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.
Senator Levin? |