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Enron Mail |
Enron Names Stephen F. Cooper Interim CEO and Chief PRNewswire, 01/29/02 Enron names Stephen Cooper interim CEO, chief restructuring officer AFX News, 01/29/2002 What Did He Know?; Wife Says Enron CEO Was Out of Loop The Washington Post, 01/29/2002 Wife: Lay did no wrong but couldn't stop crash=20 Houston Chronicle, 01/29/2002 The Informer; Alan Greenspan's advice for Ken Lay; Bear Stearns calls out J= .P. Morgan Chase. Forbes Magazine, 02/04/2002 Enron Workers File Suit Over 'Staggering Losses' Los Angeles Times, 01/29/2002 Enron's System Has New Owners, But Will It Fly? The Wall Street Journal, 01/29/2002 Doubts Increasing About Enron's Ability To Reorganize Dow Jones News Service, 01/29/2002 DYNEGY INC.: Set to acquire Enron pipeline this week Chicago Tribune, 01/29/2002 DESTRUCTION OF ENRON AUDIT DOCUMENTS Congressional Testimony by Federal Document Clearing House, 02/24/2002 Texas Atty Genl To Rule On Release Of Baxter Suicide Note Dow Jones News Service, 01/29/2002 EBay Sellers Offering 'Never Used' Enron Ethics Manual Dow Jones News Service, 01/29/2002 Monster Mess ; The Enron fallout has just begun. Things can't stay the same= , can they? Fortune Magazine, 02/04/2002 You're On Your Own That Enron workers lost life savings is just another sig= n that the short era of economic security is over. Fortune Magazine, 02/04/2002 Pension Plans Are Adjusted After Enron --- Workers, Firms Shy Away From Own= ing Too Much of 1 Thing The Wall Street Journal, 01/29/2002 The Analyst Who Warned About Enron The Wall Street Journal, 01/29/2002 Accounting for Enron: Enron's Hiring of One Firm to Represent Forty Employe= es Raises Some Concerns The Wall Street Journal, 01/29/2002 THE FALL OF ENRON Firm Did Not Get His Help, President Says Enron: Bush als= o defends refusal to release energy task force's records. GOP lawmakers con= cerned about fallout from company's collapse. Los Angeles Times, 01/29/2002 Enron Collapse Has Congress Backing Off Deregulation --- Better Financial R= eporting, Tighter Accounting Rules Top Bipartisan Call for Changes The Wall Street Journal, 01/29/2002 "The stunning collapse of a Fortune 10 company in such a short period Financial Executive's News, 02/01/2002 Whistle-Blowers To Tell the Truth Sherron Watkins gave Enron a piece of her mind-- and inve= stigators a smoking gun People Magazine, 02/04/2002 Two 'Evildoers' Meet at the Bar of Justice Los Angeles Times, 01/29/2002 ___________________________________________________________________________= ______ Enron Names Stephen F. Cooper Interim CEO and Chief 2002-01-29 09:02 (New York) Restructuring Officer; Retains Zolfo Cooper for Company Restructuring; Name= s Members of Office Of Chief Executive=20 HOUSTON, Jan. 29 /PRNewswire-FirstCall/ -- Enron (OTC Bulletin Board: E= NRNQ) announced today that Stephen F. Cooper has been named interim CEO and= chief restructuring officer. Cooper is the managing partner of Zolfo Coop= er, LLC, a corporate recovery and crisis management firm, and has more than= 30 years experience leading companies through operational and financial re= organizations. Cooper will be joined by a team of Zolfo=20 Cooper professionals who will assist with Enron's restructuring effort.=20 Enron's Board of Directors, working in cooperation with its Creditors C= ommittee, made the decision after a review of candidates last week.=20 In addition, the company also named members of the Office of the Chief = Executive, which will include Cooper, Jeff McMahon, who has been named pres= ident and chief operating officer, and Ray Bowen, who has been named execut= ive vice president and chief financial officer. McMahon formerly was chief= financial officer, and Bowen had been treasurer.=20 The members of Enron's Office of the Chief Executive are scheduled to h= old a media call later today, details of which will be released separately.= =20 Cooper and his team are expected to begin working immediately with Enro= n's current management and its Creditors Committee on the company's continu= ing efforts to reorganize and emerge from bankruptcy.=20 "Our focus is on the future of Enron. With more than 19,000 employees = worldwide, Enron has real businesses with real value," said Cooper. "We wi= ll work closely with the Board of Directors, management, and the Creditors = Committee to develop a reorganization plan to maximize value for the compan= y's stakeholders."=20 Following the resignation last week of former Enron Chairman and CEO Ke= nneth L. Lay, the Board intends to promptly focus on the selection of a new= chairman.=20 Enron also announced, in accordance with the previously disclosed Maste= r Agreement with UBS Warburg concerning its purchase of Enron's North Ameri= can wholesale natural gas and power trading business, that Lawrence G. Whal= ley has resigned his position as president and chief operating officer of E= nron and will accept a position with UBS Warburg. Details of the UBS trans= action were announced on Jan. 15 and can be accessed in the pressroom of En= ron's web site .=20 Zolfo Cooper has worked on more than 500 engagements, including Federat= ed Department Stores, Sunbeam, Laidlaw, Washington Group International, Pol= aroid Corporation, Morrison Knudsen, Pegasus Gold, NationsRent, and ICG Com= munications.=20 Zolfo Cooper's 85 professionals have in-depth expertise in operational = and financial management. Working with senior management, Zolfo Cooper has= a demonstrated track record in rapidly stabilizing businesses while develo= ping a tactical plan to meet short-term financial needs and a strategic pla= n for long-term financial viability. Founded in 1982, Zolfo Cooper is head= quartered in New York, with offices in New Jersey and Los Angeles. Zolfo C= ooper's Internet address is www.zolfocooper.com .=20 Enron names Stephen Cooper interim CEO, chief restructuring officer 01/29/2002 AFX News © 2002 by AFP-Extel News Ltd HOUSTON (AFX) - Enron Cop said it has appointed Stephen Cooper, a managing = partner at Zolfo Cooper LLC, as interim chief executive and chief restructu= ring officer, following the resignation last week of former CEO and chairma= n Kenneth Lay.=20 Cooper will be joined by a team of colleagues from Zolfo, a corporate recov= ery and crisis management firm, to work on Enron's restructuring. At the same time, Enron said it is setting up an Office of the Chief Execut= ive, which will include Cooper, Jeff McMahon and Ray Bowen.=20 McMahon, who was formerly chief financial officer, has been named president= and chief operating officer, replacing Lawrence Whalley, who has accepted = a position with UBS Warburg as part of its agreement to acquire Enron's who= lesale energy trading operations.=20 Bowen, who was formerly treasurer, has been made CFO.=20 The company said it will host a conference call later today to discuss the = changes.=20 Cooper and his team are expected to being working immediately with Enron's = existing management and its creditors committee.=20 Enron will now focus on finding a suitable candidate to replace Lay in his = role as chairman of the board.=20 cl/lj Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 A Section What Did He Know?; Wife Says Enron CEO Was Out of Loop Lois Romano Washington Post Staff Writer 01/29/2002 The Washington Post FINAL A01 Copyright 2002, The Washington Post Co. All Rights Reserved The defense of former Enron chief executive Kenneth L. Lay began yesterday = when his wife suggested on national television that her husband was kept in= the dark as the nation's largest energy-trading company slipped into debil= itating debt and collapsed, leaving thousands without jobs and life savings= .=20 "There's some things that weren't -- that he wasn't told," Linda Lay told N= BC's "Today" show. Lay, alternately weepy and defiant, provided the first window into what her= husband's stance is likely to be if he testifies as scheduled before the S= enate Commerce Committee on Monday. He faces congressional and Justice Depa= rtment investigations and a barrage of civil suits charging that he misled = shareholders, employees and the government about the well-being of Enron Co= rp.