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Enron Mail |
Enron to Fire 95% of Staff After Bankruptcy Filing, CNBC Says
Bloomberg, 11/30/01 Enron Says CNBC Report of Layoffs Is Incorrect (Update1) Bloomberg, 11/30/01 Andersen's Enron Audit Prompts Tighter `Peer Review' of Quality Bloomberg, 11/30/01 Enron's Fall to Spark Legal Wrangles Over Derivatives (Update1) Bloomberg, 11/30/01 Enron's Legal Woes to Make Bankruptcy Case Complex, Bloomberg, 11/30/01 Enron Might Raise $610 Mln in Brazil Asset Sale, Analysts Say Bloomberg, 11/30/01 Bush Spokesman Fleischer Comments on Enron Corp.'s Collapse Bloomberg, 11/30/01 Enron's Board Was Compromised by Financial Ties (Correct) Bloomberg, 11/30/01 EnronOnline Resumes Some Commodity Product Trading (Update1) Bloomberg, 11/30/01 AGL Resources Ends Services Contract With Enron (Update1) Bloomberg, 11/30/01 Arthur Andersen's Enron Audit Is Under Review by SEC (Update1) Bloomberg, 11/30/01 Enron Fires U.K. Workers, Plans Bankruptcy Soon (Update1) Bloomberg, 11/30/01 Enron Creditors List Potential Losses From Energy Trader's Fall Bloomberg, 11/30/01 Dynegy Says Pipeline Option Not Dependent on Enron (Update8) Bloomberg, 11/30/01 Enron Bankruptcy Case Would Take Years to Resolve (Update2) Bloomberg, 11/30/01 Chairman Says Dynegy's Right to Enron Pipeline Indisputable Bloomberg, 11/30/01 Williams Has Withdrawn Pipeline Capacity From Enron (Update1) Bloomberg, 11/30/01 New Jersey Has Limited Exposure to Enron Decline, Treasury Says Bloomberg, 11/30/01 Wall Street Firms, Pension Funds Face Enron Losses (Update6) Bloomberg, 11/30/01 S&P Says Credit Derivative Exposure to Enron Totals $6.3 Bln Bloomberg, 11/30/01 Enron's Fall to Spark Legal Wrangles Over Derivatives (Update1) Bloomberg, 11/30/01 Enron to Fire 95% of Staff After Bankruptcy Filing, CNBC Says 2001-11-30 17:40 (New York) Houston, Nov. 30 (Bloomberg) -- Enron Corp. will file for bankruptcy Monday or Tuesday and fire 95 percent of its staff, financial news network CNBC reported, citing an unnamed employee. The employee said a vice president told his workers that Enron would take the steps next week and give the employees two weeks of severance pay for every year of service at the company, CNBC said. Enron Says CNBC Report of Layoffs Is Incorrect (Update1) 2001-11-30 17:59 (New York) (Adds in third paragraph that Enron says CNBC report is false.) Houston, Nov. 30 (Bloomberg) -- Enron Corp. will file for bankruptcy Monday or Tuesday and fire 95 percent of its staff, financial news network CNBC reported, citing an unnamed employee. The employee said a vice president told his workers that Enron would take the steps next week and give the employees two weeks of severance pay for every year of service at the company, CNBC said. Enron will not fire 95 percent of its workforce and has made no announcement to workers on layoffs, company spokesman Vance Meyer said. No decision has been made on whether the company will make a bankruptcy filing, Meyer said. Andersen's Enron Audit Prompts Tighter `Peer Review' of Quality 2001-11-30 17:27 (New York) Andersen's Enron Audit Prompts Tighter `Peer Review' of Quality Washington, Nov. 30 (Bloomberg) -- Enron Corp.'s accounting firm, Arthur Andersen LLP, will undergo tougher scrutiny in the ``peer review'' process in which U.S. audit firms police one another's quality-control standards. Andersen, the fifth-largest accounting firm, said it asked its peer reviewer, Deloitte & Touche LLP, for the additional scrutiny in light of financial reporting issues at Enron, according to an Andersen press release. Deloitte & Touche had independently determined that it wanted to conduct additional procedures, the release said. ``In light of recent developments, we believe that extending the peer review to include work done in other offices, including Houston, and other procedures that Deloitte & Touche deems appropriate and necessary is the right thing to do,'' Andersen Chief Executive Joseph Berardino said in the release. The peer review is due on Dec. 31. Andersen's last review by Deloitte & Touche, the third-largest accounting and consulting firm, was in 1998. The review did not report any significant problems. The SEC is examining whether Andersen acted properly in audits of energy provider Enron, which is also under investigation by the SEC. Andersen has acknowledged that the SEC has subpoenaed documents related to Houston-based Enron, which is on the brink of bankruptcy after saying it had overstated earnings. Andersen's announcement comes as the Public Oversight Board, an accounting industry oversight group, plans to look at the adequacy of the peer review system amid concerns about the failed Enron audits. The system calls for audit firms to periodically submit their reports on public companies for examination by other accounting firms, in an effort to assure investors the firm's methods comply with professional standards. Enron, the largest energy trader, this month said it overstated earnings by $586 million over four-and-a-half years, inflated shareholder equity by $1.2 billion because of an accounting error, and failed to consolidate results of three affiliated partnerships into its balance sheet. Andersen was Enron's outside auditor for more than a decade, assuring investors that the company's financial statements conformed with generally accepted accounting principles U.S. Representative John Dingell, a Michigan Democrat, questioned the peer review process recently in a letter to the Public Oversight Board. None of the five biggest international accounting firms has ever issued a negative peer-review report against another, Dingell said. The so-called Big Five also include PricewaterhouseCoopers LLC, KPMG LLP, and Ernst & Young LP. ``There appears to be little reason for the public to have faith in Andersen or the peer review process,'' Dingell wrote. Andersen responded that it has faith in the accounting profession's self-regulatory process, which the POB oversees. A spokeswoman at Deloitte & Touche didn't return a telephone call seeking comment. Enron's Fall to Spark Legal Wrangles Over Derivatives (Update1) 2001-11-30 11:24 (New York) Enron's Fall to Spark Legal Wrangles Over Derivatives (Update1) (Rewrites 2nd paragraph.) London, Nov. 30 (Bloomberg) -- Enron Corp.'s plunge toward bankruptcy may spark legal wrangles over how to unravel the web of derivatives contracts tied to the energy company. Enron is set to file for protection in the biggest Chapter 11 reorganization ever. That's likely to mean the energy trader can't pay on derivatives it sold as insurance against default by other borrowers, as well as defaulting on its own debts and triggering similar contracts bought by its creditors. ``If I traded with Joe Bloggs down the road, and Enron owed him a lot of money and he couldn't get it so he went into bankruptcy, then he wouldn't fulfill his obligations under my contract,'' said Brian Senior, head of trading at Innogy Holdings Plc, the U.K.'s top electricity supplier. ``I don't think the major risk is market liquidity, I think it's the domino effect.'' Enron used derivatives -- financial instruments such as futures and options whose value is based on other assets -- to insure against price swings or take bets on a price's direction. The Houston-based company had revenue of $1.9 billion from derivatives trading last year, more than double the $765 million in 1999, making it one of the largest traders, according to Swaps Monitor Publications Inc. By comparison, Williams Cos., the No. 2 U.S. natural-gas pipeline owner, had revenue of $1.29 billion on derivatives trading in 2000. Paul Spraos, president of Swaps Monitor, a research company that compiles trading figures, said Enron only posts derivatives