Hiding losses and camouflaging wrongdoing

Shady Enron Doing Go Back to '87 -Report


Shady Enron Doing Go Back to '87 -Report
LOS ANGELES (Reuters) - Hiding losses and camouflaging wrongdoing was an established pattern at disgraced energy trader Enron Corp. as far back as 1987, according to a Vanity Fair magazine report published on Thursday quoting former company auditors and insiders.

The magazine's April issue claimed that former Chief Executive Kenneth Lay chose in 1987 to keep on staff, rather than dismiss, two Enron Oil Corp. executives who had run a rogue trading operation involving the misappropriation of between $2 million and $4 million.
``Lay read the (internal investigation) report and he read his budget, and estimated how much money they made and if they were fired what could he lose...,'' Vanity Fair writer Marie Brenner quoted an Enron auditor involved in unraveling the fraud as saying.
``My conclusion was that this is a guy who puts earnings before scruples, rather than reacting to the dishonesty right in front of him,'' the unnamed auditor added.

Enron (ENRNQ.PK) collapsed in December, the biggest-ever U.S. corporate bankruptcy, laying bare a complex web of special partnerships that its own investigators have found were used to hide debt and inflate profits by nearly $1 billion.

Its demise led to the loss of thousands of jobs, and shareholders, creditors and employees lost more than $50 billion.
Lay last week refused to testify before Congress on the spectacular collapse, citing his Fifth Amendment right against self-incrimination. Lay's spokeswoman did not return calls for comment on the Vanity Fair article.

Vanity Fair said the two executives in the 1987 trading case, Louis Borger and Thomas Mastroeni, were later prosecuted by the U.S. attorney and pleaded guilty to conspiracy to defraud and to filing false tax returns.
The magazine quoted minutes of an April 29, 1987 meeting at which Lay decided, despite objections from other participants, to keep the two men on the payroll. Brenner said the auditor who supplied the minutes is still upset at the outcome.

``I can remember Ken Lay sitting there saying 'I have made the decision'...What can I say? He was the CEO, and he felt that they could put controls in place and that he needed those earnings. That was his call...We all knew those people were crooks! We told him that,'' the auditor told Brenner.
Brenner interviewed 50 people, including a number of former and current Enron employees, for her article which hits newsstands on March 6.
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