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Auditor hits Enron in Congress, ex-CFO reappears

Enron Corp sought on Wednesday to win support for its plan to emerge from bankruptcy, its auditor told Congress it warned the energy trader about possibly illegal financial acts and its ousted former chief financial officer emerged from the shadows.

In Washington, the chief executive of long-time auditor Arthur Andersen told Congress that Enron hid crucial data at the heart of its spectacular collapse, the first time Andersen publicly denounced the Houston-based company.

"It is not clear why the relevant information was not provided to us. We are still looking into that. On November 2, 2001, we notified Enron's audit committee of possible illegal acts within the company," Andersen Chief Executive Joseph Berardino told the House Financial Services Committee.

Enron hit back late in the day, with chairman Ken Lay saying in a statement that "It has always been Enron's policy to be open with its accountant." Lay had declined an invitation to appear at the same hearings with Berardino, opting instead to travel to New York where Enron laid out its plans to emerge from bankruptcy in a meeting with its biggest unsecured creditors.

Also in New York, ousted chief financial officer Andrew Fastow appeared with one of his several lawyers, top litigator David Boies, to put to rest reports that he had fled the country for Israel or elsewhere.

"This is not a situation where he is not going to be available. Fastow will be responding to a variety of inquiries from a variety of government agencies," Boies said.

Fastow was to have met on Wednesday with attorneys from the US Justice Department, but they rescheduled, and the US Securities and Exchange Commission asked a federal judge to enforce an October 31 subpoena Fastow had not answered.

The SEC is probing conflict-of-interest issues surrounding Fastow's involvement in two off-balance-sheet partnerships he created and managed from both sides of the table, earning some $30 million in management fees from the deals in addition to his Enron salary.

The partnerships, which Enron revealed in October, accelerated a crisis of investor confidence that ruined the world's dominant energy trader in the space of a few weeks. Congress, the SEC, and the Labor and Justice Departments are all probing the collapse, which culminated with Enron's Chapter 11 filing on December 2, the biggest in US history.

OUT OF BANKRUPTCY IN A YEAR?

At a New York meeting of Enron's largest unsecured creditors, Enron put on a brave face as CFO Jeff McMahon laid out its plan to emerge from Chapter 11 bankruptcy within a year.

McMahon also told creditors about Enron's months-old plan to raise between $4-$6 billion by selling global assets including its failed Azurix Corp water unit, its wind energy businesses; and its operations in emerging markets. As far back as August, Lay said Enron would sell its underperforming global assets to raise money to pump back into its core businesses.

McMahon also said Enron is in advanced talks with three prospective financial bidders to sell a controlling stake in its core energy trading unit. It is considering holding an auction to bring in other bidders to boost the price the unit may command, said McMahon.

Financial backers include J P Morgan Chase & Co, Citicorp, two of Enron's biggest creditors, and UBS Warburg, people close to the matter said.

All decisions are subject to approval by US bankruptcy court Judge Arthur Gonzalez.

The creditor's committee, which will be led by representatives from Williams Cos Inc and Wells Fargo, includes a cross-section of Enron's debtors, including bank debt providers, bondholders, and energy companies.

Some 5,000 employees have lost their jobs to date, which is expected to save the company some $600 million a year, McMahon said.

Enron said it now has about $15 billion in bank debt, of which only about $2 billion is secured. The company has bond debt of $15 billion; $13 billion in trade debt, of which $8 billion is for derivatives and $5 billion is to banks and for bonds; and surety debt related to contract delivery of $2.5 billion, Bienenstock said.

Enron shares, despite bouncing off an intraday low of 52 cents, closed down 6 cents at 66 cents a share on the New York Stock Exchange. The shares have traded in a 52-week range of $84.88 and 25 cents.

The gloom spread to Enron's rivals. Calpine Corp fell as much as 30 per cent but bounced back late in the day as investors gained confidence the power company's is in solid financial shape.

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