statistics once a year so there are no figures for 2001. Dynegy Inc. abandoned its planned merger with Enron on Wednesday, leaving it with more than $15 billion of debt and the possibility of bankruptcy. As well as oil and gas futures, Enron trades derivatives based on such things as weather and information- transmission capacity, known as bandwidth. Banned From Trading Spraos estimates that as of Sept. 30, Enron owed $18.7 billion on derivatives trades that went sour, though he said that doesn't take into account the collateral Enron probably posted to back up the trades. The European Energy Exchange today banned Enron from trading its products, while Australian regulators barred the company's finance unit, Enron Australia Pty, from trading electricity futures because its funding wasn't assured. U.S. Senate and House committees will investigate Enron's decline and consider new regulations for electricity and natural- gas trading. The Securities and Exchange Commission is also examining the company. Enron had $201 billion worth of derivatives on oil, gas and electricity at the end of last year, Swaps Monitor has reported. That's measuring the notional amount, the face value of the securities on which the derivatives are based. `Quantifying It' ``Everyone will be looking at their exposure, whether they've got collateral, and quantifying it,'' said Robert G. Pickel, chief executive officer of the International Swaps and Derivatives Association. ISDA, a New York-based trade association representing more than 550 companies that trade derivatives, designed the legal contracts typically used in derivatives transactions. Pickel said those contracts are designed to address such situations. ``There are two potential issues relating to ISDA documentation, as a result of the situation regarding Enron,'' Pickel said. The first involves companies that have entered derivatives trades with Enron using ISDA's standard contract, known as the Master Agreement. The second concerns banks that have provided credit protection on Enron in the form of a credit- default swap, also using ISDA documents. Credit-default swaps work like insurance on a company's bonds or loans. They pay out if there's a bankruptcy, default, debt restructuring or similar occurrence, known as a credit event. ``If there's a bankruptcy filing there's no question it would be a credit event,'' Pickel said. `Can't Tell' Enron's U.K. units are in administration, which has triggered what lawyers define as a credit event, said Simon Firth, head of the credit derivatives practice at Linklaters & Alliance, which is acting for PriceWaterhouseCoopers, the accountant for Enron's European arm. ``The documents are fairly robust, and we've been through issues before,'' Firth said. He said that while ``each time the documentation gets strengthened, you can't tell what happens until you look at the individual cases.'' Enron owes almost two dozen energy companies about $700 million. J.P. Morgan, the bank that advised Enron in the failed merger with Dynegy, said it was owed $500 million for unsecured loans. Canadian Imperial Bank of Commerce was owed $215 million in loans and credit derivatives. In Europe, ABN Amro may set aside $97.5 million to cover its Enron exposure. The energy company owes Abbey National Plc $164 million, and Dresdner Bank AG said its exposure is about $100 million. ``This one has left every head shaking, and people are wondering how to organize by class of creditor and how to hire counsel,'' said Glenn Reynolds, an analyst at CreditSights Inc. in New York. ``Lawyers are high-fiving.'' Enron's Legal Woes to Make Bankruptcy Case Complex, 2001-11-30 12:41 (New York) Enron's Legal Woes to Make Bankruptcy Case Complex, Houston, Nov. 30 (Bloomberg) -- Enron Corp.'s legal problems, one reason for the collapse of the world's largest energy trader, would add to the complexity of a bankruptcy filing and might take years to resolve, experts say. With Dynegy Inc. having withdrawn a proposed $23 billion takeover offer, Enron is weighing what would be the largest bankruptcy in history and may go to court within a week. Enron shareholders, employees and business partners are lining up to sue the Houston-based company after its shares lost $26 billion in value since mid-October. Enron restated $586 million in earnings because of accounting irregularities, and questions surfaced about conflicts of interest among some of the company's executives. The U.S. Securities and Exchange Commission is investigating the company, and that wouldn't be affected by a bankruptcy filing. ``There are so many legal tentacles to this thing it's scary,'' said Chuck Tatelbaum, former vice president for research at the American Bankruptcy Institute. ``We could be talking about a six-year bankruptcy case here.'' Lawsuits seeking damages from a company under Chapter 11 are pulled into the bankruptcy case and judgments or settlements are converted into bankruptcy claims. Fraud Claims Among the suits likely to be included in a bankruptcy case are claims by shareholders that the company misled investors about its financial health. Another category would be allegations that Enron executives improperly prevented workers from moving 401(k) investments out of the company's stock. Enron probably would face accusations it broke energy trading contracts. The agreements, known as derivatives, were used as insurance against price swings in the energy market. With the company poised to file for Chapter 11, it is expected to miss payments under the contracts. There's also the developing battle between Enron and Dynegy over the failed buyout bid that might end up in bankruptcy court. That might lead a bankruptcy judge to take a look at the recent court case involving Tyson Foods Inc. and IBP Inc., a beef producer. A judge in Delaware ordered Tyson to complete its buyout of IBP after their proposed combination collapse. Tyson, like Dynegy, had said it wasn't fully informed about IBP's financial problems when it negotiated to acquire the beef producer. Dynegy said today it plans to take over Enron's Northern Natural Gas Co. pipeline unit next month. Dynegy said it's entitled to the pipeline under the terms of its Nov. 9 merger agreement that gave it $1.5 billion in preferred stock in Northern Natural Gas. Enron could sue as part of the bankruptcy case to stop Dynegy from walking away from the buyout and claiming ownership to the pipeline. Complications Any Chapter 11 cases would be ``inordinately complicated,'' said Lynn LoPucki, a law professor at the University of California at Los Angeles. The largest bankruptcy on record is Texaco's $35.9 billion filing in 1987. Enron lists $61 billion in assets. Other big companies, like W.R. Grace & Co. and SGL Carbon Inc., used bankruptcy filings to manage lawsuits, said Ken Eckstein, a New York attorney who handles bankruptcy litigation. W.R. Grace, a financially healthy chemical maker, filed for Chapter 11 protection in April to cope with asbestos-related lawsuits. SGL Carbon is the U.S. unit of a German company with a market value of more than $1.2 billion that makes products used in steel production. SGL filed bankruptcy papers in 1999 to dispose of customers' suits over price-fixing claims. What sets Enron apart are the questions about its financial viability, Eckstein said. He represented customers suing SGL as part of the bankruptcy case. ``Here, you have a fundamentally broken company,'' Eckstein said. ``It may never emerge from bankruptcy.'' That makes it tougher to gauge how much other creditors might recover, he said. `Makes Me Mad' Enron investors aren't optimistic about the future of the company's shares. ``I took at least a 60 percent hit on them,'' said Jim Anders, a