=20 "Never, never, not for one second would he have allowed anything to go on t= hat was illegal," Linda Lay said. "If those people had come to him and told= him that there was something wrong, he would have stopped it and fixed it.= "=20 She maintained that her husband did not realize until "two or three days, m= aybe, before everything fell apart" that he couldn't save Enron. She also s= aid that she and her husband lost substantial amounts of money in the firm'= s demise and are fighting personal bankruptcy.=20 Linda Lay's comments bluntly put into the public domain what Kenneth Lay's = friends, family members and attorneys have been saying in recent weeks: The= man who helped build the aggressive, innovative energy company was not inv= olved in the day-to-day details of its operations, trusting his executives,= former chief executive Jeffrey Skilling and former chief financial officer= Andrew Fastow, to make the right choices. Today, Enron is expected to appo= int an interim CEO to help restructure the company.=20 Some involved in the crisis scoffed at the notion that Lay was that far out= of the loop. "Enron's senior management had full knowledge of the transact= ions and approved every aspect of them," Fastow's spokesman, Gordon Andrew,= said yesterday.=20 But Lay's defenders maintain that it's plausible that some things slipped b= y him. "It's not that he wasn't in charge," said one member of Enron's vast= legal team said. "He was in charge, but a lot of things were kept from him= and procedures were put in place that didn't work, and he didn't know it u= ntil it was too late."=20 According to this source, Lay relied heavily on the judgments of Skilling a= nd Fastow, both of whom were involved in creating the partnerships that shi= elded hundreds of millions of dollars in losses and overstated profits by n= early $600 million since 1997. "Ken did not know that Fastow took out $30 m= illion [in compensation] from [one such] partnership," the source said.=20 Lay himself, asked last year by the New York Times about the complicated pa= rtnerships, said, "You're getting way over my head."=20 Everyone concedes that Lay spent an enormous amount of time on civic projec= ts in recent years. A generous and high-profile activist and philanthropist= , he assiduously worked the Houston community as well as the national polit= ical scene. He and Enron were among President Bush's largest financial back= ers.=20 "He has this persona as kind of a goodwill ambassador, so people want to be= lieve that he didn't have his hands on the wheel of the ship when it went d= own. The captain of the Exxon Valdez didn't get off easy," said one source = familiar with Enron's inner workings.=20 Enron disclosed in November that the board had required Lay and other top e= xecutives to review and approve every transaction of Fastow's partnerships.= But the company's outside counsel, Vinson & Elkins, reported that "in most= instances, there was no approval signature" by Enron's Office of the Chair= man, headed by Lay. Whether the reviews were properly done is now under inv= estigation by a special committee appointed by the board.=20 Lay received at least two warning memos from employees fearful that the com= pany would be ruined by its complex and secretive accounting practices. In = November, Enron admitted that accounting errors had led it to overstate pro= fits.=20 Lay's detractors question why he did not push harder to investigate the emp= loyees' concerns.=20 Lay's defenders, however, said he relied on Vinson & Elkins, who advised En= ron that the concerns of Vice President Sherron Watkins did not, "in our ju= dgment, warrant a further widespread investigation by independent counsel a= nd auditors."=20 But the law firm also said "there is serious risk of adverse publicity and = litigation" over the partnerships' activities. The V&E reviewers said they = briefed Lay about their findings.=20 Lay helped form Enron in 1985, when Houston Natural Gas, which he headed, m= erged with InterNorth Inc. He took over as CEO in 1986, helping to transfor= m a sleepy pipeline company into one of the globe's largest, most aggressiv= e energy-trading firms.=20 He stepped down as CEO about a year ago, passing the reins to Skilling -- a= brash former business consultant hired by Enron in 1990. Lay remained chai= rman of the board, and when Skilling unexpectedly resigned six months later= , Lay returned as CEO, at a time -- his family maintains -- that he was try= ing to retire.=20 Linda Lay yesterday also defended her husband's public comments made as lat= e as October assuring employees that everything was okay with the company a= nd encouraging people to buy stock even as the price spiraled downward. "He= totally 100 percent believed in it," she said. "He believed it would be ok= ay."=20 Enron filed for bankruptcy Dec. 2. Lay resigned from the company last week = at the urging of Enron's creditors and is spending all his time dealing wit= h lawyers, auditors and accountants preparing for his congressional testimo= ny. One lawyer close to Lay, who requested anonymity, said that Lay was sti= ll committed to testifying even though some of his attorneys have advised h= im that speaking publicly could be risky legally.=20 In the NBC interview, taped over the weekend, Linda Lay also painted a blea= k picture of her husband's personal finances, saying that the couple were h= eavily invested in Enron and they are now "fighting for liquidity."=20 "We don't want to go bankrupt," she said. "Other than the home we live in, = everything we own is for sale." That includes three multimillion-dollar hom= es in Aspen, Colo., as well as a weekend getaway in Galveston, Tex.=20 "By anyone's standards it was a massive amount of money, and it's gone," La= y said of her husband's $300 million in compensation and stocks from Enron = over the past four years. "There's nothing left. Everything we had was most= ly in Enron stock."=20 In Sugar Land, Tex.,, police still declined to disclose the contents of the= note left by former Enron vice chairman J. Clifford Baxter, who was found = dead of a gunshot wound in his Mercedes-Benz on Friday. They said that whil= e the autopsy reports had ruled the death a suicide, the investigation woul= d remain open until all the evidence is tested.=20 Staff writers Peter Behr and Jennifer Frey contributed to this report. http://www.washingtonpost.com=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Wife: Lay did no wrong but couldn't stop crash=20 By BILL MURPHY=20 Copyright 2002 Houston Chronicle=20 Jan. 29, 2002, 12:42AM The wife of former Enron Chairman Ken Lay said he would have acted to fix t= he company's problems if he hadn't been kept in the dark by accountants fro= m Arthur Andersen and outside legal counsel.=20 "There's some things that weren't -- that he wasn't told," Linda Lay said d= uring an interview aired on NBC's Today show Monday. "There's some things t= hat the board of directors weren't -- didn't know. But that will come out i= n the investigation."=20 During the interview, Lay described her and her husband's attempt to stave = off personal bankruptcy, defended her husband's integrity and said he belie= ves Enron can recover.=20 The Lays declined to be interviewed by the Chronicle. A public relations fi= rm representing the family said Linda Lay and her children would do no more= interviews for the time being.=20 She said she understands why her husband is the focal point of many people'= s anger.