Enron's Ex-CEO: IBM, CA Victims In Enron-Like Liquidity Hit

Enron

Skilling, testifying on Capitol Hill Tuesday about the collapse of Houston-based Enron, reiterated earlier testimony that he believed the company suffered from "a run on the bank" due to bad publicity.

He suggested that Congress may want to examine putting curbs on derivative trading to prevent future corporate failures like Enron. Skilling pointed to several technology companies whose stock prices have fallen drastically as a result of bad publicity over their accounting methods.

"They're looking at IBM . . . they're looking at Computer Associates," Skilling said in testimony at a hearing before the U.S. Senate's Commerce Committee.

IBM, Armonk, N.Y., saw its share price fall last week after questions emerged over accounting treatment it gave to the sale of one of its units to JDS Uniphase.

Islandia, N.Y.-based CA's stock price dropped substantially last week after reports that the FBI and U.S. Securities and Exchange Commission were probing that company's accounting and revenue reporting methods.

Both CA and IBM have denied doing anything untoward in their business practices. Their stock prices have not yet recovered.

Skilling painted a picture in which bad publicity hurt Enron's stock price and prompted lenders to call in loans. That, in turn, caused Enron's total collapse into bankruptcy after its share price could no longer provide it with liquidity.

"Ultimately, a lot of people are going to get hurt," Skilling told Senators in a hearing broadcast by C-Span. "Maybe we can look at Enron as the canary in the coal mine. Maybe that's the issue."