Columbia, South Carolina, lawyer who has sold shares. ``It really makes me mad. I'd like to get my hands on some of those executives who were doing the insider deals. That really shook people's confidence in the company.'' Enron's fall was accelerated by questions about some partnerships the company used to move assets and debt off the company's books. Many investors had complained Enron's financial reports hid the significance of the partnerships. Enron's former Chief Financial Officer Andrew Fastow led some of the partnerships and earned more than $30 million through their dealings with Enron, the company disclosed. Fastow and other executives later were fired over their connection to the partnerships. Anders acknowledged that bankruptcy law puts shareholders and litigants at the back of the repayment line. ``I know we've had it and aren't going to get squat back,'' Anders said. ``The company led us to believe Enron was as solid as GE or one of the big banks. Now the bank is busted.'' Enron Might Raise $610 Mln in Brazil Asset Sale, Analysts Say 2001-11-30 13:24 (New York) Enron Might Raise $610 Mln in Brazil Asset Sale, Analysts Say Sao Paulo, Nov. 30 (Bloomberg) -- Enron Corp. may be able to raise as much as $610 million from the sale of assets in Brazil, including two power plants and stakes in two gas distributors, analysts and investors said. The U.S. energy trader, which is on the brink of bankruptcy, also might reduce the $700 million price tag on its 99 percent stake in power distributor Elektro-Eletricidade e Servicos SA that it has tried to sell for more than a year, analysts said. ``They would sell those assets to make a quick buck,'' said Marcos Severine, a power utility analyst at Sudameris Corretora. About 56 percent of Enron's $6.5 billion of overseas assets were in South America, most in Brazil, as of June 30. Enron said it currently plans no change to its operations in the country. The U.S. company is expected to file for bankruptcy protection in the biggest Chapter 11 reorganization in history, which may force the company to sell assets to pay about $15 billion of debt. Dynegy Inc. this week abandoned its proposed merger with Enron. Enron, which had less than $2 billion of cash as of last week, has more than $61 billion in assets. Enron may fetch as much as $190 million from the sale of Eletrobolt, a 380-megawatt power plant, and $220 million from RioGen, another power plant, Severine said. Both are based in Rio de Janeiro. Gas Companies Enron also may be able to raise $200 million from the sale of stakes in two natural gas distributors, said a spokesman for Petros, the employee pension fund of Petroleo Brasileiro, which is bidding for one of the companies. Brazilian energy regulators already have approved the sale, though it still requires backing from antitrust regulators. If Enron tries again to sell Elektro, it may be required to offer the company to the federal government at a discount or to another private company, analysts said. The country's regulations aren't clear, they said. Regulatory approval may delay any sale of assets in Brazil. In addition, price controls in Brazil's power industry will limit the amount of money Enron will be able to raise from the sales, analysts said. Investors are demanding lower prices for power companies in Brazil after electricity rationing and price controls over the past two years cut earnings of power distributors and generators, analysts said. Elektro has posted losses for six quarters. Venezuela, Mexico A bankruptcy filing by Enron would probably result in the cancellation of its investment plans in Venezuela, Latin America's largest oil and natural gas producer, analysts said. Enron had been slated to invest three-quarters of the $700 million needed to build a liquid natural gas processing plant with state oil company Petroleos de Venezuela SA. PDVSA officials declined to comment on whether the plant, which would cool natural gas until it liquefies, would go on with a new partner. Enron, which also owns a small Venezuelan power company, pulled out of exploration in 2000 from an offshore block in the Gulf of Paria between Venezuela and Trinidad and Tobago. Enron also has smaller investments in Mexico, Argentina and Colombia. Enron holds 20 percent of a joint venture building a $189 million power plant in Monterrey, Mexico. Tractebel SA took an 80 percent share in the project in November. Colombia Enron and Promigas SA, a Colombian natural gas pipeline operator, each have a 50 percent stake in Centrogas SA, a natural gas pipeline that transports about 400 million cubic feet of gas a day about 900 kilometers from the northern Guajira Peninsula to Barrancabermeja, the main oil refining city in central Colombia. The gas is produced at an offshore field operated by Texaco. Officials at Promigas weren't available for comment. Enron closed its administrative office in Colombia about three months ago, leaving an attorney to represent it in Colombia. Enron's Argentine assets include Azurix Buenos Aires SA, a natural gas and water utility, and shares in Transportadora de Gas del Sur SA. Perez Companc, which owns shares in Transportadora, is prohibited by law from increasing its stake in the distribution company. ``If the law is modified, then yes, we would consider it,'' said Mario Grandinetti, head of Perez Companc's institutional relations. ``But there are also economic issues to consider.' Bush Spokesman Fleischer Comments on Enron Corp.'s Collapse 2001-11-30 14:48 (New York) Washington, Nov. 30 (Bloomberg) -- Following are comments from White House press secretary Ari Fleischer on the collapse of Enron Corp., which faces the biggest bankruptcy ever. The energy committees in the Senate and House have said they'll investigate the collapse and consider new regulations for electricity and natural-gas trading. ``The president understands that Congress at all times should exercise its proper oversight roles. That includes anything that, in a case like this, the Senate sees fit, in terms of an investigation into the collapse of a company. That's the purview of the Congress,'' Fleischer said. ``As I indicated, the federal government, the administration, is already doing that. The Department of Treasury and other entities are monitoring it. So I think we're all looking with the same cause of concern.'' Enron's Board Was Compromised by Financial Ties (Correct) 2001-11-30 15:01 (New York) Enron's Board Was Compromised by Financial Ties (Correct) (Corrects percentage of Natco Group sales that went to Enron to 0.16 percent in 25th paragraph, and adds that sales are within Council of Institutional Investors standards in 26th paragraph.) New York, Nov. 29 (Bloomberg) -- Enron Corp. plunged from the largest energy trader to the verge of bankruptcy under a board of directors whose independence was undercut by financial ties to management, according to corporate governance experts. Enron gave seven of its 14 directors consulting contracts, sales to their business or donations to their non-profit institutions, according to company and public records. The recipients include three members of Enron's audit committee, which is responsible for financial oversight. Lord John Wakeham, for example, a former leader of the British House of Commons, sits on the audit committee. Enron gave him a $72,000-a-year consulting contract. John Mendelsohn, president of the MD Anderson Cancer Center in Houston, is also on the audit committee. In the last five years, Enron and its Chairman Kenneth Lay have donated $567,900 to the cancer center. ``To get on a board you have to be `clubbable,' but this looks like collegiality turning to cronyism,'' said Allan Cleveland, counsel to the New Hampshire Retirement System, an