Dynegy points the finger at Enron

US CONGRESSIONAL investigators say they have uncovered 'substantial evidence of illegal activity' by collapsed energy giant Enron. They also criticised its former auditor Andersen.

Andersen 'knew or should have discovered the fraudulent nature' of certain transactions with outside partnerships controlled by former finance boss Andrew Fastow, said Billy Tauzin, chairman of the House Energy and Commerce Committee.

'We have found that Enron's financial statements violated numerous existing accounting rules,' he said.

Dynegy, the US firm which backed out of a rescue bid, said internal documents reveal that Enron has only itself to blame for its demise.

A report following an Enron internal investigation revealed that the firm regularly cooked its books to inflate profits and hide debt, and that management were aware of the schemes.

Dynegy said Enron's finances were clearly already beyond repair before it abandoned the merger. It rejects a $10bn lawsuit from Enron that alleges Dynegy withdrew in a ruse to ruin Enron's finances.

Chancellor Gordon Brown has ordered a Treasury review of UK accounting practices.