Report Commissioned by Enron's Board Criticizes Management
CATHERINE CALLAWAY, CNN ANCHOR: Enron executives who have been in the pressure cooker lately may feel even more heat tonight. A report that was commissioned by the company's board of directors is scathing in its criticism of Enron management. It's known as the Powers report. And it was released just a short time ago. Our own CNN's Brooks Jackson is joining us now in Washington. He's been mulling over this report tonight. What's the latest, Brooks?</s>BROOKS JACKSON, CNN FINANCIAL NEWS CORRESPONDENT: Well, Catherine, good to see you again. The report says the problems at Enron could've been avoided and should not have happened. It accuses former chief executive Ken Lay of failing to do his job. Lay personally approved some of the controversial off the books partnerships that were at the heart of the Enron collapse. And the report says, "He bears significant responsibility for those flawed decisions." It says Lay, while earning $7 million a year, was functioning more as a director than a real member of management. The most severe criticism is aimed at one of Lay's deputies, Andrew Fastow, who set up those partnerships that hid huge debts and losses by Enron. Fastow collected $30 million in fees for the partnerships. And the report says he was not entitled to it. Fastow would not talk to the Enron investigators. A revelation in the report is that one of Fastow's underlings, named Michael Copper, also made a killing at Enron's expense. It said Copper "earned more than $10 million from a $125,000 investment" in one of Fastow's partnerships. It said Kopper wouldn't talk to investigators either. The Powers report was issued by University of Texas Law School Dean William Powers, who joined Enron's board in October, to conduct this self-investigation. It says the directors themselves who ordered the report had fallen down on the job themselves and should've prevented the abuses that were -- through more vigilant oversight. It says Enron's document shredding accounting firm, Arthur Andersen, "did not fulfill its professional responsibilities, collecting millions in fees, while making simple and not so simple accounting mistakes." Even Enron's outside law firm, Vinson & Elkins, is accused of failing to criticize Enron's failure to make more complete disclosures of its problem partnerships. And Catherine, this is, again, a self- investigation by Enron. It surely won't satisfy Enron's critics, but it will be used as a road map by the criminal investigators, congressional investigators, and lawyers suing Enron and their top executives.</s>CALLAWAY: Brooks, did it really answer any questions or just tell what a lot of people already knew?</s>JACKSON: Well, we are getting a much more detailed look at these partnerships that are the heart of the Enron problem. Now I want to stress this report did not deal with political contributions, lobbying, 401(k) problems. Those are all outside the scope. It was supposed to focus on these key partnerships. And it did. We are going to be going over this report, myself and a lot of other reporters, looking for additional details in days to come.</s>CALLAWAY: You know, we mentioned it was some 200 pages, a litany of blame here on this continued to snowball, with all the different -- the roadblocks that nothing -- no one seemed to catch it. It just kept getting bigger.</s>JACKSON: Absolutely true. And again, as the report says, the board should have been more on the ball. Top management should not have allowed this to happen. Outside lawyers collecting huge fees really were not giving wise advice. And as you heard, a criticism of the accounting firm, Arthur Andersen, which was collecting fees not only for looking at these -- the accounting issues here, and making mistakes, but collecting fees for advising the company on its management as well.</s>CALLAWAY: Brooks, thank you for breaking it down for us tonight.</s>JACKSON: All right. TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com