=20 "He is at the top. That's where it ought to be," Lay said. "If I were back = there listening to all the things that were being said, I would absolutely = have to say that: `What is wrong here? How can all of this be happening wit= hout something -- someone doing something terribly evil?' "=20 She praised Sherron Watkins, Enron vice president of corporate development,= for sending her husband a memo Aug. 15 and later meeting with him to discu= ss her concerns about the company's practice of hiding losses in off-the-bo= ok accounts.=20 "He had their, their outside counsel (Vinson & Elkins law firm) come in and= the accounting firm look at it," Lay said, "and they came back and told hi= m it was fine."=20 Asked if her husband, who resigned as Enron's chairman last week, felt let = down by accountants and lawyers, she replied, "Absolutely. Absolutely. Neve= r, never, not for one second would he have allowed anything to go on that w= as illegal. If those people had come back to him and told him there was som= ething wrong, he would have stopped and fixed it."=20 Days after receiving Watkins' memo, Ken Lay exercised options on more than = 92,000 shares of Enron stock but did not sell it. That effectively repaid a= $2 million loan from the company.=20 A month after Watkins warned about looming financial scandal, Lay told empl= oyees in an e-mail session that the company was sound and urged them to buy= stock. Less than three weeks later, the company reported a third-quarter l= oss of $618 million and and a $1.2 billion reduction in shareholder equity.= =20 "My husband tells the truth," Linda Lay said. "He's not a liar. He totally,= 100 percent believed in it. He believed it would be OK."=20 She said "everything we own is for sale" in an effort to stave off personal= bankruptcy, even though her husband earned more than $300 million in compe= nsation and salary the past four years.=20 "By anyone's standards, it was a massive amount of money," Linda Lay said, = "and it's gone. It's gone. There's nothing left. Everything we had mostly w= as in Enron stock."=20 The Lays did not diversify their investments much, including their 401(k), = she said.=20 "Why wouldn't I put it in Enron? Why wouldn't I?" she said. "My husband was= Enron. He believed in it."=20 The Lays own substantial property. In Harris and Galveston counties and Asp= en, Colo., they have homes and properties worth at least $27 million.=20 Three of their four Aspen properties were up for sale earlier this month: a= 4,500-square-foot home listed at $6.8 million; a 4,500-square-foot riverfr= ont home listed at $6.5 million; and a 20,000-square-foot vacant lot listed= at $2.9 million.=20 Their Houston home, a 12,800-square-foot condominium in the Huntingdon luxu= ry high-rise, has five bedrooms and 6 1/2 baths. It has an assessed market = value of $7.1 million.=20 They own jointly or separately at least 13 homes and apartment homes in Har= ris and Galveston counties. Those include a home on Avalon Place assessed a= t $742,000, a home on Sul Ross Street assessed at $320,000 and a home in Ga= lveston assessed at $790,000.=20 "We're fighting for liquidity," she said. "We, we don't want to go bankrupt= . And we've had long-term investments, and those long-term investments have= cash calls. Other than the home we live in, everything we own is for sale.= "=20 She began crying when she recounted a conversation with her husband after h= e realized bankruptcy was inevitable.=20 "He was very emotional about it," she said. "He said he just didn't think h= e could stop it. He said he tried everything, everything he could think of,= and he couldn't stop it."=20 She said she and her husband were devastated by the suicide of former Enron= Vice Chairman Cliff Baxter on Friday.=20 "My husband has spoken to him not too long ago, and Cliff is a, a -- was a = wonderful man."=20 Most analysts say Enron -- under investigation by the Justice Department fo= r possible criminal wrongdoing and by 11 congressional committees -- has no= chance of avoiding liquidation. But Lay says her husband remains optimisti= c that the company can emerge from Chapter 11 bankruptcy protection to beco= me profitable again.=20 Consultants who specialize in corporate and political damage control were d= ivided on whether Lay's interview will help her husband's cause.=20 Ken Fairchild, principal owner of Fairchild Consulting in Dallas, said the = Lays should tell their side of the story since there has been so much negat= ive coverage of Ken Lay's role in Enron's collapse. Ken Lay's lawyers have = advised him not to do interviews.=20 Ken Lay would have been grilled by an interviewer, but Linda Lay got much e= asier questions because she is his wife and claims to be a victim as well b= ecause her own retirement has evaporated, said Fairchild, author of Sunday = Showdowns with 60 Minutes, an account of how he prepared more than 30 corpo= rate executives for appearances on the news show.=20 "Obviously, it was a good move," said Fairchild. "It doesn't work unless th= e person really believes what she is saying. They have to believe they are = telling the truth, and they have to look like they are telling the truth. A= nd that certainly sounds like the case here."=20 But Houston political consultant Allen Blakemore said there is little to be= gained by calling on your wife to defend your integrity.=20 "She's being trotted out to make an appeal to people's emotions," Blakemore= said. "Should we go ask his mother if he cleaned up his room or picked up = his bath towel? None of this stuff is relevant."=20 Gloria Alvarez, who was laid off from her job as senior administrative assi= stant for Enron Global Strategic Sourcing, said Linda Lay's interview was p= redictable.=20 "She's the wife of the CEO," Alvarez said. "Of course she's going to defend= her husband, as any wife would."=20 Nathan Childs, who was laid off from Enron's information technology hardwar= e department, is living in a trailer on his parents' property in Kempner.= =20 "I can't cry for the Lays right now. They have a home to go to every night,= " Childs said. "It doesn't matter what she says; Ken Lay's got more than ex= -Enron employees."=20 Chronicle reporter Kristen Mack contributed to this story.=20 OutFront The Informer; Alan Greenspan's advice for Ken Lay; Bear Stearns calls out J= .P. Morgan Chase. William P. Barrett, Robert Lenzner, Janet Novack, Daniel Lyons & Kiri Blake= ley 02/04/2002 Forbes Magazine 42 Copyright 2002 Forbes Inc. No Trouble Getting This Drift=20 Eyebrows arched in November when Alan Greenspan visited Houston's Rice Univ= ersity to get the Baker Institute's Enron Prize for public service just as = Enron was becoming synonymous with financial deceit. But the Fed head's adv= ice for students went largely unnoticed. "The best chance you have of makin= g a big success in this world is to decide from square one that you are goi= ng to do it ethically," he told an audience that included Enron boss Kennet= h Lay. "What you're going to find is not necessarily that if you are ethica= l you will succeed, but the probability that you will is significantly grea= ter than if you are not." --William P. Barrett Time to Call Marshal Matt Dillon=20 Meanwhile, in deliciously nasty Wall Street mudslinging, Bear Stearns & Co.= insurance analysts Michael A. Smith and Brian M. Wright write that pending= lawsuits suggest big Enron lender J.P. Morgan Chase "had at the very least= obfuscated" its total exposure by using two Channel Island entities for "s= ham transactions that in reality were loans." Morgan Chase faces a $1 billi= on exposure on that deal in the wake of Enron's startling bankruptcy becaus= e several insurers are balking at honoring surety bonds; it denies any wron= gdoing. Declare the analysts: "As Gunsmoke's Festus used to say, 'Ugly goes= clear to the bone.'" --Robert Lenzner=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business; Business Desk Enron Workers File Suit Over 'Staggering Losses' NANCY RIVERA BROOKS TIMES STAFF WRITER 01/29/2002 Los Angeles Times Home Edition C-6 Copyright 2002 / The Times Mirror Company Enron Corp. employees past and present who said they suffered "staggering l= osses" in their retirement funds filed a lawsuit Monday seeking reimburseme= nt from top company executives.