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2018 | OriginalPaper | Buchkapitel

4. Taking on Enron and Its Bankers

verfasst von : Elise J. Bean

Erschienen in: Financial Exposure

Verlag: Springer International Publishing

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Abstract

This chapter examines a Levin-led investigation into Enron whose bankruptcy injured employees, business partners, and the U.S. economy. It details three PSI hearings on the Enron scandal, the first showing how the Enron Board of Directors allowed the company to engage in high-risk accounting, conflicts of interest, and excessive executive pay; the second exposing the role of financial institutions like Citibank, JPMorgan Chase, and Merrill Lynch in Enron’s deceptive financial reporting; and the third tracing Enron’s use of an abusive tax shelter called Slapshot. The chapter shows how the Enron hearings helped lead to the enactment of the Sarbanes-Oxley Act as well as a jail sentence for a corporate executive who lied to PSI investigators.

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Vorheriges Kapitel Combating Money Laundering: Round One

Nächstes Kapitel Stopping Abusive Tax Shelters

The information in this chapter is based upon the following reports and hearing records produced by PSI: “The Role of the Board of Directors in Enron’s Collapse,” S. Hrg. 107-511 (5/7/2002) (hereinafter “PSI Enron Board Hearing”), https://www.gpo.gov/fdsys/pkg/CHRG-107shrg80300/pdf/CHRG-107shrg80300.pdf; “The Role of the Board of Directors in Enron’s Collapse,” S. Prt. 107-70 (7/8/2002) (hereinafter “PSI Enron Board Report”), https://www.gpo.gov/fdsys/pkg/CPRT-107SPRT80393/pdf/CPRT-107SPRT80393.pdf; “The Role of the Financial Institutions in Enron’s Collapse,” S. Hrg. 107-618 (7/23, 30/2002), Volumes 1–2 (hereinafter “PSI Financial Institution Hearing”), https://www.gpo.gov/fdsys/pkg/CHRG-107shrg81313/pdf/CHRG-107shrg81313.pdf (Volume 1) and https://www.gpo.gov/fdsys/pkg/CHRG-107shrg83050/pdf/CHRG-107shrg83050.pdf (Volume 2); “Oversight of Investment Banks’ Response to the Lessons of Enron,” S. Hrg. 107-871 (12/11/2002), Volumes I–II, https://www.gpo.gov/fdsys/pkg/CHRG-107shrg83485/pdf/CHRG-107shrg83485.pdf (Volume 1) and https://www.gpo.gov/fdsys/pkg/CHRG-107shrg86375/pdf/CHRG-107shrg86375.pdf (Volume II); “Fishtail, Bacchus, Sundance, and Slapshot: Four Enron Transactions Funded and Facilitated by U.S. Financial Institutions,” S. Prt. 107-82 (1/2/2003) (also reprinted in the 12/11/2002 hearing record), https://www.gpo.gov/fdsys/pkg/CPRT-107SPRT83559/pdf/CPRT-107SPRT83559.pdf.

See PSI Enron Board Report, at 24, citing Hearing Exhibit, at 55, “Defendant Andersen Exhibit 763,” from U.S v. Arthur Andersen, Case No. H-02-0121 (USCD SD Texas).

See United States v. Bayly, Case No. H-03-363 (USCD SD Texas, Houston), Third Superseding Indictment (7/22/2004) (hereinafter “Bayly Case”), ¶ 11, at 3–4; United States v. Brown, 459 F.3d. 509 (5th Cir. 2006).

Bayly Case, ¶ 11, at 3–4.

PSI Financial Institutions Hearing, at 215–264.

“Enron’s Enablers,” Wall Street Journal editorial (7/29/2002), http://on.wsj.com/2ARvuiT.

