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Enron Mail |
Some Merrill Executives Had Stakes in Enron Partnership --- Investments Raise Conflict-of-Interest Questions The Wall Street Journal, 01/30/2002 How to be an Enron millionaire Salon.com, 01/29/2002 Enron Directors Backed Moving Debt Off Books The Washington Post, 01/31/2002 Concerned ex-worker was sent to human resources House panel asks Lay to explain what happened to memo from former energy services manager Houston Chronicle, 01/30/2002 2nd Enron warning disclosed ; Manager wrote to board about losses, practices Chicago Tribune, 01/31/2002 Enron's Acting CEO Says Energy Trader Can Be Salvaged The Wall Street Journal, 01/31/2002 Cooper hits ground running Houston Chronicle, 01/31/2002 ENRON'S MANY STRANDS: THE CHIEF EXECUTIVE A Strategy Of Returning To the Roots In Energy The New York Times, 01/31/2002 Enron Interim CEO: More Value From Restructuring Assets Dow Jones News Service, 01/31/2002 Enron's new turnaround specialist discusses strategy for bringing firm back from bankruptcy Associated Press Newswires, 01/31/2002 City - Enron dogged by talk of price manipulation. The Daily Telegraph, 01/31/2002 Andersen CEO: Significant Information Not Made Available Dow Jones Energy Service, 01/31/2002 Evidence likely lingers amid high-tech shreds Chicago Tribune, 01/31/2002 Enron's One Good Return: Political Investments The Wall Street Journal, 01/31/2002 Firm Accused of Withholding Data Probe: Senate panel chairman says the company has not produced some requested documents. Los Angeles Times, 01/31/2002 Ernst & Young Says It Played Dual PNC Role The Wall Street Journal, 01/31/2002 Law firm cuts ties with Enron, citing potential conflict Associated Press Newswires, 01/31/2002 Enron hopes to rehire Vinson & Elkins The Daily Deal, 01/31/2002 UK press watchdog chief Lord Wakeham steps down amid Enron links AFX News, 01/31/2002 Enron board member temporarily resigns press watchdog job Associated Press Newswires, 01/31/2002 Questioning the Books: CPA Institute's President Opposes More Limits on Nonaudit Services The Wall Street Journal, 01/31/2002 The Gottesdiener Law Firm Moves Against Enron in Bankruptcy Court Business Wire, 01/31/2002 Law Firm Asks Court To Lift Enron 'Automatic Stay' Dow Jones News Service, 01/31/2002 4 BofA execs quit in wake of Enron's fall The San Francisco Chronicle, 01/31/2002 Former Texas governor: `stunned' by Enron collapse Associated Press Newswires, 01/31/2002 Stock dumped on Enron jitters South China Morning Post, 01/31/2002 ENRON'S MANY STRANDS: A CASE STUDY A Video Study Of Enron Offers A Picture of Life Before the Fall The New York Times, 01/31/2002 Learning From Enron The Washington Post, 01/31/2002 _____________________________________________________________________________ Some Merrill Executives Had Stakes in Enron Partnership --- Investments Raise Conflict-of-Interest Questions By Charles Gasparino and Randall Smith Staff Reporters 01/30/2002 The Wall Street Journal M1 (Copyright © 2002, Dow Jones & Company, Inc.) Nearly 100 Merrill Lynch & Co. executives invested more than $16 million of their own money in a controversial partnership the securities firm was selling for Enron Corp., even as other senior Merrill officials decided to turn down the offer, people close to Merrill said. Among the top Merrill officials who put their own money into the Enron partnership were current Vice Chairman Thomas Davis; Daniel Bayly, Merrill's investment-banking chief; and Schuyler Tilney, who heads Merrill's energy investment-banking department and directly oversees the firm's dealing with Enron on corporate-finance matters, the people said. Though each executive invested less than $1 million, the people said, their involvement highlights the role played by senior Wall Street officials in helping to create some of the partnerships Enron used to pad its earnings and hide debt from investors -- and that eventually resulted in huge losses that led to the energy-trading company's downfall. Mr. Davis, Mr. Tilney and Mr. Bayly didn't return calls for comment. Joseph Cohen, a Merrill spokesman, said the investments were entirely appropriate, and common on Wall Street. The personal investments were part of a total of $22 million Merrill and its officials committed to invest in the partnership, known as LJM2 Co-Investment LP. This partnership was particularly controversial because it allowed some Enron officials to make far more money working part time on the partnerships than they did working full time for Enron. The energy company has estimated, for instance, that Andrew Fastow, whom Enron replaced as chief financial officer in October as pressures on the company mounted, made more than $30 million since 1999 running LJM2 and a smaller partnership, called LJM Cayman LP. At issue for Merrill is the potential for conflicts of interest. Merrill, like other Wall Street firms, wore a number of hats with Enron: The securities firm acted at various times as securities underwriter and investor with the energy company. Since 1990, Merrill was among the top five underwriters of Enron's stock and bond deals, according to Thomson Financial, earning fees for helping to raise about $3.7 billion in securities issues for the company. Thus, some critics question whether Merrill officials would let their personal investments with Enron entities interfere with their business decisions in dealing with the energy company. "Merrill's involvement as underwriter for Enron and its executives' investments raises serious conflict-of-interest questions," says Jacob Zamansky, a New York-based plaintiffs' lawyer. "It gives the appearance that Merrill did this to get Enron deals. Merrill had a vested interest in . . . the partnership and investing" in it. There are other conflicts as well, securities lawyers say. Some top executives at Merrill declined to invest their money because they believed that the Enron partnership -- which kept assets off Enron's balance sheet -- wouldn't get the best investments, which would be kept by the corporate parent. Another concern: Enron's Mr. Fastow suggested the idea of investing in the partnership to Mr. Tilney, whose wife until last week was a managing director of Enron's energy-services unit. Mr. Fastow through a spokesman had no comment. It is unclear if top Merrill executives, who also worked on Enron's financings, had more information about the nature of the LJM2 partnership than Merrill's individual customers who were offered opportunities to invest in the partnership. "I'm not saying that Merrill violated the law here," says John Coffee, a professor of securities law at Columbia University in New York. "But this is a big public-policy issue. Merrill has an obligation, because Enron is a client, not to reveal some confidential information, but it also has a fiduciary obligation to its investors to tell them if these securities aren't suitable for them." Mr. Cohen, the Merrill spokesman, brushes aside such concerns. "The investment partnership was reviewed and deemed appropriate by parties on all sides of the transaction," Mr. Cohen said, reading from a prepared statement. "Consistent with common industry practice, it was offered to qualified external as well as internal investors, and this is not a conflict of interest." Mr. Cohen added that Merrill high-net-worth clients "in the partnership offering were given the same information as all Merrill executives who wanted to invest." Mr. Davis, who at the time of the investment headed the institutional-securities group, appears to be the only official on Merrill's executive committee to have invested in the partnership. Even though close to 100 Merrill executives invested in the partnership, neither Chief Executive Officer David Komansky nor his heir apparent, President E. Stanley O'Neal, were in the group, people close to the deal said. One person with knowledge of the matter said some top executives balked at investing their own money because they were uncomfortable with some LJM2 investments. Mr. Davis, however, headed the institutional group, which counted Enron