Enron: US government opens criminal probe
The US Justice Department has opened a criminal investigation into Enron Corporation, whose employees lost billions when the company barred them from selling plummeting Enron shares from their retirement accounts.
The department has formed a national task force, headed by the criminal division and made up of federal prosecutors in Houston, San Francisco, New York and several other cities, said a Justice Department official.
The US Labour Department and the Securities and Exchange Commission are conducting civil investigations.
Officials at Enron refused to comment on the report.
While ordinary employees were prohibited from selling company stock from their Enron-heavy 401(k) accounts, Enron executives cashed out more than 1 billion dollars (€1.12bn) in stock when it was near its peak.
In addition to retirees and some 4,500 out-of-work employees, countless investors around the country have been burned by Enron’s rapid descent into federal bankruptcy court in recent weeks.
Enron, which was the nation’s seventh-biggest company in revenue and admired by Wall Street as a technological innovator, has acknowledged it overstated profits for four years.
The chief executive of its longtime auditor, Arthur Andersen LLP, told a House hearing last week that the accounting firm notified Enron’s audit committee on November 2 of ‘‘possible illegal acts within the company’’.
Enron, which was formed in 1985 and has 20,000 employees, was once the world’s top buyer and seller of natural gas and the largest electricity marketer in the US. It also marketed coal, pulp, paper, plastics, metals and fibre-optic bandwidth.
One likely focus of the Justice Department investigation: Possible fraud based on Enron’s heavy reliance on off-balance-sheet partnerships which took on Enron debt. The partnerships masked Enron’s financial problems and left its credit ratings healthy so it could obtain the cash and credit crucial to running its trading business.
The Houston-based company went bankrupt after its credit collapsed and its main rival, Dynegy Inc backed out of an buyout plan late last year.
Just a year ago, stock of the nation’s largest buyer and seller of natural gas traded at 85 dollars per share. Today, it is less than one dollar.
The news of the criminal investigation comes amid questions about the White House’s dealings with Enron, which contributed to President George W Bush’s election campaign.
The White House has acknowledged that Enron representatives met six times with Vice President Dick Cheney or his aides on energy issues last year, most recently in mid-October just before the investing public realized the company was heading for disaster.
Enron’s financial position wasn’t discussed in any of the meetings, vice presidential counsel David Addington insisted in a letter.
Yesterday, White House spokesman Ari Fleischer told reporters: ‘‘I’m not aware of anybody in the White House who discussed Enron’s financial situation.’’
