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Enron lawyer says was warned not to raise concerns

An Enron Corp attorney who complained about murky partnerships considered central to the energy trader's collapse testified before Congress on Thursday that two senior officials warned him not to approach top management with his concerns.

Lawmakers said that during a week of Enron hearings, a picture had emerged of falsified earnings and self-enrichment by company officers ahead of a December 2 bankruptcy filing, the biggest in US history.

The off-balance-sheet partnerships run by former chief financial officer Andrew Fastow led Enron last year to restate earnings, write down its net worth and eroded investor confidence in the company.

Attorney Jordan Mintz was worried in late 2000 and early 2001 that Enron's dealings with partnerships known as LJM did not comply with procedures approved by the company's board.

Mintz told a House Energy and Commerce subcommittee that he was steered away from approaching Enron president Jeffrey Skilling by Enron chief accounting officer Richard Causey and Enron chief risk officer Richard Buy.

"Both Ricks shared with me that Jeff was very fond of Andy -- don't go there," Mintz testified.

Lawmakers vowed to get to the bottom of Enron's collapse as a number of former executives have claimed their constitutional right to remain silent.

SOME DECLINE TO TALK

"Reluctant witnesses will not keep us from getting at the truth," said Rep James Greenwood, the Pennsylvania Republican who chairs the House Energy subcommittee on oversight and investigations.

"A simple story of old-fashioned theft," said Billy Tauzin, the Louisiana Republican who chairs the full House Energy and Commerce Committee.

The US Justice Department is conducting a criminal investigation into Enron's demise and the Securities and Exchange Commission is looking at possible violations of securities laws.

Unlike some of his colleagues, Skilling was expected to testify later Thursday, setting the stage for a battle with lawmakers who say he had plenty of warning about Enron's problems.

Lawmakers said they planned to ask Skilling about why his signature was missing from deal sheets belonging to the partnerships that were used to hide debt and inflate earnings.

An internal Enron inquiry into the company's collapse released on Saturday, upbraids Skilling for failing to exercise greater oversight of Enron's finances.

Fastow, the man accused of amassing millions for himself while running the outside partnerships, declined to testify to the House panel on Thursday.

Also exercising their Fifth Amendment rights to silence were Fastow protege and former Enron executive Michael Kopper, as well as Causey and Buy, who company sources said are currently negotiating severance packages.

Former Enron chairman Kenneth Lay backed out of testifying to Congress earlier this week. Lay was then subpoenaed by two committees to appear next week.

MCMAHON'S CONCERNS

Enron President Jeff McMahon told the subcommittee that when he was treasurer of Enron in early 2000, he raised concerns about the company's LJM transactions, but was brushed off and moved into a new job.

McMahon said he raised his concerns in meetings in March 2000 with Skilling and Clifford Baxter, the Enron vice chairman who killed himself last month.

He said he met for 30 minutes with Skilling on March 16, 2000, and discussed worries about Fastow and the LJM deals.

"The LJM situation had basically gotten to the point that it was untenable for me and my group ... Throughout the meeting, he (Skilling) pretty much listened," McMahon said. "His parting words to me were that he understood all my concerns and that he would remedy the situation."

Shortly later, McMahon said he switched jobs at Enron, having been told my Fastow and Skilling that he should, and lost track of the LJM situation.

In prepared testimony, members of the company's board blamed management, auditor Andersen and the company's outside law firm, Vinson & Elkins, for keeping them in the dark.

Herbert Winokur, chairman of the Enron board's finance committee, testified that he was "deeply disturbed" by the internal report on Enron's problems prepared by William Powers, dean of the University of Texas Law School.

"The report makes clear that those in management on whom we relied to tell us the truth did not do so. The outside experts at Arthur Andersen and at Vinson & Elkins failed us," Winokur said.

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