Hearings on Enron Begin on Capitol Hill; Kenneth Lay Resigns
Rep. Billy Tauzin (R-La.), chairman of the House Energy and Commerce Committee, opened hearings this morning by asserting that Arthur Andersen’s destruction of key Enron documents “compounded the catastrophic business failure” of the former energy giant.
Four witnesses from Arthur Andersen testified on the auditing firm’s role in destroying key Enron-relateddocuments.The four were David Duncan, a former partner in charge of Enron who allegedly ordered the destruction of documents in October; Michael Odem, an Andersen accountant recently demoted for his alleged role in shredding documents; Dorsey L. Baskins, the managing director for Andersen’s Professional Standards division; and Nancy Temple, a lawyer for Andersen who advised accountants on company policy on document destruction.
Rep. Jim Greenwood (R-Pa.), chair of the Committee’s subcommittee on Oversight and Investigations, sharply criticized Andersen’s unethical and possibly illegal actions regarding Enron’s financial collapse and former employee David Duncan, who was subpoenaed by the House Energy and Commerce Committee.
“Enron robbed the bank, Arthur Andersen provided the getaway car and they say you were at the wheel,” the subcommittee chairman, Greenwood said to Duncan.
Duncan, who had been subpoenaed by the House committee, invoked his fifth amendment right to avoid self-incrimination. Arthur Andersen had fired Duncan earlier this month.
“I would like to answer the committee’s questions, but on the advice of my counsel, I respectfully decline to answer the question based on the protection afforded me under the Constitution of the United States,” Duncan told the committee.
Dorsey Baskin defended the firm’s actions, asserting that Duncan committed the unethical and illegal acts without direction from senior-level Arthur Andersen executives.
Baskin testified that Duncan “directed the purposeful destruction of a substantial number of documents just as an investigation was beginning.
“Although the firm was well aware of the potentially devastating impact this discovery could have on our reputation, we did the right thing in making public the disclosure,” Baskin said.
The House will hear from other Arthur Andersen executives, who are expected to reject accusation that the firm was aware of Duncan’s actions. Andersen has been subject to previous inquiry into its accounting methods, most recently with Sunbeam and Waste Management.
At least eleven other congressional committees are investigating Enron’s sudden collapse, the largest corporate bankruptcy in U.S. history.
The Securities and Exchange Commission began its investigation of the company’s finances in early October.
Kenneth Lay’s resignation
The hearings began the morning after Enron’s Chairman and CEO resigned. Chair and CEO Kenneth Lay announced last night that his resignation would be effective immediately.
“This was a decision the board and I reached in cooperation with our creditors’ committee,” Lay said in a statement released Wednesday night.
“I want to see Enron survive, and for that to happen we need someone at the helm who can focus 100 percent of his efforts on reorganizing the company and preserving value for our creditors and hard-working employees.”
Lay said that the federal investigations and civil suits filed against him and Enron’s executives were distracting him from fulfilling his management responsibilities. Lay explained that the company needed a chief executive who could be fully devoted to repairing the bankrupt company and rebuilding shareholder value.
Kenneth Lay, once considered a pioneer of the deregulated energy markets, has been requested to testify in front of several congressional committees.
The company has not announced who will replace Kenneth Lay as the board’s chairman or company chief executive.
Enron’s board and its creditor’s committee, which is working to restructure its debt, said they would select a restructuring specialist who would also act as its chief executive officer in order to manage its operations and help the company emerge from bankruptcy.