February 1, 2002
Mr. William C. Powers, Jr. Dear Mr. Powers: We look forward to your appearance before the Subcommittee on Oversight and Investigations next Tuesday. We hope your special committee’s investigation of related-party transactions at Enron will assist our investigation, as well as increase the public’s understanding of what happened. The composition of your special committee, however, may have the regrettable effect of hindering that result. It has come to our attention that Herbert Winokur, a long-time Enron board member and one of the three outside board members on your special committee, was the head of the board’s finance committee and recommended approval of many of these transactions. Then-outside director Winokur played a direct role in approving the LJM partnerships in 1999, appearing to have had direct knowledge of both their structure and the potential conflicts Mr. Fastow’s role presented to Enron. We understand that Mr. Winokur also recommended that Enron’s "Conduct of Business Affairs Policy" be waived twice so that Andrew Fastow, formerly Enron’s chief financial officer, could be the general partner in the LJM1 and LJM2. As you know, Mr. Fastow’s position as both the chief financial officer of Enron and the managing partner of the LJM partnerships was the subject of extensive conversation by senior Enron officials, including the company’s board, and Enron’s auditors. Moreover, Mr. Winokur was chairman of the board of directors of Azurix Corp., the ill-fated water company set up by Enron and Rebecca Mark, a former Enron director. Enron invested $1 billion in this company, took it public and in late 2000 bought the shares back at more than double the market price. Mr. Winokur sold 22,500 shares to Enron for $184,275 at that time. Although Enron claimed Azurix was an independent company, all of its entire board of directors were also Enron directors. Enron, Azurix, and its senior directors were sued in 2000 by shareholders claiming the issuance of misleading statements about the company’s financial condition and future prospects. Today’s Wall Street Journal reported that Mr. Winokur was also a member of Enron’s executive committee that approved the financial structure of CHEWCO, an allegedly independent entity which would be run by Michael Koppers, an Enron executive. The consolidation of CHEWCO’s debt onto Enron’s balance sheet in 2001, due to the fact that it was actually an affiliated entity, was one of the reasons Enron had to write down $1.2 billion in equity last October. The minutes of the 1997 meeting reportedly show that Mr. Winokur, who was then boarding a plane, said that he was familiar with the topic and supported management’s recommendations as described by Mr. Skilling. "Minutes from a 1997 Meeting Reveal Enron Brass Were in Partnership Loop," Wall Street Journal, Feb. 1, 2002, A1. As a member of the special committee now responsible for investigating the related-party transactions between Enron and the LJM1/LJM2 and other related partnerships, Mr. Winokur is essentially investigating his own actions and approving or disapproving the resulting report. You can understand why disinterested observers might conclude that the report’s independence, or at least the appearance of independence, has been compromised. We will be very interested in your report’s evaluation of the related-party transactions and the way they were structured to enshroud Enron debt from shareholders’ view. But we also expect there will be questions about the conflicts posed by Mr. Fastow, Mr. Winokur’s role in the related-party transactions, and how your special committee addressed Mr. Winokur’s role in your inquiry. We appreciate your willingness to testify next Tuesday, and hope that making you aware of some of our concerns now will help you address these issues at that time. Sincerely, JOHN D. DINGELL PETER DEUTSCH
cc: The Honorable W. J. "Billy" Tauzin,
Chairman The Honorable James C.
Greenwood, Chairman | |
|
 |
 |
 |
 |
 |
 |
 |
 |
