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Thursday, 24 January, 2002, 09:21 GMT
Enron chairman resigns
Enron symbol with former chief executive Kenneth L Lay
The probe into Enron's finances is just beginning
The chairman of bankrupt energy giant Enron has resigned, as an investigation in the US Congress continues into the company's crash.

Kenneth Lay, who ran Enron since it was founded in 1986 and who is close to senior members of the Bush administration, said the investigations into the collapse left him unable to concentrate on rescuing the company.

The key issues
Political impact: Top-level political links with Bush administration. Donated to Republican and Democratic campaigns
Accounting process: Company used complex financial partnerships to conceal debt. Shares tumbled when this emerged and bankruptcy was declared
Criminal investigation: Executives investigated for insider dealing. Officials alleged to have shredded documents. Employees lost billions due to ban on selling stock

Special section on Enron

"I want to see Enron survive," said Mr Lay, who will remain a director.

"And for that to happen we need someone at the helm who can focus 100% of his efforts on reorganising the company."

Although Mr Lay has been keen to portray his departure as a mutual decision, it seems likely that he was forced out by creditors.

The search for a replacement, who insiders said should ideally be a corporate restructuring specialist, is already reportedly under way.

Congressional hearings on the destruction of Enron-related documents by auditing firm Andersen, and on the general background to the collapse, are due to begin at 1430 GMT.

Money man

Mr Lay was a significant financial backer of Mr Bush's 2000 election campaign.

Enron's downfall last autumn was the biggest corporate bankruptcy in American history.

Links between Enron and politicians of both main parties have raised fears of a nationwide political scandal.

The bankruptcy has already triggered two criminal investigations - by the US Justice Department and the stock market regulator - and Congressional inquiries.

Not testifying

Enron's chief auditor, David Duncan, will refuse to testify to a congressional committee on Thursday, his lawyer has said.

Mr Duncan has asked the committee for immunity from prosecution before agreeing to appear and, unless he is granted it, will invoke his constitutional right not to incriminate himself.

Mr Duncan was sacked by audit firm Andersen, which admitted the team he led shredded documents relating to Enron.

Andersen chief executive Joseph Berardino has also declined to appear before Thursday's committee hearing.

Mr Berardino offered late on Wednesday to send a replacement witness - a move which correspondents said was almost guaranteed to anger committee members.

He nominated in his place "a top technical expert in accounting standards", an Andersen spokesman said.

Constitutional right

Without immunity, Mr Duncan would "rely on his constitutional right not to testify," his attorney Robert Giuffra said in a letter to the House Energy and Commerce Committee.

It would be "premature" to require Mr Duncan to testify on Thursday because he had not had sufficient time to prepare, the letter added.

Mr Duncan was subpoenaed on Tuesday to appear before the committee and his refusal to do so could earn him a short prison sentence for being in contempt of Congress.

The same is true of Mr Berardino.

Committee chair Billy Tauzin, to whom the letter was sent, is reportedly irritated by television interviews given by Andersen executives, including Mr Berardino, who are reluctant to appear before the committee.

Shredding centre stage

The question at the heart of the inquiry is how much the audit firm's Chicago head office knew about the destruction of documents at its Houston branch, and when.

The investigation into document shredding has expanded to include Enron itself.

On Tuesday, FBI investigators searched Enron's headquarters in Houston after a former executive alleged that documents had been destroyed there, despite a court order.

The BBC's Stephen Evans
"Enron engaged in some very dubious practices"
Peter Wyman, Institute of Chartered Accountants
"We need to see what went wrong with the audit"
Eli Gottesdien, Lawyer for the Enron employees
"Kenneth Lay needs to concentrate on staying out of jail"

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14 Jan 02 | Business
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