According to him S&P had requested a full description of Enrons special purpose vehicle activity to gain a full understanding of the latters off-balance-sheet partnerships. On two occasions - once in 1999 and again in 2000 - Enron made presentations to the rating agency that purported to provide an analysis, including the kitchen-sink, of 100 per cent of Enrons off-balance-sheet affiliates. These presentations failed to mention many partnerships, including Chewco, LJM1 and LJM2. And S&Ps requests for updates and further clarification of this information were not met in any meaningful way.

Enron failed to reveal nearly $4 billion in debt, instead called them hedge instruments. For a company that actually showed between $8 billion and $10 billion in debt, the effect on Enrons book debt-to-total capital ratio of showing several billion more would have been enormous, Barone said.

In a letter to the House Committee on Energy and Commerce, USA, Leo C. O''Neill, S&P''s president described some of the steps taken by the agency to analyse Enron''s creditworthiness. For example, because of the volatility involved in Enron''s business, S&Ps analysts put back between $2 billion to $4 billion in debt onto Enron''s balance sheet for ratings purposes.

In one of its presentations to S&P, Enron had asserted that its communication with analysts, investors and credit officers is direct and candid adopting `No Secrets Policy. Enron had consistently maintained that it has been under rated by S&P. O''Neill noted that it all its presentations Enron failed to mention many partnerships, including Chewco, LJM1 and LJM2.

The off-balance-sheet partnerships had been created and designed precisely to conceal from others the true picture of Enrons financial status. This concealment persisted, notwithstanding repeated requests from S&P for any further information to more clearly depict Enrons true financial situation, Barone said.

Had Enron told the truth about its financial condition during the ratings process, the impact on Enrons rating would have been significant, he said. Had they been revealed, the clandestine dealings and obfuscatory disclosure practices conducted by Enrons management would have cast long shadows on the validity of Enrons credibility in general and its financial reporting in particular.

Strongly defending S&Ps rating of Enron, he explained that Enrons BBB+ rating was by no means the greatest vote of confidence a rating can bestow. He said it placed Enron at the lowest category of investment grade ratings and was well below what Enron itself repeatedly and unsuccessfully sought from S&P.

The rating assigned by S&P is not only well below how Enron was often treated when it borrowed money from the market, but it was also consistently lower than the ratings of other companies its size, he submitted. Even that rating was predicated on deliberate misrepresentations made by Enron to S&P.

Barone noted that studies on S&P demonstrate an excellent track-record with a strong correlation between the ratings initially assigned by S&P and eventual default - the higher the initial rating, the lower the probability of default, and vice versa. To ensure this, ratings are assigned by a committee, not by any individual. No portion of an analysts compensation is dependent on or connected with the performance of the companies they rate or the amount of fees paid to S&P, he asserted. Clearly the collapse of Enron has been a terrible tragedy. It is vital, however, that we look to it as an opportunity to consider improvements that can be made to our system. Noting that S&P has long been an advocate for the highest standards of corporate transparency around the world, he said: Ratings ultimately depend upon information provided by the issuer; we have been a long-time champion of complete, timely, and reliable disclosure of financial information and the best means of corporate governance. We have supported, and will continue to support, any regulatory efforts aimed at enhancing these goals.