Wakeham 'turned blind eye' at Enron

FORMER Tory Cabinet minister Lord Wakeham deliberately turned a blind eye to 'questionable' and 'high risk' accounting practices that led to the collapse of energy giant Enron, says an investigation by the US Senate.

The report rejects claims by Wakeham and other independent Enron directors that they were kept in the dark about the 'deceptions' that pushed Houston-based Enron into a $50bn corporate.

Its undermines the credibility and reputation of Wakeham, who resigned as chairman of the Press Complaints Commission this year after questions about his role in the Enron scandal. He also faces personal ruin after being named in a series of law suits brought by more than 400 former Enron staff who are trying to recover hundreds of millions of dollars lost from their pension funds.

Today's report, by the Senate permanent sub committee on investigations, singles out the peer as one of several directors whose independence may have been compromised by 'consulting payments' worth hundreds of thousands of dollars.

It says the directors ignored more than a dozen 'red flags' in the three years before the company's collapse that should have made them 'ask hard questions'.

'Much that was wrong with Enron was known to the board, from high risk accounting practices and inappropriate conflict of interest transactions to extensive, undisclosed off-the-books activity and excessive executive compensation.'

At the same time, Wakeham and other directors on the audit committee were told by auditors Andersen that Enron's accounting methods were 'pushing the limits'. As a member of Enron's audit committee, Wakeham was meant to check the accounts. In return, he received a monthly consultancy retainer of £4,100 and other payments that came to more than £240,000 a year, much of it in stock options.

The report says the board 'knowingly allowed Enron to move at least $27bn or almost 50% of its assets off balance sheet'. Board members also rubber stamped huge payments to chairman Kenneth Lay, who 'abused' a personal line of credit with the company to take out £53m in cash from Enron, paying it back with his own shares.

Wakeham, 69, was Energy Secretary under Prime MInister Margaret Thatcher, and approved a deal that let Enron build a massive gas-fired power station in Teeside in 1990. He joined the company's board four years later. He is due to give evidence into an inquiry by the Commons Treasury select committee into City regulation. He stood down as PCC chairman in March after his role in the Enron collapse became known, but will keep his £156,000 salary until September.

W Neil Eggleston, a lawyer representing Enron directors, claimed the Senate's criticisms were 'unfair' and they had been 'misled by management and the outside management'.

The Senate report comes on the eve of a major speech by President Bush in Wall Street today, in which he will attack corporate accounting fraud in a bid to restore investor confidence. Senators are also pushing for reforms in the accounting industry after several other corporate giants, from WorldCom to Xerox, also admitted that they had overstated their earnings by billions of dollars.