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Enron Mail |
Enron Letter Writer Worked At Key Partnership Early On Dow Jones Energy Service, 01/18/2002 Enron's Chief Sold Shares After Receiving Warning Letter The New York Times, 01/18/2002 A look at Thursday's developments involving Enron Associated Press Newswires, 01/18/2002 Enron fires Andersen=20 Board takes action as new facts surface=20 Houston Chronicle, 01/18/2002 In Enron Leaders, Seeing the Worst Of Ourselves The Washington Post, 01/18/2002 Broadband-unit hype didn't match reality=20 Houston Chronicle, 01/18/2002 Enron chairman selling 2 homes, lot in Colorado for $16.2 million=20 Houston Chronicle, 01/18/2002 Blockbuster deal helped sow seeds of Enron fiasco CIBC World Markets agreed= to invest $115.2-million in affiliated partnership Wall Street Journal, 01/18/2002 Deals That Helped Doom Enron Began to Form in the Early 90's The New York Times, 01/18/2002 Enron deals that led to collapse began in early 1990s - report AFX News, 01/18/2002 Andersen HQ 'discussed Enron purge'. Financial Times, 01/18/2002 Attorneys for Enron assure judge more documents won't be shredded Associated Press Newswires, 01/18/2002 When Rules Keep Debt Off the Books --- Did Andersen Act Properly? Firm Is F= ired The Wall Street Journal, 01/18/2002 Slugfest Is Seen Among Creditors Fighting for Slice of Enron Assets The Wall Street Journal, 01/18/2002 ENRON FIRES ACCOUNTANTS; DISMISSAL A MOVE OF DESPERATION, EXPERTS SAY South Florida Sun-Sentinel, 01/18/2002 CONGRESS WANTS ANDERSEN TO PROVIDE MORE BOOKKEEPING DATA ENRON SEVERS RELAT= IONS WITH ITS ACCOUNTING FIRM Pittsburgh Post-Gazette, 01/18/2002 Andersen execs aired concerns ; Enron `intelligent gambling' was topic in F= ebruary Chicago Tribune, 01/18/2002 Andersen: No Sign Of 'Any Illegal Action' At Feb 5 Mtg Dow Jones News Service, 01/18/2002 House Panel Wants Documents On Andersen's Feb Enron Talks Dow Jones Energy Service, 01/18/2002 Andersen falls deeper into Enron crisis. The Guardian, 01/18/2002 Enron, auditor Andersen trying to pin responsibility for collapse Associated Press Newswires, 01/18/2002 Enron Scandal: Bank Fallout CIBC would like to forget nightmare: Total writeoff likely: Enron's 'projec= t Braveheart' seemed too good to be true National Post, 01/18/2002 Enron Reports Weren't Reviewed Fully by SEC for Several Years Before Collap= se Dow Jones Business News, 01/18/2002 Enron Scandal: Legal Battles Andersen, Enron hire legal heavyweights: Who's who of law world National Post, 01/18/2002 Canadian institutional investors file suit against Enron's Wall Street bank= ers: 'Wrongful conduct' claim National Post, 01/18/2002 Enron probe is yet to begin. The Times of India, 01/18/2002 THE VIEW FROM WASHINGTON Enron's far-reaching tentacles undermine a fair probe The Globe and Mail, 01/18/2002 Politicians Trade Shots Over Enron AP Online, 01/18/2002 GOP: Enron won't hurt in 2002 campaigns Associated Press Newswires, 01/18/2002 Lawmakers investigating Enron have accepted more than $700,000 in political= donations from company Associated Press Newswires, 01/18/2002 SEC's Pitt Stresses He's Not Participating In Enron Case Dow Jones News Service, 01/18/2002 SEC's Pitt Faces Criticism on Industry --- U.S. to Form Group To Oversee Re= views Of Accounting Firms The Wall Street Journal Europe, 01/18/2002 ENRON'S COLLAPSE: THE OVERVIEW S.E.C. LEADER SEES OUTSIDE MONITORS FOR AUDITING FIRMS The New York Times, 01/18/2002 SEC PROPOSES ACCOUNTING WATCHDOG IN WAKE OF ENRON Pittsburgh Post-Gazette, 01/18/2002 COMPANIES & FINANCE ENRON COLLAPSE - Pitt attacks accountancy system and US= audits. Financial Times, 01/18/2002 FERC Chairman: Enron Meltdown Showed Power-Market Strength Dow Jones Energy Service, 01/18/2002 Burns won't return Enron donations Associated Press Newswires, 01/18/2002 Elizabeth Dole won't keep campaign money from Enron chairman Associated Press Newswires, 01/18/2002 UPPING THE PRESSURE AT NORTHWEST BusinessWeek, 01/21/2002 Citibank Asserts Right To Liquidate Enron Subsidiary Dow Jones Corporate Filings Alert, 01/18/2002 Report: Enron power plant in China one of several ventures likely to be sol= d Associated Press Newswires, 01/18/2002 ENRON MAY SELL POWER PLANT. China Daily, 01/18/2002 Enron expressed interest in mills last summer Associated Press Newswires, 01/18/2002 HOT POTATO: HANDLE WITH CARE Playing politics in the Enron probe could burn= either party BusinessWeek, 01/21/2002 ENRON'S COLLAPSE: THE APPOINTEES Several Administration Officials Held Enron Shares The New York Times, 01/18/2002 Enron's Influence Reached Deep Into Administration; Ties Touched Personnel = and Policies The Washington Post, 01/18/2002 Accounting for Enron: Investigation Raises Oliver North Problem --- Congres= sional Testimony Can Taint Prosecutions The Wall Street Journal, 01/18/2002 Enron: How Governance Rules Failed The audit committee followed all the rul= es--but it let shareholders down BusinessWeek, 01/21/2002 THE MORTICIANS MOVE IN Lawyers, investment bankers, and accountants could w= alk away with as much as $300 million BusinessWeek, 01/21/2002 THE PERILS OF J.P. MORGAN Enron, Argentina, the bear market-a year after th= e merger with Chase, the bank is racking up losses BusinessWeek, 01/21/2002 HOLD THE RATINGS AGENCIES TO A HIGHER STANDARD BusinessWeek, 01/21/2002 Who's Accountable? ; Inside the growing Enron scandal: how evidence was shr= edded and top executives fished for a bailout as the company imploded Time Magazine, 01/21/2002 THE NATION THE ENRON INQUIRY As Questions Get Louder, Cheney Stays Silent P= olitics: Critics want details on meetings with Enron over energy policy. He= asserts executive privilege. Los Angeles Times, 01/18/2002 The Mirror Image of Whitewater National Journal, 01/19/2002 Gramms regulated Enron, benefited from ties Chicago Tribune, 01/18/2002 Bush In The Glare The Enron mess may revive a tough question: Whose side is= this President on? Time Magazine, 01/21/2002 The Enron scandal.(investigation into collapse of Enron Corp.)(Brief Articl= e) Maclean's, 01/21/2002 Late to the Party National Journal, 01/19/2002 McKinsey Held Close Enron Ties For Many Years The Wall Street Journal, 01/17/2002 Enron Creditors Group Law Firm Has Ties To Co, Creditors Dow Jones News Service, 01/18/2002 Enron Excerpt CNN: Special Report With Aaron Brown, 01/18/2002 Diversify, Diversify, Diversify The Wall Street Journal, 01/18/2002 Breakingviews: J.P. Morgan May Pay for Creativity --- Insurers Challenge Ba= nk's Method for Controlling Risks in Enron Dealings The Wall Street Journal Europe, 01/18/2002 COMPANIES & FINANCE ENRON COLLAPSE - Duke benefits from traders' flight to = quality - RIVAL MERCHANT'S RESULTS. Financial Times, 01/18/2002 Enron debacle casting 'lousy' light on accountants The Globe and Mail, 01/18/2002 The Enron Story That Waited To Be Told The Washington Post, 01/18/2002 The Big City Blame Game Has Two Sets Of Standards The New York Times, 01/18/2002 ENRON ENLIGHTENMENT LOTS OF QUESTIONS AND A NEED FOR ANSWERS Pittsburgh Post-Gazette, 01/18/2002 AS ENRONGATE UNFOLDS, A PARTISAN'S HEART LEAPS WITH GLEE Pittsburgh Post-Gazette, 01/18/2002 Commentary: JOHN BALZAR Enron: A Scandal So Good That It Hurts Los Angeles Times, 01/18/2002 REVIEW & OUTLOOK (Editorial) Enron's Sins The Wall Street Journal, 01/18/2002 Enron Case Upsets Long-Held Illusions Newsday, 01/18/2002 ENRON EXECUTIVES DESERVE TO BE HIT BY A TWAIN Pittsburgh Post-Gazette, 01/18/2002 Code of conduct: A matter of trust Chicago Tribune, 01/18/2002 Blind ambition: Good and shameful ; Sorting out the tales of 2 mind-sets Chicago Tribune, 01/18/2002 Letters to the Editor The Enron Debacle: Be Forewarned . . . The New York Times, 01/18/2002 Opportunists may benefit if embattled Kmart files for Chapter 11 The Globe and Mail, 01/18/2002 City - City Diary - Enron going, going, gone. The Daily Telegraph, 01/18/2002 ___________________________________________________________________________= _____________________ Enron Letter Writer Worked At Key Partnership Early On By Jason Leopold 01/18/2002 Dow Jones Energy Service (Copyright © 2002, Dow Jones & Company, Inc.) Of DOW JONES NEWSWIRES=20 (This article was originally published Thursday.) LOS ANGELES (Dow Jones)--The Enron Corp. (ENE) executive who warned Chief E= xecutive Kenneth Lay in August that questionable accounting practices could= bring about the company's downfall was initially hired by Enron to work on= one of the partnerships now at the center of current federal investigation= s, the executive's lawyer and Enron said.