Enron shareholder. Enron, based in Houston handled almost a quarter of all natural gas and electricity trades. During the past seven weeks, its board has presided over a $26 billion drop in market value that began after the company wrote down $1.2 billion in shareholder equity and reported it had overstated earnings by $586 million since 1997. Responsibility As Enron's shares fell, the company suffered a cash crunch. It sought an infusion of capital and agreed to be acquired by Dynegy Inc., a Houston-based rival. That plan collapsed yesterday as investors balked at investing $1.5 billion, prompting Dynegy to withdraw its offer. Enron shares today fell another 39 percent, or 24 cents, to 37 cents per share. The stock began the year trading at $83.125. Corporate boards are responsible for protecting shareholder interests by reviewing the work of top executives. To accomplish that, two-thirds of a board should be ``independent'' from management, according to the Council of Institutional Investors, which represents pension funds. Independence The council defines an independent director as ``a person whose directorship constitutes his or her only connection to the corporation.'' ``Consulting contracts, donations to non-profit organizations linked to directors, this eats away at independence,'' said Ann Yergen, the council's director of research. Corporate governance standards established by the New York and NASDAQ stock exchanges say all audit committee members should be independent. Enron board members, including Wakeham and Mendelsohn, declined repeated requests for interviews. Vance Meyer, a company spokesman, said Enron could not immediately respond to questions regarding the board. Enron's board met nine times in 2000, with each member receiving annual compensation of $79,000 in cash and stock. Every member attended at least 75 percent of the meetings, except Ronnie Chan, chief executive of the Hang Lung Group, a Hong Kong development business, according to company filings. Relationships Based on Enron proxy statements and other documents, the following relationships existed between Enron and board members: -- Robert A. Belfer, 65, has been on the board since 1983 and sits on the executive committee. He is Enron's largest individual shareholder, with 8.5 million shares, and is chairman and chief executive of Belco Oil & Gas Corp., which operates from an office overlooking New York's Central Park. In 2000, Belco had $32 million in trade settlements and $1 million in option premiums with Enron Trade Resources Corp., an Enron subsidiary. -- John Urquhart, 72, a former General Electric Co. executive, sat on the board until last May. He received an annual consulting fee from Enron of almost $200,000 a year as a special adviser to the Enron chairman. -- Mendelsohn, 64, is a physician who was formerly head of medicine at Memorial Sloan-Kettering Cancer Center in New York. He pioneered research in controlling cancer through the chemistry of a tumor's growth and was on President George W. Bush's short list to head the National Institutes of Health. Since 1996, Mendelsohn has been president of the M.D. Anderson Cancer Center, part of the University of Texas health system. Donations Mendelsohn joined Enron's board in 1999. Enron has donated $221,650 to the cancer center. Lay and a foundation he established with his wife, the Linda and Ken Lay Family Foundation, have donated $346,250 in the last five years. The Enron Foundation pledged $1.5 million for a new clinic. -- Charles LeMaistre, 77, headed the Anderson Cancer Center for 18 years until retiring in 1996. He has been an Enron board member for 16 years, is a member of the executive committee and chairs the compensation committee. That panel awarded Lay a $20 million-a-year severance package that he renounced two weeks ago. -- Wendy Gramm, 56, has held positions at the Federal Trade Commission and the U.S. Office of Management and Budget and was chairman of the U.S. Commodity Futures Trading Commission. She is director of regulatory studies at the Mercatus Center of George Mason University in Fairfax, Virginia. She is married to Phil Gramm, a U.S. Republican Senator from Texas. In the last three years, Enron and the Ken and Linda Lay Family Foundation have donated more than $50,000 to the university and the Mercatus Center, according to university records. Consulting Fee -- Wakeham, 68, a chartered accountant and self-made millionaire, became a force in the government of former U.K. Prime Minister Margaret Thatcher. He was known as her ``Mr. Fix-it.'' He was the target of an Irish Republican Army bomb in 1984 that killed his wife and left him buried under rubble for seven hours. Enron pays Wakeham $6,000 a month to advise the company on European business. -- Herbert S. Winokur Jr., 57, is the managing partner of Capricorn Investors LP, a holding company that owns Natco Group Inc., a maker of oil and gas production equipment. An Enron board member since 1985, Winokur serves on the executive committee, chairs the finance committee and was appointed to a special committee created to look into how Enron was managed. In 2000, Natco had $370,294 in sales to Enron subsidiaries, 0.16 percent of sales. ``Business between companies linked to board members ought to be discouraged,'' said Yergen of the Council of Institutional Investors. Still, Natco's sales fall within the group's recommended standards. ``We think that anything over 1 percent is compromising,'' Yergen said. Enron said in a proxy statement it believes the terms of the sales were ``no less favorable than the terms of similar arrangements with third parties.'' Audit Committee Enron's audit committee poses particular problems, according to corporate governance experts. The committee is composed of Wakeham, Mendelsohn, Gramm, Chan, Robert Jaedicke, a retired Stanford University Business School dean, and Paulo Ferraz Pereira, a Brazilian banker. Wakeham, Gramm and Mendelsohn are not independent, according to corporate governance experts and standards. ``For the audit committee, you don't even want the appearance of a conflict,'' said Charles Drott, a forensic accountant who has testified as an expert witness in bankruptcy and business fraud cases involving companies such as DeLorean Motor Co. and Lincoln Savings & Loan Association. The committee is spread across the globe, with Wakeham in London, Ferraz in Rio de Janeiro and Chan in Hong Kong. ``The question is why this committee?'' Drott asked. ``For a big sophisticated company like Enron, why did they choose these people?'' Swift Descent Enron's rapid decline -- Standard & Poor's Corp. slashed its credit rating eight levels this month to junk status -- centered on its dealings with partnerships the company used to move assets and debt off the company's books. Many investors had complained Enron's financial reports obscured the partnerships' businesses to the point they were impossible to understand. Enron's former Chief Financial Officer Andrew Fastow led some of the partnerships and earned more than $30 million through their dealings with Enron, the company disclosed. Enron documents filed with the U.S. Securities and Exchange Commission state that the board determined that Fastow's participation in the partnerships would ``not adversely affect the interests of Enron.'' The documents also say the board approved all transactions involving partnerships that were brought to it by Lay and other Enron executives. ``What went wrong at Enron?'' said Patrick McGurn, a vice president at Institutional Investor Services, which evaluates board candidates for institutional investors. ``A lot of it goes back to the board.'' EnronOnline Resumes Some Commodity Product Trading (Update1) 2001-11-30 