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Thursday, 10 January, 2002, 03:07 GMT
Criminal inquiry into Enron collapse
Enron graphics
Enron: the biggest corporate failure in US history
The US Government has opened a criminal investigation of fallen energy giant Enron.

The White House says the probe is necessary to protect the interests of workers and pensioners in similar companies.

It's important for the investigation to proceed to determine what was done and why it was done

Ari Fleischer
White House spokesman

Justice Department officials did not disclose when the investigation began but said it would be centred within the department's criminal division.

When Enron filed for bankruptcy on 2 December, thousands of employees lost their jobs and billions of dollars when the company prevented them from selling shares from retirement accounts as they plunged in value.

Executives in Enron, once the world's largest energy trading firm, meanwhile drew out more than $1bn in stock when the company was near its peak.

A Justice Department source said the probe would be led by a task force made up of federal prosecutors in Houston, San Francisco, New York and several other cities.

Enron is also the subject of congressional investigations and probes by the Securities and Exchange Commission and the Labour Department.

New policies

Enron attorney Robert Bennett welcomed the investigation, saying the company counted on a Justice Department investigation "bringing light to the facts".

"It's important that we not let the Washington scandal machine take over, which will have as a consequence that every move will be politicised and the facts will be trivialised," he said.

The White House says it is likely to propose new policies shortly to protect the interests of employees and pensioners in other companies.

"It's important for the investigation to proceed to determine what was done and why it was done," said spokesman Ari Fleischer.

President George W Bush, he said, believed it "important to explore new policies so it (a similar collapse) can never happen again".

Correspondents say the investigation is likely to focus on possible fraud based on Enron's heavy reliance on off-balance-sheet partnerships which took on the company's debt.

Such partnerships would have masked Enron's financial problems and left its credit ratings healthy so it could obtain the cash and credit crucial to running its trading business.

Bush links

The collapse of Enron was spectacular, with its share price dropping from $85 to $1 inside a year.

The company was formed in 1985 and was once the world's top buyer and seller of natural gas and the largest electricity seller in the United States.

I'm not aware of anybody in the White House who discussed Enron's financial situation

Ari Fleischer
White House spokesman

It also traded in coal, pulp, paper, plastics, metals and fibre-optic bandwidth.

Enron contributed to Mr Bush's election campaigns, becoming his biggest corporate patron when he first ran for the governorship of Texas.

Last year, Enron representatives met six times with Vice President Dick Cheney or his aides on energy issues.

But the White House denies that Enron's financial situation was discussed at the meetings.

Meanwhile, the White House has announced that President Bush will meet his economic team on Thursday for the second time this week.

Details of the agenda for the meeting, due to begin at the 0910 (1410 GMT), were not given other than that it would focus on "matters of concern in the economy, [and to] workers".

The BBC's Nick Bryant in Washington
"It's a scandal which threatens to embroil the White House"
Lawyer for Enron employees Ron Kilgaard
"What our folks really need is their retirement money"
See also:

29 Nov 01 | Business
Q&A: Enron's plight
05 Oct 01 | Business
Q&A: Bankruptcy made simple
03 Dec 01 | Business
Enron files for bankruptcy
03 Dec 01 | Business
Barclays counts 89m cost of Enron
28 Nov 01 | Business
Rise and fall of an energy giant
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