US House panel launches probe of Enron problems
The Republican-led House Energy and Commerce Committee launched a probe of Enron Corp's financial collapse on Thursday, abruptly reversing course to focus on the once-mighty energy trader's accounting practices.
Enron, which dominates US natural gas and electricity markets, was widely expected to see protection under federal bankruptcy laws after rival Dynegy Inc on Wednesday pulled out of a deal to buy it.
Rep Billy Tauzin, the Louisiana Republican who heads the House energy panel, said lawmakers would investigate the surprisingly swift downfall of Enron. The global giant employs 21,000 people in operations ranging from marketing electricity and natural gas to delivering commodities such as metals, coal, pulp and paper.
"The chairman has instructed staff counsel to begin investigating Enron's collapse with the expectation of holding a congressional hearing in the near future," a Tauzin spokesman said.
The plan to launch an investigation marked an unexpected change by the Republican-led panel, which has been a staunch advocate of free markets and deregulation.
Earlier on Thursday, a Tauzin spokesman said lawmakers did not plan to step in unless Enron's problems precipitated another energy crisis like the one in California last winter.
But later, after meeting with Democrats on the panel who have criticised Enron's accounting procedures, the influential Republican announced a probe.
PROBE TO FOCUS ON ACCOUNTING
Enron's financial troubles stemmed from the discovery a few weeks ago of off-balance-sheet transactions that led to a $1 billion charge and write-down of shareholder equity.
While the Houston-based company's disintegration has raised questions about its securities accounting procedures, federal energy regulators said there was no sign of spillover damage to US electricity and natural gas markets. Both markets have plentiful supplies at this time, unlike last winter.
The ranking Democrat on the House panel, Michigan Rep John Dingell, has repeatedly called for a probe of the accounting firm Arthur Andersen LP that handled Enron's books. The accounting firm, which audited Enron's books, has already been sued in several lawsuits filed by Enron shareholders.
Dingell on Thursday berated regulators like the Securities and Exchange Commission for not spotting Enron's troubles early.
Current US corporate accounting standards are "seriously broken," Dingell said in a statement. "There are likely other ticking time bombs out there with smoke-and-mirror earnings."
ENRON LINKED TO REPUBLICANS
The Enron fiasco could also give Democrats new political ammunition.
Enron chairman Kenneth Lay is believed by some experts to be the biggest single contributor to President George W Bush's various campaigns. Last year, Lay raised at least $100,000 in contributions for the presidential campaign. By some estimates, he has given about $1 million to Bush over the years.
Enron and its employees also donated money to many House and Senate candidates.
In the 2000 election year, the company and employees gave $2.4 million to candidates -- more than any other energy company, according to the Center for Responsive Politics. Of that amount, 72 per cent went to Republicans, the group said.
Democrats are also eyeing Enron's ties to Sen Phil Gramm of Texas, the ranking Republican on the powerful Senate Banking Committee. His wife, Wendy Gramm, is on Enron's board of directors.
From 1988 to 1993, Wendy Gramm chaired the US Commodity Futures Trading Commission, which played a role in deregulating energy markets that Enron now dominates.
SENATE LEADER WANTS ANSWERS
US Senate Majority Leader Tom Daschle said Congress should find out what pushed Enron to the brink of bankruptcy, and what impact there may be on the energy industry.
"I think we need to find as much information as possible, and make some assessments of whether it's indicative of energy in the larger context and if it is, what we ought to do about it," Daschle, a South Dakota Democrat, told reporters.
Some analysts said Enron would find little sympathy in Washington.
"It's not like (Enron)... had an act of God," said Christine Uspenski, a utility analyst with Schwab Capital Markets. "They're far more culpable. No one put a gun to their head and told them to be cute with their accounting."
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