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Enron officials seen facing prosecution

A key witness in Congressional hearings on the spectacular collapse of energy trader Enron Corp, former chief executive Kenneth Lay, on Sunday withdrew from hearings next week after members of Congress said they believed there was evidence of criminal misconduct in the company's demise.

"These inflammatory statements show that judgements have been reached and the tenor of the hearing will be prosecutorial," Lay's lawyer, Earl Silbert, wrote to the chairs of committees due to hear from the former CEO.

An internal Enron Corp report released Saturday showing the company inflated profits while top employees raked in millions of dollars they should not have received puts some Enron executives in jeopardy of criminal prosecution, key members of the US Congress said on Sunday.

The report is the most comprehensive analysis of the former energy-trading giant's collapse to date and gives members of Congress a preview of what transpired.

"This is a devastating report. It suggests massive problems. This is almost a culture of corruption here," said Sen Byron Dorgan, the North Dakota Democrat who chairs a Senate Commerce subcommittee that was due to open hearings on Monday on Enron's Decmeber 2 filing of the biggest bankruptcy in US history.

Speaking on NBC's "Meet the Press", Dorgan said whether criminal charges should be brought was a Justice Department decision, but "clearly some things have happened here that are going to put some people in real jeopardy."

In addition to his appearance on Monday before the Senate panel, Lay had been set to testify Tuesday before the House Financial Services Committee. A spokesman for the Senate committee said the hearing was canceled and that no decision had been made on whether to subpoena Lay.

Lay's testimony was expected to be the opening highlight of a jam-packed week of Enron-related hearings, during which nine panels are set to take up the financial collapse of the one-time Wall Street darling and vanguard of the energy industry.

ENRON OFFICERS TAKE THE FIFTH

Meanwhile Enron's former chief financial officer, Andrew Fastow, and an aide, Michael Kopper, will invoke their right to protection against self-incrimination under the Fifth Amendment of the constitution when they testify before Congress on Thursday, the chair of a House investigating committee said.

Fastow is charged in the report with pocketing $30 million from questionable deals that led to the company's collapse. Kopper is similarly charged with having enriched himself at Enron's expense.

"They will be before the committee on Thursday and Fastow will take the Fifth, Kopper will take the Fifth," Rep Billy Tauzin, Republican chairman of the House Energy and Commerce Committee, also said on "Meet the Press".

Jeffrey Skilling, Enron's former chief executive officer, will answer questions, Tauzin said.

The Louisiana representative said the report tracked his own findings.

"Not only were there corrupt practices," he said. "Not only was there hiding of the fact that debt was being put off the balance sheets and profits that were reported that didn't exist, but we're finding more than that -- what may clearly end up being securities fraud."

"Officers all the way to the board of directors have some responsibility," Tauzin said, adding the report even mentioned Ken Lay, the former Enron chairman.

Houston-based Enron, once the seventh-largest company in America, collapsed in a cloud of debt and questions about its finances and accounting practices. It is under investigation by nine congressional committees, the Justice and Labor departments and the Securities and Exchange Commission.

An Enron internal inquiry released on Saturday said the company inflated its profits by nearly $1 billion and top employees took in millions of dollars "they should never have received" through complex partnerships that played a major role in the company's collapse.

"The tragic consequences of the related-party transactions and accounting errors were the result of many failures at many levels and by many people," the study said. "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."

The report concluded that partnerships with names such as LJM1, LJM2 and Chewco were used to do deals meant to hide losses, fatten profits and enrich corporate executives at the former energy trading giant, which was President George W Bush's biggest political contributor.

The review's author, Enron director William Powers, is among those scheduled to testify before Congress in the coming week.

ANDERSEN HIRES FORMER FED CHAIR VOLCKER

Meanwhile, Andersen, the accounting firm that was Enron's auditor for nine years, challenged the review and called it "extremely self-serving" through a spokesman.

"The authors of this report, whose independence has already been questioned, were hand-picked by Enron's board," said Andersen spokesman Charlie Leonard.

The accounting firm, under fire for how it handled its oversight of Enron's finances, announced on Sunday it had hired former Federal Reserve Chairman Paul Volcker to help restore its credibility. The firm also said it would no longer offer some consulting services to some clients.

"This is not about window-washing or eye-washing," Andersen chief executive Joseph Berardino told reporters at a news conference. "This is not where a report comes in a month later that says nothing. This is about getting answers to what the American public needs from an auditing firm."

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