15:58 (New York) EnronOnline Resumes Some Commodity Product Trading (Update1) (Updates with trader comment in fourth paragraph, today's halt in EnronOnline system in sixth and seventh paragraphs, trading at other exchanges in 10th and 11th paragraphs.) New York, Nov. 30 (Bloomberg) -- Enron Corp. resumed Internet trading in almost one-third of the commodity products it normally offers, as buyers and sellers sought to unwind positions following a shutdown of the Web site Wednesday. EnronOnline offered 472 products today, including natural gas, power, metals and forest products, compared with 65 yesterday, spokesman Mark Palmer said. The marketplace normally offers about 1,600 products for which Enron is a buyer or seller in each transaction. The Web site, which used to handle about $2.8 billion a day in trades, shut for several hours Wednesday when Dynegy Inc. pulled out of a planned merger with Enron, which is now poised to file for bankruptcy. Trading with Enron has plunged on concern that the company wouldn't be able to meet its obligations. ``People are only making selective trades, unwinding their positions'' with Enron, said David Chang, vice president of energy trading at Bank of America in New York. ``People are adding no new net exposure.'' Trading has shifted to other marketplaces such as the Intercontinental Exchange, Dynegy Direct and the New York Mercantile Exchange, traders said. Trading Disrupted? Users of the system reported that EnronOnline stopped functioning at 2 p.m. for about 15 minutes today, shortly after Enron announced that it was dismissing 1,100 of its U.K. employees. The companied denied service was interrupted. Enron still isn't offering its full spectrum of products, said Kyle Cooper, an analyst at Salomon Smith Barney in Houston. Enron recorded about 825 transactions on the system yesterday, down from an average of about 5,000 a day, Palmer said. Houston-based Enron is the counter-party for every trade at EnronOnline. Some of its rivals, such as the Intercontinental Exchange and the Nymex, are intermediaries for transactions that are backed by funds from clearinghouses or banks. The Nymex traded a record 79,701 natural gas options contracts yesterday and a record 228,728 natural gas futures contracts on Wednesday. By 2:49 p.m. today, it had traded about 133,000 futures. The Intercontinental Exchange Inc., an Internet-based system in Atlanta, said trading activity so far this month was up 65 percent from October levels. EnronOnline had accounted for about 60 percent of Enron's energy trading volume. It also trades commodities by telephone. ``Traders we speak to are still working on their Enron exposure, doing what they can to minimize that,'' said Justin Fohsz, an oil broker at Starsupply Petroleum Inc. in Englewood, New Jersey. ``Trading has taken a back seat for the past few days and I don't think this is going to change any time soon.'' Shares of Enron were down 8 cents at 28 cents in late trading, compared with $70 a year ago. AGL Resources Ends Services Contract With Enron (Update1) 2001-11-30 16:15 (New York) AGL Resources Ends Services Contract With Enron (Update1) (Updates with AGL comment in second paragraph, closing share prices in fifth paragraph.) Atlanta, Nov. 30 (Bloomberg) -- AGL Resources Inc., which owns natural-gas utilities in the southeastern U.S., ended a contract for energy services provided by cash-strapped Enron Corp. to its Virginia Natural Gas unit. The two-year contract for gas, transmission and other services began in December and was ended without penalties, AGL spokesman Russ Williams said. He said he didn't know the value of the pact. Enron, facing the disintegration of its energy-trading business and saddled with $15 billion in debt, probably will file for bankruptcy, analysts say. Rival Dynegy Inc. withdrew a buyout bid Wednesday after Standard & Poor's cut Enron's debt rating to junk status. Atlanta-based AGL said its business exposure to Enron was ``minimal,'' and the end of the contract eliminates the prospect of losses tied to Enron. AGL has 1.8 million customers in Georgia, southeast Virginia and Chattanooga, Tennessee. Shares of Enron, which reached $84.88 just 11 months ago, fell 10 cents to 26 cents. AGL fell 57 cents to $21.43. Arthur Andersen's Enron Audit Is Under Review by SEC (Update1) 2001-11-30 15:17 (New York) Arthur Andersen's Enron Audit Is Under Review by SEC (Update1) (Adds SEC no-comment in fifth paragraph, accounting board review in 12th paragraph.) Chicago, Nov. 30 (Bloomberg) -- The Securities and Exchange Commission is investigating whether Arthur Andersen LLP acted properly in audits of Enron Corp., which already is being examined by the SEC, a person with knowledge of the probe said. Andersen, the fifth-largest accounting firm, acknowledged the SEC has subpoenaed documents related to audits of Houston-based Enron, which is on the brink of bankruptcy after saying it had overstated earnings for four and a half years. ``As is customary when the SEC investigates a financial reporting matter of a company we audit, they've asked for our cooperation,'' said David Tabolt, an Andersen partner and spokesman. ``The SEC is reviewing our work as part of their process.'' Enron shares have plummeted to 30 cents from a high of $37.50 as recently as Sept. 11. Enron's collapse has focused government attention on the company's bookkeeping practices and the audits by Andersen, which last June agreed to pay $7 million to settle SEC charges it issued false and misleading audit reports about trash-hauler Waste Management Inc. U.S. attorneys in Houston and Manhattan, who would prosecute individuals or companies if criminal wrongdoing is found, are monitoring the SEC's Enron probe, the person with knowledge of the investigation said. ``We don't confirm or deny the existence of investigations,'' SEC spokesman Michael Robinson said. Enron Restatement Andersen worked as Enron's outside auditor for more than a decade, assuring investors the company's financial statements conformed with generally accepted accounting principles. Tabolt declined to say when the SEC subpoena was received, or what documents were requested. Earlier this month, Enron said it overstated earnings by $586 million over four-and-a-half years, inflated shareholder equity by $1.2 billion because of an ``accounting error,'' and failed to consolidate results of three affiliated partnerships into its balance sheet. Last month, Enron said it was the subject of a formal investigation by the SEC. Enron restated its financial reports as the company suffered a cash crisis triggered by disclosure of the cut in shareholder equity and the start of an SEC investigation. The prospect of dual investigations by the SEC and the Justice Department's U.S. attorneys arises because the SEC only has authority to file civil lawsuits alleging securities law violations. The Justice Department has jurisdiction on criminal securities law prosecutions. Parallel Probes The agencies often conduct parallel probes, such as the current investigations of initial public offering practices at some of Wall Street's biggest underwriters. Yesterday, Credit Suisse First Boston said the Manhattan U.S. attorney has dropped a criminal probe of how it allocated IPO shares, while the SEC is continuing to investigate. Last year, the SEC and Justice Department prosecutors both filed charges against executives accused of inflating revenue at HBO & Co. before its 1999 acquisition by McKesson Corp. Citing concerns raised by Andersen's audits of Enron, Public Oversight Board Chairman Charles Bowsher last week said that accounting industry oversight group plans to examine the adequacy of its peer-review system for ensuring proper audit procedures. Under