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Enron's trading operations under spotlight at Senate hearing

In expert testimony, Frank Partnoy, a professor in the University of San Diego School of Law, warned that the probing into accounting practices should not take the spotlight away from the role that derivatives could have played in the energy monolith’s decline.

Partnoy - who is currently researching a book about Enron’s fall - claimed his research suggests that the profits Enron attributed to its derivatives operations may have been inflated due to systematic problems with the way the firm valued its positions and recorded them in its trading book. But Partnoy was unable to come up with any hard evidence at this time.

Enron spokesman Vance Meyer refused to address the matter, stating that the firm's representatives would not offer counterarguments to each testimony.

Meanwhile, senator Carl Levin, the Democrat chairman of the Senate governmental affairs committee hearing on the fall of Enron, used his opening address to take a sideswipe at US Treasury Secretary Paul O’Neill.

O'Neill had previously stated: “Companies come and go. Part of the genius of capitalism is people get to make good decisions or bad decisions and they get to pay the consequences or enjoy the fruits of their decisions.” But Levin expressed “surprise” at O’Neill’s comments, saying: “Ken Lay and his colleagues got the fruits and haven’t yet suffered the consequences."

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