Archive for Thursday, March 21, 2002

Credit-rating firm claims Enron lied

March 21, 2002

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— An official of a major Wall Street credit-rating agency told Congress Wednesday that Enron Corp. executives lied to his agency in late 1999 about partnerships that were used to conceal massive debts.

Lawmakers and regulators dissecting the biggest corporate failure in U.S. history are examining why the three big credit-rating agencies, Moody's Investors Service, Standard & Poor's and Fitch Ratings, maintained high ratings for Enron while its stock plummeted, until four days before its bankruptcy filing Dec. 2. The complex web of partnerships, improperly buttressed by Enron stock, ultimately brought down the energy-trading company.

The agencies' grading of companies' creditworthiness is closely watched by the markets.

John Diaz, managing director of Moody's, told a Senate panel that Enron gave the agency information on its finances in the fall of 1999 that company executives described as a comprehensive, "kitchen sink" disclosure.

"We now know that material information was missing" and that Enron failed to disclose the existence of three of the partnerships, Diaz said in testimony.

Furthermore, based on what has become known recently about Enron, Diaz said, "Much of the information that was provided was inaccurate."

He said Enron had made a concerted effort to get an upgrade of the rating of its long-term debt. After Moody's reviewed the information the company provided, the agency upgraded the long-term debt in March 2000, Diaz told the committee.

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