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Enron execs knew of problems
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January 2, 2002: 8:58 a.m. ET
Report says Lay, Skilling, others aware of debt-shielding partnerships
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NEW YORK (CNN/Money) - Officers of Enron Corp. were aware of efforts to hide debt in off-the-books partnerships that eventually led to the biggest bankruptcy in corporate history, according to a published report Wednesday.
Documents circulated within the collapsing energy trading firm show Chairman Kenneth Lay, former President Jeffrey Skilling and former Chief Financial Officer Andrew Fastow, among others, were actively involved in partnerships that helped shield debt from public view and give the impression of rapid profit growth, according to a Wall Street Journal report.
The news comes less than two weeks after Skilling told the New York Times he had been completely unaware of Enron's financial trouble, which led to its Chapter 11 bankruptcy filing Dec. 2.
"We're all trying to figure out what happened," the Times quoted Skilling as saying. "This was a tragedy. I had no idea the company was in anything but excellent shape."
Houston-based Enron (ENE: Research, Estimates) did not return calls seeking comment.
The disclosure earlier this year of accounting irregularities led to the collapse of Enron's stock value, the evaporation of about $60 billion in market capitalization, the biggest bankruptcy filing in corporate history, the dissolution of a planned merger with Dynegy Inc. (DYN: Research, Estimates), lawsuits by shareholders and employees, and investigations by the Securities and Exchange Commission and Congress.
It also led to increased investor skepticism about corporate financial reporting, and the SEC recently said it will seek new rules requiring greater disclosure of accounting practices by companies.
The Journal said it culled information from several documents, including minutes of meetings of Enron's board and finance committee and a memo from an Enron attorney to Skilling about procedures for keeping track of activities in the debt-shielding partnerships, sometimes called Special Purpose Entities (SPEs).
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The documents show Lay and Skilling discussed the partnerships as early as 1999 and that they were aware of the possible conflicts of interest in Fastow running them, the Journal said. Enron thinks Fastow made several million dollars running the partnerships.
A representative of Skilling told the Journal he was aware of the partnerships' existence, but not of the details of their operation. An attorney for Fastow has told the Journal the partnerships were legitimate and were established at the behest of top management. Fastow and other Enron executives skipped Congressional hearings on the matter in December. 
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