=20 Enron hired Sherron S. Watkins away from accounting firm Arthur Andersen in= 1993 to oversee the accounting for Joint Energy Development Investment, an= off-balance-sheet partnership Enron started with the California Public Emp= loyees Retirement System to make investments in energy projects, an Enron s= pokesperson and Watkins' lawyer Philip H. Hilder said.=20 After four years in her post, Watkins expressed concerns about accounting p= ractices used on the partnership and asked to be reassigned, Hilder said. W= atkins did some "clean-up" work regarding JEDI in early 1997, and then was = moved to a new job, he said.=20 "She did raise some concerns at that time," Hilder said. Watkins told curre= nt Enron Chief Financial Officer Jeff McMahon, a long-time colleague, that = she was uncomfortable with the accounting practices she was told to employ = in her work for JEDI, Hilder said.=20 McMahon declined to comment on the issue.=20 Robert Bennett, an attorney representing Enron in federal investigations of= the company, wouldn't comment on whether concerns were raised or how they = were handled.=20 Last November, Enron conceded it shouldn't have treated JEDI as a separate = entity. Consolidating JEDI and a related partnership, Chewco Investments LP= , into its financial reports reduced Enron's earnings by $400 million.=20 Enron auditor Arthur Andersen has said consolidating those partnerships acc= ounted for most of the restatement of Enron's financial reports, which all = told reduced the company's earnings by about 20% over a four-year period be= ginning in 1997.=20 Trouble With JEDI=20 The trouble with JEDI came in 1997, when Enron wanted to establish a new pa= rtnership with Calpers called JEDI II. Calpers was willing to invest $500 m= illion in the new partnership, but wanted to recover its $250 million inves= tment in JEDI.=20 According to published reports and congressional testimony by an Andersen o= fficial, Enron bought Calpers' interest in JEDI for $375 million, then sold= it to Chewco, another Enron off-balance-sheet partnership. Chewco's invest= ment allowed Enron to avoid booking JEDI-related debt to its own balance sh= eet. It emerged later that Enron had guaranteed part of Chewco's investment= , invalidating its status as an outside party and forcing the consolidation= .=20 As reported, Andersen Chief Executive and Managing Partner Joseph Berardino= told a House committee that the firm only learned of Enron's guarantee in = November, at which time it alerted Enron to "possible illegal acts" within = the company. Enron said at the time it has always been open with its audito= r and notified Andersen as soon as it learned the information.=20 Revelations about JEDI, Chewco and other Enron partnerships eventually ruin= ed the one-time market leader's credibility on Wall Street and led to the b= iggest bankruptcy filing in U.S. history. The U.S. Justice Department, seve= ral Congressional committees, and the Securities and Exchange Commission ar= e investigating the collapse.=20 Watkins warned in her much-publicized August 2001 letter to Lay that Enron'= s handling of the partnerships could produce such an outcome. "I am incredi= bly nervous that we will implode in a wave of accounting scandals," she wro= te.=20 Watkins wrote her letter to Lay one day after then Chief Executive Jeffrey = Skilling abruptly resigned from the company on Aug. 14, attorney Hilder sai= d.=20 Work On Raptor, Condor=20 At the time, Watkins had been working with Fastow for a month on a temporar= y basis on some of the partnerships. Watkins was able to go into detail in = her letter about transactions with partnerships called Raptor and Condor be= cause "she was reviewing the assets of Raptor and Condor for potential sale= ," he said.=20 "She saw that there were some serious questions with the accounting operati= ons and raised some questions and wanted the executives to be aware," Hilde= r said.=20 The issues she raised - namely that the partnerships were thinly capitalize= d and insufficiently independent - were those that eventually forced Enron = to consolidate some of the partnerships.=20 Those close to Fastow now characterize Watkins as a disgruntled employee wh= o hadn't quickly climbed the corporate ladder.=20 Watkins' lawyer dismissed that conclusion. "It's completely the opposite of= disgruntled," Hilder said. "She found great job satisfaction. She had an o= utstanding work history with Enron."=20 Enron lawyer Bennett also distanced the company from those characterization= s. "She certainly isn't a kook," Bennett said.=20 As reported, Watkins met with Lay, who asked Enron's outside law firm to re= view her concerns. The firm, Vinson & Elkins, concluded in an Oct. 15 repor= t that the accounting for the partnerships was sound, but that Enron could = face public-relations problems if the details were revealed. Watkins initia= lly hadn't signed the letter she sent to Lay, but was later convinced to re= veal her identity by McMahon, at the time the chief executive of Enron Indu= strial Markets, Hilder said.=20 Watkins brought her concerns about the partnerships to McMahon because she = has a longstanding relationship with him dating back to the late 1980s, acc= ording to Hilder. Both worked at MG Natural Gas Corp. and Arthur Andersen.= =20 They also shared a concern about the partnerships. In early 2000, when he w= as Enron's treasurer, McMahon raised concerns about partnerships headed by = Chief Financial Officer Andrew Fastow to Skilling, then Enron's president, = according to The Wall Street Journal. Skilling wasn't concerned, and McMaho= n moved on to a new post. After Fastow was ousted in late October 2001, McM= ahon was named CFO.=20 -By Jason Leopold, Dow Jones Newswires; 323-658-3874; jason.leopold@dowjone= s.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business/Financial Desk; Section C ENRON'S COLLAPSE: THE AUDITOR Enron's Chief Sold Shares After Receiving Warning Letter By RICHARD A. OPPEL Jr. and JONATHAN D. GLATER 01/18/2002 The New York Times Page 1, Column 2 c. 2002 New York Times Company Documents disclosed yesterday indicate that Kenneth L. Lay, the chairman an= d chief executive of Enron, disposed of stock within days of receiving a le= tter warning of accounting problems at the company.=20 That letter, from Sherron S. Watkins, a senior employee, ignited an investi= gation by Enron's outside law firm, which concluded that the accounting iss= ues could be embarrassing. As part of that inquiry, Mr. Lay met with Ms. Wa= tkins. The documents released yesterday by Congressional investigators were intern= al memos from Arthur Andersen, Enron's auditor, which the company fired yes= terday. The documents not only put Mr. Lay's stock transactions and the Wat= kins letter on a timeline, but also provide the best map to date of what An= dersen officials considered doing about Enron's accounting.=20 In Houston, investigators continued to interview Enron executives and to pr= ess for more information on Enron's collapse and Andersen's role, including= the destruction of documents.=20 One memo released by investigators revealed that as long ago as February, A= ndersen workers considered dropping Enron as a client because of concerns a= bout the disclosure of off-balance-sheet debts.