VZCZCXRO5935
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #2265 3170829
ZNR UUUUU ZZH
R 130829Z NOV 06
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 5435
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/USDOC WASHDC
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC
RHHMUNA/HQ USPACOM HONOLULU HI

UNCLAS GUANGZHOU 032265 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV KPAO CH
SUBJECT: Enron Prosecutors Share Lessons Learned with Guangdong 
Audiences 
 
 
¶1. (U) SUMMARY AND COMMENT: In two days of meetings and roundtables 
with Guangdong officials, legal experts, students, and media, 
Department of Justice prosecutors John Hueston and Robb Addison 
discussed their involvement in the Enron case and highlighted the 
differences between the U.S. and Chinese judicial systems.  Their 
interlocutors were particularly interested in such issues as 
evidence collection, intra-agency cooperation, and victim 
compensation, noting that the lessons of Enron are relevant in 
China's current economic and legal environment.  END SUMMARY AND 
COMMENT. 
 
¶2. (U) Hueston and Addison visited Guangzhou as part of a 
PAS-sponsored China-wide visit.  In Guangzhou, they met with the 
Guangzhou and Guangdong bar associations, Guangdong Procuratorate, 
Guangdong office of the China Banking and Regulatory Commission 
(CBRC), local reporters, and Zhongshan University law and business 
students.  In addition, the Consul General hosted a dinner at his 
residence that included five prominent local lawyers and a judge 
from the Foshan Intermediate People's Court.  The judge, Lai Zining, 
is currently presiding over a case of alleged earnings misstatements 
and corruption by a large Foshan-based firm named Kelong. 
 
HOW TO SPOT THE WARNING SIGNS 
----------------------------- 
 
¶3. (U) In their presentations, Hueston and Addison described how 
some of Enron's leaders misled investors and profited from stock 
sales.  They highlighted the warning signs that should have alerted 
analysts and regulators that Enron was on weak financial footing, 
including a vague and unproven business model, sudden earnings prior 
to quarterly statements, and the unexpected resignation of the CEO. 
They noted that new legislation -- the Sarbanes-Oxley Act -- has 
strengthened financial reporting requirements and increased funding 
for regulatory agencies. 
 
REGULATORS AND PROSECUTORS INTERESTED IN U.S. SYSTEM 
--------------------------------------------- ------- 
 
¶4. (U) Officials from the Guangdong CBRC peppered Hueston and 
Addison with questions about the complicity of banks in Enron's 
illegal activities and what kinds of techniques they used for 
evidence collection.  Officials were also interested in the civil 
cases brought by ex-Enron employees and the criminal sentences for 
those Enron leaders found guilty.  Chinese prosecutors from the 
Guangdong Procuratorate asked how the various U.S. investigative 
agencies, including the police, FBI, and Security and Exchange 
Commission (SEC), coordinated with DOJ.  They asked for information 
on such aspects of U.S. law as the Fifth Amendment, plea bargains, 
and grand juries. 
 
STUDENTS TURN OUT IN FORCE 
-------------------------- 
 
¶5. (U) Between two hundred and three hundred students from Zhongshan 
University's schools of law and business showed up for a lively 
evening presentation with the prosecutors.  The students focused on 
the effect of the Enron case on U.S. policy and asked about 
restitution for foreign investors of U.S. companies.  Hueston and 
Addison said they were proud to have been part of this landmark 
case, and encouraged the students to pursue careers that benefit 
China. 
 
GOLDBERG