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CNN Live At Daybreak
Ken Lay Will Not Testify on Capitol Hill Today
Aired February 04, 2002 - 05:01 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL COSTELLO, CNN ANCHOR: In the midst of the Enron storm, the Arthur Andersen audit firm makes a move to right itself. The firm is bringing in former Fed Chairman Paul Volcker to advise them on how they need to change. Volcker will chair an independent oversight board with sweeping authority. Volcker is not being paid for his services and says he hopes to complete his job within 18 months.
And former Enron CEO Kenneth Lay has decided not to testify on Capitol Hill as scheduled today. A letter from Lay's attorney says inflammatory statements made on Sunday TV talk shows indicate the hearings would have what he calls "a prosecutorial tone." Lay hasn't been subpoenaed, but congressional committees could now compel him to appear. We'll see what happens today.
Kenneth Lay's decision not to appear before the Senate Commerce Committee follows the release of a scathing internal report.
As CNN's Fred Katayama reports, the report charges top Enron executives with cashing in while covering up.
(BEGIN VIDEOTAPE)
FRED KATAYAMA, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): One day before former Enron executives begin testifying on Capitol Hill, influential lawmakers blasted the company's practices, saying its managers could face criminal prosecution.
SEN. BYRON DORGAN (D), NORTH DAKOTA: There seemed to me to be a kind of culture of corporate corruption here that grew over time. I expect the Securities and Exchange Commission will be very interested in this with respect to potential securities fraud.
KATAYAMA: Senate Consumer Affairs Subcommittee Chairman Byron Dorgan made those remarks in response to a report on Enron made public Saturday. That report found Enron had wildly inflated profits and hid debt, as some senior executives enriched themselves by up to millions of dollars. They did that by setting up partnerships that did complex deals with Enron.
The report said: "Many of the most significant transactions apparently were designed to accomplish favorable financial statement results, not to achieve bonafide economic objectives."
The report was compiled by a special committee of Enron's board led by University of Texas Law School Dean William Powers. It faulted players across the board, from senior executives to its outside advisers. It charged that former Chairman Ken Lay didn't do his job as chief executive, acting more like a director than a senior manager.
CHARLES PARKER, ATTORNEY, HILL, PARKER & ROBERSON: Ken Lay had the total oversight responsibility for this operation and very unfortunately he set up a corporate structure that incentivized the officers of this company to make decisions that would immediately enhance their income and boost the supposed income of earnings.
KATAYAMA: The Enron executive controlling the partnerships, Andrew Fastow, received the sharpest censure, for violating company ethics and enriching himself to the tune of $30 million while hiding critical information about the partnerships from the board.
The report faulted Enron's auditor, Arthur Andersen, and its counsel, Vinson & Elkins, of failing to inform the board of its concerns over the company's dealing with its partnerships.
Andersen lashed back, calling the report "self-serving." Enron would only say in a statement that the report made its board aware of numerous past events for the first time. "These events are deeply regretted by the board."
(on camera): The action moves to Washington beginning Monday. Former Chief Executive Jeff Skilling will testify. But Fastow and his former aide, Michael Kopper, are expected to take the fifth and not answer questions.
Fred Katayama, CNN Financial News, Houston, Texas.
(END VIDEOTAPE)
COSTELLO: More on Enron now. The auditing firm criticized for its handling of the Enron account is looking to fix its own house. Arthur Andersen is bringing in former Fed Chairman Paul Volcker to head an independent oversight board. The board will be charged with making fundamental changes in the way the firm does business.
(BEGIN VIDEO CLIP)
JOSEPH BERNARDINO, CEO, ARTHUR ANDERSEN: We're not here today to comment on what's happened in the past. We're asking you to just bear with us for this brief moment in time to focus on how this firm is going to be built in the future.
PAUL VOLCKER, CHAIRMAN, ANDERSEN OVERSIGHT BOARD: I can remember when Arthur Andersen, made in America auditing firm, accounting firm, was considered the cream of the crop and I would like to see Andersen return to leadership in the industry.
(END VIDEO CLIP)
COSTELLO: Volcker, by the way, will not be paid for his work.
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