10/09/06 (US):
Accountant simplifies things for the Enron jury
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Paul Regan, a forensic accountant, has provided three days of videotaped testimony in the impending civil trials against former Enron executives and the banks that allegedly helped them commit massive accounting fraud.
As a forensic accountant, Regan has testified as an expert witness in approximately 150 cases over 30 years, explaining in basic terms the ins and outs of financial data and how some of the most complex accounting-fraud schemes have transpired. Regan, chairman and president of San Francisco-based accounting firm Hemming Morse Inc., has worked on myriad high-profile cases, some involving Fortune 500 companies such as Microsoft and Xerox.
From Sept. 19 to Sept. 21, Regan began and ended his day at a witness table in federal court, where he provided a rundown of the Byzantine accounting schemes Enron's top executives used to inflate the company's profits and keep its stock price high. In preparation for his testimony, Regan's staff spent 8,000 hours putting together a 272-page report accompanied by about 150 exhibits and 50 or so binders full of supporting documents, each around 5 inches thick. Arrayed on the floor behind him, the documents stretched 12 feet.
Using a type of visual investigative-analysis software favoured by the FBI, Regan explained how memos and e-mails from Enron executives, when compared with the company's financial transactions, showed a pattern of deception that ultimately led to the firm's implosion in 2001.
One of the charges in the civil suits, which aim to recover billions on behalf of investors who were wiped out by Enron's collapse, is that an array of respected banks helped the company devise its black-magic accounting tricks. Enron was allowed to report loans from the banks as income and sell assets to the banks to generate cash while agreeing verbally to buy the assets back with interest.
"They were disguising loans as either commodity trades or some other kind of transaction to keep debt off the balance sheet, or recording sales as if there had been an asset sale and gains while committing at the time to repurchase the asset," Regan said.
Explaining these transactions to jurors can be incredibly difficult, meaning that experts who do it well are extremely valuable. The Enron civil suits won't go to trial until next year or even 2008.
© X-Pro 2006
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