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Tax avoidance may soon replace accounting fraud as the primary corporate scandal topic. Congressional investigators released a report Thursday, concluding that Enron Corp. used outside lawyers and accountants to devise tax shelters that were so complex that even the Internal Revenue Service could not figure them out. “Enron not only engaged in accounting gimmicks to boost stock prices, but Enron repeatedly abused the tax code,” Sen. Max Baucus, D-Mont., said in a statement released as the Joint Committee on Taxation began a hearing on how to curb tax-avoidance. In a signal that the issue is not going away, the Joint Committee on Taxation also warned that other U.S. companies use similar strategies. And Senate Finance Committee Chairman Charles Grassley, R-Pa., said he intended to pass legislation retroactive to Feb. 13, to eliminate the schemes that Enron employed. Reuters said Thursday that Deloitte & Touche, J.P. Morgan Chase & Co., Deutsche Bank AG, and law firms Vinson & Elkins, Shearman & Sterling, King & Spalding and Akin, Gump, Strauss, Hauer & Feld are singled out in the report. Still, the bulk of the report was devoted to Enron, which managed to avoid paying federal taxes from 1996 to 1999. The staff concluded that Enron viewed its tax unit as a “profit center” and engaged in transactions that had no business value, other than to reduce taxable income. In Enron’s ongoing bankruptcy case, The Los Angeles Times reported Thursday that creditors could recoup up to $5 billion in assets that may have been illegally moved off the company’s books. It also said that R. Neal Batson, the lawyer hired by the Justice Department to investigate Enron as part of the bankruptcy proceeding, said monies could be recovered by suing to claim assets transferred to secret partnerships used to hide the company’s debt load. Enron’s energy market manipulations also are causing changes in how energy deals are reported. Bloomberg reported last week that McGraw Hill Co.’s Platts division is demanding that natural gas and power traders report more details of transactions, such as the name of the counterparty. It also wants a senior official at the energy trader to certify the data. The Associated Press said last week that U.S. District Judge Kenneth Hoyt in Houston has granted a 90-day delay in the start of the fraud trial against former Enron Chief Financial Officer Andrew Fastow. The judge said the mountain of paperwork generated from the case did not make it practical to start the proceedings anytime soon. A prosecutor said there were hundreds of thousands of pages. To expedite the process, both sides will have access to a room containing all the documents. Copyright (c)2003 TDD, LLC. All rights reserved.

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