The hearings are focusing on the role of major financial institutions in structuring transactions that had a significant impact on Enron's financial statements. Witnesses include representatives from major financial institutions, accounting and financial experts, and investigators from the Permanent Subcommittee on Investigations.
The Subcommittee's first hearing examined the role of Enron's Board of Directors in the company's collapse and found that the board failed to play its required role as the guardian of the corporation's shareholders. Since that hearing, the Subcommittee has released a bipartisan report describing the actions and, in some cases, inactions of the Enron Board of Directors that clearly contributed to the company's downfall.
"The Board's failures, of course, are only part of the story," said Senator Collins. "We know now, nearly eight months after Enron filed for bankruptcy protection, that a web of conflicts of interest, accounting improprieties, high risk transactions, and appropriation of corporate assets by Enron executives contributed to the company's collapse. Today, we're examining the pivotal role of another set of players in the Enron story, the financial institutions." The Subcommittee's investigation has revealed that certain financial institutions, namely J.P. Morgan/Chase and Citigroup, knowingly participated in, and indeed facilitated, transactions that Enron officials used to disguise debt and, thereby, make the company's financial position appear more robust than it actually was. Enron's relationships with these institutions allowed the company ultimately to benefit in ways that were or should be improper.
"This charade led to Enron's never-ending need for more cash, creating a merry-go-round of refinancings at the expense of investors," the Senator said.
To date, the Subcommittee has issued more than 60 subpoenas to members of the Board of Directors and officers of Enron as well as to the Enron Corporation, Arthur Andersen and a number of financial institutions. In addition, PSI staff members have reviewed over one million pages of documents as part of their investigation into the collapse of Enron.
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