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Enron Deception Started at Top - Director (Reuters)

WASHINGTON (Reuters) - Enron Corp. tried to systematically manipulate its results and deceive shareholders as top executives raked in millions of dollars in personal gains, the author of an internal inquiry into the company's collapse told Congress on Monday.
Monday February 4 3:39 PM ET

Enron Deception Started at Top - Director

By Kevin Drawbaugh

WASHINGTON (Reuters) - Enron Corp. tried to systematically manipulate its results and deceive shareholders as top executives raked in millions of dollars in personal gains, the author of an internal inquiry into the company's collapse told Congress on Monday.

``We found a systematic and pervasive attempt by Enron's (ENRNQ.PK) management to misrepresent the company's financial condition,'' said William Powers, dean of the University of Texas Law School, in testimony to be delivered to Congress.

``There were failures in the performance of Enron's outside advisors. And there was a fundamental default of leadership and management,'' starting with former Chief Executive Kenneth Lay and reaching to the board and senior managers, Powers said.

He also cited Jeff Skilling, a chief operating officer who later was briefly CEO before he resigned last August.

Powers was appointed to the Enron board last fall to probe the downfall of the former energy trader, which filed the largest bankruptcy in U.S. history on Dec. 2.

Powers said former Enron Chief Financial Officer Andrew Fastow made ``at least $30 million,'' while former senior executive Michael Kopper made ``at least $10 million'' through outside partnerships used by the company to hide losses.

He also said the board of directors failed in its duty to provide leadership and oversight.

In the end, this is a tragedy that could and should have been avoided,'' Powers said.

Over the weekend, after Powers' report was released, Lay canceled a date to testify on Monday before a Senate committee. He has also canceled plans to testify to the House Financial Services subcommittee on capital markets.

PITT'S REMARKS

That subcommittee was to hear from Powers and Securities and Exchange Commission (news - web sites) Chairman Harvey Pitt on Monday.

In prepared remarks, Pitt elaborated on his Jan. 17 proposal for a new accounting supervisory body to be called the Public Accountability Board, saying it should be funded ``not by the accounting profession but from the entire private sector.

He reiterated that his vision for the board includes that it have ``at least a predominant majority'' of members unaffiliated with the accounting profession. His original proposal was criticized by some in Congress as too closely aligned with the profession as it included accountants.

Pitt also cited a possible need for legislation ``to require corporate insiders to make public their trading activities more quickly than current law requires.''

Under present law dating to 1934, insiders need not report trades until weeks after they occur.

``That may have been good enough in 1934, but it is not nearly good enough today,'' said Pitt, who represented the accounting industry for years as a private lawyer before being named to head the SEC last summer.

Pitt called on companies to disclose financial information more clearly and quickly. He called for clearer definitions of non-traditional financial trend data. He also called for a better understanding of accounting for outside partnerships, or special purpose entities, like those used heavily by Enron that ultimately led to the company's financial collapse.

Pitt called for faster standard-setting by the Financial Accounting Standards Board (FASB). ``For too many years the FASB has failed to set standards for accounting for special purpose entities. In the wake of Enron, it must act and act quickly to give guidance,'' he said.
 
 

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