KWAME HOLMAN: Ever since members returned to Washington late last month, the Enron collapse has dominated the congressional agenda. Congress had treated Enron like a routine, though very large, corporate bankruptcy until a series of revelations: that Enron officials knew the company was in trouble and sold their stock while telling employees, whose pension fund was invested in Enron stock that the company was in good shape; that workers at the Arthur Andersen accounting firm shredded documents related to an audit of Enron; and that document shredding also occurred at Enron's Houston headquarters.
By the end of January, nearly a dozen congressional committees had joined other federal and regulatory probes of what happened at the giant energy trader. And President Bush himself proposed a set of reforms aimed at protecting workers' investments in their company- sponsored retirement accounts.
PRESIDENT GEORGE W. BUSH: If you're Corporate America, you're responsible for making sure you reveal all your assets and liabilities to your shareholders and your employees. (Mild applause)
KWAME HOLMAN: Then, over last weekend came the release of an investigative report by a special committee of Enron's board of directors, headed by University of Texas Law Professor William Powers. It said: High-ranking employees involved in Enron partnerships "were enriched by tens of millions of dollars they should never have received." And management: "allowed Enron to conceal very large losses from the public." In congressional testimony early this week, report author Powers called what he discovered "appalling."
WILLIAM POWERS: We found a systematic and pervasive attempt by Enron's management to misrepresent the company's financial condition. Enron management used these partnerships to enter into transactions that it could not, or would not have done with unrelated commercial entities. Many of the most significant transactions apparently were not designed to achieve bona fide economic objectives. Now how could that have happened? The tragic consequences of the related-party transactions and accounting errors were the result of failures at many levels and by many people: A flawed idea, self-enrichment by employees, inadequately-designed controls, poor implementation, inattentive oversight, simple-- and not-so-simple-- accounting mistakes, and overreaching in a culture that appears to have encouraged pushing the limits.
KWAME HOLMAN: But an expected response to the Powers report from Enron CEO Kenneth Lay never materialized because he suddenly reneged on a promise to appear before a Senate committee on Monday. Yesterday, congressional investigators did manage to compel the appearance of several men who held positions of responsibility at Enron. Among them was Andrew Fastow, the accused architect of hundreds of improper partnership schemes that brought the company down. But in turn, Fastow and three other former officials invoked their Fifth Amendment rights and refused to testify. However, former chief financial officer and current Enron president Jeffrey McMahon did answer questions. He testified to a conversation he had in the spring of 2000 with then-CEO Jeffrey Skilling about the suspect partnerships. McMahon said he told Skilling a partnership designed by Andrew Fastow and known as LJM created a fundamental conflict of interest.
JEFFREY McMAHON: He let me walk through my talking points, notes. At the end of the meeting, Mr. Skilling indicated to me that he understood my concerns and he would try to remedy the situation.
KWAME HOLMAN: Late yesterday Jeffrey Skilling himself testified and claimed he was unaware of any financial problems at Enron before he resigned in August of last year.
JEFFREY SKILLING: Contrary to the refrain in the press, while I was at Enron, I was not aware of any financing arrangements designed to conceal liabilities or inflate profitability.
KWAME HOLMAN: Committee members were skeptical.
REP. CHRIS JOHN: If you like football somewhat the analogy could be that you were at times the quarterback, as the CEO, did not know of anything happening in your departing words was, everything seemed fine when you left on August 14. So you think that maybe it started before you left, the deterioration of Enron, and what ultimately happened, and it took only four months?
JEFFREY SKILLING: My hypothesis, my conjecture, is that it was a run on the bank, that there was a liquidity issue. That is pure conjecture on my part. But it seems consistent with the sorts of panics and the sort of changes or meltdowns of financial institutions that you used to see at the turn of the century, because I can't for the life of me-- cannot for the life of me-- understand how we could go from where I thought the company was to bankruptcy in such a short period of time.
KWAME HOLMAN: Skilling said he was not part of any of the mismanagement pointed out in the Powers report.
JEFFREY SKILLING: I can only comment on what I know. To the extent that that report, in any way, says I did something that was not in the interest of the shareholders of Enron Corporation, then yes, I disagree with those passages in the report vehemently. I do not believe... I did not do anything that was not in the interest, in all of the time I worked for Enron Corporation, that wasn't in the interest of the shareholders of the company.
KWAME HOLMAN: This afternoon, the chairman of the Senate panel, spurned by Kenneth Lay this week, said he is hopeful Lay ultimately will answer questions. North Dakota Democrat Byron Dorgan was asked how skeptical members are of Lay.
SEN. BYRON DORGAN: I don't think anybody who comes to Congress in these circumstances expects to have a walk in the park. Testifying with respect to this kind of a situation is going to be tough for anybody at any time. You know, you've got people here... You're familiar, you've all heard the story of the $25,000 that grows into $4.5 million in 60 days that Mr. Fastow invested of his personal funds. You know, I come from a small town, but I can understand a real big scam. There were things happening here that were disgusting, and there isn't any way to put sugar on it and make it look any better or taste any better. What happened here was awful. And stockholders were cheated, employees were cheated, and so the question is: Who is responsible?
KWAME HOLMAN: Now facing a subpoenas for next week from Dorgan's committee and one in the House, Lay is expected to appear, but has not yet said he'll testify.