Senate orders Enron's former boss to testify

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The Independent US

The heat on former chairman Kenneth Lay and other senior executives with Enron intensified yesterday as a Senate committee formally subpoenaed its reluctant main witness, and further allegations of criminality swirled around the energy corporation that crashed owing $40bn (£28bn).

Just 24 hours after Mr Lay refused to appear to give testimony, Democrats and Republicans on the Senate commerce committee voted by 23-0 to issue the subpoena, and tentatively scheduled a new session for next week. Mr Lay, who has not been seen but is understood to be in his home town of Houston, will have to attend.

It's expected he will follow the example set last month by David Duncan, the chief Andersen accountant handling Enron's contested audits, and take the fifth amendment. This would allow Mr Lay not to give answers that might incriminate him. "If you think he'll tell us anything here, I'll eat my hat," said Senator Kent Conrad of North Dakota, a Democrat, on the committee.

Mr Lay has resigned from Enron's board thus severing his last formal links with the company he founded in 1985. The only remaining connection is his holding of some 2.9 million all-but-worthless shares.

In the absence of Mr Lay, the spotlight on Capitol Hill yesterday was on Joseph Berardino, the chief executive of the beleaguered Andersen, who suffered a furious attack during testimony before the House finance services committee.

Mr Berardino looked tired and dispirited as he fended off question after question, saying that all the facts about the auditing debacle were not yet known. But his interrogators were not satisfied. "Your ship's going down, and you're lashed to the mast unless you answer us," one frustrated Congressman shouted at him.

But if Andersen is guilty of negligence and incompetence, the allegations of criminal conduct are increasingly focusing on Enron itself, and the coterie of senior executives involved with the 30 or so secret partnerships which hid the company's massive debts.

In evidence on Monday, William Powers, the author of the massively critical internal report on Enron's demise, described as "appalling" what had happened at the energy firm. There had been "a fundamental default of leadership and management", he said, adding that "leadership and management begin at the top," with Kenneth Lay.

Hours later, the possible criminal ramifications of the Enron collapse grew with claims that the Enron employee benefit, or pension, fund had been raided by management, violating a US law which rules illegal the use of such funds for any purpose other than employee benefits.

Robin Hosea, a former senior Enron accountant, told CBS News that the company took at least $15m from the employees' fund and spent it. Ms Hosea said she questioned her superiors, but was told it was "a payment to friends of executives and to leave it".

For all the exchanges over Enron, Democrats are having trouble using the controversy over the company's close ties with the Bush administration, as a political weapon against the Republicans.

The Justice Department dismissed a request by Fritz Hollings, the Democratic chairman of the commerce committee, for a special prosecutor to handle investigations into Enron, a step that would lift the affair into the ranks of the Watergate, Iran-Contra and Whitewater inquiries.

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