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Wednesday, 12 December, 2001, 22:42 GMT
Enron to start $6bn sell-off
Enron offices
The hearing is one of several into the collapse
The bankrupt energy giant Enron has said it plans to raise $6bn (4.18bn) from selling some of the remnants of its business, an amount equal to almost half its bank debts.

Enron has said it is in talks to sell a controlling stake in key energy trading unit, and is also considering selling its emerging market businesses and water business Azurix.

As Enron tries to salvage what it can following its collapse which has led to thousands of job losses worldwide, a US congressional hearing is questioning its auditors about why they did not know that the company was inflating its profits.

Enron's accountants and auditors, Andersen, have alleged at a Congressional hearing into the energy giant's collapse that the company withheld "critical information" from them.

'Professional error

Andersen's chief executive Joseph Berardino - testifying at the hearing at the House Financial Services' Committee - added that the company had "made a professional judgement... that turned out to be wrong".

Enron chairman and chief executive Kenneth Lay - formerly an adviser to George Bush on energy policy - has declined to attend the hearings.

Kenneth Lay, Enron
Wanted: Kenneth Lay declined to attend Wednesday's hearing
Enron filed for bankruptcy earlier this month, having previously admitted that it had overstated its profits.

Enron now has about $15bn in bank debt.

The energy giant had some outside partnerships, the details of which were kept off balance sheet, allowing it to overstate its profits.

Many - including union representatives who also testified - question how Andersen could have failed to know what was going on.

Wrong judgement

Andersen's Berardino said that Enron failed to tell them about an agreement with a financing vehicle called Chewco.

"Two SPEs (special purpose entities) were involved in Enron's recent restatement announcement. On one, the smaller of them, we made a professional judgement about the appropriate accounting treatment that turned out to be wrong," Mr Berardino said.

"On the one with the larger impact, it would appear that our audit team was not provided [with] critical information. We are trying to determine what happened and why," he added.

Thousands of employees have lost their jobs and many have seen their retirement savings eroded since the energy giant filed for bankruptcy on 2 December.

"There was more than enough information in those statements alone to sound warning bells among the auditors that signed off on them," AFL - CIO secretary treasurer Richard Trumka said.

Enron also faces investigation by the Justice Department while the US Labor Department will look at how Enron handled its employees' retirement pension plans.

It has been under investigation by the Securities Exchange Commission (SEC) since October.

Under scrutiny is Enron's accounting practice, possible violation of securities law and the company's handling of its employees' retirement investment plans.

No show

The hearing on Wednesday is designed to help Congress and the public "understand as best as we can what structurally went wrong, what mistakes were made and what mistakes were not noticed," committee chairman Republican Michael Oxley said.

"I don't think they want to, or are not prepared to answer some very pointed questions [about] what went wrong," he said of Enron executives' refusal to attend.

An Enron spokeswoman said: "We don't believe we would be able to adequately serve the interest of the committee while at the same time trying to serve the interest of our creditors, shareholders and our current and former employees."

Senior Enron officials may yet be forced to attend hearings.

The House Energy & Commerce Committee - which is conducting its own probe - has given Enron's former chief financial officer Andrew Fastow until 21 December to meet investigators or face a subpoena.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Mark Gregory
"Investors have already filed numerous lawsuits"
Peter Coy, Business Week
"He could be forced to turn up"
See also:

08 Dec 01 | Business
Enron chiefs sued for $25bn
03 Dec 01 | Business
Enron files for bankruptcy
09 Nov 01 | Business
Enron admits inflating profits
05 Dec 01 | Business
Enron debacle forces audit rethink
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