- News>
- Companies & Commodities
Enron examiner says Lay, accountants liable
Houston, Nov 25: Enron Corp.`s former chief Ken Lay, its lawyers and accountants should all be held liable for claims against the bankrupt energy giant, a bankruptcy court examiner said in a new report filed on Monday.
Houston, Nov 25: Enron Corp.'s former chief Ken Lay, its lawyers and accountants should all be held liable for claims against the bankrupt energy giant, a bankruptcy court examiner said in a new report filed on Monday.
Lay, Enron's former chairman and chief executive, could be liable for USD 94 million related to a loan from the company he paid back illegally with Enron shares, according to the examiner, Neal Batson.
Enron's dramatic collapse in November 2001 was the first of several scandals that rocked Wall Street and sapped confidence in US corporations.
The report, the fourth and final publication by Batson, was submitted to the bankruptcy court hearing claims against Enron.
Lay and Jeff Skilling, Enron's former president and chief operating officer, both breached their legal duty to properly supervise several "special purpose entities," according to the report.
Enron used dozens of such entities to hide billions of dollars in debt while fraudulently boosting its income.
Lay and Skilling "failed to respond appropriately to the existence of 'red flags' indicating that certain senior officers were misusing (special entity) transactions to disseminate materially misleading financial information," the report said.
Skilling could also be liable for a USD two million loan he paid off with Enron stock, it said.
Enron's in-house and outside attorneys committed legal malpractice related to the company's special purpose entities, he said.
The examiner also found evidence that Royal Bank of Scotland Group Plc, Credit Suisse First Boston and Toronto-Dominion Bank knew of and abetted "wrongful conduct" related to Enron's transactions, and that their combined USD one 1 billion of claims should be subordinated to other creditors' claims.
In July, Batson said six investment banks, including Citigroup Inc. and J.P. Morgan Chase & Co., could also risk losing their claims on more than USD five billion owed to them by Enron because they helped the company cheat investors.
No criminal charges have been filed against Lay or Skilling, and both have denied any wrongdoing in the collapse of the company.
Earlier this month, Lay agreed to surrender documents he had tried to withhold on the grounds the papers were personal and were covered by constitutional protections against self-incrimination.
Enron's dramatic collapse in November 2001 was the first of several scandals that rocked Wall Street and sapped confidence in US corporations.
The report, the fourth and final publication by Batson, was submitted to the bankruptcy court hearing claims against Enron.
Lay and Jeff Skilling, Enron's former president and chief operating officer, both breached their legal duty to properly supervise several "special purpose entities," according to the report.
Enron used dozens of such entities to hide billions of dollars in debt while fraudulently boosting its income.
Lay and Skilling "failed to respond appropriately to the existence of 'red flags' indicating that certain senior officers were misusing (special entity) transactions to disseminate materially misleading financial information," the report said.
Skilling could also be liable for a USD two million loan he paid off with Enron stock, it said.
Enron's in-house and outside attorneys committed legal malpractice related to the company's special purpose entities, he said.
The examiner also found evidence that Royal Bank of Scotland Group Plc, Credit Suisse First Boston and Toronto-Dominion Bank knew of and abetted "wrongful conduct" related to Enron's transactions, and that their combined USD one 1 billion of claims should be subordinated to other creditors' claims.
In July, Batson said six investment banks, including Citigroup Inc. and J.P. Morgan Chase & Co., could also risk losing their claims on more than USD five billion owed to them by Enron because they helped the company cheat investors.
No criminal charges have been filed against Lay or Skilling, and both have denied any wrongdoing in the collapse of the company.
Earlier this month, Lay agreed to surrender documents he had tried to withhold on the grounds the papers were personal and were covered by constitutional protections against self-incrimination.
Batson's previous reports concluded that former senior company officers, including ex-Chief Financial Officer Andy Fastow, ex-Chief Accounting Officer Rick Causey, ex-Treasurer Ben Glisan and ex-Chief Operating Officer Jeff McMahon, had illegally entered into the special entity transactions to manipulate Enron's earnings.
Glisan is currently serving a prison term after admitting to engaging in fraud.
Fastow has pleaded not guilty to nearly 100 charges of fraud and insider trading. His trial is scheduled to begin in April in Houston .
Bureau Report