=20 Enron's sudden collapse last fall and the resulting criminal and civil inve= stigations revolve around Enron's transactions with partnerships formed by = Andrew S. Fastow, Enron's former chief financial officer. Mr. Fastow was ou= sted in late October as investors grew concerned about the partnerships, am= ong them LJM1 and LJM2. Enron subsequently disclosed that Mr. Fastow made m= ore than $30 million off the deals.=20 An e-mail message dated Feb. 6, 2001, released by investigators, showed tha= t Andersen partners discussed whether to consolidate one of the partnership= 's financial results with Enron's, and it discussed potential conflicts of = interest confronting Mr. Fastow. The message was reported yesterday by The = Washington Post.=20 Yesterday, Andersen issued a statement saying that the deliberations descri= bed by the memo were routine and that nothing ''indicated that any illegal = actions or improper accounting was suspected.''=20 The firm also acknowledged that senior partners with Andersen in Chicago, w= here the accounting firm has its headquarters, were involved in the Februar= y discussions and held conference calls with the firm's Houston office, whi= ch oversaw the Enron account. An Andersen spokesman said it was not unusual= for senior partners to be involved in such meetings about clients of Enron= 's size and complexity.=20 Meanwhile, Congressional investigators have also been told that by Septembe= r, officials from the Chicago office had joined a review team of Andersen a= uditors in Houston analyzing Enron's dealings with the partnerships in the = wake of Ms. Watkins's letter.=20 On ''Moneyline'' on CNN last night, Andersen's chief executive, Joseph F. B= erardino, said he had been meeting with the firm's partners, other employee= s and clients to try to reassure them about the firm's prospects. ''We will= do what great companies have done: learn from this experience,'' he said. = ''Our people are very, very confident that we will move forward.''=20 Until yesterday, it had not been clear just when Ms. Watkins wrote her lett= er warning of accounting problems or when Mr. Lay received it. But her lawy= er, Philip Hilder, said in an interview yesterday that the letter was writt= en on Aug. 15, and one of the newly disclosed Andersen memos obtained by Co= ngressional investigators indicates that her meeting with Mr. Lay had been = scheduled for Aug. 22 and the scheduling had been done by Aug. 20.=20 It was on Aug. 20 and Aug. 21 that Mr. Lay exercised options on 93,620 shar= es of stock for $2 million. At the time, the shares were worth $3.5 million= . Mr. Lay did not report selling the stock, but a lawyer for Enron disclose= d earlier this week that some shares had been used to repay a previously un= disclosed loan from Enron. Enron has declined to discuss details of the rep= ayment, but it seems likely that the shares purchased then were used to rep= ay the loan. Had Mr. Lay not planned to use the shares for that purpose, th= ere would have been no apparent reason to exercise the options then.=20 Under rules of the Securities and Exchange Commission, corporate officials = are required to disclose sales of their company's stock by the tenth day of= the month after the sale. But there is an exception when the shares are su= rrendered to the company to repay a loan. Disclosures of such transactions = can be delayed until 45 days after the company's fiscal year ends. For Enro= n, that will be Feb. 14.=20 As Mr. Lay was apparently reducing his own stake in Enron, he was sounding = optimistic in public. ''As I mentioned at the employee meeting, one of my h= ighest priorities is to restore investor confidence in Enron,'' Mr. Lay wro= te in an e-mail message to employees dated Aug. 21. ''This should result in= a significantly higher stock price.''=20 An Enron spokesman said last night that Mr. Lay ''exercised the options to = hold those shares,'' but that he did not know whether those ''particular'' = shares had then been used to repay a company loan.=20 Congressional investigators have learned this week that some Enron executiv= es, concerned about the company's finances, sought legal counsel on their o= wn from lawyers outside the company before the financial disclosures last f= all that ultimately led to Enron's bankruptcy in December.=20 Last night, Salon.com reported that an Enron corporate lawyer, Jordan Mintz= , last summer hired a New York law firm, Fried Frank Harris Shriver & Jacob= son, to take another look at the company's financial structure. Fried Frank= , where the S.E.C. chairman, Harvey L. Pitt, worked until last fall, recomm= ended that Enron end its deals with the partnerships. There was no response= to a message left last night at Mr. Mintz's home in Houston.=20 The investigation by the Houston law firm of Vinson & Elkins, a result of M= s. Watkins's letter, concluded that Enron had done nothing wrong in setting= up the partnerships but also said that there was a serious risk of adverse= publicity and litigation for the company.=20 In Houston yesterday, investigators of the House Energy and Commerce Commit= tee interviewed Richard Buy, Enron's chief risk officer, among other execut= ives. On Friday they plan to interview Richard Causey, the company's chief = accounting officer. Investigators then plan to conduct interviews across th= e country about document destruction at Andersen. Investigators have also s= tarted to receive reconstructed versions of some of the e-mail messages and= electronic documents that were destroyed by the accounting firm from Septe= mber to November.=20 On Wednesday, investigators from the committee spent more than four hours i= nterviewing David B. Duncan, the lead Andersen partner in charge of auditin= g Enron, who was fired earlier this week after the firm said he oversaw doc= ument destruction at Andersen's Houston office despite a regulatory investi= gation.=20 Mr. Duncan maintained that he was only following a document-destruction pol= icy re-emphasized in an Oct. 12 memo from an Andersen lawyer, according to = a person close to the case. He was asked by investigators whether ''it was = usual in your career for people to talk to you about the document-retention= policy,'' this person said. ''He said it's not something that happens all = the time.''=20 Mr. Duncan also stated that by September, Andersen executives in Chicago we= re having frequent phone calls with auditors in Houston re-examining Enron'= s transactions with the partnerships, this person said.=20 The internal Andersen documents paint a complicated picture of a firm where= accountants were struggling to evaluate the risks posed by Enron's aggress= ive approach to accounting. The Andersen executives also worried that the f= ees received from Enron could appear to compromise their objectivity.=20 ''We arbitrarily discussed that it would not be unforeseeable that fees cou= ld reach a $100 million per-year amount considering the multidisciplinary s= ervices being provided,'' wrote Michael D. Jones, in Andersen's Houston off= ice. ''Such amount did not trouble the participants so long as the nature o= f the services was not an issue.''=20 In a statement yesterday, Andersen said that ''discussion about the potenti= al that fees could rise to as much as $100 million was not in the context o= f the firm's desire to grow revenues.''=20 ''Rather,'' it continued, ''the discussion related to concerns about the po= ssibility that the size of the fees could be misperceived as affecting inde= pendence.''=20 But Mr. Jones's e-mail message also suggested that Andersen's accountants c= onsider whether the LJM partnerships should be treated as a separate entity= for accounting purposes. That suggestion makes clear that nearly a year ag= o Enron's auditors questioned whether unreported transactions between the c= ompany and entities like LJM might be improperly characterized in its finan= cial statements. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 A look at Thursday's developments involving Enron By The Associated Press 01/18/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. Developments involving bankrupt energy company Enron Corp.:=20 -Enron Corp. and accounting firm Arthur Andersen LLP are trying to pin resp= onsibility on each other over Enron's financial practices. Enron fired Ande= rsen, citing its destruction of thousands of documents and its accounting a= dvice. -More than $700,000 in campaign donations has gone from Enron to the member= s of seven congressional committees investigating its collapse, but none of= the lawmakers has decided to drop out of the probe. Some money has been re= turned. Watchdog groups criticize the lawmakers still involved in the probe= .=20 The Security and Exchange Commission chief says Enron's collapse was just t= he latest in a series of horrific accounting failures at big companies. He = is calling for a new private-sector agency to regulate the accounting profe= ssion.=20 -Rep. Henry Waxman, the top Democrat on the House Government Reform Committ= ee, says he documented 17 provisions in Vice President Dick Cheney's energy= plan that benefited Enron. The White House refuses Waxman's demands that i= t list contacts with the bankrupt energy trading company. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Jan. 18, 2002, 9:26AM Enron fires Andersen=20 Board takes action as new facts surface=20 By JULIE MASON=20 Copyright 2002 Houston Chronicle Washington Bureau=20 WASHINGTON -- As evidence surfaced Thursday that Arthur Andersen was worrie= d about Enron Corp.'s accounting and conflicts of interest as early as Febr= uary, the one-time energy giant fired Andersen as its auditor.=20 The action by the Enron board of directors is the latest in a round of firi= ngs and recriminations spawned by the collapse of the Houston-based energy = company.=20 Embattled Enron Chairman Ken Lay, whose own conduct is under intense scruti= ny, said company officials are reviewing past Enron accounting practices --= and are now looking to hire new auditors.=20 "While we had been willing to give Andersen the benefit of the doubt until = the completion of that investigation, we can't afford to wait any longer in= light of recent events," Lay said.=20 Those events include the apparent destruction of thousands of documents per= taining to Enron by Andersen executives, and firing and disciplinary action= taken by Andersen against its employees in charge of Enron's books.=20 Andersen officials responded to their firing by Enron with a statement illu= strating the growing acrimony between the one-time high-flying allies.=20 "As a matter of fact, our relationship with Enron ended when the company's = business failed and it went into bankruptcy," the auditors said.=20 Investigators from the House Energy and Commerce Committee were in Houston = interviewing Enron's former risk assessment officer, Rick Buy, and others a= s part of a probe of the company's free fall.=20 Ken Johnson, chief spokesman for the committee, declined to identify what i= nformation was gleaned, but said a key theme is emerging in the investigati= on.=20 "We are now in the middle of a classic `he said, she said,' " Johnson said.= =20 Committee staffers are expected to remain in Houston through today to inter= view former Enron chief accounting officer Rick Causey.=20 David Duncan, lead Andersen partner on the Enron account and blamed by the = firm for ordering the document destruction, has in turn said he was followi= ng company policy outlined by the auditors' in-house lawyers.=20 Andersen fired Duncan on Tuesday, and the next day Duncan began cooperating= with congressional investigators.=20 A Feb. 6 memo provided by the House committee shows Andersen officials were= concerned nearly a year ago about Enron's accounting methods and possible = conflicts of interest.=20 "A significant discussion was also held about Enron's (monthly) earnings an= d the fact that it was `intelligent gambling,' " said the memo, authored by= Houston-based Andersen accountant Michael D. Jones and addressed to Duncan= .=20 The memo, detailing concerns discussed at a meeting of eight Andersen audit= ors in Houston and six Andersen executives on a conference call, indicates = for the first time how long before Enron's Dec. 2 bankruptcy those familiar= with its practices were expressing uneasiness.=20 Despite the range of misgivings discussed at the meeting, Andersen decided = to keep serving Enron, estimating its fees could reach $100 million a year.= =20 Enron, a major client for the Chicago-based Big Five accounting firm, paid = Andersen $52 million last year.=20 "Ultimately the conclusion was reached to retain Enron as a client citing t= hat it appeared that we had the appropriate people and processes in place t= o serve Enron and manage our engagement risks," Jones wrote to Duncan, who = participated in the meeting.=20 On Oct. 16, Enron released a devastating third-quarter earnings report cont= aining more than $1 billion in losses on bad investments and a $1.2 billion= reduction in shareholder equity.=20 Enron's losses were tied in part to investment partnerships with LJM Cayman= and LJM2 Co-Investment.=20 Andrew Fastow, Enron's chief financial officer at the time, created and ran= those partnerships with the blessing of the board of directors and Lay.=20 Fastow's dual roles have led to widespread conflict-of-interest charges, di= scussed by Andersen in February and now the subject of federal government i= nquiry.=20 Wall Street last year began focusing on Enron's complex accounting methods,= scrutinizing financial vehicles and deals Enron used to make various inves= tments without putting the related debt on its balance sheet.=20 At the conclusion of the Andersen meeting in February, participants compile= d a to-do list that included suggesting the Enron board create a special co= mmittee to review the propriety of the Fastow partnerships.=20 Nine months later on Nov. 8, Enron acknowledged to the Securities and Excha= nge Commission that it had overstated its profits by $586 million as it shi= elded losses in partnerships, including those headed by Fastow.=20 The company's subsequent collapse cost thousands of Enron employees their j= obs and many their retirement savings.=20 Investigations into Enron are under way by the Securities and Exchange Comm= ission and the Labor Department, and Justice Department officials have open= ed a criminal investigation.=20 The House Energy and Commerce Committee probe is one of at least nine Enron= -related inquiries under way on Capitol Hill.=20 Another document provided by House investigators shows that Andersen offici= als were alerted by an Enron executive in August about possible improprieti= es in Enron accounting.=20 Sherron Smith Watkins, vice president for corporate development, whose Aug.= 15 memo to Lay prophesied the accounting scandals that subsequently engulf= ed the company, called a friend at Andersen to discuss her concerns.=20 James A. Hecker, who did not work on the Enron account, drafted a detailed = memo Aug. 21 to several Andersen auditors handling the Enron books, detaili= ng Watkins' allegations.=20 Hecker described Watkins, also a former Andersen employee, as "agitated" be= cause Enron financial statements did not tell the "whole story."=20 According to Hecker, Watkins had been assured by Enron in-house counsel tha= t there was no impropriety in Fastow's partnerships or accounting; however,= Watkins wanted to meet with Lay to discuss her concerns.=20 Chronicle reporter Dale Lezon in Houston contributed to this story.