=20 The legal action came as the wife of ousted Chairman and Chief Executive Ke= nneth L. Lay was claiming in a television appearance that the couple are ne= arly broke. The group of more than 400 Enron employees, whose 401(k) retirement plans a= re now virtually worthless, contends in the federal lawsuit filed in Housto= n that employees were urged to invest in Enron stock but were not told how = fragile the company's financial condition was. Enron filed for Chapter 11 b= ankruptcy protection Dec. 2.=20 The suit names as defendants Lay, former CEO Jeffrey K. Skilling and former= Chief Financial Officer Andrew S. Fastow, among others. Those three execut= ives sold more than $198 million in stock, the suit alleges. The suit also = names Northern Trust Co., trustee for the retirement plan, and Andersen, En= ron's former accountant.=20 "Enron executives were profiting from an elaborate shell game, using the ha= rd-earned retirement savings of their loyal employees," Randy McClanahan, a= lawyer representing the group, said in a statement.=20 This is the latest in dozens of lawsuits filed against current and former E= nron executives, accusing them of misleading investors. The company and its= officers have repeatedly denied any wrongdoing.=20 So did Linda Lay, who defended her husband, in a taped interview aired Mond= ay on NBC's "Today" show, as an "honest, decent, moral human being who woul= d do absolutely nothing wrong."=20 Lay, appearing bitter and emotional, told NBC News correspondent Lisa Myers= that everything the family owns is for sale except the opulent Houston hom= e where the interview took place over the weekend. Ken Lay, Myers noted, ha= s been advised by his lawyers to avoid speaking to the media.=20 Lay acknowledged that her husband earned "a massive amount of money." Howev= er, she added: "It's all gone. There's nothing left. Everything we had most= ly was in Enron stock."=20 The couple's wealth has been further drained by cash calls on other long-te= rm investments, and the Lays are nearly bankrupt, she said. Lay said that s= he understands the anger being focused on her husband but that he did not k= now all that occurred at Enron before the company crumbled into insolvency.= =20 Public relations professionals, who asked not to be identified, saw the int= erview as a desperate move to humanize Ken Lay--but one that may not play w= ell.=20 "I don't know what ... they were thinking," one said.=20 *=20 RELATED STORY=20 Andersen suffering: The former Enron auditor is losing clients. A1 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron's System Has New Owners, But Will It Fly? By Mitchell Pacelle and Peter A. McKay Staff Reporters of The Wall Street Journal 01/29/2002 The Wall Street Journal C1 (Copyright © 2002, Dow Jones & Company, Inc.) As UBS AG prepares to take over Enron Corp.'s once-powerful energy trading = operation, the Swiss bank faces a question: When the trading system flicks = back on, will Enron's former customers come with it?=20 Since Enron's meltdown late last year, competitors have been whittling at t= he flagship oil, natural-gas and electricity trading business that UBS is t= aking over. While some customers will go over to the new entity, which has = been dormant for two months, others say they may stay away. "I can't imagine us dealing with them," said George Hickox, chief executive= of Wiser Oil Co., a former customer and current Enron creditor that has si= nce taken its trading business to Morgan Stanley. Mr. Hickox said he'd be i= nclined not to go back unless the Enron bankruptcy plan "is good enough to = make us feel that we're not doing business with someone who shafted us."=20 While companies like Reliant Energy Inc., El Paso Corp. and Duke Energy Cor= p. have stepped up their energy-trading operations since the Enron collapse= -- as have the energy trading desks at Morgan Stanley and J.P. Morgan Chas= e & Co. -- other Enron trading operations may have simply evaporated. Tradi= ng in fiber-optic bandwidth and weather derivatives, for instance, weren't = bought by UBS and aren't being picked up by others, raising questions about= how vibrant the businesses were in the first place.=20 The fortunes of Enron's former energy-trading business are being closely wa= tched on Wall Street. Historically, it has been difficult for trading compa= niess to stop operating, as Enron has done since filing for bankruptcy-cour= t protection on Dec. 2, and then ratchet up the business again.=20 In addition, revitalizing the Enron trading operation is critical to maximi= zing the recovery by Enron's creditors, who are owed billions. At its peak,= Enron enjoyed a 15% market share in natual-gas trading, and 20% in power, = competitors estimate.=20 In an interview, UBS Warburg Chief Executive Officer John Costas expressed = confidence that with a new name -- UBS Warburg Energy -- and UBS's credit r= ating behind the operation, customers will return. "You have to win clients= one by one," said Mr. Costas. "If we're able to replicate everything they = had in terms of capabilities on a AA+ credit-rated platform, there's a pret= ty high probability of success."=20 The trading unit, which includes its EnronOnline Internet-based trading pla= tform, generated roughly 90% of Enron's earnings in the most recent quarter= , although accounting questions have clouded Enron's financial results. Mr.= Costas declined to comment on how Enron accounted for the unit's trading r= evenues.=20 Some traders expect UBS to take a much more cautious approach than Enron as= it rebuilds the trading operation. Moreoever, many of the companies that w= ere stuck in trading contracts with Enron itself may be gun-shy about doing= business with its successor, having struggled to unwind their Enron trades= . "At the end of the day, nobody is going to undo the efforts they just wen= t through to come back to Enron," said Charlie Sanchez, energy-markets mana= ger for Gelber & Associates, an energy consulting firm in Houston.=20 In bidding on the unit, UBS beat out Citigroup Inc. in a bankruptcy-court a= uction that concluded Jan. 11. Under the deal, UBS isn't offering any cash = to Enron for its trading operations and isn't taking over its trading portf= olio. Instead, it agreed to pay royalties to Enron amounting to one-third o= f the energy-trading operation's pretax profit for a 10-year period. UBS ha= s an option to eliminate the royalty payments by buying out Enron's stake i= n the profits. The agreement doesn't require UBS to inject any minimum amou= nt of capital, nor supply any minimum amount of credit.=20 While the terms of the deal seem to limit UBS's risk in taking over a spect= acularly tainted business, some trading experts say the deal poses other pe= rils.=20 "UBS is taking a fair degree of risk in buying this operation," maintained = Henry T. C. Hu, professor of banking law and finance law at the University = of Texas School of Law. "They've invested, in a sense, their reputation. If= it turns out they misjudged the plusses of the Enron deal, it may undermin= e their image in the eyes of customers and potential customers."=20 UBS hasn't yet spelled out how it will restart the Enron unit, which will b= e run by Michael Hutchins, UBS Warburg's co-head of bond operations. UBS sa= id it intends to use its assets to back the trades of the new operation. "W= e're going to provide the necessary capital and credit support to ensure th= e success of the business," said Mr. Costas.=20 Since winning the auction, UBS has been working to hire Enron trading emplo= yees it deems key to the new operation. UBS said yesterday it had signed on= about 625 of the Enron trading group's 800 employees.=20 Enron's competitors are also in the hunt for talent. "The number of resumes= flying around this industry from Enron traders is amazing," says Harvey Pa= dewer, president of the energy-services unit of Duke Energy, an Enron compe= titor. Mr. Padewer said his company has received more than 500 resumes, and= hired about two dozen, including a dozen traders.