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US House panel chairman to confront Enron ex-CEO

The chairman of a House panel probing Enron Corp pledged on Wednesday to confront its former CEO at a hearing on Thursday and said there was "substantial evidence of illegal activity" at the fallen energy trader.

Louisiana Republican Rep Billy Tauzin said he planned to ask former Enron chief executive Jeffrey Skilling about his role in a web of off-the-books partnerships that Enron used and that led last fall to its stunning collapse.

"Mr Skilling, I understand, is anxious to come and testify. I understand he's very bright and thinks he can come over here and tell us all how wrong we are," Tauzin said.

As Congress completed another day of intensive hearings into the Enron affair, Tauzin said investigators for his House Energy and Commerce Committee had found evidence that Enron did financial deals to hide losses and hoodwink investors.

Citing a group of deals known as the Raptor transactions, he said Enron did business with an entity whose only asset was Enron shares that had come from the company.

"This clearly violated existing law," Tauzin said. "There may have been securities fraud here."

An Enron lawyer was not immediately available for comment.

At a hearing on Wednesday, Tauzin's committee looked into possible post-Enron reforms for the accounting industry.

Accountants, including long-time Enron auditor Andersen, have come under heavy fire since Houston-based Enron filed the largest bankruptcy in US history on Decemebr 2, destroying thousands of jobs and devastating investors.

Reforms are on the way for corporate bean-counters, predicted Michigan Democratic Rep John Dingell at the hearing. "The accountants promised they would reform themselves. They did not. Now we must do it for them," he said.

FOUR WITNESSES SEEN PLEADING FIFTH

Skilling was expected to be among witnesses appearing before Tauzin's committee on Thursday. Four of the witnesses were expected to refuse to testify by invoking their right not to incriminate themselves.

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

Tauzin said he wanted to ask Skilling why his signature was absent from "approval sheets" circulated among Enron executives to check off on many of the partnership deals. The sheets were among thousands of Enron documents obtained by the committee.

"Of all the people who were supposed to sign the approval sheets, he's the only one who refused even though he voted to approve them at the board, and the question is why not," said Tauzin, who released some of the internal documents.

The documents showed that Enron executive Jordan Mintz raised doubts in March about how Enron was handling dealings with outside ventures known as the LJM partnerships.

In one of the Mintz memos to senior Enron officers released by Tauzin, Mintz wrote, "The company needs to improve both the process it follows in executing such transactions and implement improved procedures regarding written substantiation."

Tauzin described Mintz's memos as an additional sign of internal concern at Enron like that shown in a worried memo by corporate development director Sherron Watkins and complaints raised by former treasurer Jeff McMahon.

Enron's partnerships were created and managed by then chief financial officer Andrew Fastow, who pocketed at least $30 million from related dealings, said a report by an Enron internal inquiry panel led by University of Texas Law School Dean William Powers.

'IN DEEP TROUBLE'

Fastow is also due to attend Thursday's hearing. Tauzin feels Fastow will refuse to testify. "I think he's going to take the Fifth," Tauzin said. "He's in deep trouble."

The Powers report said Skilling bears responsibility for failed internal controls to mitigate the risk in relationships between Enron and the LJM partnerships.

"Why did he ignore repeated requests from Jordan Mintz, who will be testifying tomorrow, to sign those (approval sheet) documents?" Tauzin asked.

"(Mr) McMahon brought to him evidence that these Enron deals were very suspicious, probably bad deals," Tauzin said. "Instead of taking action to correct them or investigate them, he reassigned (Mr) McMahon to another position."

In an interview with the Powers committee, Skilling said he had little to do with individual LJM transactions and had no detailed understanding of the Raptor deals.

Skilling told the committee he would sign off on transactions if Enron's chief accounting officer Richard Causey and chief risk officer Richard Buy approved.

Buy and Causey were also listed as witnesses for the Thursday hearing, but a Tauzin aide said they were expected to plead the Fifth, as was Fastow protege Michael Kopper.

Accounting professors testifying on Wednesday called for reforms like a new accounting supervisory body independent of the industry, shareholder-appointed auditors, more disclosure of Securities and Exchange Commission correspondence with companies and updates on the status of SEC investigations.

There was wide support by witnesses and lawmakers for graded audits, rather than the current pass/fail system, an idea promoted in testimony on Tuesday by Andersen CEO Joseph Berardino to a House Financial Services subcommittee.

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