Enron Fails To Deliver On Tax Disclosure Promise

by Mike Godfrey, Tax-News.com, Washington

27 February 2002

According to a report in the Wall Street Journal on Tuesday, despite Enron's promise to fully cooperate with Senate Finance Committee investigators, it has yet to reveal details of its tax affairs.

In a letter written to the panel two weeks ago, attorneys for the former energy trading company revealed that it intended 'to provide the Finance Committee with consent' to review its tax returns, an agreement which at the time was hailed as the first of its kind by a US corporation. However, Enron wants to set rigid boundaries on which areas of its finances can be investigated and exactly what can disclosed, and as a result, has still not signed a formal Internal Revenue Service release.

Although the Finance Committee has used its powers to authorize investigators to examine the company's tax returns on their own, without an official IRS release disclosure of any findings would be a federal crime, meaning that the panel is effectively helpless to act upon information regarding Enron's tax affairs.

According to the WSJ, the energy trading concern is seeking to limit the disclosure of information to final reports and hearings, a demand which the Senate Finance Committee feels would drain the momentum from the investigation. It has also asked that the finance panel limit its investigations to tax issues which 'gave rise to Enron's bankruptcy'. However, the issue in which the Senate Finance Committee is principally interested, namely the extent to which the company used aggressive tax avoidance mechanisms and tax shelters in offshore jurisdictions to mislead shareholders, does not necessarily fall under that remit.

Committee staffers are said to be optimistic that they will receive full cooperation from the US company in the very near future, and a spokesman for Finance Committee Chairman Max Baucus predicted recently that this could conceivably happen as early as next week. However, tax experts are not so sure that the process of reaching an agreement will be as easy as that.

Speaking to the Wall Street Journal on Tuesday, former IRS Commissioner, Donald C. Alexander predicted darkly that: 'I think they'll eventually get what they want, but I'm not sure they can do much with it. Are we going to learn much? Probably not. Is it going to take a long time? Surely.'

Recommended