=20 As Enron's woes unfolded, industry analysts say the trading activity quickl= y shifted from its online platform to several competitors. In a few cases, = smaller companies that couldn't find companies like Enron to guarantee thei= r trades simply got out of the market.=20 The online IntercontinentalExchange seems to be the biggest winner, with it= s overall volume up about 65% since the Enron collapse began. On the New Yo= rk Mercantile Exchange's trading floor, energy trading volume is up 71% thi= s month, while Duke Energy reported a 77% year-over-year increase in electr= icity trading in the fourth quarter, due in part to Enron's collapse.=20 Despite such an abundance of busy trading outlets, Mr. Costas contends that= the widening of spreads on energy trades since the collapse of Enron indic= ates that there isn't enough liquidity in the marketplace. "The markets are= telling us if we restore liquidity, we're going to be able to capture mark= et share," he said.=20 Nymex President J. Robert Collins cautioned against attributing his exchang= e's recent volume gains entirely to Enron, considering that natural-gas tra= ding tends to be busiest during the winter heating season anyway.=20 "It's hard to characterize whether we've seen a lot of business or a little= ," because of Enron, said Mr. Collins. "It's definitely helped, but just ho= w much is very difficult to know."=20 ---=20 Alexei Barrionuevo contributed to this article. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Doubts Increasing About Enron's Ability To Reorganize By Kathy Chu 01/29/2002 Dow Jones News Service (Copyright © 2002, Dow Jones & Company, Inc.) Of DOW JONES NEWSWIRES=20 NEW YORK -(Dow Jones)- What little confidence remains in Enron Corp.'s (ENR= NQ) ability to reorganize itself is rapidly waning. Amid allegations of document shredding and other misdeeds by Enron executiv= es, creditors are becoming more aggressive in their criticism of the compan= y, and more vocal in their demands for information.=20 In the past week, a movement to appoint an independent trustee to take cont= rol of the company or an examiner to investigate wrongdoing has been brewin= g. Also, creditors are petitioning the court to segregate the cash flowing = into one of Enron's units, saying that the parent company can't be trusted = to keep accurate records and to divvy up funds appropriately among its subs= idiaries.=20 They also want detailed accounting of cash flows for some of the bankrupt s= ubsidiaries - information that Enron isn't required to submit to federal Ju= dge Arthur J. Gonzalez, of the U.S. Bankruptcy Court of the Southern Distri= ct of New York, for another five months.=20 The continuing source of Enron's troubles: a colossal collapse of confidenc= e that first brought the company to its knees late last year, and now is th= reatening to endanger its reorganization efforts.=20 Andrew Entwistle, of the Entwistle & Cappucci law firm, which represents a = Florida state pension fund that lost $334 million in Enron-related investme= nts, said he has "very grave concerns" about the company's ability to overs= ee its own operations in light of recent disclosures.=20 The Florida State Board of Administration hasn't joined the movement to get= a trustee named, according to Entwistle, but "may yet find that it's neces= sary."=20 Lately, even Enron has been less optimistic about prospects for getting bac= k on its feet quickly.=20 When asked a little more than a week ago about whether Enron will emerge fr= om bankruptcy within a year - as the company had previously said it would -= Chief Financial Officer Jeffrey McMahon said that reorganization will be c= ompleted "as soon as possible." He declined to give a specific timeframe.= =20 Examiner More Likely Than Trustee=20 The naming of a trustee to wrench Enron North America out of the hands of t= he parent company isn't likely because of the disruption this would have on= already complex bankruptcy proceedings, according to legal experts.=20 But the odds are increasing for having an examiner assigned to the case to = investigate wrongdoing, according to experts, as allegations of corporate m= isconduct by Enron executives pile up.=20 Under Chapter 11 of the bankruptcy code, "fraud, dishonesty, incompetence o= r gross mismanagement" are grounds that could warrant the appointment of an= independent trustee or examiner.=20 Pending investigations by the Department of Justice and at least 10 congres= sional committees could yield information useful to Enron's bankruptcy proc= eedings, but these probes could take months, if not years, to be completed,= according to Jack Williams, the outgoing scholar at the American Bankruptc= y Institute, a nonprofit think tank in Alexandria, Va.=20 This may provide justification for Judge Gonzalez to name an examiner, in o= rder to investigate specific aspects of Enron's complex business operations= on a court-dictated timeline.=20 Also, if the judge feels that ongoing investigations aren't "full or fair,"= he may revert to this legal option, said Williams.=20 A half-dozen energy concerns and the Regents of the University of Californi= a are spearheading the effort to name either a trustee or examiner in the c= ase, the largest bankruptcy in history.=20 Some of these same creditors also are taking issue with Enron's cash manage= ment system, and are petitioning the bankruptcy court to segregate Enron No= rth America's funds for that unit's creditors.=20 This will prevent "future plundering" of the estate by other bankrupt entit= ies, according to Wiser Oil Co. (WZR), an Enron creditor owed about $7 mill= ion on energy trades.=20 The Enron North America unit includes the core wholesale trading operations= , which comprised about 90% of the company's $101 billion in revenue last y= ear. This business was recently sold to UBS Warburg for future profit payou= ts, with no cash up front.=20 Under the current cash management system, funds are swept up to the parent = company, which is charged with keeping track of which unit is owed money. T= his system is commonly used to centralize a company's finances and keep the= accounting simple, according to legal experts.=20 Requiring Enron to implement a separate system for Enron North America will= entail "a significant expenditure of time and effort on the part of the De= btors' employees and retained professionals," the company said in a court f= iling on Sunday.=20 It also would be a wasted step if Enron ever decides to enact a substantive= consolidation, which would sweep all of the company's assets into one pot = and allocate them to a greater pool of creditors.=20 "It's too early to think about" this possibility, Enron attorney Brian Rose= n, of Weil Gotshal & Manges, said earlier this month.=20 The company believes that the cash management system is sufficient to prote= ct creditors because a subsidiary's cash flow will "continue to be subject = to the guidelines of budgets and business plans for each individual Debtor.= "=20 Also, because most of the company's units have been pledged as collateral u= nder a debtor-in-possession facility led by J.P. Morgan Chase Inc. (JPM) an= d Citigroup Inc. (C), any money borrowed will be "repaid by entities whose = creditors benefit" from the loan, according to Enron.=20 The final size of Enron's financing has yet to be decided, but banking sour= ces familiar with the deal have said it could be less than $500 million. Th= is compares with $1.5 billion originally expected under the facility, which= Enron has yet to draw upon.=20 -By Kathy Chu, Dow Jones Newswires; 201-938-5392; kathy.chu@dowjones.com=20 (Carol S. Remond contributed to this report.) Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business THE TICKER DYNEGY INC.: Set to acquire Enron pipeline this week Associated Press 01/29/2002 Chicago Tribune North Sports Final ; N 2 (Copyright 2002 by the Chicago Tribune) Dynegy Inc., once a prospective savior for Enron Corp., expects to official= ly acquire one of the fallen energy giant's most prized assets by the end o= f the week, a spokesman said.=20 Enron agreed Jan. 3 to surrender the 16,500-mile Northern Natural Gas Pipel= ine in exchange for $1.5 billion that Dynegy invested in Enron before a pro= posed merger of the two Houston-based competitors fell apart in late Novemb= er. Enron filed the largest bankruptcy in history Dec. 2. As agreed in November, Dynegy will pay a $23 million excise fee for invokin= g its option to acquire the pipeline. Dynegy also will assume roughly $750 = million in debt and liabilities.=20 Enron maintains its option to buy the pipeline back by June 30. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 DESTRUCTION OF ENRON AUDIT DOCUMENTS EDWARD J. MARKEY 02/24/2002 Congressional Testimony by Federal Document Clearing House (Copyright 2002 by Federal Document Clearing House, Inc.) JANUARY 24, 2002=20 OPENING STATEMENT OF REPRESENTATIVE EDWARD J. MARKEY (D-MA) OVERSIGHT AND INVESTIGATIONS SUBCOMMITTEE=20 HEARING ON DESTRUCTION OF ENRON-RELATED DOCUMENTS OF ARTHUR ANDERSON PERSON= NEL THURSDAY,=20 Thank you, Mr. Chairman, for extending to me the courtesy of participating = in today's hearing.=20 I think it is outrageous that the same executives who may be responsible fo= r the destruction of workers' pensions -- and the destruction of documents = that might prove their guilt -- are currently protected by Congress when de= frauded worker's actually try to recover their life savings. But, sadly, it= is true. Why? Because in 1995, Arthur Anderson and the other big accountin= g firms succeeded in lobbying Congress to strictly limit their future liabi= lity for securities fraud. That bill passed over the President's veto as pa= rt of the Republican Contract with America. And today, we are seeing the gr= im results -- Arthur Anderson can no longer be held jointly and severally l= iable when a court has found them guilty of securities fraud. I believe tha= t this ill-advised law has directly contributed to a rising tide of account= ing failures, culminating in the Enron-Arthur Anderson fiasco. The types of= internal checks and balances that a healthy concern about litigation risk = used to create within each accounting firm has been undermined. The many ho= nest and decent people who want to do the right thing get overruled, and th= e increasing revenues coming from consulting and non-audit businesses put g= rowing pressure to sign off on the `cooked books' of major clients.=20 Yesterday, I introduced legislation aimed helping to address this problem. = This bill would, among other things, require auditors to retain copies of a= ll documents generated during the course of an audit for a period of four y= ears and establish criminal penalties of up to ten years imprisonment for a= uditors that knowingly and willfully destroy such documents. The bill also = would reform the liability standards applicable to accountants in securitie= s fraud cases and provide an exemption from the "Catch 22" discovery stay t= hat allows accounting firms to escape accountability for their actions. I l= ook forward to working with Members on this and other reforms. Clearly, we = have a system that is very broken, and we need to work together to fix it.= =20 Today's hearing is focused on the disturbing reports that employees of Arth= ur Anderson have destroyed documents in connection with the Enron debacle. = I think it's appalling that Anderson CEO Joseph Berardino has declined the = Subcommittee's invitation to testify on this matter, when he was somehow ab= le to make an appearance on Meet the Press last Sunday. I have also read th= at Mr. Berardino has agreed to appear before the House Financial Services C= ommittee on February 4th. If Mr. Berardino can appear to answer questions o= n national television and before other Committees, it seems to me that he s= hould be able to appear before this Subcommittee so that we can get to the = bottom of why his firm destroyed documents being sought by the SEC, by the = Justice Department, and by defrauded workers and investors.=20 Now, I have many questions about the underlying transactions and investment= s whose accounting treatment helped to bring Enron to bankruptcy, but I und= erstand that this is not the subject of today's hearing. I would merely hop= e, Mr. Chairman, that we will have a chance to thoroughly examine Enron's i= nvestments in broadband, its energy trading operations, and its derivatives= and other structured financings in the detail needed to understand just wh= at happened here and what lessons we can learn from this massive fraud and = misbehavior. That will require more than a single hearing of all of the pri= ncipals to do properly.=20 Thanks again, Mr. Chairman, for allowing me to participate in today's heari= ng. I look forward to the testimony. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Texas Atty Genl To Rule On Release Of Baxter Suicide Note 01/29/2002 Dow Jones News Service (Copyright © 2002, Dow Jones & Company, Inc.) NEW YORK -(Dow Jones)- The city of Sugar Land, Texas, has requested that th= e Texas Attorney General decide whether the contents of a suicide note foun= d in the car of former Enron Corp. (ENRNQ) executive J. Clifford Baxter wil= l be released to the public.=20 Baxter, 43 years old, was found dead early Friday morning in his parked Mer= cedes Benz by police on a routine patrol in the affluent Houston suburb. Although a coroner has ruled Baxter's death a suicide, the Sugar Land Polic= e Department is continuing a full investigation in accordance with procedur= e. The investigation includes ballistic tests, fingerprinting and hair and = fiber analysis, police said.=20 The police department had not yet received the medical examiner's official = report as of Tuesday morning.=20 The suicide note found in the vehicle has been under seal while the investi= gation proceeds.=20 The police department has completed its review of the note and doesn't obje= ct to the release of its contents, said Sugar Land city attorney Joe Morris= . "However, under Texas law, the contents of the note raise confidentially = issues, including right-to-privacy questions that prohibit the city from re= leasing the note without first receiving a determination from the Texas Att= orney General."=20 According to Morris, the city must submit a request for an Attorney General= ruling within 10 business days from the first request for the note. The fi= rst request was received Jan. 25.=20 The Attorney General has 45 business days to make a determination, unless e= xtended.=20 Baxter, who resigned as vice chairman of Enron last May, was reported to ha= ve complained about Enron's questionable accounting practices. Baxter was s= ubpoenaed to appear in front of two congressional committees and was named = in an insider trading lawsuit.=20 Enron filed for bankruptcy protection in early December, the largest in the= U.S. to date.=20 -By Christina Cheddar, Dow Jones Newswires; 201-938-5166 christina.cheddar@= dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 EBay Sellers Offering 'Never Used' Enron Ethics Manual By Erik Ahlberg 01/29/2002 Dow Jones News Service (Copyright © 2002, Dow Jones & Company, Inc.) Of DOW JONES NEWSWIRES=20 (This report was first published late Monday.)=20 CHICAGO -(Dow Jones)- Among the rare books, Beanie Babies and fine china on= eBay Inc.'s (EBAY) Web site, a new collectible has emerged: Enron Corp.'s = (ENRNQ) code of ethics. As of Monday afternoon, at least 20 copies of the soft-cover booklet, compl= ete with forward by former Chief Executive Kenneth Lay, were available for = sale online. The top bid was $61.51.=20 "Own a piece of history from the largest corporate bankruptcy in history," = advertises one seller. "Help me recoup my 401k losses."