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CNN Sunday Morning

Interview With Senator Carl Levin

Aired July 07, 2002 - 10:01   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.
KYRA PHILLIPS, CNN ANCHOR: A Senate subcommittee is blaming Enron's board of directors for the company's financial collapse. A report released today cites the board for numerous shortcomings including failing to stop the bankrupt energy giant from using misleading accounting. An Enron lawyer is calling the report "unfair."

The Senate report didn't mince words. It did say the subcommittee does not accept the board's claim that it was out of the loop and can't be blamed for Enron's collapse.

Senator Carl Levin, the subcommittee's chairman joins us now by phone with more on the Enron investigation. Senator, thanks for being with us.

SEN. CARL LEVIN, (D), MICHIGAN: Good being with you, Kyra.

PHILLIPS: So let's talk about the findings of this report. What's your first overall reaction?

LEVIN: Well, the first reaction is the board had plenty of warning. They were informed of the risky accounting practices very explicitly by the accountants. It was presented to the board as risky. And they also went ahead and put a good portion of their assets off the books where they were hidden. And many of them, by the way, were -- still contained liabilities for Enron and that was also hidden.

And the board also approved some very unique waivers of conflict of interest rules to allow their chief financial officer to open up a partnership and then to make an awful lot of money at Enron's expense. And they didn't even know how much he was making or follow it up.

So there's a lot of responsibility here and the board can simply not escape it.

PHILLIPS: Sir, how did the Senate subcommittee reach its findings?

LEVIN: We had about 50 subpoenas, millions of pages or a million pages or more of documents. We had public hearings. We had a real thorough opportunity on a bipartisan basis to find out what the board knew. And basically what we found out is that they knew it was going on. They had the warnings. They were put on notice and they cannot escape responsibility.

PHILLIPS: Now Robert Bennett, an attorney for Enron, is saying this report is very unfair. Do you agree with that in any way?

LEVIN: Well, he should talk about facts which are set forth in this report. We have lengthy facts which are laid out there.

Instead saying that any facts are wrong, which he is not able to do because these facts are very carefully assessed, he just does what you would expect Enron's lawyer to do, which is to just throw out charges and mud.

PHILLIPS: So what are the implications of this report for Enron do you think?

LEVIN: Well, I think Enron was in a great deal of trouble long before this report but the hopeful implications are that we will pass very strong reforms. The bill, which is coming from the banking committee -- a very good bill -- the so-called Sarbanes bill -- will come to the floor of the Senate this week. And we're hoping to strengthen that bill in a number of significant ways -- give the SEC more powers to stop the kind of practices which occurred at Enron and a number of other companies.

There is a responsibility that the Congress has to help clean up this mess. We can't do it alone. We need the corporate world to clean up their own act where there are problems. But we do also now have an opportunity and I think a responsibility to really do some significant reforming and a good start is the Sarbanes bill.

PHILLIPS: Do you see a domino effect happening here? There will be another -- a number of other companies next to be investigated?

LEVIN: Well, there -- I'm sure there are other companies out there but it's not a domino effect. This is -- if these activities occurred in other companies then they should be disclosed and not because of any kind of domino effect but just because if they occurred they will come out sooner or later and they should.

And, again, we just are very, very determined to do what we can in the Congress to try to restore credibility to the market. The public's entitled to this confidence. People's pensions depend upon the stock market being clean and being informative and being honest and we're going to do our part to see that that's done.

PHILLIPS: Senator Carl Levin -- sir, thank you for being with us this morning.

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