that system, each of the five biggest international accounting firms is reviewed periodically by another firm in the so-called Big Five. Non-Audit Work Enron paid Andersen $52 million last year, $25 million for auditing and $27 million for services including business and tax consulting, due diligence procedures and help in preparing SEC filings, according the company's proxy statement. Enron and Andersen declined to provide further detail. Asked if the SEC request includes documents relating to Andersen's consulting work for Enron, Tabolt said, ``questions about the nature of the investigation should be directed to the SEC.'' Earlier this year, Andersen paid $130 million to settle private lawsuits alleging the firm allowed Waste Management and Sunbeam Corp. to file false financial reports that cost investors billions of dollars in losses. In April, Andersen agreed to pay $110 million to settle a securities fraud class-action suit filed over its accounting work for appliance maker Sunbeam Corp. The appliance maker filed for bankruptcy protection in February. Earlier this month the firm agreed to pay $20 million to settle a class-action lawsuit about its work with Waste Management. Enron Fires U.K. Workers, Plans Bankruptcy Soon (Update1) 2001-11-30 15:49 (New York) Enron Fires U.K. Workers, Plans Bankruptcy Soon (Update1) (Updating share change.) New York, Nov. 30 (Bloomberg) -- Enron Corp. fired 1,100 employees in the U.K. as the energy trader sought to line up financing for the largest U.S. bankruptcy reorganization. Enron's bankers, led by J.P. Morgan Chase & Co. and Salomon Smith Barney Inc., sought to arrange more than $1 billion of loans to help Enron trade while in bankruptcy, said people familiar with the situation. The debtor-in-possession financing may be secured in part by $1.8 billion in proceeds Enron expects to receive by selling its Portland General Electric Co. unit. Enron is also considering using its Northern Natural Gas Co. pipeline, which analysts estimate is worth $2.7 billion, as collateral for new loans. Dynegy Inc. said it would seek to block such a move by exercising an option to purchase the pipelines. ``This whole thing is going to be in the courts,'' said Kathleen Vuchetich, who helps manage $1.4 billion in assets. The firm owns Dynegy shares in the Strong American Utilities fund that Vuchetich helps run. Enron will have 250 U.K. workers after the dismissals, according to a statement by PricewaterhouseCoopers, which is overseeing the company's British operations. Enron has 6,800 workers in Europe and 21,000 total. More firings are likely in the U.S. after its $23 billion acquisition by Dynegy collapsed earlier this week. That failure, and a credit-rating downgrade to junk, left the company short of cash needed to pay its $15 billion of debt. Enron, with less than $2 billion in cash as of last week, needs to pay $690 million to lenders by mid-December and is responsible for another $3.9 billion in debt owed by affiliated partnerships. Pipeline Debate Dynegy said it plans to take over Enron's Northern Natural Gas pipeline on Dec. 12, even if Enron files for bankruptcy. Dynegy invested $1.5 billion in Enron as part of the merger plan, giving it preferred stock in Northern Natural Gas. Dynegy backed out of the takeover Wednesday. Enron likely will go to court to argue that Dynegy didn't have the right to end the merger, so it shouldn't get the pipeline, New York bankruptcy lawyer Robert Christmas said. Enron needs collateral for loans to stay in business. Enron pledged assets of Northern Natural Gas and Transwestern Pipeline as collateral for $1 billion in loans from J.P. Morgan and Salomon this month. The banks may not back Enron's claim, as they are more likely to be repaid by Dynegy, said Fahnestock & Co. analyst Fadel Gheit. ``I expect to see Enron, J.P. Morgan, Citibank and Dynegy all in court fighting over who owns the pipeline,'' said Jon Kyle Cartwright, a fixed-income senior analyst at Raymond James & Associates. ``At this point we put our chips on Dynegy. We suspect they had the time and expertise to perfect their purchase.'' Biggest Pipeline Dynegy will assume $950 million of Northern Natural debt with the purchase. Enron can buy the pipeline back if it pays Dynegy $1.5 billion, plus interest, within 180 days of the merger's collapse, Dynegy Chairman Chuck Watson said yesterday. Watson said he would rather get the pipeline than recoup the investment. Northern Natural Gas, the biggest of Enron's four gas pipelines, stretches from the Permian Basin in Texas to the Great Lakes. Dynegy's right to buy it ``is not dependent on Enron's agreement to our right to terminate the merger,'' Dynegy Chief Financial Officer Rob Doty said today in a statement. Shares of Enron fell 9 cents to 27 cents in early afternoon trading. They had fallen 99 percent since mid-October. Dynegy fell $2.34, or 7 percent, to $31.31. Enron's unsecured bonds were bid at 18 cents on the dollar this morning, down about 3 cents from yesterday, traders said. Enron, which got its start as a natural-gas pipeline company, was transformed in the past decade into the biggest competitor in the business of trading energy. As part of the company's strategy, it shifted its focus from developing assets such as pipelines and power plants to developing markets for commodities. As a result, Enron has few assets it can use as collateral for loans. On the Brink Enron has been unable to raise enough cash to ensure it can pay debts and is having trouble financing daily operations. Dynegy's decision to back out of the acquisition left Enron on the brink of bankruptcy. Northern Natural Gas can't take any action, including filing for bankruptcy, without the consent of Dynegy as a preferred stockholder, Dynegy said in the statement. ``From what I understand, Dynegy has as strong a legal claim to the pipeline as they can have,'' said Commerzbank Securities analyst Andre Meade. ``They structured the deal in a way, with bankruptcy as a likely scenario, to have good legal standing.'' Meade rates Enron ``sell'' and Dynegy ``buy'' and doesn't own shares of either company. He values Northern Natural at $2.7 billion, more than the $2.47 billion that Dynegy is paying, including debt. ``Dynegy paid fair market value (for the pipeline), and they have the law and the facts on their side,'' said John Olson, research director for Sanders, Morris, Harris Group Inc., a Houston financial-services firm. Watson said yesterday he hopes that Northern Natural employees won't quit after the takeover. Enron and Dynegy are both based in Houston. ``Dynegy has contacted Enron to begin a transition of the pipeline's management and expect Enron's full cooperation,'' Doty said today. Enron Creditors List Potential Losses From Energy Trader's Fall 2001-11-30 15:54 (New York) Enron Creditors List Potential Losses From Energy Trader's Fall New York, Nov. 30 (Bloomberg) -- Enron Corp.'s creditors, companies spanning the energy, financial and banking industries, stand to lose billions of dollars from the collapse of the energy trader. The following list shows how much each might lose. *T Company Description Amount ($mil) J.P. Morgan Chase & Co. U.S. securities company 500 John Hancock Financial Services U.S. life insurer 320 Credit Lyonnais SA French bank 250 Canadian Imperial Bank Canadian bank 215 ING Groep NV Dutch financial-services co. 195 Principal Financial Group U.S. insurer 172 Abbey National Plc British bank 164 Daiwa Asset Management Co. Japanese financial-services co. 140 Australia & New Zealand Bnk Grp Australian bank 120 National Australia Bank Ltd. Australian bank 104 Dresdner Bank AG German bank 100 HVB Group German bank 100 Duke Energy Corp. U.S. energy company 100 Williams Cos. U.S. energy company 100 ABN Amro Holding NV Dutch bank 97.5 Lincoln National Corp. U.S. insurer 95 Deutsche Bank AG German bank <90 Reliant Resources Inc. U.S. energy company 80 Dynegy Inc. U.S. energy company 75 Bear Stearns & Co. U.S. securities company 69 MetLife Inc. U.S. insurer 62.6 Mirant Corp. U.S. energy company 60 Aquila Inc. Unit of U.S.