=20 "This item must have been hidden along with the debt for the past three yea= rs," another seller said. "Never been used," said another.=20 Sections of the book include business ethics, governmental affairs and poli= tical contributions, and consulting fees.=20 Other Enron-related items for sale on the site included sleeves of logo-emb= lazoned golf balls, stainless steel coffee mugs and wristwatches.=20 Enron spokesman Vance Meyer said some employees have been surprised - and a= mused - to find everyday office items popping up for sale.=20 "People have fun talking about it, which is a good thing given the position= that we're in," Meyer said.=20 Enron, Houston, filed for Chapter 11 bankruptcy protection in December afte= r disclosures about its finances led to debt downgrades and a failed merger= attempt. The company's business practices are being investigated by Congre= ss and the Department of Justice.=20 -By Erik Ahlberg, Dow Jones Newswires; 312-750-4141; erik.ahlberg@dowjones.= com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Features/Enron Monster Mess ; The Enron fallout has just begun. Things can't stay the same= , can they? Bethany McLean; Additional reporting by Jeffrey H. Birnbaum and Jeremy Kahn 02/04/2002 Fortune Magazine Time Inc. 93 (Copyright 2002) Anytime a stock market bubble bursts, a business scandal that epitomizes th= e excesses of that particular period is seldom far behind. The Roaring '20s= had Teapot Dome. The end of the bull market in the early 1970s was marked = by the collapse of Equity Funding Corp. The 1980s, of course, had Michael M= ilken.=20 Until recently it wasn't easy to choose the scandal that encapsulated the 1= 990s bubble. That's not because there was a shortage of sleazy behavior but= rather because there was an abundance of it. Rampant conflicts of interest= on Wall Street. Wildly creative accounting. Auditors who didn't audit. Mon= ey managers who didn't manage. A stunning lack of oversight by regulators. = We could go on. But now the wait is over: Enron's bankruptcy is, without doubt, the grand f= inale of the last decade of the 20th century. The company's rise and fall w= as made possible by a willingness to overlook--and indeed, for a time, even= to reward--all of the above behavior.=20 Then there's the politics. The hint of impropriety at the highest levels of= government has cemented the energy giant's place in history, producing a b= arrage of coverage that has even supplanted the war in Afghanistan as the l= ead story in newspapers. That alone, in today's weird circular logic, would= be enough to make a nonresponse by the political system nearly impossible.= =20 But politics are almost beside the point. As a financial scandal, Enron is = much bigger than anyone imagined--and, more important, the factors that ena= bled it haven't gone away. "Systemic conflicts of interest are more pervasi= ve and corrosive than either Congress, regulators, investors, or the press = appreciate," Scott Cleland, CEO of the Precursor Group, an independent rese= arch firm, said in congressional testimony. "The breathtakingly swift colla= pse of Enron is no isolated incident that can be dismissed as unique, brush= ed under the rug, and ignored." The real question should be not whether the= Enron debacle will change anything, but how much and how soon?=20 The most scintillating Enron tidbits are emerging from a nondescript set of= rooms on Capitol Hill, filled with some 40 boxes of documents from the com= pany and its auditor, Arthur Andersen. Over the past few weeks as many as t= en people, four of them working full- time, have been combing through the b= oxes. On the wall of a room is a map laying out details of Enron's controve= rsial myriad partnerships. The investigation is being conducted by the Hous= e Energy and Commerce Committee, chaired by Louisiana's Billy Tauzin, whose= work makes it seem unlikely that the financial story will be buried by eit= her its sheer complexity or the unfolding political sideshow.=20 What has the committee discovered? For one thing, founder and chairman Ken = Lay, who often came across as clueless as Enron unraveled, deserves a great= deal of blame. If nothing else, Lay allowed a culture of rule breaking to = flourish, and he obviously misled investors. Enron's adventures in creative= accounting are not a recent development. Back in mid-1995, Jim Alexander, = then CFO of Enron Global Power & Pipelines, walked into Lay's office to rep= ort concerns he had about Enron's numbers for overseas projects. "I told hi= m I had heard there were manifold serious problems with the [accounting on]= international projects," Alexander recalls. Lay's reaction? Nothing.=20 That wasn't the only warning. One of the most remarkable documents unearthe= d by Energy and Commerce researchers was an unsigned seven- page letter fro= m Enron vice president Sherron Watkins to Lay, written on Aug. 15, 2001. Th= e letter informed him, among other things, that Enron executives "consisten= tly and constantly" questioned the company's accounting methods to senior o= fficials, including former CEO Jeff Skilling. "I am incredibly nervous that= we will implode in a wave of accounting scandals," she wrote. That was aro= und the same time Lay was telling Wall Street that there weren't any "accou= nting issues, trading issues, or reserve issues" at Enron. Two months later= , when Enron announced its quarterly financial results, Lay had this to say= : "The continued excellent prospects in these businesses and Enron's leadin= g market position make us very confident in our strong earnings outlook."= =20 In reality, of course, Enron was a bigger financial scandal than even the m= ost critical observers believed. Watkins' letter makes it clear that the pa= rtnerships and off-balance-sheet entities that Enron created weren't used j= ust to "reduce risk," as the company claimed repeatedly last fall. They wer= e used to cook the books, plain and simple. "That's just too bad, too fraud= ulent, surely AA&Co. wouldn't let them get away with that," wrote Watkins, = anticipating the reaction should outsiders begin to dig into the accounting= .=20 If Arthur Andersen hadn't "let them get away with it," what would Enron's e= arnings have looked like? How much of the $101 billion in revenues that Enr= on reported in 2000 were created via multiple transactions with entities th= at weren't independent third parties? And the partnerships are only part of= the story. The other issue is Enron's overly aggressive use of mark-to-mar= ket accounting. There's nothing wrong with this method of accounting, which= entails pricing securities at their fair value and running gains or losses= through the income statement. But in illiquid markets, like those for long= - term energy contracts, there's no benchmark of fair value. So Enron often= relied on internal models--which creates serious potential for abuse. And = because Skilling and Lay had established a culture in which earnings growth= was paramount, managers had plenty of incentive to push the limits.=20 Enron's much-hyped North American trading operation, which at one point acc= ounted for the majority of its reported earnings and $70 billion valuation,= is now nearly worthless. After the company declared bankruptcy, it set out= to find a well-capitalized third party and create a joint venture to resta= rt the trading operation. Only two firms--UBS Warburg and Citigroup--were i= nterested (although BP Amoco did offer $25 million for some pieces of Enron= 's technology). UBS Warburg, the winning bidder, will pay Enron a third of = any pretax profits for ten years and has the option to buy the business out= right for a multiple of the previous years' profits--but UBS is not assumin= g any of the business' liabilities. In other words, UBS basically got a fre= e option on the business.