WASHINGTON (AP) -- The nation's biggest brokerage firm denied Tuesday that it knowingly helped Enron hide its true financial condition. Leaders of three telecom companies engulfed in accounting scandals, meanwhile, were criticized by senators over the excesses of executives who cashed out millions in company stock while employees were losing their jobs and savings.þþAt the White House, President Bush signed into law the most far-reaching government crackdown on business fraud in 70 years, hoping to restore investor confidence with a promise of ``hard time'' for corporate wrongdoers.þþ``This law says to every dishonest corporate leader, `You'll be exposed and punished.' The era of low standards and false profits is over,'' Bush declared at a signing ceremony marked by fanfare and the absence of corporate executives.þþAn election-year wave of accounting scandals, which drove down the stock market and threatened political damage to the White House and Republican lawmakers, helped propel the bill through Congress with extraordinary speed.þþOn Capitol Hill, skeptical senators accused Merrill Lynch & Co. of abandoning its moral, if not legal, responsibility to investors by allegedly helping Enron hide its financial problems despite a host of ethical questions.þþOne document -- a handwritten note at the bottom of a Dec. 12, 1999, fax by Merrill Lynch's senior finance chief James Brown -- questioned whether there would be a ``reputational risk'' if the firm helped ``aid/abet Enron income stmt manipulation.''þþG. Kelly Martin, senior vice president of the company's International Private Client Division, said he assumed the issue was discussed by Merrill Lynch executives as they considered whether to buy, at Enron's urging, an energy-producing barge service in Nigeria -- with Enron promising the service would be bought back in six months. Senators said the firm knew that the energy trading company was going to claim the transaction as a sale to boost its earnings statements and that the transaction was a loan, not a sale.þþIn written testimony, the firm contended that its transactions with Enron were ``appropriate and proper based on what we knew at the time.''þþThe Senate investigators also are looking into a 1998 episode in which, they say, Merrill Lynch wanted to win more investment banking business from Enron and removed a financial analyst who had angered Enron executives with his rating of the company. The analyst was replaced by one who upgraded the rating of Enron, according to the investigators.þþAt a separate hearing with the leaders of WorldCom Inc., Global Crossing Ltd. and Qwest Communications International Inc., Sen. John McCain, R-Ariz., noted the millions in stock options given to executives of telecom companies who cashed them in before the companies collapsed. The options were supposed to be tied to company performance.þþ``Why didn't you immediately ask for that money back?'' McCain asked them at the Senate Commerce Committee hearing.þþThe officials responded that until allegations against the former executives are proven valid, the companies cannot move against them.þþMcCain had pushed unsuccessfully for a requirement in the new corporate responsibility law that companies count as an expense against earnings the valuable stock options they shower on top executives.þþWorldCom filed the biggest corporate bankruptcy in history on July 21, Global Crossing also is in bankruptcy proceedings and Qwest acknowledged major accounting errors on Sunday. The three companies are under federal investigation.þþThe three company leaders and Michael Powell, chairman of the Federal Communications Commission, testified they didn't expect major phone or Internet disruptions as a result of the companies' financial problems.þþ``I remain confident that we are not facing a crisis in the provision of services stemming from WorldCom's bankruptcy,'' Powell said.þþWorldCom President and Chief Executive Officer John Sidgmore told the panel: ``We are intensely focused on ensuring that all of our customers -- consumer, business and government -- continue to receive the highest quality service without disruption.''þþWorldCom, which has laid off 17,000 of its 80,000 workers, owns No. 2 long-distance telephone company MCI and is the largest operator of the Internet backbone.þþAt the hearing, senators decried excesses of telecom executives at a time when thousands of employees were losing their jobs.þþMcCain cited Global Crossing's founder and chairman, Gary Winnick, cashing out $734 million in stock before the company collapsed.þþExecutives of Denver-based Qwest, the biggest provider of local phone service in 14 Western states, made some $500 million selling company stock from 1999 to 2001 while they issued profit figures that the company now says were inflated and based on improper accounting, according to research reports made public Tuesday.þþThe Justice Department and the Securities and Exchange Commission -- which already has filed civil fraud charges against WorldCom -- are investigating accounting irregularities at the telecom titan. WorldCom disclosed it had disguised nearly $4 billion in expenses, thereby inflating its earnings.þþGlobal Crossing, which operates a worldwide fiber-optics network, has acknowledged documents were shredded before and after its January bankruptcy filing and the disclosure of a federal accounting investigation in February.þþThe SEC is investigating Qwest's swaps of fiber-optic capacity and the federal General Services Administration is reviewing its government contracts. The Justice Department also is investigating the company.þ
Source: NY Times
