its auditing firm, Arthur Andersen – to determine whether the firms are worthy of government business. Budget director Mitch Daniels noted, in a letter to the General Accounting Office, that charges of document shredding, manipulative accounting practices and other activities “could reflect poorly’ on the companies and their ability to meet government ethics standards.
Earlier in the week, the Department of Labor said that the transaction blackout Enron imposed on its retirement plan participants was being examined to see if the beleaguered Houston energy trader committed any wrongdoing (see DoL Inquiry Focuses on Participant Trading Blackout ).
Speak No Evil
David Duncan, former head of the Enron audit team at Arthur Andersen and subsequently dismissed by the accounting firm, appeared before the House Energy Committee (see Enron Hearings Proliferate on Hill ). However, Duncan exercised his Fifth Amendment right to avoid self-incrimination – and earned an early dismissal from the hearing after his attorney made it clear that would be his response to all questioning.
Meanwhile, Andersen now says it will spend at least $30 million to recover, sort and manage as many as 10,000 back-up tapes that could contain computer files and e-mails related to its role as auditor for Enron. A federal judge stepped in during the week to stop the shredding of Enron-related documents by Arthur Andersen LLP (see Shredding Stops, Depositions to Start in Enron Case ).
Tale of the Tape
Adding fuel to the legislative fires was the release of a transcript of a meeting held via the Enron intranet on September 26, 2001 – “the clearest evidence yet that Mr. Lay broke faith with his employees,” according to Eli Gottesdiener, head of The Gottesdiener Law Firm, which has filed suit against Enron and others involved to recover some $1 billion in Enron workers’ retirement savings. During the meeting Enron Chairman and CEO Kenneth Lay was encouraging workers to buy more stock just weeks before the bottom fell out (see Lay Lauds Enron Prospects in September Employee Meeting ).
Leaders of the House Energy and Commerce wrote to former Enron CEO Kenneth Lay asking for information on his sales of Enron stock. Lay, who resigned as CEO last week, has agreed to testify at a Senate Commerce subcommittee hearing on February 4.
Former Enron Chief Executive Officer Jeffrey Skilling and former Chief Financial Officer Andrew Fastow, have not yet responded to the subcommittee’s request, according to panel chairman Senator Byron Dorgan (D-North Dakota).
Money manager Alliance Capital Management defended its actions in continuing to invest in Enron while the energy trading firm was sliding into bankruptcy. “Over the past few months, even as the share price declined, the basic business appeared to be unaffected and standing alone could more than justify the lower price of the stock,’ Alliance executive Alfred Harrison wrote in a December 5 letter to Florida pension officials, just after the energy trader filed for bankruptcy, according to the Associated Press.
The Florida State Board of Administration, which reportedly lost some $306 million in the Enr