2002 – The U.S. Justice Department announced that it was pursuing a criminal investigation of Enron Corp. The company had filed for bankruptcy on December 2, 2001.


WASHINGTON (CNN/Money) — The Department of Justice has opened a major criminal investigation into Enron Corp., the once mighty energy trader that filed the largest bankruptcy in United States history, government officials told CNN Wednesday.
The Justice officials, who spoke on condition of anonymity, said the department has formed a task force that includes attorneys from the fraud section of the Justice Department’s criminal division in Washington and investigators from various U.S. Attorney’s offices, including those in Houston, San Francisco and New York.
The details on the size and scale of the investigation have not been determined, the Justice officials said.
An Enron attorney said the consolidation of probes by various U.S. Attorney’s offices around the country is actually a positive for the company.
“I’m pleased they’re going to consolidate any investigation in Washington,” said Bob Bennett, an attorney representing Enron in Washington. “It makes life a lot easier. I wish Congress would follow the same lead.”
Bennett said the investigation is not a surprise.

Joseph Berardino, the CEO of Enron auditor Arthur Andersen, testified before a congressional committee in December that his firm had told Enron’s audit committee that some of the company’s actions might have been illegal.
In addition, Andrew Fastow, Enron’s former chief financial officer, announced in December that he had retained both civil and criminal attorneys to represent him in various probes of the company’s collapse. And recent days have seen increasing congressional scrutiny of the company’s operations, along with its ties to top members of the Bush administration.
One Justice Department official told CNN, “The investigation is open.” The official would not say when the investigation had started, only that it had begun before Wednesday and that the criminal investigation is under way.
White House Press Secretary Ari Fleischer, while refusing to discuss the specifics of any administration action, said, “The president has said that all agencies across the government that have legitimate reason to should look into this and appreciate the importance of Enron’s bankruptcy on Enron employees and other people who are affected.”
Among the investors hurt by the collapse of the company stock are Enron employees who were barred from selling plummeting Enron shares from their retirement accounts.
The Labor Department and Securities and Exchange Commission already have launched civil investigations, and legislators have demanded an investigation of what the Bush administration may have known about Enron’s financial problems when White House officials — including Vice President Dick Cheney — met with Enron representatives last year.
In a letter to Rep. Henry Waxman, D-Calif., dated Jan. 3, the White House disclosed for the first time that Cheney or members of the White House’s energy task force met six times with representatives from Enron.
Rep. John Dingell, D-Mich., called Wednesday for more hearings into Enron’s meetings with Cheney and members of the While House’s energy task force.
“These meetings should be brought to light so that we can tell how the public interest was served,” Dingell told CNNfn. Dingell is the ranking Democrat on the House Energy Committee.
Cheney himself met with Enron CEO Kenneth Lay in April for a half hour and discussed energy policy issues. But the two did not discuss Enron’s financial situation, according to the White House.
The Senate’s Permanent Subcommittee on Investigations plans to send out 51 subpoenas on Friday to all Enron board members and officials since January 1999. Fastow, Lay, former President Jeffrey Skilling, and Enron’s adviser in its collapse, Arthur Andersen, will also receive subpoenas.
The subcommittee is not slated to hold a hearing until late spring or early summer, a member of Chairman Levin’s staff said.
Enron, which markets electricity and natural gas, delivers energy and other physical commodities, and provides financial and risk management services to customers around the world, filed for bankruptcy protection Dec. 2 with $62.8 billion in assets. It was the largest bankruptcy case in U.S. history, dwarfing Texaco’s filing in 1987 when it had $35.9 billion in assets.
Meanwhile, more than a dozen creditors to Enron have petitioned the U.S. Bankruptcy Court for the Southern District of New York to delay the sale of its wholesale trading unit set for Thursday. Salomon Smith Barney, a unit of Citigroup Inc. (C: Research, Estimates), and UBS Warburg have made formal bids for the unit.
Aquila Inc. and the Royal Bank of Scotland both questioned how Enron would use the proceeds from the sale. Aquila said it did not want Enron to use the proceeds from the sale “to fund or pay the costs and expenses” arising from its bankruptcy filing without the court’s approval.
An Enron lawyer told CNNfn Wednesday that the auction will likely go ahead as planned Thursday, with the winning bid announced on Friday. Enron is selling 51 percent of its energy trading business, court documents said.
Also on Wednesday, a federal judge ruled that she has the authority to freeze $1.1 billion in assets belonging to Enron executives. The ruling relates to a lawsuit from Amalgamated Bank that alleges that Enron executives artificially inflated the price of the company’s stock.
The bank claims that Enron insiders gained at least $1.1 billion by selling more than 17.3 million shares of stock during the past three years.
Shares of Enron (ENE: Research, Estimates) gained 6 cents, or 8 percent, to close Wednesday trading at 79 cents.