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Tearful Enron workers testify, CEO slated in February

Tearful workers and investors told a congressional committee on Tuesday how they lost their life savings in the collapse of Enron Corp, while the committee said Enron's reluctant chief executive will testify before it in February.

Enron CEO Kenneth Lay has committed to appear before the Senate Commerce Committee on February 4, said Sen Byron Dorgan, the North Dakota Democrat chairing Tuesday's hearing.

Lay has declined invitations to appear before two of four congressional committees probing Enron. He declined to appear before the commerce committee on Tuesday, and before the House Financial Services Committee last week because he had to attend a creditors' committee meeting in New York.

Dorgan said his committee would try to get Enron's former CEO, Jeffrey Skilling, and Andrew Fastow, its former chief financial officer, to the February 4 hearing.

The SEC, and the Justice and Labor departments, are looking into Enron, whose stunning decline has left investors -- many of them employees -- with virtually nothing.

Fighting back tears, retired Enron attorney Charles Prestwood told the committee, "I lost $1.3 million. I had all my savings, everything in Enron stock. It was rags to riches back to rags. I had no idea our company was in trouble, on the verge of collapse."

RETIREMENT PLANS

A Wall Street darling just a few months ago, Enron on December 2 made the largest bankruptcy court filing in US history after a rescue takeover by rival Dynegy Inc fell apart amid investor concerns about Enron's murky finances.

Once ranked No 7 on the Fortune 500 list of top companies, Enron's stock was trading at 51 cents a share at midday on the New York Stock Exchange, off an August 2000 high of $90.56.

Thousands of Enron employees have lost their jobs and much of their retirement savings. A 401(k) retirement plan that made many of them heavily dependent on company stock, and then blocked them from selling their holdings when the stock turned south, came under fire at the committee hearing.

Janice Farmer, a retired Florida attorney who worked many years in the energy industry, said she tried to sell her Enron shares when they started to fall. But she said could not due to a provision prohibiting some employee stockholders -- except senior management -- from selling. "At the most critical time, they denied us access to our money," Farmer said.

Sen Barbara Boxer on Tuesday unveiled a bill aimed at shielding workers' 401(k) accounts from such problems by limiting how much company stock an account can hold.

"We're going to see if Enron broke the law. I personally think they broke many laws. I hope some of these people wind up in jail. And that extends to people who audited the books here," the California Democrat said at a press conference.

MORE DETAILS FROM ANDERSEN

The Andersen accounting firm that audited Enron's books provided more details at the committee hearing on its work, which was subjected to much criticism by lawmakers.

Remarks by Andersen global audit practice managing partner C E Andrews focused on the treatment of two special-purpose entities out of hundreds that Enron used. Restated results involving the two contributed to Enron's decline.

The larger of the two SPEs -- accounting for 80 per cent of the restatement -- was known as Chewco. On Andersen's review of Chewco, Andrews reiterated a comment made last week by Andersen CEO Joe Berardino. "It would appear that our audit team was not provided critical information," Andrews said.

That information showed the financial backing of Chewco had changed after Andersen's initial look at the SPE, making it no longer eligible to be excluded from Enron's books. That led Andersen to tell Enron that Chewco results would have to be consolidated, and to the bulk of the restatement, he said.

Andrews said Lay and Enron executive Richard Causey have told Andersen they were unaware of the change in Chewco's backing until November. "We do not know of any contrary facts," Andrews said.

"We have notified Enron's audit committee of possible illegal acts within the company. We have not concluded that any illegal acts occurred."

A smaller SPE involved in the restatements was a unit of an entity known as LJM1. Again echoing Berardino, Andrews said, "In retrospect, we believe LJM1's subsidiary should have been consolidated. I am here today to tell you candidly that this was the result of an error in judgment" by Andersen, he said.

MARKETS SEEN FAILING INVESTORS

Scott Cleland, head of independent research firm Precursor Group, told the hearing US capital markets failed thousands of Enron investors, pension holders, creditors, employees and customers. He said sell-side stock analysts maintained "buy" or "strong buy" ratings on Enron stock even as its value plunged.

"It is clear that the system will continue to fail investors until the root cause -- rampant conflicts of interest throughout the system -- are brought under control," he said.

During the question and answer part of the hearing, retired attorney Farmer said an unnamed Enron director was, until recently, building a big house in a pricey area of Houston.

"He had built it about half way, and I'm talking about a $4 million house. He just stopped work. There is no more work to be done to that house. And that gives me great pleasure," she said, drawing laughter from the committee.

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