“Wall Street banks, acting on the advice of leading lawyers and accounting firms, helped Enron devise shelters that let the company operate tax-free for years while exaggerating its reported profits by billions, the Senate Finance Committee was told Thursday,” writes David Johnston in today’s New York Times.

“Senators said that the findings, in a three-volume report by the staff of the Joint Committee on Taxation, raised disturbing questions about the reliability of corporate financial reporting.”

“Senator Charles E. Grassley, the Iowa Republican who is chairman of the committee, said that ‘the report reads like a conspiracy novel.’ He and Senator Max Baucus of Montana, the ranking Democrat, pledged to campaign for legislation closing abusive tax shelters and to push for further reform of accounting rules and enforcement of ethical standards governing accountants and lawyers.”

“At a hearing on the report Thursday, Lindy L. Paull, chief of the joint committee staff, said that Enron’s tax department “was converted into an Enron business unit, complete with annual revenue targets.”

“The tax shelters were intended to allow Enron to book $2 billion of profits almost immediately, even as the company was saving $2 billion of federal income taxes over a period of years, according to the report.”

“The tax savings and the manufactured profits ‘were mostly from internal machinations where we couldn’t find any benefit to the company,’ Ms. Paull said.”

“The front page of one tax shelter deal, known as the Steele Project, was titled ‘Show Me the Money!’ “

“The transactions, according to the report and testimony at the hearing Thursday, relied on technical interpretations of the differences between tax and accounting rules to allow Enron to deduct some dollars from its tax liabilities more than once, treat some of the company’s capital as an expense and generate tax losses while creating the appearance of profits.”