See “Three Top Former Merrill Lynch Executives Charged with Conspiracy, Obstruction of Justice, Perjury in Enron Investigation,” Department of Justice Press Release (9/17/2003), http://www.justice.gov/archive/opa/pr/2003/September/03_crm_510.htm; letter agreement between Justice Department and Merrill Lynch (9/17/2003), http://www.justice.gov/archive/opa/pr/2003/September/enronagree.pdf.

See “SEC Charges Merrill Lynch, Four Merrill Lynch Executives with Aiding and Abetting Enron Accounting Fraud,” SEC Press Release No. 2003-32 (3/17/2003), https://www.sec.gov/news/press/2003-32.htm.

See United States v. Brown, 459 F.3d. 509 (5th Cir. 2006).

Id. While other Merrill and Enron executives also made false statements to PSI, they did so while in Washington, DC, outside the reach of the Texas prosecutor. In contrast, Mr. Boyle participated in his interview by telephone from Texas.

For more information about the stock option tax loophole, see “Executive Stock Options: Should the Internal Revenue Service and Stockholders Be Given Different Information?” Permanent Subcommittee on Investigations, S. Hrg. 110-141 (6/5/2007), https://www.gpo.gov/fdsys/pkg/CHRG-110shrg36611/pdf/CHRG-110shrg36611.pdf.

The information in this section is based upon “Fishtail, Bacchus, Sundance, and Slapshot: Four Enron Transactions Funded and Facilitated by U.S. Financial Institutions,” S. Prt. 107-82 (1/2/2003), at 4, https://www.gpo.gov/fdsys/pkg/CPRT-107SPRT83559/pdf/CPRT-107SPRT83559.pdf.

See Arthur Andersen LLP v. United States, 544 U.S. 696 (2005).

See “Commission Files Settled Action against Former Arthur Andersen Partner in Connection with the Audits of Enron’s Financial Statements,” SEC Litigation Release No. 20441 (1/28/2008), https://www.sec.gov/litigation/litreleases/2008/lr20441.htm.

See, for example, “UC Reaches $168-Million Settlement with Enron Directors in Securities Fraud Case,” University of California Press Release (1/12/2005), http://bit.ly/2iuCbjV.

See, for example, “What’s $13 Million among Friends?” Opinion Editorial by Harvard Professor Lucian Bebchuk, New York Times (1/17/2005), http://nyti.ms/2j4YmwH.

For a discussion of some of the more than 140 civil lawsuits involving Enron, see “Enron: Navigating the Civil Side of the Corporate Case of the Century,” Diane M. Sumoski, http://bit.ly/2AZqTM3.

“Interagency Statement on Sound Practices Concerning Complex Structured Finance Activities,” 69 Fed. Reg. 97 (5/19/2004), at 28980. This interagency statement built upon earlier guidance issued by the SEC in 2003. “Guidance on the Potential Liability of Financial Institutions for Securities Law Violations Arising from Deceptive Structured Finance Products and Transactions,” Prepared by Annette Nazareth, Director, SEC Division of Market Regulation (12/4/2003), http://www.federalreserve.gov/boarddocs/srletters/2004/sr0407a1.pdf.

“Interagency Statement on Sound Practices Concerning Elevated Risk Complex Structured Finance Activities,” Federal Reserve Supervisory Letter No. SR 07-5 (4/17/2007), http://www.federalreserve.gov/boarddocs/srletters/2007/SR0705.htm.

Sarbanes-Oxley Act of 2002, P.L. 107-204 (7/30/2002).

Senate Amendment 4295, offered by Senators Schumer and Feinstein to S. 2673, the Senate precursor to the Sarbanes-Oxley Act, H.R. 3763.

Titel: Taking on Enron and Its Bankers
verfasst von: Elise J. Bean
Verlag: Springer International Publishing
Buch: Financial Exposure
Print ISBN: 978-3-319-94387-9

Electronic ISBN: 978-3-319-94388-6

Copyright-Jahr: 2018
DOI: https://doi.org/10.1007/978-3-319-94388-6_4