=20 All this makes Enron a political issue, but not for the obvious reasons. Mu= ch has been made of the multiple phone calls that Enron executives placed d= uring the company's dying days to Administration officials--including Treas= ury Secretary Paul O'Neill, Fed Chairman Alan Greenspan, Commerce Secretary= Don Evans, and Treasury's Under Secretary for Domestic Finance Peter Fishe= r. But despite the money that Enron lavished on all sorts of people, no one= came to its rescue. And whatever influence Enron had on energy policy (acc= ording to one former employee, Vice President Dick Cheney had only one sit-= down meeting with Lay in early 2001, and he opposed Enron on such key issu= es as the Kyoto Accord and nuclear power), the company isn't around to enjo= y the benefits.=20 The bigger political issue is not Enron's input on energy matters but rathe= r its earlier influence on financial policies. Most notably, Enron lobbied = for legislation, passed in 2000, that exempted much of its energy-trading b= usiness from oversight. That legislation passed through the Senate Banking = Committee, which was chaired by Phil Gramm, a big recipient of Enron funds;= his wife, Wendy, sat on Enron's board. Enron also lobbied for mark-to-mark= et accounting; in 1998 the Emerging Issues Task Force, which is backed by t= he Financial Accounting Standards Board, said that energy-trading contracts= should be booked on that basis--but the agency included few guidelines for= valuing illiquid contracts.=20 Clearly, the fallout from Enron has only just begun. One obvious candidate = for change is the accounting business. Enron is just the latest in a long s= tring of disasters for the industry--remember Waste Management, Sunbeam, an= d Cendant?--but it's by far the biggest. And Arthur Andersen is facing not = just a slap on the wrist but a battle for survival. That won't be easy, giv= en that Andersen is the only one with deep pockets left standing--and Enron= 's legal strategy will be to say that complicated transactions were left to= the judgment of its accounting firm. Mark L. Cheffers, a former accounting= litigation consultant who is now CEO of Accountingmalpractice.com, estimat= es that Andersen may be exposed to $10 billion to $20 billion in liabilitie= s. The previous largest settlement of an accounting case was the $335 milli= on Ernst & Young paid to settle claims related to Cendant. Putting legal li= abilities aside, Andersen may not have much of a business left. "The tremen= dous damage done to their credibility will make it extremely difficult to a= ttract business to their firm," says Lynn Turner, the SEC's former chief ac= countant. One portfolio manager says that if a company is audited by Anders= en, he simply won't invest in it.=20 All that may finally be enough to give accountants backbone. The fact that = even lay people now realize that the profession is a mess may give regulato= rs the clout they didn't have when Arthur Levitt, the former head of the SE= C, tried to enact reforms a few years ago. At that time the cognoscenti wer= e well aware of the conflicts that accounting firms faced--but no one cared= enough to make the situation change. SEC Chairman Harvey Pitt has now call= ed for an organization that would discipline accountants for ethical violat= ions.=20 But while Arthur Andersen has much to answer for, current accounting rules = allowed Enron a great deal of latitude. In the view of some, there are actu= ally too many rules, because rules inevitably leave loopholes that can be e= xploited and create a mindset where form is more important than substance. = Contrast that with Britain, where accountants have a "true and fair" overri= de, which they use if the accounting treatment follows the letter of the la= w but doesn't fully reflect the economics of a transaction.=20 Another good candidate for reform is retirement plans. The talk is that Con= gress will finally put limits on what percent of a plan's total assets can = be in company stock--perhaps 20%--and make it easier for ordinary employees= to sell their shares. Oddly enough, there's less discussion about options,= although the fact that Enron executives were able to sell $1 billion in st= ock over the past decade is precisely because they were given such generous= option grants. If accounting laws had mandated that the cost of those opti= ons be reflected in reported earnings, would Enron--which cared deeply abou= t reported earnings--have enriched its executives to such an extent?=20 But the area most in need of reform is the one that is least likely to chan= ge. That's Wall Street. Although Enron's inadequate financial disclosure ma= de it impossible to ascertain the company's true condition, those who bothe= red to read its documents saw enough-- including curious mentions of the pa= rtnerships as early as 2000--to be suspicious. Despite the professions of s= hock about Enron's liberal use of off-balance-sheet entities, when CFO maga= zine bestowed the "Excellence Award for Capital Structure Management" on fo= rmer CFO Andy Fastow in 1999, analysts and rating agencies raved about his = creative use of such "unique" financing techniques. And the fact that execu= tives were selling stock at a frightening pace was publicly available infor= mation. Skeptics eventually made fortunes shorting the stock. Why didn't an= yone else care? Perhaps because when everyone-- money managers, analysts, b= anks, management--benefits from a soaring stock, no one has any incentive t= o ask disturbing questions. "A lot of knowledgeable people on Wall Street w= ere duped, didn't care, or purposefully went along for the ride at the expe= nse of thousands of others," said Senator Carl Levin, a Michigan Democrat.= =20 You only have to look at Citigroup to see the multiple roles that Wall Stre= et firms can play today. Analyst Ray Niles of Salomon Smith Barney (which i= s owned by Citigroup) was one of Enron's biggest bulls. Citigroup (along wi= th J.P. Morgan) led most of Enron's financings in the '90s, and was owed ar= ound $1 billion by Enron. Why did the banks, which have access to informati= on that equity investors don't, keep handing Enron money? And Citigroup is = an investor in LJM2, one of the Enron partnerships that was run by Andy Fas= tow. Of all the phone calls that were placed during Enron's final days, the= one that seems most inappropriate was made by Robert Rubin, former Treasur= y Secretary and current Citigroup chairman of the executive committee, to U= nder Secretary Fisher, raising the possibility that he intervene with the r= ating agencies on behalf of Enron.=20 So far all the major players in this drama are doing whatever they can to d= odge responsibility. "Lay, Skilling, Fastow et al. have demonstrated a rema= rkable ability to ignore their personal responsibility for this," says Univ= ersity of Houston management professor J. Timothy McMahon. If it weren't so= tragic, it would be comical: In Skilling's one public appearance since he = abruptly resigned from the company last August for undisclosed "personal re= asons," he said, "I had no idea the company was in anything but excellent s= hape." Watkins' letter suggests otherwise: Skilling "knew this stuff was un= fixable and would rather abandon ship now than resign in shame in two years= ," she wrote. All the stories can't conflict forever, and at some point, we= 'll know the answer to the biggest question of all: Who's going to jail?=20 FEEDBACK: bmclean@fortunemail.com=20 Quote: This scandal isn't an isolated incident that can be dismissed as uni= que. Many Wall Streeters were either duped or went along for the ride. COLOR ILLUSTRATION: ROBERT NEUBECKER=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 First; Value Driven You're On Your Own That Enron workers lost life savings is just another sig= n that the short era of economic security is over. Geoffrey Colvin 02/04/2002 Fortune Magazine Time Inc. 42 (Copyright 2002) The miserable fate of Enron's employees will be a landmark in business hist= ory, one
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