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Thursday, 10 January, 2002, 15:01 GMT
Enron collapse prompts inquiry
Enron graphics
Enron: World's largest buyer and seller of natural gas
The United States Justice Department has launched a criminal investigation into the bankruptcy of Enron, the biggest corporate failure in US history.

The energy company - one of the largest commodity trading firms in the world - filed for bankruptcy in December, and more than 5,000 employees lost their jobs.

George W Bush
Enron donated funds to Bush's campaign for the Texas governorship
The White House said the investigation was necessary to protect the interests of workers and pensioners in similar companies.

It is also proposing to review company pension regulations as a result of the Enron case, officials said.

Enron's 20,000 employees lost billions of dollars in their pensions plans, after they were barred by the company from selling shares when their value plummeted.

Many of the company's executives - who have also advised the White House on energy policies - allegedly raked in massive profits, selling their shares before the steep fall in prices.

Markets stunned

Enron, which is based in Houston, Texas, and has close links with the Bush administration, is already being investigated by four Congressional committees and two other government departments.

Its financial collapse stunned financial markets, its share price dropping to less than $1 from $85 in the space of a year.

Enron's downfall
16 Oct 2001: Third quarter results reveal black hole in finances
22 Oct: Regulator launches inquiry
9 Nov: Enron admits inflating its profits
11 Nov: Dynegy, a smaller rival, bids for Enron
29 Nov: Dynegy drops takeover plan
2 Dec: Enron files for bankruptcy
11 Dec: Hearings in Congress begin
10 Jan 2002: Criminal inquiry confirmed
The BBC's Washington correspondent Nick Bryant says it is a scandal which threatens to embroil the White House.

When President Bush first ran for the governorship of Texas, the company was his biggest corporate patron, donating hundreds of thousands of dollars.

More recently, Enron executives met Vice President Dick Cheney and his staff, offering advice on the administration's controversial energy plan.

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

The exact focus of the Justice Department's criminal investigation has not been disclosed, but it is likely to focus on the company's heavy reliance on so-called off-balance sheet partnerships, which concealed financial problems from investors.

'Scandal machine'

Enron attorney Robert Bennett has 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.

Job cuts confirmed at Enron so far include 1,100 in London and 4,500 in Houston.

The White House said it was likely to propose new policies shortly to protect against a debacle similar to the Enron case happening again.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Rob Watson
"Bush said he was deeply concerned"
Peter Speigel, FT expert in Washington
"There is a lot of smoke but no fire"
Lawyer for Enron employees Ron Kilgaard
"What our folks really need is their retirement money"
See also:

10 Jan 02 | Business
The case against Enron
10 Jan 02 | Business
Q&A: Enron's plight
05 Oct 01 | Business
Q&A: Bankruptcy made simple
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