as one of its big clients. Merrill, which helped market LJM2 to more than three dozen institutional and individual investors, was only one of many Wall Street firms to invest in the $386.6 million partnership. Other corporate investors in the partnership included Lehman Brothers Holdings Inc., two units of Credit Suisse Group's Credit Suisse First Boston, Citigroup Inc., Deutsche Bank AG, J.P. Morgan Chase & Co., First Union Corp. and the CIBC World Markets unit of Canadian Imperial Bank of Commerce. The funds for a $15 million investment from J.P. Morgan Chase came from the private-equity unit of J.P. Morgan, which invests the firm's own funds. While individual Morgan bankers may have stakes in those funds, they didn't have any direct, separate stakes in LJM2, a spokeswoman said. At Citigroup and Lehman Brothers, which committed $10 million each, and CIBC World Markets, which committed $15 million, the funds came from the firms' own assets and not from outside clients or individual investment bankers, according to people familiar with the investments. Officials declined to comment at CSFB, a unit of Credit Suisse Group, whose DLJ Fund Investment Partners III LP made a $5 million commitment, while a CSFB affiliate named Merchant Capital Inc. committed $10 million. Company representatives had no comment at Deutsche Bank, where an affiliate of its former Bankers Trust unit, BT Investment Partners, committed $10 million, and First Union, whose First Union Investors Inc. committed $25 million. Officials at some of these Wall Street firms said their investment committees felt pressured to make the investments in order to stay in the running for investment-banking assignments. Some bankers were concerned about whether they were being asked to make uneconomical investments in corporate castoffs that wouldn't appreciate in value. Indeed, it is unclear what returns, if any, the LJM2 partnership investment has generated for limited partners and investors. Wall Street securities firms have long made investments associated with their investment-banking business. Sometimes the investments are made to provide extra capital to help clients complete deals. Sometimes the investments are used to acquire an asset a client wants to sell. The funds may come from the securities firm itself, from investment clients, or individuals at the firm who may be offered the chance to make the investments as part of their compensation packages. What was unusual about the Merrill investment in the Enron vehicle was that some senior bankers chose not to participate out of concern about what the partnership would invest in. In addition, some of Merrill's top executives, including Mr. Komansky, Merrill's chief executive, had been embarrassed in 1998 by disclosure that they had taken personal stakes in Long-Term Capital Management, the highflying hedge fund for which Merrill had raised funds and whose near collapse jeopardized the entire U.S. financial system. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Salon Exclusive - - - - - - - - - - - - How to be an Enron millionaire According to former colleagues, two executives reaped million-dollar windfalls by investing $6,000 apiece in the company's partnership scam. A case study in corporate rot. - - - - - - - - - - - - By Jake Tapper Jan. 29, 2002 | When she heard that Kristina Mordaunt had been mixed up in Enron's infamous LJM partnership, Julia Murray broke down in tears. Murray, an Enron in-house counsel, wasn't known within the firm for such emotional displays. Enron was a hard-charging company that attracted tough-as-nails Type A executives and lawyers. But Kristina Mordaunt, a fellow Enron attorney who had worked in the counsel's office before joining the company's financial division, was Murray's close friend. And the news about her was rather shocking: On Nov. 7, 2001, Mordaunt was fired and escorted from the Enron building in downtown Houston by company security. According to four current or former Enron executives, Mordaunt was fired after the company found that she had made a windfall profit off LJM, one of the controversial -- and possibly illegal -- partnerships set up by Enron's former chief financial officer, Andrew Fastow. According to these sources, there is a lesson in Kristina Mordaunt's downfall. The ignominious exit of employees like Mordaunt, who had enjoyed the trust and respect of fellow company attorneys and managers, shows how Enron's corporate culture rotted from within, under the twin pressures of financial ambition and personal greed. A few weeks before Mordaunt was fired, Enron had announced that her former boss Fastow was on a "leave of absence." But few inside the company expected him back. On Oct. 31, Enron had reported that the Securities and Exchange Commission had upgraded its interest in the company's financial dealings from an inquiry to a formal investigation. Within Enron, the board of directors set up a special internal committee to investigate the company's convoluted finances as well. Soon, according to the four Enron sources, the committee stumbled upon stunning news: Working with Fastow, Mordaunt and Enron treasurer Ben Glisan had invested around $6,000 apiece in LJM, one of the limited partnerships Enron had established to hide its debt. Within a few weeks, they each made approximately $1 million from those investments. Enron later revealed that Fastow himself, the financial wizard behind the partnerships scheme, earned as much as $30 million from his role in managing the partnerships. Due to Enron's complex -- some think purposely confusing -- financial arrangements, those numbers could not be confirmed with documentation, though they were reported to Salon by the four current or former Enron executives. A congressional investigator also informed Salon that his committee has been given the same information and is currently trying to verify the charge. What is clear is that Mordaunt and Glisan were key members of the team Fastow worked with to set up these questionable partnerships, and they appear to have benefited dramatically. "Mordaunt, for all practical purposes, was Fastow's lawyer at Enron" since she was "the top lawyer in his division," at the time, said one former Enron executive. After working for Fastow, Mordaunt later became chief counsel for a separate Enron division called EBS -- which itself was involved in highly questionable accounting activities. Mordaunt could not be reached for comment by Salon, but according to a former Enron employee, "She has told people that she doesn't think she did anything wrong." Glisan declined to comment. "I've been advised not to talk to anybody," he told Salon. Glisan referred calls to his attorney, Hank Schuelke, with the Washington, D.C., law firm Janis Schuelke & Wechsler. Asked about the allegation against Glisan, Bill Shields, an attorney with the firm, said only, "We're not going to have any comment." So far, according to the congressional investigator, the world knows "just the tip of the iceberg" about what drove Enron, once the nation's seventh-largest company, into the biggest U.S. bankruptcy of all time, depriving investors and employees of at least $1 billion. Up to this point, most of the public's attention has been focused on Enron's political connections and the failure of Wall Street's so-called gatekeepers -- the analysts, banks, credit agencies and analysts -- to sound a warning bell. But the inside story of Enron's corporate culture -- as the company transformed itself from an energy trader whose business was rooted in the physical delivery of gas and electricity into a high-finance wheeler-dealer whose business was primarily manipulating numbers -- is just coming to light. This part of the story is about greed, betrayal and deception -- and its human costs, in broken friendships, ruined careers and worse. The apparent suicide of former Enron vice chairman J. Clifford Baxter on Friday might be the most dramatic example so far of this human cost. But Enron's corporate ranks have been suffering many shocks since last fall -- and the revelation about Mordaunt and Glisan