=20 Metro DONNA BRITT In Enron Leaders, Seeing the Worst Of Ourselves Donna Britt 01/18/2002 The Washington Post FINAL B01 Copyright 2002, The Washington Post Co. All Rights Reserved To many, the Enron debacle -- the largest corporate bankruptcy in U.S. hist= ory -- is a complex soup whose ingredients boil down to some essential less= ons:=20 About how money can obliterate corporate executives' good sense. About the = dangers of employees putting all their investment money into one seemingly = sound basket. About elected officials distancing themselves from a formerly= valued contributor -- President Bush's description of embattled Enron CEO = Kenneth Lay went from "Kenny Boy" to "Mr. Lay" to "a supporter." To me, the Enron fiasco boils down to a simple question for everyone who cr= eated it:=20 "How could you?"=20 They're three little words that reflect all the passion and frustration of = "I love you" -- and that we think far more often. It's the question we sile= ntly ask the boss who passes us over, the co-worker who disrespects us, the= child who lies to us with a sweet, open face.=20 But considering all we know about human treachery, what's stunning isn't th= at some people treat us poorly. It's that such behavior surprises us.=20 I've wrapped "How could you?" around everyone from commitment-phobic ex-boy= friends, to the car dealer who tried to charge me $1,300 for a repair for w= hich I paid $63 elsewhere, to spy Robert Hanssen for selling classified inf= ormation that could have threatened his nation's -- and his own family's --= security.=20 What other response -- besides a stiff jail sentence -- is more appropriate= for Enron officers who apparently made millions selling their own soon-to-= be-worthless stock while preventing their employees from doing the same?=20 The photos of blank-faced young former employees whose trust in corporate A= merica had evaporated were bad enough. What drove me to "How could you?" wa= s reading about folks like retired pipeline operator Charles Prestwood -- w= hose $1.3 million 401(k) nest egg in Enron stock is now virtually worthless= .=20 I mean, how could one Enron official make nearly $63 million in 14 months -= - and then watch 20,000 other employees lose their retirement savings?=20 How could anyone?=20 "It's called sociopathy -- people who don't think about or have much empath= y for the impact of their actions on others," says clinical social worker D= ennis O'Brien, who often counsels employees of businesses and organizations= .=20 A Houston native whose neighborhood adjoined that of many Enron honchos, O'= Brien sounds as baffled as anyone by certain executives' behavior.=20 "These are not the type of people who show up at therapy," he says. "They d= on't know they have a problem."=20 They aren't just in the business world. Years ago, my friend Elizabeth was = pregnant with her second child when her husband went off with "friends" to = a college reunion.=20 "He leaves on Thursday and I don't hear from him the entire weekend," she r= ecalls. "No phone call, nothing. He just shows up Sunday. I was like, 'How = could you?' "=20 Her husband, who was actually with a lover, told his pregnant wife the affa= ir was her fault because she was "fat."=20 But it took Elizabeth seven years to leave him because "I thought it must b= e something I was doing. . . . I allowed myself to be a victim, but finally= realized that what he did was about him. . . . He just doesn't think about= how what he's going to do affects other people.=20 "That's what Enron did to the people who worked for them," she theorizes. "= I used what happened with my ex to learn who I am. I don't know how people = victimized by Enron will recoup what they've lost."=20 Certainly, Enron's victims have heard enough about what they did wrong. But= the rest of us should acknowledge what's tricky about "How could you?"=20 Too often, it absolves us from asking another valid question:=20 "How could I?"=20 "It's sort of like going to a doctor and letting him operate and you don't = ask questions or get a second opinion," suggests Shelley Lafall, a Silver S= pring artist. "We've learned not to do that. I guess we'll learn some busin= ess lessons from Enron."=20 But in fact, she continues, "we all do mean stuff all the time, in little w= ays -- whether it's a waitress you don't give a good tip to or somebody who= 's bagging your groceries and you're huffing and puffing and looking at you= r watch."=20 Most people, thank God, aren't coldblooded enough to grab millions of dolla= rs and then run. But we'll cut off some perfectly nice person in traffic.= =20 "Usually, I'll let somebody in -- and give myself Brownie points," Shelley = says. "But sometimes, there's this survival instinct that kicks in to look = out for number one -- especially when number two is faceless.=20 "It's a hardness that fails to recognize someone else's humanity."=20 Every jerk responsible for the cosmic horror that is Enron should be soundl= y punished. Yet Shelley has a point when she suggests that those who ask, "= How could you?" are ignoring a basic fact:=20 "We're just not that far from our primitive selves." http://www.washingtonpost.com=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Jan. 18, 2002, 12:34AM Broadband-unit hype didn't match reality=20 By TOM FOWLER=20 Copyright 2002 Houston Chronicle=20 A year ago this month, at Enron's annual analysts' meeting at the Four Seas= ons Hotel in Houston, then-President Jeff Skilling was emphatic about the p= otential of the company's broadband Internet business.=20 At a time when Enron stock was trading in the low $80s, Skilling said the b= roadband unit alone was worth $40 per share. Enron stock, he said, should b= e selling for $126.=20 That brought a gasp from many of the Enron Broadband Services employees wat= ching the presentation on a webcast. The picture he painted was a far cry f= rom the reality they knew.=20 Not only did many of the 2,000 EBS employees have copious time to kill beca= use of a lack of customers, they knew the company was actually trying to se= ll the very heart of the business -- an 18,000-mile fiber-optic data networ= k, assembled at a cost of $1.5 billion.=20 The effort to peddle broadband's one hard asset, known as "Project Cannon,"= was not shared with analysts or investors, but it started to leak out to e= mployees in December 2000. By March, most employees knew, but few, if any, = outsiders did.=20 And by April, the company -- while publicly saying it planned to expand the= network -- also was trying to quietly sell millions of dollars in computer= s and telecommunications equipment stockpiled in a warehouse on Shepherd Dr= ive near Interstate 10.=20 "There wasn't a whole lot of connection between what the management said an= d what we knew," said Dixie Yeck, a former trader with EBS.=20 Eventually, losses from the broadband business, combined with disclosure of= myriad questionable financial transactions, eroded investor confidence in = Enron. On Dec. 26, EBS followed 28 other Enron affiliates and filed for Cha= pter 11 bankruptcy.=20 Now, a month after Enron's bankruptcy filing, it's clear that EBS had much = in common with the hundreds of dot-com and telecom businesses that folded i= n the past two years.=20 Like dot-coms, EBS always admitted profitability wasn't imminent but would = take time, hard work and a lot of investment. And, also like dot-coms, it h= ad a lot of hype, too many employees and not enough paying customers.=20 Enron created the broadband business after its 1997 acquisition of Portland= General Electric, a small Oregon utility that was also building its own fi= ber-optic network. Some Enron employees believed they could do just what co= lleagues had done in the natural gas business a decade earlier -- turn acce= ss to the largest Internet data pipelines into a fluid commodity that could= be bought and sold on a daily basis.=20 By building more than two dozen "pooling points" -- data-switching hubs tha= t connected with other networks around the world -- Enron could sell time o= ver the Internet to send and receive large amounts of data reliably. This i= ncluded everything from broadcasts of conferences and sporting events to su= ch mundane traffic as vast amounts of arcane business data.=20 The business reported steep losses every quarter it was in existence, but i= t still got points from investors for being a pioneer.