Report sets stage for Enron bankruptcy battle

Enron, the bankrupt energy trader, may have improperly transferred as much of $5bn (£3.1bn) in assets to other entities as part of the company's manipulation of its financial statements, a report said today.

The report, by Neal Batson, a lawyer who was appointed by the federal bankruptcy court in New York to investigate Enron's financial transactions, also claimed that some former Enron executives earned more than had been previously thought from the transactions with outside entities.

Andrew Fastow, Enron's former chief financial officer, received at least $60.6m, from his dealings with the entities, the report said. That is about $15m more than previously thought. Mr Fastow is under indictment in a federal court in Houston on several charges. He has pleaded not guilty.

Mr Batson's report, which was filed last month, set the stage for a battle in the Enron bankruptcy case, as creditors fight to get their hands on what they can from a collapse that shattered confidence in corporate America and Wall Street.

The report also held out the prospect of a confrontation between the company and its own former executives. Mr Batson concluded that under the bankruptcy laws, the Enron estate could seek $74m from Kenneth Lay, the former chairman.

Mr Lay borrowed the money and repaid it with company stock in the months before the bankruptcy. The report also said it could seek $55m in deferred compensation that was given as accelerated payments to certain senior executives soon before its bankruptcy in December 2001.

In the most complete analysis of the Enron collapse to date, the 2000-page report concluded that the company violated accounting rules in a wide array of transactions that misrepresented its true financial performance and shifted billions of dollars in assets off the books.

Mr Batson described how Enron and its accountants at Arthur Andersen followed the letter of the law but often bent accounting rules, so that figures misrepresented the company's true financial performance.

Like previous reports, Mr Batson's account asserted that the company improperly used accounting and financial devices to vastly boost reported income while lowering reported debt. In 2000, such techniques accounted for 96% of Enron's reported $979m in net income for the year and allowed Enron to report debt of only $10.2bn instead of $22.1bn.