was one of them. Many executives were stunned to learn that these two trusted co-workers and friends had been raking in such extraordinary amounts of cash. Though Julia Murray declined to comment to Salon, her tearful reaction to the news about her friend Mordaunt last November indicate the deep emotional wounds inflicted by some of Enron's suddenly rich managers as they grabbed their cash and ran for the door. "Did I feel betrayed? Yeah, a lot," said an Enron executive and friend of both Mordaunt and Glisan who would speak with Salon only on the condition of anonymity. "I was extremely surprised." After the news about Mordaunt and Glisan broke inside the company, colleagues rushed to see who else might have been involved in the scandal. After Mordaunt was escorted out of the Enron building, said one executive, "I called a number of people I know who work in the finance division and said, 'Please tell me that you didn't invest in LJM!" LJM along with LJM2 and Chewco have become the most notorious of the shady accounting partnerships set up by Enron. Set up, it is now believed, specifically to hide Enron debt from public scrutiny, the partnerships proved to be the catalyst for Enron's fall. On Nov. 8, 2001, the same day the company announced that its financial statements from 1997 through the first half of 2001 "should not be relied upon," Enron filed an "8-K" form -- an interim document required for certain types of financial events -- with the Securities and Exchange Commission. In that form, <http://www.enron.com/corp/sec/<; Enron disclosed that some of the "limited partners" in the partnerships "were, at the time of the investment, non-executive officers or employees of Enron." Enron also announced that it was "terminating the employment" of Glisan and Mordaunt for participating in the LJM partnerships. "At the time these individuals invested in the limited partnership, LJM1 had ceased entering into new transactions with Enron," Enron's 8-K stated. "However, some pre-existing investments involving LJM1 and Enron were still in effect, and Enron believes that these investments resulted in distributions or payments to LJM1 and to the limited partnership in which these individuals invested." According to the congressional investigator, Mordaunt reaped her LJM windfall after she was approached by an Enron executive, who asked her if she wanted to make some money. Yes, she said. "Give me a check for $6,000," he told her, according to the congressional investigator. Later, the executive asked Mordaunt for her bank account number so he could deposit the proceeds from her investment. "How much is it?" she asked. He told her to check her bank account the next day. When she did, she discovered over $1 million had been deposited into her account. The congressional committee is currently investigating the matter. The Nov. 8 SEC filing also clarified Fastow's role in the company. He was no longer officially on a leave of absence. He "is no longer working for Enron," the filing stated. At a November news conference, then-CEO Kenneth Lay reported that he knew about the partnerships but not about Mordaunt's and Glisan's role in them. Asked last week about the allegations against Mordaunt and Glisan, Enron spokesman Mark Palmer said, "I have no idea." Palmer noted that a special committee had been appointed "to look into" such matters. "I know they're looking into everything surrounding those transactions," he said, referring to the partnerships. Said another former Enron executive after hearing about Mordaunt's and Glisan's lucrative deals: "Hillary Clinton should have gone to their school of futures trading." To many of their former colleagues, Mordaunt's and Glisan's closeness to Fastow's suspicious transactions makes things look even worse. "To many of us, this looks and smells like a bribe," said one Enron former employee. "'I' -- Fastow -- 'will give you money, you shut up.' Or put another way, 'Here is the payoff for helping me set up the structures that helped me rake in more than $30 million.'" The two weren't merely "Enron executives," the former employee says, "they were the treasurer and one of the top lawyers in the company. And both of them worked on LJM-related deals. That is what makes it sickening." The accusations highlight the personal betrayal many Enron executives feel. After Mordaunt and Glisan were fired last November, their former colleagues spent much time trying to figure out how it all could have happened. Mordaunt, according to a current Enron executive, "was very tight with Andy [Fastow]. Andy was responsible for making her managing director, and she would have done anything for him." Nonetheless, as a lawyer, Mordaunt should have known better, the executive said. "Given his connection with LJM, which was dicey at best and at worst probably illegal, I personally would have stayed far away from it. But you never know how Andy spun it to her." After working as Fastow's top lawyer, Mordaunt later served as chief counsel for EBS, an Enron subsidiary set up specifically to handle another complex partnership, code-named Braveheart. In Braveheart, Enron sold 10 years' worth of future revenue from a broadband interactive television deal it was setting up with Blockbuster. Although the deal itself never went past the testing stage, Enron booked $110 million worth of revenue for selling off those future, never-to-be-realized earnings. Glisan also played a key role in Fastow's division, a former Enron executive noted: "All the deals we did had to go through Glisan and get his approval because of the impact on funds flow." The former executive, like others affiliated with the firm, said that he once had a positive impression of Glisan and was surprised to learn that he had been an LJM investor. To some current and former Enron executives, the transformation of respected managers like Mordaunt and Glisan represented a major shift in the company ethos. "In my opinion this all goes back to when Jeff Skilling took over and Enron ceased being an energy company and we became an earnings company," said one former executive, referring to Enron's metamorphosis into a company that focused more on highly complex financial-derivatives trading than on actual commodities. In 1997, Skilling became the company's president and chief operating officer. Press accounts of Enron's rise traditionally gave him credit for Enron's increasing focus on complex financing schemes and risky leaps into such areas as bandwidth trading, an enterprise that ended up costing the company hundreds of millions of dollars. Skilling was "all hype," the one-time executive says. "Everything he did was to hype the stock. And they had this need to create complex financial dealings to hide all the things going wrong. "Once we became an earnings-focused company, that was the beginning of the end." The former executive said he's still unsure whether recently resigned CEO Lay knew everything that was going on. "But that doesn't excuse him. Captain Joe Hazelwood didn't know that the guy was going to run the Valdez into the reef. But he was Captain Hazelwood. It was his ship." The company's business practices changed under Skilling, this former executive said. And so did the attitudes of managers like Mordaunt and Glisan -- and Lay, for that matter. Keeping the stock price up, at all costs, became the order of the day, even if that meant telling employees all was fine, when in fact the company's situation was rapidly deteriorating. "[Lay] lied to us starting in August," said the former executive. "He lied to us." In August, Lay went before the company and announced that Skilling was resigning for personal reasons. In an all-employees meeting, Lay told a touching tale about why Skilling felt the need to leave the company. Skilling, Lay said, had recently visited the Teesside Power Station, Enron's gas-fired power plant in northeast England, where an Aug. 8 explosion and fire had killed three Enron employees. "It shook him up so much he realized how much he had sacrificed with his own family," one executive recalled Lay saying. "And he wanted to