=20 In the summer of 2000, when it signed a 20-year deal with Dallas-based Bloc= kbuster Inc. to deliver movies over the Internet to homes, EBS became a sta= r and the stock rose to record heights.=20 Then-EBS Chief Executive Ken Rice predicted broadband trading would one day= equal the company's natural gas retail and wholesale business.=20 "A lot of the guys in that division will say `no way,' but there's no doubt= to anyone it will be big," Rice said last spring.=20 It wasn't. In March 2001, the Blockbuster deal fell apart. Long before that= , company insiders said, there were clear signs of trouble.=20 Though EBS had plans to increase staff significantly, in early 2000 it star= ted to become a dumping ground for employees cut from operations being down= sized or eliminated. Several hundred employees from Enron's faltering water= -industry spinoff, Azurix, were transferred to EBS as a way to keep talente= d workers.=20 The influx of new people meant roles and responsibilities changed frequentl= y, said Matt Mitchell, a former sales engineer with the broadband group who= was laid off in November.=20 For a while there was plenty of work to go around, with customers to find a= nd things to trade. But not all the trades brought in cash. Some, for insta= nce, involved Enron selling access to a particular circuit to Dynegy, which= would then sell it to El Paso Corp., which would sell it back to Enron. Th= e transaction could be treated as a trade, but Enron didn't net any cash fr= om it.=20 And some of the contracts were so structured that companies would buy long-= term broadband access without having to pay for it for years. Such deals we= re done with startup companies in particular, to enable them to get on thei= r feet without having to lay out cash upfront.=20 Enron, however, would book the full value of the contract in the quarter th= e deal was closed, insiders said, but many customers never got around to pa= ying before going out of business.=20 Playing with the numbers wasn't that unusual in EBS, as revelations made in= November 2001, after Enron started to come undone, now show.=20 According to Securities and Exchange Commission documents, in June 2000, EB= S sold an unused portion of its network to LJM2 Co-Investment, one of the n= ow-infamous partnerships that had been formed by then-Chief Financial Offic= er Andrew Fastow.=20 LJM2 bought the cable for $30 million in cash and $70 million in an interes= t-bearing note, an IOU. Enron recorded $67 million in pre-tax revenue from = the transaction.=20 Six months later, LJM2 sold some of that fiber to other companies for $40 m= illion, but because Enron helped market the fiber to those buyers, it recei= ved an "agency fee" of $20.3 million.=20 That same month, LJM2 sold the remaining fiber for $113 million to a specia= l partnership that Enron had created strictly for the purpose of making tha= t purchase. So even though EBS technically no longer owned those assets, an= Enron-controlled partnership did.=20 The public record of this flip-flopping of assets wasn't nearly as revealin= g, however. Financial statements Enron made in early 2001 about the deals s= imply described it as "the sale of excess dark fiber."=20 When the Blockbuster deal fell apart, outsiders started to become more skep= tical of Enron's claims about the business. When about 250 employees were c= ut from EBS a month later, the stock started to drop.=20 Analysts said they were never told of plans to sell the network, or even wh= en the company started to sell millions of dollars in Compaq and Sun Micros= ystems equipment it had bragged about buying a year earlier.=20 A company spokeswoman said Enron was continually re-examining whether such = hard assets as pipelines or networks were necessary.=20 Some analysts agree, saying that not having that information doesn't seem v= ery important, even in hindsight.=20 "They always said the important part of the business would be the trading, = not the network," said Andre Meade, head of utilities research at Commerzba= nk Securities. "So getting rid of the assets would eventually be a good mov= e."=20 But to John Olson, an analyst with Sanders Morris Harris, the omission of t= he attempted network sale was significant.=20 "The disconnect there was like night and day," Olson said. "How could they = get out there and make presentations on their business like they did when t= hey were trying to unload these other assets?"=20 Jan. 18, 2002, 9:43AM PREMIER PROPERTIES=20 Enron chairman selling 2 homes, lot in Colorado for $16.2 million=20 By ED ASHER=20 Copyright 2002 Houston Chronicle=20 Joshua & Co. photos Broker Joshua Saslove, of Aspen, Colo., said his c= ompany put Enron Chairman Ken Lay's three properties -- two houses pictured= above and a vacant lot -- on the market on Nov. 12, three days after Enron= had agreed to be bought by rival energy company Dynegy Inc. =09 Enron Chairman Ken Lay has put three of his four Aspen, Colo., properties u= p for sale for $16.2 million, or reportedly $3.6 million more than he paid = for them since 1998.=20 They include a 4,537-square-foot log and stone "cabin-style" home listed at= $6.8 million and a 4,559-square-foot riverfront residence listed at $6.5 m= illion.=20 Both have hot tubs, security systems and lawn sprinklers. The larger house = includes a "caretaker unit," according to the listing.=20 The third property is a 20,266-square-foot vacant lot listed at $2.9 millio= n. It has a building permit with plans for a home, said Aspen broker Joshua= Saslove, owner of Joshua & Co.=20 "They are premier Aspen properties located within walking distance of downt= own," he said "We have had a substantial amount of interest in them."=20 Lay and his wife, Linda, are not selling a 4,200-square-foot "cottage" they= use in the summer and winter, he said. The Pitkin County assessor's office= has valued it at $3 million.=20 The "cabin-style" home is seven years old and was purchased by the Lays in = November 1999. The two-story home has five bedrooms and five bathrooms.=20 The other home, with "considerable" frontage on the Roaring Fork River, has= four bedrooms and four bathrooms, Saslove said.=20 Saslove said his company put the three properties on the market on Nov. 12,= three days after Enron had agreed to be bought by rival energy company Dyn= egy Inc. for $9 billion in stock. Dynegy later backed out of the deal.=20 "They seem to be in no great hurry to sell the homes," Saslove said. "But l= ike any seller, I'm sure they would like to see some activity as soon as po= ssible."=20 Lay could not be reached for comment late Thursday.=20 Saslove said he did not know how much the Lays would profit if all three pr= operties sell at their listed prices.=20 However, The Aspen Times said the couple would get a $3.6 million profit be= fore taxes, or a 23 percent return on their investment.=20 Report on Business: The Wall Street Journal Blockbuster deal helped sow seeds of Enron fiasco CIBC World Markets agreed= to invest $115.2-million in affiliated partnership REBECCA SMITH Wall Street Journal 01/18/2002 The Globe and Mail Metro B6 "All material Copyright © Bell Globemedia Publishing Inc. and its licenso= rs. All rights reserved." When Enron Corp. and Blockbuster Inc. joined forces in mid-2000, it looked = like they were on to something big. The companies announced they would soon= be allowing consumers across America to choose from among thousands of mov= ies, including hot new features, sent via telephone lines to watch on their= TVs at home.=20 Announcing the partnership in July, 2000, Enron chairman Kenneth Lay called= it the "killer app for the entertainment industry." Blockbuster chairman J= ohn Antioco said the two companies had come up with the "ultimate bricks-cl= icks-and-flicks strategy." Oracle Corp. chairman Larry Ellison later commit= ted his private company, nCube Corp., to provide critical computer hardware= and $2-million (U.S.). Mr. Ellison said he was "proud" to be part of the v= enture. It looked like another brilliant move by Enron, already a hero on Wall Stre= et. But within eight months of its launch, the partners had split. Enron's = impatience "didn't add up," says Blockbuster spokeswoman Karen Raskopf.