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News
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Lay resigns from Enron board
graphic February 4, 2002: 7:26 p.m. ET

Hollings calls for special prosecutor; Enron ex-Chairman Lay won't testify.
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  • Special Report: Enron's Collapse
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  • CNN.com - Lawmakers irked as ex-Enron CEO backs out -- February 4, 2002
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    NEW YORK (CNN/Money) - Kenneth Lay, the former chairman and CEO of Enron Corp., resigned Monday from the company's board as lawmakers moved to subpoena the executive and compel him to appear before Congress.

    Lay blamed his resignation on the multiple investigations and inquiries into Enron, which he said are proving a distraction. "My concern is for current and former Enron employees and other stakeholders, and I feel it is in their best interest for me to step down from the board," Lay said in a statement.

    Lay already had resigned as Chairman and CEO of Enron on Jan. 23.

    Sen. Fritz Hollings, D-S.C., chairman of the Senate Commerce Committee, announced Monday that he would convene the committee Tuesday to "get authority" to subpoena Lay. A subpoena would force Lay to appear before Congress, but he could still could invoke his Fifth Amendment right against self-incrimination and not say anything.

    The House Financial Services Committee, which is going ahead with its subcommittee hearing as planned, also is leaning toward issuing a subpoena, sources in Washington told CNN.

    Lay had been scheduled to appear before a Senate Commerce subcommittee Monday but backed out late Sunday. Details

    Sen. Hollings, who ripped the Bush administration for its ties to Enron, also called for a special prosecutor to investigate the matter.   

    "There's a culture of government corruption," Hollings said, offering some of the harshest comments yet directed at the Bush administration. "I've never seen a better example of cash-and-carry government than this Bush administration and Enron."

    However, the Department of Justice said there is no apparent reason for a special counsel to investigate Enron. Regulations call for a special counsel when prosecution by the DOJ would present a conflict and serve the public interest.

    "Neither of these criteria exist for the Department of Justice in this case. No conflict of interest exists," the DOJ said in a statement. "No person involved in pursuing this investigation has any conflict, or any ties that would require a recusal. Failing to carry out our duties and responsibilities in investigating this matter would not serve the public interest."

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      graphic CNN's Jonathan Karl reports on Ken Lay's decision not to testify.

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    When he originally agreed to testify before both committees last month, Lay did not receive immunity, meaning his testimony could be used against him in a court of law. Details

    In other Enron developments:

    The embattled CEO of Arthur Andersen LLP, Joseph Berardino, will testify this week before Congress on accounting reform. Former Enron CEO Jeff Skilling is expected to appear before Congress and will testify, Congressional sources with knowledge of the situation told CNN/Money.

    Andrew Fastow, former Enron Chief Financial Officer, will also appear voluntarily, but his lawyers have told congressional investigators that he will invoke the Fifth Amendment, a source said. Details

    A report commissioned by the independent directors of Enron released Saturday said the company's management "spent considerable time and effort working" to say as little as possible about the controversial partnerships the firm used to improperly inflate profits and hide debt.

    "Many of the most significant transactions apparently were designed to achieve favorable financial statement results, not to achieve bona fide economic objectives or to transfer risk," the report said.

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    The report specifically criticized Lay and the company's former accounting firm, Arthur Andersen.

    Enron's former "captain of the ship," as the report called Lay, "does not appear to have directed their [the directors'] attention or his own" to the controversial partnerships.

    Arthur Andersen was cited for a failure to properly perform oversight duties and improperly providing accounting advice on the partnerships, which generated $5.7 million in fees for the accounting firm, according to the report. Details     

    Separately, Arthur Andersen named former Federal Reserve Chairman Paul A. Volcker to head an independent board that will develop changes in its auditing and consulting practices.

    Andersen CEO Joseph Berardino said Volcker will be given a complete professional staff and full access to the firm's operational procedures. Details

    The Department of Justice asked the White House to retain all Enron-related documents received since 1999. The request covers e-mails, storage devices, notes and memos.

    The White House said it directed its staff to comply with the request. Details

    The crisis of confidence caused by the Enron debacle is one of the challenges the investment banking industry will face this year. But it ultimately could prove to be a benefit, Henry Paulson, Goldman's chairman and CEO, said Monday.

    Paulson suggested that changing the accounting rules to give the public a clearer picture of companies' financial health could be a catalyst for M&A in the longer term. Details

    The Enron internal report outlining mismanagement and misdeeds shows that the bankrupt firm has only itself to blame for its demise, Dynegy said on Monday in response to a $10 billion Enron lawsuit.

    According to Reuters news service, Dynegy, in papers filed in U.S. bankruptcy court in New York, said Enron's finances were clearly beyond repair before Dynegy pulled out of a proposed merger of the energy-trading rivals in November in a move that Enron says triggered its downfall. graphic

      RELATED STORIES

    Special Report: Enron's Collapse

      RELATED LINKS

    CNN.com - Lawmakers irked as ex-Enron CEO backs out -- February 4, 2002





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