Washington -- A congressional panel has uncovered "eye-popping" pay deals for Enron executives and an elaborate scheme to manipulate the failed company's taxes and accounting, the Senate Finance Committee chairman said
The House-Senate Joint Committee on Taxation has been combing through
Enron's tax records for about a year, trying to determine whether the
energy-trading company skirted tax laws. The panel is presenting its
findings in a report Thursday at a Finance Committee hearing.
Chairman Charles Grassley, R-Iowa, said staffers told him the report is
"an absolute barn-burner."
"In addition to an eye-popping account of executive compensation, the
report provides for the first time the complete story of Enron's efforts
to manipulate its taxes and accounting," Grassley said at a confirmation
hearing for two Bush nominees for seats on the U.S. Tax Court. "The report
is very disturbing in its findings."
Details of the report were not available Wednesday.
Top Enron executives and directors received millions of dollars worth of
company stock, which they sold in 2000 and 2001.
Data obtained by federal prosecutors from company computers reportedly
showed Enron paid its executives huge one-time bonuses totaling $320
million as rewards for hitting stock-price targets. Investigators say the
stock targets, ending in 2000, were reached at the same time Enron
officials were improperly inflating company profits by hundreds of
millions of dollars, buoying share prices.
A court-appointed bankruptcy examiner also has been looking into Enron's
For examiner Neal Batson, appointed by the federal bankruptcy court in New
York City after Enron's spectacular bankruptcy in December 2001, the
question is whether the company violated tax rules. That would open the
way for Batson, on behalf of Enron creditors, to go after assets involved
in the tax deals or to sue the big banks, accounting firms and law firms
that helped design them.
The twin tax probes represent a new focus of investigation following the
yearlong dissection of Enron's complex web of partnerships -- used to hide
more than $1 billion in debt -- by federal prosecutors and lawmakers.
Andrew Fastow, the company's former chief financial officer, was indicted
in October on 78 counts of fraud, money laundering, conspiracy, obstruction of justice and other charges. He pleaded innocent and is free on $5 million bond. Justice Department prosecutors allege that he engineered several off-balance-sheet schemes and partnerships that hid debt, inflated profits and let him skim millions of dollars for himself, family and friends at shareholders' expense.
Enron's failure destroyed the retirement savings of thousands of employees
and hurt individual investors and pension funds nationwide. It was the
first in a series of big company scandals that shook public confidence in
the stock market and the integrity of corporate America. The joint
taxation committee's tax inquiry was among more than a dozen congressional
investigations into Enron's collapse.
According to Enron's former top tax executive, Robert Hermann, the
Houston-based company boosted its reported profits by another $1 billion
or so by using tax schemes between 1995 and 2001. Hermann has defended the
practices as legal.
Some experts say that even if that is the case, the complex transactions
may have helped Enron paint a false picture of its financial situation and
In one 1997 transaction reportedly examined by Batson's staff, Enron
transferred a lease on corporate jets and other assets into a
special-purpose entity. A complex series of loans and swaps of cash and
stock produced big tax losses and deductions extending over several years.
The deal was said to have netted Enron $66 million to add to its earnings
between 1997 and 2001.
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