=20 As it turns out, Blockbuster didn't know the half of it. Within months of i= nking the deal, Enron had set up an affiliated partnership, code-named Proj= ect Braveheart, an apparent allusion to the 1995 Mel Gibson movie. Enron ob= tained a $115.2-million investment in the partnership from CIBC World Marke= ts, the investment-banking arm of Canadian Imperial Bank of Commerce in Tor= onto. In return, CIBC received a promise of almost all earnings from Enron'= s share of the venture for the first 10 years. Blockbuster didn't know abou= t Braveheart at the time, Ms. Raskopf says.=20 The partnership had no separate staff and no assets other than Enron's stak= e in the venture with Blockbuster, which was barely getting off the ground = in late 2000. Still, in an audacious accounting move, Enron claimed $110.9-= million in profits from Braveheart in the fourth quarter of 2000 and the fi= rst quarter of 2001. That amount sharply limited the overall losses suffere= d by Enron's fibre-optics division in the two periods.=20 At its peak, in March, 2001, the venture with Blockbuster provided only abo= ut 1,000 test customers with movies in four U.S. cities. Many of those cust= omers didn't even pay. "It was nothing but a pilot project," says Blockbust= er's Ms. Raskopf. "I don't know how anyone could have been booking revenues= ."=20 Blockbuster, a unit of Viacom Inc., never accounted for any financial gain = or loss from the short-lived venture, she says.=20 Project Braveheart was one of dozens of outside partnerships that Enron off= icials created to burnish the company's financial results at a time when it= felt under pressure to show high profits that would justify its soaring st= ock price, according to current and former company executives. One of the r= easons Enron began sliding toward bankruptcy court last fall was the abando= nment of some of these accounting manoeuvres, which contributed to huge los= ses and the collapse of its stock.=20 Some of the partnerships were designed to shift large debts off Enron's bal= ance sheet and make the company appear more robust in the eyes of investors= and credit-rating agencies. Others, such as Braveheart, raised fast cash n= eeded to fund Enron's ever-expanding array of new businesses.=20 Enron's current chief financial officer, Jeffrey McMahon, says he had nothi= ng to do with Braveheart or related partnerships. "I'm not going to defend = them," he says. An Enron spokeswoman says the company has no other comment.= =20 In exchange for its $115.2-million investment, CIBC was supposed to receive= 93 per cent of Braveheart's cash flow for 10 years. But Enron made the inv= estment in the embryonic partnership more attractive by promising to repay = CIBC the full value of its investment if the partnership failed to be a mon= ey maker. Three former Enron employees familiar with the partnership deals = say that this kind of guarantee was designed specifically to attract invest= ors who otherwise might worry about the viability of the deals.=20 In late November, CIBC said its total unsecured potential losses related to= Enron amounted to $115-million. That amount is roughly equal to the sum CI= BC invested in Braveheart. The bank also said it has secured-debt exposure = to Enron of another $100-million. Citing "client confidentiality," Rob McLe= od, a CIBC spokesman, declined to comment on its investment in Braveheart o= r other Enron partnerships.=20 Separately, three Canadian institutional investors that invested more than = $175-million in Enron debt securities in October have filed a wrongful-cond= uct lawsuit against the company's investment bankers and auditor. The suit,= filed Wednesday in federal court in Manhattan, names Citigroup Inc.'s Salo= mon Smith Barney unit, Goldman Sachs Group Inc., Bank of America Corp.'s Ba= nc of America Securities LLC and accounting firm Arthur Andersen LLP. The p= lantiffs are investment managers based in Toronto: Silvercreek Management I= nc. and two of its funds, Onex Industrial Partners Ltd. and Pebble Limited = Partnership.=20 Bank of America, Goldman and Andersen couldn't be reached for comment. Salo= mon Smith Barney declined to comment. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business/Financial Desk; Section A ENRON'S COLLAPSE: THE STRATEGY Deals That Helped Doom Enron Began to Form in the Early 90's By KURT EICHENWALD with MICHAEL BRICK 01/18/2002 The New York Times Page 1, Column 5 c. 2002 New York Times Company HOUSTON, Jan. 17 -- The financial dealings that played a central role in En= ron's collapse were begun a decade ago, court records show, by a newly hire= d financial whiz kid in part to keep debt off the company's books so it cou= ld grow unimpeded.=20 Those early deals by the finance officer, Andrew S. Fastow -- the first lin= ks of the complex chain of thousands of partnerships -- were much simpler t= han the ones that the company developed in the late 1990's. But the records= show that they contained many of the hallmarks of the transactions that la= ter helped bring the company to its knees. Mr. Fastow, now 40, who was ousted in October, has not spoken publicly abou= t the events leading to Enron's downfall. But in a 1997 deposition -- from = a lawsuit contending, essentially, that Enron's business model had been sto= len from a New York businessman, Bernard H. Glatzer -- Mr. Fastow provided = answers to some of the questions that investigators are puzzling over: For = example, why were assets of Enron moved into the partnerships? What role di= d the accountants play? What motivated it to start down a path that ultimat= ely led to its demise?=20 In 1991, soon after he joined Enron from Continental Bank in Chicago, Mr. F= astow worked with a group of Wall Street firms to put together a deal, know= n as Cactus 1, in which interests in natural gas reserves would be packaged= and sold to public investors. But that effort was abandoned as Enron reali= zed it would make no money from the transaction, largely because the compan= y could not obtain high enough credit ratings for the securities.=20 ''Enron would have lost money compared with the transaction we ultimately d= id,'' Mr. Fastow said in the deposition.=20 The deal that finally worked was called Cactus III. Rather than packaging t= he energy assets for purchase by the public, Mr. Fastow constructed a compl= ex partnership deal for private investors, including the General Electric C= redit Corporation and a consortium of banks.=20 In describing that transaction in the deposition, Mr. Fastow explained the = benefits it brought to Enron -- in particular how it allowed the company to= maintain the high credit rating necessary to carry out its business strate= gy. ''If a company like Enron has too much debt on its balance sheet, then = the rating agencies will lower Enron Corp.'s rating,'' Mr. Fastow said. ''S= o, we endeavor to find ways to finance activities off balance sheet.''=20 Such transactions, which are legal and common in business, offer corporatio= ns alternate means of financing, while allowing them to avoid issuing new s= tock or being weighed down with additional debt.=20 ''In making things off balance sheet,'' Mr. Fastow said, ''you're actually = transferring risks of the transaction to investors. So when you sell someth= ing to investors, they take some risk, they earn a return from that risk.''= =20 To put together such complex deals, Mr. Fastow said, the company worked han= d-in-hand with its auditing firm, Arthur Andersen.=20 ''We worked very closely with our accountants, making sure that we are neve= r violating any of the rules,'' Mr. Fastow said.