Printer Friendly PageTestimony Highlights from Enron Pre-Paids Hearing
The following are highlights from testimony given by Citigroup personnel to the Senate Permanent Subcommittee on Investigations:
Highlights of testimony given by David Bushnell, Managing Director of Citigroup’s global corporate and investment bank and head of Global Risk Management
“We believed that Enron was making good-faith accounting judgments that were reviewed by Arthur Andersen, which was then the world’s premier auditing firm in this sector, and that the Audit Committee of Enron’s Board exercised meaningful supervision over the company’s accounting policies and procedures.”
“If what has been reported turns out to be the case — large-scale self-dealing, inflated assets, management that was inattentive or worse, a subservient Board, and a failure of auditing controls — we would not have done the business we did with Enron.”
“Our employees, including the bankers who are here today, are honest people doing honest business. They did transactions that were common throughout Wall Street, and they believed those transactions were entirely appropriate.”
“. . . we do not dictate our clients’ accounting practices. Once we are satisfied that a client’s proposed tax and accounting treatment seem reasonable, the accounting judgments are left to the client and its accounting professionals who have access to complete information.”
“Our financial system assumes that all market participants must be able to rely on a company’s financial statements and the representations of its outside auditors.”
Testimony by Maureen Hendricks Senior Advisory Director at Salomon Smith Barney. From 1999 until May 2001, head of SSB’s Global Energy and Power Group, with management responsibility for SSB’s investment banking relationship with Enron:
“In the due diligence that we conducted for the Yosemite offering, in close cooperation with our outside counsel, we received an opinion from Enron’s outside counsel and a comfort letter from Enron’s auditor. I believe that we asked the right questions. I regret to say that it appears from all that has recently been disclosed that we were not provided with the right answers by Enron management. It also appears that the audited financial statements, upon which we relied, were not accurate and did not fairly present Enron’s financial condition.”
Testimony by Rick Caplan, a Managing Director of Citigroup’s corporate and investment bank and co-head of its North American Credit Derivatives Group:
“Some have suggested that prepaids are ‘off balance sheet’ or that the liabilities that Enron incurred as a result of these financings somehow were ‘disguised’ or ‘hidden.’ That simply is not true. Enron’s obligations on these financings were clearly reflected as liabilities on Enron’s balance sheet and denominated as ‘price risk management liability.’ A ‘price risk management liability’ is a liability, plain and simple, that must be satisfied every bit as much as ‘debt.’ Thus, while not recorded as debt, prepaid liabilities were clearly obligations of the company and visible as such to investors.”
“We arranged these financings for what appeared to be one of America’s best companies, using a financing structure that had been commonly employed in the energy and power industry for many years and relying on the fact the accounting treatment was blessed by one of the nation’s leading accounting firms and seemed reasonable under the then-existing accounting rules and guidelines.”
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