spend more time with his kids." Lay then told the company more lies, according to the executive: that Enron had just enjoyed the best quarter in its history; that it was going to be more friendly to Wall Street; it was going to simplify its accounting practices; there were no other people other than Fastow involved in the shady partnerships. "About two weeks later, the news came out about Ben Glisan and Kristina Mordaunt," recalled the executive. Soon afterward, the company was told that "we would have to restate our earnings for the past five years." Then came the news that executives like Lay had been dumping their stock for years while simultaneously telling stockholders and employees that all was fine and the stock would soon bounce back. In hindsight, few Enron executives believe that Skilling's departure had anything to do with the Teesside Power Station tragedy. "Lay got in front of the entire company and just lied," said the executive, who has lost his life savings. "I feel like a schmuck." salon.com - - - - - - - - - - - - A Section Enron Directors Backed Moving Debt Off Books Kathleen Day and Peter Behr Washington Post Staff Writers 01/31/2002 The Washington Post FINAL A01 Copyright 2002, The Washington Post Co. All Rights Reserved Members of Enron Corp.'s board of directors received detailed briefings as early as four years ago about the purpose and structure of controversial partnerships whose losses triggered the company's fall into bankruptcy, according to minutes of the meetings. The minutes, which cover four board meetings in 1997 and 1999 and three meetings of the board's finance committee in 2000, suggest that board members approved aggressive accounting actions, including moving debt off the company books. A dozen congressional committees as well as the Justice Department and the Securities and Exchange Commission are investigating Enron's collapse, which cost investors and employees billions of dollars. A focus of the inquiries is whether Enron hid debt and inflated its profits by using the private partnerships run by its chief financial officer. In other Enron-related news yesterday, the General Accounting Office announced that it would sue the White House for access to records of Vice President Cheney's meetings with Enron and other industry interests that sought to influence the administration's energy policy last year. And Stephen Cooper, the interim head of Enron, said he was optimistic the company could survive, though in a much diminished form. Individual Enron board members, who themselves are being sued and investigated, have said little publicly about their role in the transactions that toppled the company. The minutes, made available to The Washington Post by a source critical of the board, suggest that the partnerships were a key part of Enron's growth strategy and show they were regularly reviewed by the directors. The copies of the minutes do not cover every board meeting and do not include documents that are referred to as being attached to the summaries of the board's actions. When it was reported last fall that Andrew Fastow, the Enron CFO, made $30 million running partnerships with names such as LJM, Raptor and JEDI, then-chairman Kenneth L. Lay announced that the board was setting up a special committee to investigate. The minutes show that members of that special committee attended board meetings in which Fastow described the intricacy of the entities. Sources said the committee's report, which is expected to be completed as early as tomorrow, will say that while the Enron board approved the partnerships, management and auditors withheld key information from them. That is expected to be the key element of the defense that will be offered by Lay and board member William C. Powers Jr. when they testify before Congress on Monday, sources said. Last night, Robert Bennett, a Washington lawyer representing Enron, gave every indication that would be the case. "While the board of directors, including Mr. Lay, were aware that these special partnership entities were being set up, which were being run by Mr. Fastow, there is a great deal of information regarding their operation and execution that was unknown to the board of directors," Bennett said. At an Oct. 11, 1999, board meeting, Fastow discussed the company's mix of "on-balance and off-balance sheet debt," according to the minutes. At another meeting on May 1, 2000, Fastow told board members about the risk of "accounting scrutiny" on the Raptor partnership. A board resolution in October 1999 said one purpose of the LJM2 partnership was to create "a potential ready purchaser of the company's businesses and assets." A chart labeled "LJM2 Update," attached to the agenda for a May 2000 finance committee meeting, said the partnership had made seven investments, all purchased from Enron. Enron has disclosed that the board waived the company's conflict-of-interest rules to let Fastow oversee the partnerships. The board's special committee hired William R. McLucas, former head of enforcement at the SEC, to do the investigation and write a report for the committee. The report is expected to be released before Lay, who resigned last week, and board member Powers, who is also dean of the University of Texas law school, testify before Congress on Monday. Until now, Congress has focused on the role Enron's outside auditor, Arthur Andersen, played in the company's collapse and the reported destruction by Andersen executives of Enron-related documents. Monday's hearings are expected to zero in on the behavior of Enron officials, including the board. The outside directors are expected, as part of their defense, to push the focus back on Andersen, sources say. They will point, for example, to portions of board minutes that say Andersen "had spent considerable time analyzing . . . the governance structure" of one of the partnerships, LJM2, and "was comfortable with the proposed transaction." Minutes from October 1999 and October 2000 say the board ordered several safeguards be implemented to maintain control of the partnerships. One was allowing Lay or the board to remove Fastow from one partnership, LJM, at any time. Another was directing then-Enron chief executive Jeffrey K. Skilling and others to review all transactions between Enron and LJM. And Skilling was to review Fastow's "economic interest" in the partnership. Bennett said, "We have learned that many of the procedures that were put into place to ensure the appropriate operation of these entities were not complied with, without the knowledge of the board." Patrick McGurn of Institutional Shareholder Services Inc. of Rockville, which advises large shareholders on corporate-governance issues, said last night that the minutes seem to provide more evidence that board members were fully informed of the company's aggressive financial strategies. "If that's not the case, the directors better start talking and start talking now. Every step along the way it seems this board had the opportunity to say no to the partnerships, to the waiver of the ethics code, and each time they had an opportunity to take the right fork in the road, they took the wrong fork." The Oct. 12, 1999, minutes show that outside director Herbert Winokur -- now a member of the board's special investigating committee -- recommended that the board approve Fastow's participation in the LJM2 partnership. McGurn said, "The first principle of an investigation is that the people who presumably might be held responsible at the end of the day can't investigate themselves." The other two members of the special committee -- Powers and Raymond S. Troubh, a New York consultant -- had no involvement with the company when the formation of the off-balance-sheet entities took place, sources close to the company said. W. Neil Eggleston, an attorney for the outside directors of the board, said Winokur has no conflict of interest in serving on that special committee, despite his role in approving the partnership deals. "It was important for the special committee to render its report quickly and Mr. Winokur's participation provided