WASHINGTON – Governmental Affairs Committee Chairman Joe Lieberman, D-Conn., and Permanent Subcommittee on Investigations (PSI) Chairman Carl Levin, D-Mich., said Wednesday an examination into the sudden implosion of the Enron Corporation would be a Committee priority in 2002.
Lieberman announced the full Committee would hold hearings January 24 into whether government agencies could have done more to protect the thousands of people and businesses hurt by the largest bankruptcy in American history.
Senator Levin said he will subpoena documents from the Board of Directors of Enron, as well as top company officials, as part of PSI?s investigation into how Enron was governed and audited, and how it used offshore entities to conduct its business. PSI hearings are anticipated later in the year.
“The untimely and wholly unexpected failure of a corporate giant like Enron is an alarm call to all of us in government to make sure that we are doing all we can to protect the integrity of our markets and the savings and investments of the American people,” Lieberman said. “Today, 60 percent of the citizens of this country own stocks. The interest of those hardworking people in their investments and retirement plans is at the heart of the committee?s interest in Enron.”
“The collapse of Enron has enormous consequences for Enron stockholders and employees, the overall investing community, and the U.S. economy as a whole,” Levin said. “Thorough investigations are needed ? and from different perspectives ? to determine whether current law was violated and where current law is inadequate to protect the public interest. Our role in Congress is to understand what went wrong and why so we can make sure this does not happen again.”
Lieberman said the full committee will call experts on investing and regulation of the financial markets, energy and derivatives trading, and pensions and retirement savings to speak to the flaws in the system that allowed so many people to be victimized by Enron?s collapse. In the weeks and months that follow, Lieberman said, the committee will look at each of those problems in greater detail to see if cracks need to be filled in the regulatory system – including at the Securities and Exchange Commission, the Federal Energy Regulatory Commission, the Commodity Futures Trading Commission, and the Labor Department – that so many Americans fell through the day that Enron declared bankruptcy.
Levin said PSI will spend the next few months gathering and analyzing the documentary trail of Enron?s collapse, with particular attention to the role of the Board of Directors in overseeing Enron activities; the role of the auditor, Arthur Andersen; and Enron?s use of related entities, limited partnerships and special purpose entities.
“The questions that need to be asked and answered about what happened to Enron are of great public – not partisan – interest,” Lieberman said. “That is the spirit in which we begin our Enron investigation and that is the spirit in which we intend to conduct it. This is a search for the truth, not a witch hunt, because the truth will enable us to take steps to prevent what happened to Enron, its employees, customers, and investors from happening again.”
Senator Lieberman’s Press Conference Statement
Governmental Affairs Committee Hearings on The Collapse of Enron Press Conference Statement
Senator Joe Lieberman
January 2, 2002
Good afternoon, and happy New Year to everybody. As Chairman of the Senate Governmental Affairs Committee, I am announcing today that the Committee will make it a priority in 2002 to examine the troubling and precipitous collapse of the Enron Corporation and the ripple effects its bankruptcy has had on its employees, investors, customers, and the American economy as a whole.
The Governmental Affairs Committee?s Permanent Subcommittee on Investigations, which is chaired by Senator Levin, has begun an investigation into how Enron was governed, and audited, and how it used offshore entities to conduct its business. As part of its investigation, the subcommittee will soon issue subpoenas to obtain the information necessary to accomplish its purposes.
The full Committee has meanwhile begun an investigation into whether agencies of the federal government – including, for example, the Securities and Exchange Commission, the Federal Energy Regulatory Commission, the Commodity Futures Trading Commission or the Department of Labor – could have done more to protect the enormous number of people and businesses that were hurt when Enron imploded.
Senator Levin and I and our staffs will be working closely together on this investigation, and we both also look forward to working closely, with our Republican colleagues on the Committee and their staffs.
The grave consequences of Enron?s collapse are economic and personal, not political. The questions that need to be asked and answered about what happened to Enron are of great public – not partisan – interest. That is the spirit in which we begin our Committee?s investigation of Enron, and that is the spirit in which we intend to conduct it. This is a search for the truth, not a witch hunt, because it is the truth that will enable us to take steps that are necessary to prevent what happened to Enron from ever happening again.
Just a few months ago, Enron was widely hailed as one of America?s strongest and fastest growing companies. It was a favorite on Wall Street, trading at $90 per share at its height. Now, stockholders are lucky if they can sell their stock for 50 cents a share. The company is the largest ever to declare bankruptcy and is now searching for buyers or partners to keep the remaining pieces of its business afloat. More than 5,000 of its 21,000 employees have been laid off. Many more have lost much or all of their retirement savings, because half of Enron?s 401(k) plan was invested in the company?s own now worthless stock.
The suddenness with which this company fell is shocking. Even the savviest experts on Wall Street were blind-sided. When a $77 billion company loses nearly all of its market value and plunges into bankruptcy in a matter of weeks – to the surprise of everyone, including those whose business it is to know better — the public?s confidence in the stock market is shaken. Today that confidence means a lot to more and more Americans.
I remember a breakfast Al Gore and I shared with firefighters in Florida during the 2000 presidential campaign. At one point, we asked the firefighters what they talked about on an average morning at the firehouse. I figured they would say family, or sports, or fire fighting. But, their surprising answer was ?the stock market.? Today, more than 60 percent of the American people own stocks. The interest of those hardworking people in their investments and retirement plans is at the heart of the Committee?s interest in Enron.
What a remarkable transformation we have experienced. So many people are taking part in the fortunes of our powerful economy by investing in stocks. But that transformation also means the term ?investor confidence? is no longer a textbook concept, with limited applicability. It affects the quality of life of those firefighters in Florida and millions of other middle-class investors who want to participate in the larger American dream of growth and prosperity – without fear of being swindled out of their hard-earned savings and investments.
Enron?s unexpected collapse raises a number of troubling questions that the Governmental Affairs Committee will be asking. Why, for example, did Enron officials lead investors to believe that Enron was a strong company with strong earnings, just weeks before it fell into bankruptcy? Why did analysts continue to hail Enron as a strong buy even though some now admit they could not even understand how the company made its money? Why did Enron?s auditors allow the company to overstate its profits for four years by over half a billion dollars, using what now appear to be very questionable accounting practices? And why did Enron?s directors ? particularly its outside directors ? allow financial arrangements that some claim were intended to hide company holdings from public view?
Was it appropriate that the company had half of its employees? hard-earned retirement funds invested in Enron stock? And when the news of the company?s massive losses and alleged wrongdoing came out, as the rest of the world quickly sold off stock in Enron, why did the company prevent its own employees from liquidating company stock in their 401(k) plans which could have salvaged what was left of their retirement nest eggs? Did the fact that the law exempted most of Enron?s commodity trading from regulation allow the company to hide important activity from public scrutiny? How did Enron?s collapse and loss of credibility affect the future stability of the deregulated energy industry? And finally, how much of those losses Enron apparently took pains to hide with elaborate corporate structures and accounting devices were generated in risky derivatives trading?
At the full Committee level, we will hold the first of our hearings on Enron on January 24. We will call experts on investing and regulation of the financial markets, energy and derivatives trading, and pensions and retirement savings to speak to the flaws in our system that allowed so many people to be victimized by Enron?s collapse. In the weeks and months that follow, we will look at each of those problems in greater detail to see if we can fill in the cracks in our regulatory system that so many Americans and so many American businesses fell through the day that Enron declared bankruptcy.
The untimely and wholly unexpected failure of a corporate giant like Enron is an alarm call to all of us in government to make sure that we are doing all we can do to protect the integrity of our markets and the savings and investments of the American people.