HOUSTON - Enron Corp. executives pocketed large amounts of money in running complex partnerships used to disguise the troubled energy company's financial problems while top managers and auditors provided little oversight, an internal probe found.
The internal investigators focused their criticism on Andrew Fastow, the company's former chief financial officer, and Michael Kopper, an Enron employee who was put in charge of a partnership.
The investigative team, made up of three Enron board members, directed their critique at the people in charge of the partnerships, which were used to hedge investments and hide debt off Enron's books. The probe also determined that Fastow and Kopper broke the company's ethics code.
Fastow and others earned tens of millions of dollars brokering deals between the partnerships and Enron.
The 203-page report was released Sunday as former chairman Kenneth Lay joined a growing list of executives who are backing away from testifying to Congress about the energy company's complicated financial deals and spectacular collapse.
The probe found that Enron employees who reported to Fastow negotiated deals on the energy giant's behalf with partnerships that Fastow ran. The deals weren't always best for the company financially, and employees complained that Fastow pressured them to accept unfavorable terms, the investigation found.
Kopper declined to be interviewed by Enron's internal investigators, while Fastow declined to answer most of their questions.
University of Texas School of Law Dean William Powers Jr. and director Raymond Troubh, who headed the investigation, were appointed to Enron's board to probe the partnerships after they were dissolved.
Lay and Jeff Skilling, former chief executive officers, told the investigative team they had only cursory knowledge of the employees' involvement in the partnerships.
The report said the board was unaware of the conflicts of interest.
The report also criticized C.E. Andrews, a partner at accounting firm Arthur Andersen LLP, Enron's former auditor. He said the investigators had a conflict of interest.
"It does not reflect an independently credible assessment of the situation, but instead represents an attempt to insulate the company's leadership and the board of directors from criticism by shifting blame to others," Andrews said.
The 203-page report, released three days before Powers was scheduled to testify before Congress, concluded that greed motivated architects of the partnerships while top managers, directors, auditors and outside lawyers failed to watch them.
Kopper earned at least $10 million from his participation in the partnerships, the report said. Enron acknowledged last year that Fastow earned more than $30 million.
Then-Treasurer Jeff McMahon, who answered to Fastow, complained to Skilling in March 2000 after Fastow began running and investing in two partnerships.
"I find myself negotiating with Andy on Enron matters and am pressured to do a deal that I do not believe is in the best interests of the shareholders," McMahon wrote in notes of his meeting with Skilling.
Skilling "has said he recalls the conversation focusing only on McMahon's compensation," the report said. Neither Skilling nor McMahon raised the issue with Lay or the board, and Skilling took no action.
Powers declined to discuss the report, saying he would save comment for his appearance at Congress on Tuesday. Fastow declined comment through a spokesman, and Kopper's telephone number is unlisted.
Kopper resigned in July 2001, while Fastow was fired in October after information about the partnerships surfaced.
Thursday
January 9th, 2025
11:44PM
