Panel To Hear Call For Reform In Wake Of Enron
By: unknown author
WASHINGTON -- Financial collapses such
as the one that befell Enron Corp. (ENE) will occur again unless controls
against conflicts of interest in capital markets are strengthened, an
independent financial researcher will tell a Senate panel Tuesday.
"The U.S. capital markets system
clearly failed thousands of Enron investors, pension holders, creditors,
employees and customers. It is clear the system will continue to fail
investors until the root cause - rampant conflicts of interest
throughout the system - are brought under control," Scott
Cleland, chief executive of the Precursor Group, said in his prepared
Baby Boomer Americans depend on their investments in market-vulnerable
401(k) and company pension plans to supplement Social Security and
adequately fund their retirement," Cleland will testify.
"Now, more than ever, we need the
internal controls capital markets rely on - auditors, research analysts
and boards of directors - to function with integrity to ensure the protection
of investors' financial security."
He will advocate policies that
discourage conflicts of interests among auditors and directors that can
undermine internal controls, and that prohibit companies from providing
consulting services to companies they audit.
Cleland also calls for ensuring
objectivity and unbiased research among Wall Street analysts, such as by
prohibiting them from having a financial stake in the companies they
Even as Enron's problems became
apparent, many analysts were still listing Enron as a "buy,"
"strong buy" or "hold" investment, Cleland noted.
Cleland is among 10 witnesses slated to
testify Tuesday before the Senate Commerce Committee's panel on consumer
Five Enron-employee witnesses will
testify about how their personal investments were affected by the
company's stunning collapse in equity value.
Enron stock was more than $80 a share a
year ago, but has plunged below $1 in the wake of revelations of
questionable financial practices that hid the company's debt and
Arthur Andersen, Enron's outside
auditor, will offer a witness, as will the AFL-CIO and the Motley Fool, an
on-line forum for information on personal investment.
Kenneth Lay, Enron's president and chief
executive, has declined an invitation to testify Tuesday, but has promised
to appear before the Senate panel during another hearing, committee staff
PO Box 20022, New York, NY 10025
Phone: +1 (212) 557-3163 - Fax: +1 (212) 557-3164