continuity and speed to the special committee's efforts," Eggleston said. The board minutes show that as early as Dec. 9, 1997, Enron's executive committee approved a buyout -- that included a corporate guarantee of $633 million -- of the interest of the California public employees pension fund in the JEDI partnership. At an Aug. 7, 2000, meeting of the finance committee, chaired by Winokur, the off-balance-sheet partnerships are described as "the vehicles the company was utilizing to manage its balance sheet debt." Directors Wendy Gramm and Lay were among other board members that also attended the meeting. At a special board meeting on June 28, 1999, Lay called on Skilling to discuss a proposed investment partnership. "Mr. Skilling noted that due to changes in the accounting treatment of off-balance-sheet transactions, the company had been analyzing new types of financing vehicles. He called on Mr. Fastow to discuss the proposal." Skilling resigned suddenly in August. Fastow was ousted in October. The LJM partnerships were specifically cited by the company last fall when it admitted violating some accounting standards, resulting in a $586 million overstatement of its profits between 1997 and 2001. The excerpts that became available yesterday give no hint that board members had questions or qualms about the accounting maneuvers, with the exception of Fastow's dual role as Enron's chief financial officer and LJM's manager. Staff writers David Hilzenrath, Albert B. Crenshaw and Carrie Johnson contributed to this report. Peter Behr reported from Houston. http://www.washingtonpost.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Concerned ex-worker was sent to human resources House panel asks Lay to explain what happened to memo from former energy services manager By JULIE MASON Copyright 2002 Houston Chronicle Washington Bureau Jan. 30, 2002, 10:04PM WASHINGTON -- A one-time Enron Corp. manager who warned Chairman Ken Lay in August about questionable accounting practices was sent to human resources for a talk about employee morale, her attorney said Wednesday. House investigators demand Lay explain Enron's response to allegations raised in an Aug. 28 e-mail by Margaret Ceconi, who had lost her job with Enron Energy Services just over three weeks earlier. "Ms. Ceconi included her home phone number in the e-mail and offered to speak to board members," lawmakers from the House Energy and Commerce Committee said in a letter to Lay. "We are very interested in learning what happened to Ms. Ceconi's e-mail after you received it, and how Enron responded to it." An Enron spokesman did not return a call for comment. A key issue for investigators probing the collapse of Enron is at what point executives at the company became aware of financial problems and how those problems were addressed. Ceconi on Aug. 28 wrote a five-page memo to Lay, stating that losses in Enron Energy Services, or EES, were being moved to another sector of Enron to make EES appear profitable. According to Ceconi, the losses were hidden in Enron Wholesale Services, the company's highly profitable and well-established trading arm. "Some would say the house of cards are falling," Ceconi said in her memo to Lay. Demetrios Anaipakos, Ceconi's Houston attorney, said Lay never met with Ceconi to discuss her concerns, and she was instead referred to human resources. "During that meeting, the primary discussion was focused on concerns over employee morale at Enron," Anaipakos said. Ceconi's memo, which was copied to a manager in human resources, detailed morale problems and related issues at EES. Ceconi was told her accounting allegations would be taken seriously and investigated by Enron, but she never heard back, according to her lawyer. "Ms. Ceconi firmly believes the allegations she raised in her memo merited response from the company, and she didn't get one," Anaipakos said. The House Energy and Commerce Committee sent Lay 10 questions pertaining to Ceconi's memo and the company's response. Lay has until Feb. 12 to respond. Questions posed to Lay in a letter signed by Rep. W.J. "Billy" Tauzin, R-La., committee chairman, and other members seek details on how the memo was distributed and whether Ceconi's allegations were investigated. The Ceconi memo was dated two weeks after Sherron Watkins, also a former Enron executive, wrote to Lay her concerns about accounting problems and a possible "wave of accounting scandals" at Enron. In response, Enron officials sought a limited outside review of Watkins' allegations by the law firm of Vinson & Elkins. The lawyers' report concluded that Watkins' concerns did not warrant an in-depth investigation. Ceconi's memo, also copied to the board, included a litany of personal criticisms of Enron management and even some jabs at Lay. The somewhat disorganized memo is at times angry and confrontational. In it, Ceconi complains that one supervisor "had the coffee machines taken off the floors because it was too expensive. Maybe if you got rid of the company jets you could afford coffee." Ceconi also complained in it that she had been heavily recruited to move to Houston from Dallas and still hadn't been reimbursed for all her moving expenses. When the memo surfaced last week, a spokesman for Enron characterized it as the work of a disgruntled employee. Ceconi also expressed specific concerns about possible malfeasance in EES accounting. EES was formed to help companies manage and reduce energy costs. By securing fixed prices through long-term contracts, EES helped customers maintain predictable supplies at stable costs. It also provided energy audits and helped companies improve energy efficiency. The division didn't begin to report profits until late in 2000, but then revenues steadily improved. In the first quarter of 2001, it reported profits of $40 million. In the second quarter, $60 million in profit was reported on more than $7 billion in contracts. The division's Dec. 2 bankruptcy filing lists $2.5 billion in assets, mainly its contracts with companies and organizations, and $2.1 billion in debts. Lay is expected to testify Monday before a Senate committee probing Enron, one of at least 10 congressional investigations under way into the collapse of Enron. The Labor Department and Securities and Exchange Commission also are investigating Enron, and the Justice Department is conducting a criminal probe. A central point of inquiry is how Enron was able to shield its debt and appear more profitable than it was. The company, formerly the nation's seventh-largest, on Dec. 2 filed the largest corporate bankruptcy in history. Business 2nd Enron warning disclosed ; Manager wrote to board about losses, practices Stephen J Hedges and Melita Marie Garza, Tribune staff writers 01/31/2002 Chicago Tribune North Final ; N 1 (Copyright 2002 by the Chicago Tribune) An internal Enron Corp. e-mail sent from a midlevel manager to the company's board of directors warned last August of hidden losses totaling more than $500 million or more, false accounting practices and flagrant mismanagement within the doomed energy company's upper ranks. The e-mail was sent to Enron's board of directors by Margaret Ceconi, a laid-off manager for Enron Energy Services. It is the second in-house correspondence in which an employee made specific allegations of possible illegal activity in the months leading up to Enron's failure. The company, burdened by off-balance-sheet transactions that hid millions of dollars of debt, filed for bankruptcy Dec. 2, leaving thousands of employees and shareholders in the lurch. Top executives, though, cashed in hundreds of millions of dollars in stock they held in the months leading up to Enron's collapse. In her Aug. 29 e-mail, Ceconi warned Enron's directors, "Some would say the house of cards are falling. You are potentially facing shareholder lawsuits, employee lawsuits, heat from analysts and newspapers. The market has lost all confidence, and it's obvious why." The House Energy and Commerce Committee, which is investigating Enron's failure and the role of its accountant, Chicago-based Andersen, released