-based UtiliCorp <50 American Electric Power Co. U.S. energy company 50 El Paso Corp. U.S. energy company 50 Commerzbank German bank <45 Centrica Plc U.K. energy company 43 Exelon Corp. U.S. energy company <20 Energen Corp. U.S. energy company 18.3 Sempra Energy U.S. energy company <15 Dominion Resources Inc. U.S. energy company 11 NRG Energy Inc. U.S. energy company 10 RWE AG German energy company <8.9 Peoples Energy Corp. U.S. energy company 8.0 St. Mary Land & Exploration U.S. energy company 4.17 KeySpan Corp. U.S. energy company <4.0 Houston Exploration Co. U.S. energy company 3.9 Western Gas Resources Inc. U.S. energy company 2.6 FPL Group Inc. U.S. energy company <2.0 XL Capital Ltd. Bermudan insurer ``limited'' < is ``less than'' *T Dynegy Says Pipeline Option Not Dependent on Enron (Update8) 2001-11-30 16:06 (New York) Dynegy Says Pipeline Option Not Dependent on Enron (Update8) (Updates with closing share prices in 12th paragraph.) Houston, Nov. 30 (Bloomberg) -- Dynegy Inc. said it plans to take over Enron Corp.'s Northern Natural Gas Co. pipeline unit on Dec. 12, even if Enron seeks Chapter 11 bankruptcy protection or challenges Dynegy's decision to call off their merger. Dynegy invested $1.5 billion in Enron as part of the merger agreement, giving it preferred stock in Northern Natural and the right to buy the business for about $23 million. Dynegy backed out of the $23 billion buyout of Enron on Wednesday and said it would exercise the right to acquire the 16,500-mile pipeline. Enron said it's reviewing options for Northern Natural, which analysts estimate is worth $2.7 billion. Enron likely will go to court to argue that Dynegy didn't have the right to end the merger, so it shouldn't get the pipeline, New York bankruptcy lawyer Robert Christmas said. Enron needs collateral for loans to stay in business. ``This whole thing is going to be in the courts, regardless of whether Dynegy wants this asset,'' said Kathleen Vuchetich, who helps manage $1.4 billion in assets, 4.2 percent of them Dynegy shares, in the Strong American Utilities fund. ``Dynegy may as well be fighting for something worthwhile.'' J.P. Morgan Chase & Co. and Citigroup Inc.'s Salomon Smith Barney Inc. may join the dispute. Enron pledged assets of Northern Natural and the Transwestern Pipeline as collateral for $1 billion in loans from the banks this month. The banks may not back Enron's claim, as they are more likely to be repaid by Dynegy, said Fahnestock & Co. analyst Fadel Gheit. ``I expect to see Enron, J.P. Morgan, Citibank and Dynegy all in court fighting over who owns the pipeline,'' said Jon Kyle Cartwright, a fixed-income senior analyst at Raymond James & Associates. ``At this point we put our chips on Dynegy. We suspect they had the time and expertise to perfect their purchase.'' Biggest Pipeline Dynegy will assume $950 million of Northern Natural debt with the purchase. Enron can buy the pipeline back if it pays Dynegy $1.5 billion, plus interest, within six months of the Nov. 9 merger agreement date, Dynegy Chairman Chuck Watson said today in an interview. ``I'd rather have the pipe than the $1.5 billion, but they absolutely have the right to do that,'' Watson said. ``That was the deal from day one.'' Northern Natural, the biggest of Enron's four gas pipelines, stretches from the Permian Basin in Texas to the Great Lakes. Dynegy's right to buy it ``is not dependent on Enron's agreement to our right to terminate the merger,'' Dynegy Chief Financial Officer Rob Doty said today in a statement. After Dynegy canceled the buyout, Enron said in a statement it was reviewing Dynegy's claim to the pipeline. Enron has suffered from a crisis of credibility, integrity and leadership for months, Watson said. Questioning the pipeline agreement ``is not helping,'' he said. ``I find it out of balance that (Enron is) questioning this,'' Watson said. ``To throw this out in the press that this might be challenged is irresponsible and disingenuous.'' Shares of Enron fell 11 cents to 25 cents. They have fallen 99 percent since mid-October. Dynegy fell $3.30, or 9.8 percent, to $30.35. Both companies are based in Houston. Enron's 6.4 percent notes maturing in 2006 fell as much as 4 cents to 17 cents on the dollar today, traders said. Few Assets Enron, which got its start as a natural-gas pipeline company, was transformed in the past decade into the biggest competitor in the business of trading energy. As part of the company's strategy, it shifted its focus from adding assets such as pipelines and power plants to developing markets for commodities. As a result, Enron has few assets it can use as collateral for loans. Enron has been unable to raise enough cash to ensure it can pay debts and is having trouble financing daily operations. Dynegy's decision to back out of the acquisition left Enron on the brink of bankruptcy. Northern Natural can't take any action, including filing for bankruptcy, without the consent of Dynegy as a preferred stockholder, Dynegy said in the statement. ``From what I understand, Dynegy has as strong a legal claim to the pipeline as they can have,'' said Commerzbank Securities analyst Andre Meade. ``They structured the deal in a way, with bankruptcy as a likely scenario, to have good legal standing.'' Meade rates Enron ``sell'' and Dynegy ``buy'' and doesn't own shares of either company. He values Northern Natural Gas at $2.7 billion, more than the $2.47 billion that Dynegy is paying, including debt. ``Dynegy paid fair market value (for the pipeline), and they have the law and the facts on their side,'' said John Olson, research director for Sanders, Morris, Harris Group Inc., a Houston financial-services firm. Watson said yesterday he hopes that Northern Natural employees won't quit after the takeover. The unit has 1,100 employees. ``Dynegy has contacted Enron to begin a transition of the pipeline's management and expect Enron's full cooperation,'' Doty said. Enron Bankruptcy Case Would Take Years to Resolve (Update2) 2001-11-30 16:20 (New York) Enron Bankruptcy Case Would Take Years to Resolve (Update2) (Updates Enron shares in 12th paragraph.) Houston, Nov. 30 (Bloomberg) -- Enron Corp. is likely to face a maze of lawsuits that would complicate a bankruptcy filing and take years to resolve, experts say. With Dynegy Inc. having withdrawn a proposed $23 billion takeover offer, Enron is weighing what would be the largest bankruptcy in history and may go to court within a week. Enron shareholders, employees and business partners are lining up to sue the Houston-based company after its shares lost $26 billion in value since mid-October. Enron restated $586 million in earnings because of accounting irregularities, and there are potential conflicts of interest among some of the company's executives. The U.S. Securities and Exchange Commission is investigating the company, and that wouldn't be affected by a bankruptcy filing. ``There are so many legal tentacles to this thing it's scary,'' said Chuck Tatelbaum, former vice president for research at the American Bankruptcy Institute. ``We could be talking about a six-year bankruptcy case here.'' Lawsuits seeking damages from a company under Chapter 11 are pulled into the bankruptcy case and judgments or settlements are converted into bankruptcy claims. Fraud Claims Among the suits likely to be included in a bankruptcy case are claims by