By the OGJ Online Staff
HOUSTON, Dec. 12 -- Robert Herdman, chief accountant for the Securities and Exchange Commission, Wednesday told the US House of Representatives Committee on Financial Services there could be more 'Enrons' out there.
The committee questioned Herdman about the SEC's financial disclosure rules in a hearing about Enron Corp.'s sudden financial collapse. Committee Chairman Michael Oxley (R-Ohio) said the purpose of the hearing was to assess the facts and the change the disclosure rules if needed, in order to assure investors that there is real value, credibility, and consequences to those who abuse the market.
Committee members were very concerned that Enron's travails were not unique.
"Are there other Enron's out there?" asked Rep. Paul Kanjorski, (D-Pa.). Herdman answered, "There may be." But he didn't name names.
Kanjorski also asked if there were systemic problems with oversight of publicly traded companies that could have contributed to the Enron bankruptcy. He said the Enron situation raises questions about the US system of financial reporting and confidence in that system.
Herdman told the committee the SEC is revising some of the procedures for financial reporting, including requiring companies report industry trend information on a more current basis rather than quarterly. "We are wanting to improve the disclosures of performance information on a more frequent basis," Herdman said.
He said the "gravity" of the Enron situation needs to be recognized but warned against overreaction or underreaction. "What we should say is the financial reporting is challenged and steps need to be taken to improve it and that should be done quickly," Herdman said.
The SEC opened a formal investigation in October into related party transactions at Enron. The off-balance-sheet transactions and potential liabilities associated with them helped trigger a sell off in Enron's stock. Enron has said it did nothing wrong and is cooperating with the SEC probe into its reporting practices.
Herdman said the SEC will continue to push the Financial Accounting Standards Board for better direction on when special-purpose vehicles like those created by Enron should and should not be consolidated on the balance sheet.