Ceconi's letter Wednesday. Peggy Mahoney, an Enron Energy Services spokeswoman, would say only that Ceconi's letter "is not based on the facts." Enron Energy Services, a free-standing Enron unit, offered long- term energy contracts to more than 28,500 commercial and industrial customers. The unit pioneered corporate energy outsourcing, a service that includes negotiating a company's electricity and gas contracts in regulated and deregulated markets, paying company energy bills, and installing energy-efficient ventilation, heating and cooling systems. Enron Energy Services' clients included major grocery store chains and retailers such as J.C. Penney Co. and Saks Inc. Chicago customers included Quaker Oats Co. and the Archdiocese of Chicago. Stephanie Brown, a J.C. Penney spokeswoman, said that the retail chain had saved money with its energy services contract in 2001 and had been prepared to keep it. But Enron Energy Services, one of Enron's many bankrupt units, moved to terminate the contract earlier this week. In her e-mail, Ceconi said Enron Energy Services had lost $60 million on the J.C. Penney contract alone. "From our perspective, the Enron Energy Services' deals seemed too good to be true," said Craig Sieben, chief executive of Sieben Energy Associates, a Chicago-based energy management consulting firm. "The professional salespeople presenting the deals seemed messianic in their beliefs, but could not explain how Enron was making money, except to say, `Trust us.' "It was a deal-oriented culture, with the salespeople making big bonuses when they closed sales. Servicing the deals and executing the contract successfully got short shrift." Many promises made In fact, Ceconi's e-mail accused Enron Energy Services of promising more than it could deliver, a method of operating that angered clients such as Starwood Hotels & Resorts Worldwide Inc., which signed a 10-year energy management agreement with Enron Energy Services in September 2000. Starwood had set aside $45 million to invest in energy-saving technology. But Enron did not deploy the capital, much to Starwood's chagrin, said Sieben, a consultant to Starwood on the deal. "We always knew that the salespeople did not understand the energy business, and that scared us," Sieben said. "The focus was on get the business." Ceconi said losses reached at least $500 million, and perhaps $1 billion, all of it hidden when the division's "risk group" merged with its "wholesale group." "You should check on the Safeway contract, Albertson's, IBM and the California contracts that are being renegotiated," she wrote to the board. "It will add up to over $500MM that EES is losing and trying to hide in Wholesale. Rumor on the 7th floor is that it is closer to $1 Billion." Ceconi noted that Enron Energy Services, to "everyone's amazement, reported earnings" for the second quarter. She then noted that the company "has knowingly mispresented EES' earnings," in violation of Financial Accounting Standards Rule 131. "This is common knowledge among all the EES employees, and is actually joked about," her e-mail states. "But it should be taken seriously." Market analysts, including Carol Coale of Prudential Securities Research, "are continuing to push this issue very hard," Ceconi warned. Company would not talk In an interview Wednesday, Coale said she had suspected that Enron was concealing losses. But the company would not confirm those suspicions, and its customers refused to discuss their contracts. "Houston is a small big town," Coale said. "We had heard about that, that kind of information was being talked about in the marketplace. But Enron said, `No.'" Coale said Ceconi later contacted her, and on Nov. 4 provided her with a copy of the e-mail. By then, though, Enron was struggling to stay afloat. Ceconi sent her warning to the board shortly after Jeffrey Skilling abruptly ended his brief stint as Enron's chief executive. "One can only surmise that the removal of Jeff Skilling was an action taken by the board to correct the wrongdoings of the various management teams at Enron," Ceconi wrote. "However, based on my experience at this company, I'm sure that board has only scratched the surface of the impending problems that plague Enron at the moment (i.e. EES's management's incapability's of strategic planning, hiding losses/SEC violations, fraudulent recruiting practices, lack of product, etc)." Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron's Acting CEO Says Energy Trader Can Be Salvaged By Rebecca Smith Staff Reporter of The Wall Street Journal 01/31/2002 The Wall Street Journal A8 (Copyright © 2002, Dow Jones & Company, Inc.) Enron Corp.'s acting chief executive said he believes that the troubled energy company is salvageable, and he pledged to move "at light speed" to get it out of bankruptcy court. Yet the surviving corporation that he described -- one "dedicated to movement of natural gas and generation of electricity" -- would be tiny, even when compared with the Enron of a decade ago. In fact, it would resemble the very thing that Enron has disparaged in recent years: a utility. In a conference call with reporters yesterday, acting CEO Stephen Cooper said his primary motivation is to maximize value for creditors and "preserve as many jobs as possible. . . . There are a lot of people here that deserve our best shot at reorganizing this company." Mr. Cooper, a restructuring expert whose 20-year-old firm, Zolfo Cooper, has presided over many of the nation's biggest bankruptcies, was named to the Enron job on Tuesday. He succeeds Kenneth Lay, who resigned last week. Houston-based Enron continues to search for a new chairman, a position also formerly held by Mr. Lay. Asked about the questionable off-balance-sheet transactions and accounting practices that sank Enron, Mr. Cooper declined to comment. "Not only do I not know" what brought the company down, he said, "but it's literally of no interest to me." Nor would Mr. Cooper speculate about the prospects for liquidation. When you "liquidate in a situation like this," he said, "you have the patina of distress" that pulls down the prices that assets might otherwise fetch. Mr. Cooper did acknowledge that the company's creditors, in the end, are likely to be treated disparately because of the "extensive nature of the legal entities in the Enron universe." In other words, Enron pledged so many assets to so many different companies, especially as it created a web of off-balance-sheet partnerships, many creditors may find there isn't enough left to meet their claims. If it does emerge from bankruptcy proceedings, Enron is likely to be a fraction of its former size. Mr. Cooper said he envisions a company "based on hard assets with predictable revenues and cash flow." That is precisely the business model that, until recently, Enron rejected as old-fashioned as it pushed into a world of "virtual assets," anchored by a massive energy-trading operation. Meanwhile, Enron this month lost its biggest and most profitable hard asset -- the Northern Natural Gas Pipeline -- as a condition of its failed merger agreement with rival Dynegy Inc. Turning to another matter, Mr. Cooper said he expects the results of a special internal investigation, launched as the company slid toward bankruptcy late last year, to be released in coming days. He said senior executives would take "whatever actions are appropriate" in consultation with the creditors' committee to respond to the report's findings. The investigation has been conducted with assistance from William McLucas, former enforcement chief at the Securities and Exchange Commission, and accountants from Deloitte & Touche LLP. Mr. McLucas is now an attorney with the firm Wilmer Cutler Pickering in Washington. Also yesterday, Enron President Jeff McMahon said the company is continuing to interview accounting firms, looking for a replacement for Arthur Andersen LLP. