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Congressmen find possible Enron 'fraud'

By Associated Press
Monday Feb. 4, 2002

WASHINGTON - Members of Congress pointed to possible criminality in the Enron Corp. scandal yesterday, saying the company manufactured income out of its off-the-books deals that led it to financial disaster.

On the eve of congressional testimony by former company chairman Kenneth Lay, a new review of Enron disclosed that in at least two cases, key documents could not be found that would show which top executives signed their names to the controversial deals that brought about the company's downfall.

"We're finding what may clearly end up being securities fraud," said House Energy and Commerce Committee Chairman Billy Tauzin. "Fraudulent, phony attempts" to move debt out of the company "in violation of current accounting practices."

Tauzin, R-La., said that "we found instances where some employees were invited in on the deals ... for a small investment of $6,000 ... six weeks later ... that $6,000 investment became $1 million."

Sen. Byron Dorgan said that in one failed deal, an Enron partnership named Braveheart borrowed $110 million from a Canadian bank and the company booked the money as income.

"They were doing almost no business, but they manufacture income from a bank loan," said Dorgan, who appeared with Tauzin on NBC's "Meet the Press."

"That's the kind of thing that went on over and over and over again. We want to know what Ken Lay knew."

Dorgan, D-N.D., was to preside at a Senate Commerce Committee hearing today where Lay is scheduled to testify. Tauzin's panel plans three Enron hearings this week.

An internal probe of Enron led by the University of Texas law school dean, William Powers, stated that a key document was missing from a partnership deal. Lay says he was unaware of the transaction and former Enron chief executive officer Jeff Skilling says he was unaware of the terms.

"We have not located any Enron Deal Approval Sheet, 'DASH,' an internal document summarizing the transaction and showing required approvals," stated the report. The report noted the same type of situation in another transaction as well, and the report raised the possibility that no approval sheet was ever prepared.

Tauzin said that Skilling backed away from signing his name to off-the-books partnership deals.

"What does that say about his knowledge of whether these deals were honest or corrupt?" Tauzin said.

"We found out that one of the good guys ... went to Skilling and brought him all these deals to get his signature on it," Tauzin said. "He refused to sign it."

Citing a company rife with conflicts of interest, Tauzin said that in one deal, a man and his girlfriend at Enron actually negotiated with each other.

"They were really sweethearts, ended up getting married," said Tauzin. "When they signed the deals, they signed as married partners, one against the other."

Dorgan said the question of criminality is "a judgment for the U.S. Justice Department" to make, but he added that "$1 billion in profit was booked here that didn't exist. That's trouble."

On CNN's "Late Edition," Reps. Jim Greenwood and Henry Waxman argued over the political dimensions to the Enron controversy.

"I hate to see this turned into a political scandal," said Greenwood, R-Pa., chairman of the House Energy and Commerce oversight and investigations subcommittee. Powers is to testify Tuesday before the panel.

Waxman, ranking Democrat on the House Government Reform Committee, said hundreds of thousands of dollars in Enron donations to Republicans and Democrats over the years had resulted in weakened regulatory oversight of the company.

"Those who stopped the police" from looking at Enron "bear some responsibility as well," said Waxman.

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