shareholders that the company misled investors about its financial health. Another category would be allegations that Enron executives improperly prevented workers from moving 401(k) investments out of the company's stock. Enron probably would face accusations it broke energy trading contracts. The agreements, known as derivatives, were used as insurance against price swings in the energy market. With the company poised to file for Chapter 11, it is expected to miss payments under the contracts. There's also the developing battle between Enron and Dynegy over the failed buyout bid that might end up in bankruptcy court. That might lead a bankruptcy judge to take a look at the recent court case involving Tyson Foods Inc. and IBP Inc., a beef producer. A judge in Delaware ordered Tyson to complete its buyout of IBP after their proposed combination collapse. Tyson, like Dynegy, had said it wasn't fully informed about IBP's financial problems when it negotiated to acquire the beef producer. Dynegy said today it plans to take over Enron's Northern Natural Gas Co. pipeline unit next month. Dynegy said it's entitled to the pipeline under the terms of its Nov. 9 merger agreement that gave it $1.5 billion in preferred stock in Northern Natural Gas. Enron could sue as part of the bankruptcy case to stop Dynegy from walking away from the buyout and claiming ownership to the pipeline. Enron shares fell 10 cents to 26 cents. They have lost 99 percent of their value in the last seven weeks. Complications Any Chapter 11 cases would be ``inordinately complicated,'' said Lynn LoPucki, a law professor at the University of California at Los Angeles. The largest bankruptcy on record is Texaco's $35.9 billion filing in 1987. Enron lists $61 billion in assets. Other big companies, like W.R. Grace & Co. and SGL Carbon Inc., used bankruptcy filings to manage lawsuits, said Ken Eckstein, a New York attorney who handles bankruptcy litigation. W.R. Grace, a financially healthy chemical maker, filed for Chapter 11 protection in April to cope with asbestos-related lawsuits. SGL Carbon is the U.S. unit of a German company with a market value of more than $1.2 billion that makes products used in steel production. SGL filed bankruptcy papers in 1999 to dispose of customers' suits over price-fixing claims. What sets Enron apart are the questions about its financial viability, Eckstein said. He represented customers suing SGL as part of the bankruptcy case. ``Here, you have a fundamentally broken company,'' Eckstein said. ``It may never emerge from bankruptcy.'' That makes it tougher to gauge how much other creditors might recover, he said. `Makes Me Mad' Enron investors aren't optimistic about the future of the company's shares. ``I took at least a 60 percent hit on them,'' said Jim Anders, a Columbia, South Carolina, lawyer who has sold shares. ``It really makes me mad. I'd like to get my hands on some of those executives who were doing the insider deals. That really shook people's confidence in the company.'' Enron's fall was accelerated by questions about some partnerships the company used to move assets and debt off the company's books. Many investors had complained Enron's financial reports hid the significance of the partnerships. Enron's former Chief Financial Officer Andrew Fastow led some of the partnerships and earned more than $30 million through their dealings with Enron, the company disclosed. Fastow and other executives later were fired over their connection to the partnerships. Anders acknowledged that bankruptcy law puts shareholders and litigants at the back of the repayment line. ``I know we've had it and aren't going to get squat back,'' Anders said. ``The company led us to believe Enron was as solid as GE or one of the big banks. Now the bank is busted.'' Chairman Says Dynegy's Right to Enron Pipeline Indisputable 2001-11-30 16:21 (New York) Chairman Says Dynegy's Right to Enron Pipeline Indisputable Houston, Nov. 30, (Bloomberg) -- Enron Corp. negotiated an agreement that gives Dynegy Inc. the right to take over the Northern Natural Gas Co. pipeline, and arguments to the contrary are ``irresponsible'' and ``disingenuous,'' Dynegy Inc. Chairman Chuck Watson said. On Nov. 9, Dynegy announced it would buy Enron in a transaction valued at about $23 billion in stock and assumed debt. That buyout collapsed Wednesday after Enron failed to get financing to run daily operations, its stock price plunged and credit rating companies lowered its debt below junk, triggering $3.9 billion in debt payments. As part of the buyout, ChevronTexaco Corp., owner of 26 percent of Dynegy, gave Enron $1.5 billion in return for the right to take over the 16,500-mile line even if the merger collapsed, Watson said. Watson said someone is telling reporters that Enron might challenge the takeover of the pipeline. Enron doesn't have a case, Watson said. ``ChevronTexaco is not going to give Dynegy ($1.5 billion) which they know Dynegy is going to give to Enron -- a company that has lost $90 billion in net worth -- without a pretty damn good assurance that Dynegy can get the pipeline or the money back,'' Watson said. Enron said it's reviewing options for Northern Natural Gas, which analysts estimate is worth $2.7 billion. Enron likely will go to court to argue that Dynegy didn't have the right to end the merger, so it shouldn't get the pipeline, New York bankruptcy lawyer Robert Christmas said. Enron needs collateral for loans to stay in business. ``This whole thing is going to be in the courts, regardless of whether Dynegy wants this asset,'' said Kathleen Vuchetich, who helps manage $1.4 billion in assets, 4.2 percent of them Dynegy shares, in the Strong American Utilities fund. Dynegy has notified Enron by letter that it plans to go forward, and he plans to take possession by Dec. 19, Watson said. Enron has the right to buy back the pipelines if it gives Dynegy $1.5 billion plus interest in the next six months, he said. ``If the banks want to keep the pipe because they need collateral to loan Enron money, then do it,'' Watson said. ``But don't go out in the press and make it look like a big fight. Tell me what you want to do.'' Watson said he would prefer to keep the pipeline system rather than get the $1.5 billion back. Enron has suffered from a crisis of credibility, integrity and leadership for months. ``This is not helping,'' he said. Dynegy shares fell $3.30 to $30.35. Enron shares fell 10 cents to 26 cents. Williams Has Withdrawn Pipeline Capacity From Enron (Update1) 2001-11-30 16:54 (New York) Williams Has Withdrawn Pipeline Capacity From Enron (Update1) (Updates with closing share prices in fifth paragraph.) Tulsa, Oklahoma, Nov. 30 (Bloomberg) -- Williams Cos., the second-biggest U.S. natural-gas pipeline owner, won't let cash- strapped Enron Corp. use its lines because of credit concerns, Williams spokesman Jim Gipson said. Other gas shippers have taken Enron's share of capacity on Williams's 27,000-mile network, Gipson said. He said he hadn't heard of interruptions of supplies to customers. Williams competes with Houston-based Enron in energy trading. The Tulsa, Oklahoma-based company continues limited business with Enron to reduce the amount of money owed by Enron to Williams, he said. Enron's potential debt to Williams is less than $100 million, Williams said yesterday. Williams negotiated with Enron, the biggest energy trader, for several weeks on reducing that amount, Gipson said. Shares of Williams fell 28 cents to $26.72. Enron shares fell 10 cents to 26 cents. They fell 85 percent Wednesday after Dynegy Inc. abandoned a takeover offer for Enron after Standard & Poor's Corp. cut Enron's debt rating to junk s
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