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Cooper hits ground running By TOM FOWLER Copyright 2002 Houston Chronicle Jan. 31, 2002, 10:18AM Enron's new chief executive officer said he has no interest in finding out who's to blame for what went wrong at the energy giant, but will instead focus on revitalizing the business and preserving jobs. Stephen Cooper, who was named interim CEO and chief restructuring officer on Tuesday, told reporters in a conference call he plans to rebuild the company around a number of international and domestic power plants and natural gas facilities, operations that will have predictable revenues and cash flow. Most of the company's trading operations are being sold to Swiss bank UBS Warburg, while other long-term service contracts the company has under divisions such as Enron Energy services will also be sold or unwound. Cooper, a bankruptcy recovery specialist who has helped companies such as Federated Department Stores and Laidlaw, the owner of Greyhound Lines, dig themselves out of trouble, said his job will not to be to investigate the company's past. "The good news is not only do I not know what went wrong, it is literally of no interest to me," Cooper said. "I'm not going to spend my time looking in the rearview mirror, because there are a lot of people here who deserve our best shot of preserving this company." In addition to the 10 congressional investigations and other government agency probes into Enron, a special committee of Enron's board of directors is expected to issue the results of its own investigation within the next week. Appropriate disciplinary actions will be taken against employees if necessary, Cooper said, but he didn't know the full extent of those actions. Cooper seemed to waste little time in getting to work at Enron. He had met with the Enron board of directors even before being named to the job this week and canceled a Wednesday morning conference call with reporters because of another internal meeting that was running long. "He's jumped right into the reorganization," said Enron lawyer Brian S. Rosen in New York. "He's already working on a plan." That quick start is what's needed if Enron is to meet an early April deadline to present federal bankruptcy Judge Arthur Gonzalez with a reorganization plan. Companies have 120 days from the date of a bankruptcy filing to submit a reorganization plan, leaving Enron with about 60 days. Rosen said it's too early determine whether the company will seek an extension from Gonzalez, but they are commonly granted in complicated bankruptcy cases. Cooper said the restructuring will move "at light speed," as he plans to spend the first month assessing the company's assets, debts and liabilities. He estimates that the company owes unsecured creditors about $30 billion and secured creditors around $10 billion. The company will continue to sell off hard assets around the world and divest itself of all operations related to trading, Cooper said, leaving a business that is much smaller yet more stable. "One of the beauties" of Chapter 11 bankruptcy "is at the end of the day we'll be able to compress our debt against the total economic value of the remaining company," Cooper said. "This will give us the opportunity to put the company back in equilibrium with its capital structure." Enron is trying to protect some of the gains it may have made on trading contracts, but creditors would have to approve such a move, Cooper said. Enron can expect some cash to pay off creditors from selling some of its $7.5 billion in international assets it reportedly had as of late last year, including power plants, pipelines and other operations in more than a dozen countries. Enron has buyers lined up for many of those assets, most recently signing a deal Tuesday with Sempra Energy Trading to sell its London-based metal trading business, Enron Metals Group, for $145 million. Other assets for sale include: Wessex Water, a U.K.-based water and wastewater utility, which could sell for as much as $1.5 billion, about $700 million shy of how much Enron paid for it in 1997; Enron's 43 percent ownership stake in the Teeside power plant in England, which could get between $200 million and $300 million; and its majority stake in the $2.9 billion, 2,184-megawatt Dabhol power plant project and Enron Oil & Gas India Ltd. The company is also searching for an auditor to replace accounting firm Arthur Andersen, said Enron Chief Operating Officer Jeff McMahon. Andersen, the firm that has worked with Enron for more than a decade and has given the company the stamp of approval on dozens of questionable off-balance-sheet partnerships, stopped working with Enron last week. "We're in the process of talking to other accounting firms to determine where there are conflicts of interest," McMahon said. Chronicle reporter Eric Berger contributed to this story. Business/Financial Desk; Section C ENRON'S MANY STRANDS: THE CHIEF EXECUTIVE A Strategy Of Returning To the Roots In Energy By NEELA BANERJEE 01/31/2002 The New York Times Page 6, Column 6 c. 2002 New York Times Company HOUSTON, Jan. 30 -- To survive bankruptcy, the Enron Corporation plans to return to its roots, mainly by concentrating on a small collection of hard assets like natural gas pipelines and power plants, Stephen F. Cooper, the company's interim chief executive, said today. Despite a widespread belief among industry analysts that Enron should be liquidated because so little of value remains, Mr. Cooper argued that creditors, employees and others would benefit more by slimming the company rather than shutting it down. He said the new senior management team at Enron would spend the next month sorting out which businesses might prove the most viable parts in a reorganized company. But the group seems to have already decided that the core of a new Enron would be what the company had been before it developed its aggressive and varied trading operations: a transporter of natural gas. ''We will certainly be a smaller company,'' Mr. Cooper said during a conference call with reporters today. ''We will be a company based on hard assets and very predictable revenues.'' Enron's creditors have said they want to extract the maximum value from the company's assets through the bankruptcy process. Mr. Cooper appeared to be endorsing the view of company insiders that while some assets should be sold to pay debts, reorganizing Enron and giving creditors equity in the new company would be the best way to answer those demands. ''When you liquidate in a situation like this, you have the patina of distress,'' Mr. Cooper said. ''People try to put you over a barrel. They do put you over a barrel, and the size of that barrel runs from a normal wine cask up to the giant-sized cask that you have for brandy.'' Mr. Cooper, a managing partner at the New York firm of Zolfo Cooper, which specializes in salvaging bankrupt companies, was only appointed on Tuesday, endorsed by the main creditors committee and Enron's board. He said the company would conduct the reorganization at ''light speed,'' but he declined to provide a timetable and few specifics. Despite the intense scrutiny and investigations that have buffeted Enron, he said, the company still had a solid customer base for its business of providing gas and electricity. That, in turn, gives Enron some crucial cash flow for the revamping process. Mr. Cooper also said that a report of the results of the internal investigation into the past financial practices that led to Enron's collapse, led by the dean of the University of Texas School of Law, William Powers Jr., would be issued some time in the next three to six days. The company had said previously that it would make its findings known by next Monday, when the former chairman and chief executive, Kenneth L. Lay, was scheduled to testify before Congress. Mr. Cooper said that Enron officials would only decide upon disciplinary action once they had reviewed the investigation's findings. ''There will be no secrets here,'' he said. The new vision Mr. Cooper offered for Enron is a tacit, and perhaps unintentional, rebuke of the strategy the company followed throughout much of the 1990's as it transformed itself into the leading energy trader around the world. Mr. Lay and his protege, Jeffrey K. Skilling, fashioned a company they trumpeted as light on assets like pipelines and power plants. This ''virtual'' company, they said, would make its money from being smarter and quicker off the mark than the competition. The company focused on the fast-moving world of trading the many things it approached as commodities, from traditional products like gas and power to the innovative arcana of water and weather derivatives. But Mr. Cooper emphatically refused to speculate on what brought Enron down. ''It's literally of no interest to me,'' he said. ''I'm not going to spend time here looking in the rear-view mirror.'' Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Interim CEO: More Value From Restructuring Assets By Christina Cheddar 01/31/2002 Dow Jones News Service (Copyright © 2002, Dow Jones & Company, Inc.) Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- Enron Corp.'s (ENRNQ) newly appointed interim chief executive, Stephen Cooper, said he believes Enron can be restructured as a natural gas pipeline and power distribution company. "I don't see this as a liquidation," Cooper said, addressing the media in a conference call held late Wednesday. Cooper, a restructuring expert who heads consulting firm Zolfo Cooper LLC in New York, replaced Kenneth Lay, who resigned last week under pressure from the bankrupt company's creditors committee. Cooper is charged with restructuring a company that has already shed what was once its core business. Enron sold its energy trading and marketing business, which once accounted for 90% of its $100 billion in revenue in 2000, to Swiss bank UBS AG (UBS). The sale leaves behind a portfolio of gas pipelines and power plants. "My view ... is in a successful restructuring you deliver more value to your economic stakeholders," Cooper said, "Regardless of how effectively you run a liquidation, that liquidation has ... a patina of distress." The executive was joined on the call by other members from the newly created office of the chief executive, President and Chief Operating Officer Jeff McMahon and Chief Financial Officer Ray Bowen. Since the start of Enron's financial crisis, both McMahon and Bowen have vaulted up the ranks at the Houston company. The two were promoted Tuesday to the positions they currently hold. McMahon previously was Enron's chief financial officer, while Bowen was treasurer. Enron is still looking for a new chairman to replace the post left vacant by Lay's departure. Lay remains on Enron's board. According to Cooper, Enron has $40 billion in total debt, but of the total $10 billion is nonrecourse, project debt. That leaves $30 billion in debt that is owed to unsecured creditors, according to the executive. On the matter of Enron's past missteps, Enron's Cooper was very clear. "It's literally not of interest to me. ... I will spend little to zero of my time worried about the past...I frankly don't care," he said. In the 30-minute call, company officials declined to answer questions not related to restructuring. Enron still employs some 19,000 people. Cooper said he hopes to be able to save as many jobs as possible. Cooper will begin to assess which assets will become Enron's ongoing business, and since the company no longer has trading operations, that business will provide Enron with a new identity. Then, employees will be assigned to the ongoing operations. Cooper also plans to consider assets for sale. This process had already begun under the company's previous management. To date, Enron has agreed to sell a variety of assets, including $520 million in long-term contracts, and its London-based metals trading business to Sempra Energy Trading, a unit of San Diego-based Sempra Energy (SRE) for $145 million. Prior to the bankruptcy filing, Enron was in the process of selling Oregon utility Portland General Electric to Northwest Natural Gas Co. (NWN) for about $3 billion. Following the break-up of its merger with Dynegy Inc. (DYN), Enron had to cede control of its Northwest Natural Gas pipeline to Dynegy Inc. (DYN), but it does have an option to repurchase the asset. With these divestitures, both completed and in progress, Cooper admitted Enron would be a "substantially smaller enterprise." -By Christina Cheddar, Dow Jones Newswires; 201-938-5166; christina.cheddar@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron's new turnaround specialist discusses strategy for bringing firm back from bankruptcy By KRISTEN HAYS Associated Press Writer 01/31/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. HOUSTON (AP) - The man tapped to lead Enron Corp. out of the biggest bankruptcy in history said he won't be distracted by the myriad of investigations into the company's collapse. Stephen Cooper, Enron's new interim chief executive and chief restructuring officer, said Wednesday during his second day on the job that he was focused on Enron's future, not its past, and planned to move forward "at light speed" in reorganizing what's left of the company. Cooper said in a conference call with reporters that he was certain Enron could be saved even as rival Dynegy Inc. prepares to acquire one of its most prized assets, the 16,500-mile (26,550-kilometer) Northern Natural Gas Pipeline, by Friday. Enron also is transferring its once-envied trading operation to Swiss investment bank UBS Warburg. He said Enron will be left with all or part ownership of three smaller pipelines and officials are reviewing whether other businesses can be preserved or should be sold to help pay creditors. Cooper said Enron's businesses and customer base remain adequate for the company to someday emerge from Chapter 11 bankruptcy, although smaller and without its once-flagship trading venture. Chapter 11 bankruptcy frees a company from the threat of creditors' lawsuits while it reorganizes its finances. The debtor usually retains control of the business and its assets. "We will be substantially smaller from a revenue perspective, but we will be a substantial entity in the context of the movement of natural gas and liquids to our pipelines," he said. Enron filed for bankruptcy on Dec. 2. More than 5,000 employees were laid off, and most lost retirement nest eggs that were loaded with company stock. Enron crashed amid revelations of questionable accounting practices. Earnings were restated, eliminating millions in profits since 1997. The value of shares plummeted to less than a dollar from roughly dlrs 80 a year ago. Cooper, 55, is a managing principal of Zolfo Cooper, a New York-based reorganization adviser. The firm's past clients include Trans World Airlines, Polaroid Corp. and retailer Liberty House. Cooper succeeds Kenneth Lay, former chairman and CEO, who resigned last week. Lay said the numerous investigations into Enron's swift collapse were preventing him from running the company efficiently. Cooper refused to say how many additional job cuts were planned, saying the ultimate goal "is to preserve as many jobs as possible within the context of the reorganized entity. It is going to take some time to sort that out." In the end, he said the new Enron will be much like the natural gas pipeline company formed in 1985 with the merger of Houston Natural Gas and Omaha, Neb.-based InterNorth. After Enron was formed, the company increasingly took on new ventures. It started trading energy and created markets for other commodities, such as pulp, paper, bandwidth and weather futures. Anthony Sabino, an associate professor of law who specializes in bankruptcy and oil, gas and energy issues at St. John's University, said those innovations could be Enron's undoing. "They were playing with dynamite and it blew up in their faces," he said. "No doubt, if Enron is to survive it will be as a mere shadow of itself and staying away from things that got it into trouble in the first place." --- On the Net: http://www.enron.com AP Photo NY120 of Jan. 29 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. City - Enron dogged by talk of price manipulation. By Simon English. 01/31/2002 The Daily Telegraph P30 © Telegraph Group Limited, London, 2002 in New
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