An internal report into the machinations that led to the collapse of Enron has prompted predictions that some of the company's executives could face criminal prosecution.
Senator Byron Dorgan, who chairs a Senate sub-committee opening hearings into the scandal today, said: "This is a devastating report. It suggests massive problems. This is almost a culture of corruption. Some things have happened that are going to put some people ... in real jeopardy."
The report, written by a committee attached to Enron's board, asserts that executives intentionally inflated the company's profits in the year before its implosion, enriching themselves in the process. They did it by creating a web of complicated partnerships to massage the books and hide losses and debt.
The 217-page study, reviewed for the first time by board members at an emergency meeting in New York at the weekend, will provide fresh fodder to the Senate hearing this morning. Its star witness will be Kenneth Lay, the former chief executive of Enron. His testimony will mark his first public statement on the affair since his resigned last month.
The report, written by William Powers, the dean of the University of Texas Law School, concludes the problems at Enron were caused by, "a flawed idea, self-enrichment by employees, inadequately designed controls, poor implementation, inattentive oversight, simple (and not so simple) accounting mistakes, and overreaching in a culture that appears to have encouraged pushing the limits. Our review indicates many of those consequences could and should have been avoided."
Among those named by the report is the former chief financial officer at Enron, Andrew Fastow, who, it says, had control of numerous partnerships that were set up for the sole purpose of manipulating company profits and losses. He personally, it adds, took home about $30m (£21m) from the arrangements, which flew in the face of ethics and financial regulations. The partnerships allowed other executives to take home between $1m and $10m.
As for Mr Lay, the report says he "bears significant responsibility for those flawed decisions, as well as for Enron's failure to implement sufficiently rigorous procedural controls to prevent the abuses that flowed from this inherent conflict of interest".
Members of the Enron board, including the former Conservative minister Lord Wakeham, are threatened by possible financial ruin because of Enron's collapse. A new class action suit filed by 430 former employees who have lost their savings in the company's crash reportedly names each member of the board individually. The company's insurance would be unlikely to cover all the claims.
Lord Wakeham flew to America last Thursday to consult Enron lawyers over his possible liability in the face of such suits. He left London after relinquishing his role as chairman of the Press Complaints Commission.
Those facing the harshest scrutiny because of the latest revelations are the executives.
Billy Tauzin, a Republican representative, said: "Not only were there corrupt practices, not only was there hiding of the fact that debt was being put off the balance sheets and profits that were reported that didn't exist but we're finding more than that ... what may clearly end up being security fraud."Reuse content