=20 Ultimately, the decisions by Enron and Andersen to allow certain partnershi= ps to be pushed off the company's balance sheet helped set in motion the ev= ents that crippled the energy company. The Cactus III deal involved a compa= ratively small sum; by last year, the company had moved billions of dollars= of assets into partnerships and claimed hundreds of millions of dollars in= profits in connection with the deals.=20 It was when Enron, under intense pressure from securities regulators and Wa= ll Street, reversed that accounting -- pulling the partnerships back onto i= ts books and eliminating more than $1 billion in shareholder's equity in a = single stroke -- that the company went into its death spiral. The resulting= crisis in confidence among Enron's investors, its banks and traders in its= stock drove the company to file for bankruptcy protection early last month= .=20 There is little in the deposition's description of the early days of Mr. Fa= stow's tenure that indicated the troubles to come.=20 Mr. Fastow was brought into the company as a manager of its Enron Finance C= orporation and eventually was promoted to chief financial officer. Since th= e debacle, some of his superiors have maintained that they had little knowl= edge of Mr. Fastow's activities. But the partnership transactions were revi= ewed by Arthur Andersen and senior officers of Enron. Moreover, the Enron b= oard waived the company's conflict of interest policy to allow Mr. Fastow t= o manage some of the partnerships, dealings that brought him at least $30 m= illion.=20 The lawsuit in which Mr. Fastow testified was originally brought by Mr. Gla= tzer against one of Enron's bankers and some individuals. A federal judge r= uled in favor of the defendants in 1998, but motions for a rehearing are pe= nding. With the Cactus III transaction, according to Mr. Fastow's testimony= , two classes of investments were created. The first, Class A, was bought b= y what is known as a special purpose vehicle -- a legal entity whose operat= ions are limited to the acquisition and financing of specific assets. That = structure provides lenders with greater security that they will get their m= oney back even if a parent company goes bankrupt.=20 The special purpose vehicle borrowed money from a consortium of banks, leav= ing it with the obligation to repay those loans. The borrowed money was the= n used to purchase all of the Class A securities in Cactus III. Those secur= ities, in turn, paid interest which was used to repay the banks for their l= oans.=20 That structure, Mr. Fastow said, ''was a conduit, in a sense, just a way fo= r the banks to loan money instead of owning'' a direct stake in the partner= ship.=20 The second group of securities, Class B, was far less complex. They were so= ld directly to General Electric Credit, which in return received interest o= n the investment at a rate that fluctuated.=20 The structure allowed Enron to make money through a series of new transacti= ons. Cactus III now effectively owned certain gas reserves. Enron sold a co= ntract, committing it to sell the gas at some future point, Mr. Fastow said= . Enron then bought the gas from Cactus III, and used it to meet the contra= ct's obligations.=20 ''Hopefully they find a way to sell the gas for more than they purchased th= e gas,'' Mr. Fastow said.=20 In the end, Mr. Fastow said, the deal was an all-around benefit for Enron.= =20 ''Did I raise money in a cost-efficient manner?'' Mr. Fastow asked. ''I bel= ieve the answer is yes. I argue that because I did it. I want people to thi= nk I did a good job.'' Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron deals that led to collapse began in early 1990s - report 01/18/2002 AFX News © 2002 by AFP-Extel News Ltd NEW YORK (AFX) - The transactions that helped push Enron Corp into bankrupt= cy date back to the early 1990s, to the hiring of finance officer Andrew Fa= stow who developed methods of keeping debt off the company books to allow E= nron to grow unimpeded, the New York Times reported, citing court records.= =20 The report said: "The first links of the complex chain of thousands of part= nerships were much simpler than the ones that the company developed in the = late 1990s. But the records show that they contained many of the hallmarks = of the transactions that later helped bring the company to its knees." Fastow, now 40 years old, was ousted in October and has not spoken publicly= about the events leading to Enron's downfall, the newspaper said.=20 However, in a 1997 court case deposition, Fastow acknowledged that Enron be= gan creating intricate partnership relationships because "Enron would have = lost money compared with the transaction we ultimately did."=20 law/lj Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 FRONT PAGE - FIRST SECTION - Andersen HQ 'discussed Enron purge'. By ADRIAN MICHAELS, PETER SPIEGEL and PETER THAL LARSEN. 01/18/2002 Financial Times © 2002 Financial Times Limited . All Rights Reserved Officials at Andersen's head office in Chicago took part in regular confere= nce calls and discussed destroying documents with the firm's Enron auditors= in Houston in the weeks leading up to the purge, Congressional investigato= rs have learnt.=20 The discussions threaten to ruin attempts by Andersen to contain the Enron = damage to a few people in its Houston office. Investigators are focusing on= high-level, regular contacts between David Duncan, the lead Enron auditor = fired by Andersen this week, members of his team and senior staff in Chicag= o. Mr Duncan told investigators that from mid-September, sometimes two or thre= e times a week, there were conference calls involving between six and eight= people, half of whom were based in Chicago. The group referred to itself a= s the "expanded review team" and discussed matters relating to the now-disc= redited accounting at Enron.=20 Enron filed for the largest corporate bankruptcy in the US on December 2. I= ts downfall has led to a criminal investigation by the Justice Department a= nd inquiries by the Securities and Exchange Commission and Congress.=20 President George W. Bush has attempted to stop the fallout spreading to the= White House as the energy trader's ties to prominent Republicans are being= probed.=20 Andersen said when it fired Mr Duncan on Tuesday that he had organised the = destruction of thousands of Enron documents. It said the destruction was "u= ndertaken without any consultation with others in the firm".=20 According to people close to the investigations, Mr Duncan has described de= tailed communications with head office. He believes he is being hung out to= dry as Andersen attempts to keep its clients and preserve its integrity.= =20 Nancy Temple, an in-house lawyer in Chicago, was often on the calls, Mr Dun= can said. She sent a memo to Houston on October 12, after calls had taken p= lace. The memo directed the auditors to the company's document retention po= licies. According to Mr Duncan, John Stewart, director of accounting princi= ples in Andersen's Professional Standards Group in Chicago, also took part = in calls.=20 Andersen staff in Chicago did not immediately return calls. Staff in the Ho= uston office referred enquiries to Andersen head office, which also did not= return calls.=20 Joining Mr Duncan on the calls from Houston were some staff put on leave or= stripped of their management responsibilities by Andersen this week.=20 Additional reporting by Peter Thal Larsen in New York. Old boundaries, Page= 15 Enron collapse, Page 22 www.ft.com/enron.=20 © Copyright Financial Times Ltd. All rights reserved.=20 http://www.ft.com. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Attorneys for Enron assure judge more documents won't be shredded 01/18/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. HOUSTON (AP) - After Enron Corp.'s accountants shredded thousands of docume= nts during the company's collapse, att
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