OPENING STATEMENT OF  
               RANKING DEMOCRATIC MEMBER PAUL E. KANJORSKI  
                SUBCOMMITTEE ON CAPITAL MARKETS, INSURANCE,  
                    AND GOVERNMENT SPONSORED ENTERPRISES  
                          HEARING ON THE ENRON COLLAPSE:  
                 IMPACT ON INVESTORS AND FINANCIAL MARKETS  
                             WEDNESDAY, DECEMBER 12, 2001  
                                    _______________________ 

       Mr. Chairman, todayís hearing will help us to understand at least some of the factors that 
contributed to the downfall of Enron Corporation, a once mighty international conglomerate that 
recently filed the largest corporate bankruptcy in American history.  Our hearing will also help 
us to discern whether Congress needs to take steps to restore the faith and trust of investors in 
Americaís dynamic capital markets.  Although I have not yet arrived at any conclusions about 
this disturbing downfall of a corporate icon, I have already identified a number of concerns that I 
expect we will address during our investigations. 
       First, I would like to learn more about the serious financial harm done to thousands of 
Enronís employees and the many others who owned Enron stock.  Some press reports suggest 
that company rules blocked rank-and-file Enron employees from selling Enron stock in their 
401(k) retirement plans in the days and weeks following the announcement that Enron had 
overstated its earnings by $583 million in the past four years.  These hard-working Americans 
had to watch helplessly as their savings shrank without any recourse, while Enronís executives 
could apparently sell their stock options and avoid the financial pain.  That is wrong. 
       Second, I have concerns about whether the accounting industry experiences any conflicts 
of interest in serving its customers.  In recent years, many have noted that an accounting firmís 
consulting fees from one company may exceed its auditing receipts from the same company. 
This practice calls into question whether shareholders can rely on earnings reports and other 
indicators of a companyís health and its future stock price.  In order to provide transparency for 
investors, auditors should actively work to limit potential conflicts. 
       Third, we will return today to the issue of analyst independence, a topic we have closely 
studied this year.  From our past hearings, we have learned that an analyst working for a firm that 
handles investment banking for a company the analyst covers could receive a more favorable 
rating to attract new business.  I am therefore interested in learning why of the fifteen analysts 
covering Enron on the day following the failed merger with Dynegy only one had a sell rating on 
the companyís stock.  These ratings misled investors. 
       Finally, in hindsight, it appears that Enronís board of directors failed to serve Enronís 
shareholders.  Several news stories have detailed how gifts, contributions, and other activities 
may have compromised some members of Enronís board.  I expect that as time goes on, we will 
learn that Enron is not the only company where these questions arise.  Members of a corporate 
board must retain their independence and hold management accountable. 
       In closing, Mr. Chairman, I typically prefer private sector regulation to federal regulation. 
But if the private sector fails in its responsibilities and creates a vacuum, then the federal 
government has a duty to protect its citizens by addressing the market failure.  More Americans 
than ever have their savings invested in the stock market, and we have an obligation to protect 
them from the conflicts of interest we are investigating in the Enron collapse.