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The Honolulu Advertiser
Posted on: Thursday, January 10, 2002

Justice Department opens criminal probe into Enron collapse

By Karen Gullo
Associated Press

WASHINGTON — The Justice Department has opened a criminal investigation into Enron Corp., whose employees lost billions when the company went bankrupt.

The department has formed a task force, headed by the criminal division, of federal prosecutors in Houston, San Francisco, New York and several other cities, a Justice Department official said, speaking on condition of anonymity.

The Labor Department and the Securities and Exchange Commission are conducting civil investigations.

Officials at Enron refused to comment on the report, deferring to attorney Bob Bennett. He did not immediately return a call.

Enron, which was formed in 1985 and has 20,000 employees, was once the world's top buyer and seller of natural gas and the largest electricity marketer in the United States. It also marketed coal, pulp, paper, plastics, metals and fiber-optic bandwidth.

One likely focus of the Justice Department investigation: possible fraud, based on Enron's heavy reliance on off-balance-sheet partnerships that took on Enron debt. The partnerships masked the company's financial problems and left its credit ratings healthy so it could obtain the cash and credit crucial to running its trading business.

The Houston-based company went bankrupt after its credit collapsed and its main rival, Dynegy Inc., backed out of an $8.4 billion buyout plan late last year.

Just a year ago, stock of the nation's largest buyer and seller of natural gas traded at about $80 per share. Today, it is less than $1.

The news of the criminal investigation comes amid questions about the White House's dealings with Enron, which contributed to President Bush's election campaign.

The White House has acknowledged that Enron representatives met six times with Vice President Dick Cheney or his aides on energy issues last year.

The vice president's office said the last Enron meeting with a Cheney aide was Oct. 10, just six days before the first in a series of public admissions by the company about its true financial condition that sent it careening into bankruptcy court.

Enron's financial position wasn't discussed in any of the meetings, vice presidential counsel David Addington insisted in a letter.

Yesterday, White House spokesman Ari Fleischer told reporters: "I'm not aware of anybody in the White House who discussed Enron's financial situation."