Rep. Henry Waxman of California, ranking Democrat on the House Government Reform Committee, has obtained internal Enron Corp. e-mails that he says suggest that Chairman Kenneth Lay “misled” company employees about the prospects for Enron and its stock, just weeks before the energy trader collapsed and began its headlong plunge toward bankruptcy.

“If it is true that you sent these e-mails, then it appears that you misled your employees into believing that Enron was prospering and that its stock price would rise,” wrote Waxman in a letter to Lay over the weekend. Waxman said he obtained the e-mails as part of the committee minority staff’s investigation into Enron’s financial improprieties, which began in early December.

In another development Monday, the House Energy and Commerce Committee called on Enron, outside auditor Arthur Andersen LLP and the law firm of Vinson and Elkins LLP to fork over “additional records” as part of its ongoing probe into the financial dealings of the once-powerful trading company. The committee took this action after obtaining an Enron document, which it says suggests Lay, other senior company officials and Andersen may have known far more about the “controversial financial transactions and accounting practices” at the company than they have revealed so far.

Waxman cited two e-mails in his letter to Lay — one that allegedly was sent out by Lay on Aug. 14, 2001, the day that Enron’s then-CEO Jeffrey Skilling resigned, and another sent out on Aug. 27, 2001 in which Lay spelled out the details of a new Special Stock Option Grant.

In the Aug. 14 e-mail, Lay told employees: “Our performance has never been stronger; our business model has never been more robust; our growth has never been more certain…We have the finest organization in American business today,” according to the Waxman letter. Lay, in the second e-mail, reportedly wrote that one of his “highest priorities” was to restore investor confidence in Enron, and added this should result in a “significantly higher stock prices.”

Assuming the e-mails are authentic, Waxman said Lay’s “pronouncements” about Enron’s financial condition and its stock price were in “stark contrast to what is now known about Enron’s precarious situation,” and also were at odds with what Lay told Treasury Secretary Paul O’Neill nine weeks later about Enron’s financial problems. O’Neill disclosed last week that he was one of the Bush administration officials that Lay contacted prior to Enron filing for bankruptcy on Dec. 2.

In his letter to Lay, Waxman asked the Enron chairman to verify that he was the sender of the e-mails, and to confirm whether he was aware of the company’s “financial vulnerabilities” when he sent them; provide all records of internal Enron communications, including e-mails and videotapes, between Aug. 14 and Dec. 2, 2001, assessing the value of Enron’s stock or its financial condition; and provide copies of all public statements by Enron executives about the company’s stock or its financial condition made during the same time period.

He further called on Lay to supply all information related to the company’s decision last fall to bar employees from selling the Enron stock held in their 401(k) plans. This so-called lock-down action taken by Enron forced employees to sit idly by as the value of their 401(k) plans plunged along with the company’s stock. The lock-down began on Oct. 17, the day after Enron first publicly disclosed its financial problems, according to the Waxman letter.

Lastly, “I would like you [Lay] to explain why, after you allegedly sent the e-mails and subsequently spoke to Secretary O’Neill — and as the company’s stock continued to fall — you still sought a $60 million severance package from Enron,” Waxman asked Lay. He directed Lay to provide the sought-after information by close of business on Jan. 18.

Elsewhere on Capitol Hill, the House Energy and Commerce panel said it obtained an August 2001 letter written by a “knowledgeable” Enron employee to Lay in which he expressed concern about some of Enron’s off-balance-sheet partnerships (particularly the Raptor and LJM entities), Enron executives’ financial stakes in partnerships, Enron’s and Andersen’s accounting treatment of the partnership transactions, and the lack of public disclosure about the entities.

“I am incredibly nervous that we will implode in a wave of accounting scandals,” the employee told Lay. He asked Lay whether Arthur Andersen could “unwind these deals now.”

The letter further recommended that Enron conduct an investigation of the off-balance-sheet partnerships, which was carried out by Vinson & Elkins, according to the House committee. The law firm concluded that the Enron employee’s concerns did not warrant a “further widespread investigation,” but it warned that Enron faced “serious risk of adverse publicity and litigation” due to the “bad cosmetics involving the LJM entities and Raptor [partnership] transactions, coupled with poor performance of the merchant investment assets placed in those vehicles and the decline in the value of Enron stock.”

©Copyright 2002 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.