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Lawyers agree on order to safeguard documents Houston Chronicle, 01/23/2002 Investigators issue four subpoenas Two witnesses described as resisting testimony=20 Houston Chronicle, 01/22/2002 COMPANIES & FINANCE THE AMERICAS - Enron judge asks for a plan to stop shre= dding TRADER'S COLLAPSE ... Financial Times, 01/23/2002 COMPANIES & FINANCE THE AMERICAS - Plaintiffs join to halt shredding. Financial Times, 01/23/2002 BACK PAGE - FIRST SECTION - Shredding storm may leave Enron's defence in ta= tters. Financial Times, 01/23/2002 Bush defends actions on Enron President says his mother-in-law was one of collapse's victims=20 Houston Chronicle, 01/22/2002 Andersen Ex-Staffer May Invoke Fifth Amendment on Capitol Hill --- Hearings= Approach as FBI Seizes Shredded Papers, Bush Defends Stance The Wall Street Journal, 01/23/2002 Accounting for Enron: Enron Pensions Had More Room at the Top --- Executive= s' Benefits Grew As Retirement Plans Of Employees Were Cut The Wall Street Journal, 01/23/2002 ENRON'S COLLAPSE: THE CHAIRMAN Chief's Words Paint Hands-Off Image, but Actions Offer Different View The New York Times, 01/23/2002 Enron creditors seek outside supervision Court to review options=20 Houston Chronicle, 01/22/2002 Security team leaves Enron to form firm Group to continue working through consulting contract=20 Houston Chronicle, 01/22/2002 ENRON'S COLLAPSE: THE OVERVIEW In Shift, Bush Assails Enron Over Handling of Collapse The New York Times, 01/23/2002 ENRON'S COLLAPSE Kind Words for Andersen The New York Times, 01/23/2002 ENRON'S COLLAPSE: THE LAWYER Seeking Top Berth In Pursuit Of Enron The New York Times, 01/23/2002 Cast Prepares for Congressional Curtain to Rise on Enron Scandal The Wall Street Journal, 01/23/2002 Unaccountable in Washington The New York Times, 01/23/2002 Bush Makes Recess Appointment to SEC The Wall Street Journal, 01/23/2002 Enron debacle could bring problems for Gramms Senator could face conflict of interest if his wife is questioned by lawmak= ers=20 Houston Chronicle, 01/22/2002 Auditor Independence: The SEC Chairman Doesn't Get It The Wall Street Journal, 01/23/2002 Accounting for Enron: Resources, Power Of State Authorities Tested by Ander= sen The Wall Street Journal, 01/23/2002 Accounting Industry Review Board Votes to End Its Existence in Protest The Wall Street Journal, 01/23/2002 Bidders Circle Over Enron's Indian Unit, Raising Prospect That It May Be Sp= lit Up The Wall Street Journal, 01/23/2002 Spinoff pays bill for sins of its parent Enron partner bound by promises not kept=20 Houston Chronicle, 01/22/2002 ENRON'S COLLAPSE: REGULATIONS Exemption Won In '97 Set Stage For Enron Woes The New York Times, 01/23/2002 Enron: A simple question of right and wrong USA Today, 01/22/2002 Business World: Enron For Beginners The Wall Street Journal, 01/23/2002 The Enron scandal ; By the numbers USA Today, 01/22/2002 ENRON'S COLLAPSE: THE INVESTORS In 401(k) Plans, a New Rush to Diversify The New York Times, 01/23/2002 New Order: Amid Enron's Fallout, And a Sinking Stock, Tyco Plans a Breakup = --- Giant's Surprise Move Comes As More Companies Face Push for Clearer Num= bers --- Suffering for Another's `Sins' The Wall Street Journal, 01/23/2002 Letters to the Editor Enron and the Culture of Greed The New York Times, 01/23/2002 ___________________________________________________________________________ Lawyers agree on order to safeguard documents=20 By ROSANNA RUIZ=20 Copyright 2002 Houston Chronicle=20 Jan. 23, 2002, 12:35AM Attorneys for Enron shareholders agreed late Tuesday on a proposed restrain= ing order to safeguard financial documents and investigate their destructio= n by employees of the company and its auditor, Arthur Andersen.=20 Also on Tuesday, FBI agents began an initial investigation into claims that= as recently as Monday Enron employees were still shredding documents.=20 More than a dozen lawyers representing scores of plaintiffs hammered out th= e agreement after being told earlier in the day by U.S. District Judge Meli= nda Harmon to draft a temporary restraining order they could agree on.=20 The lawyers will submit the order to Arthur Andersen this morning for revie= w. Harmon will make her decision today.=20 The proposed order calls for plaintiffs' attorneys to have full access to a= ll Enron-related documents at Andersen offices or some centralized location= .=20 The attorneys also want Harmon to allow them to expedite the discovery proc= ess and depose, among others, Enron Chairman Ken Lay and Andersen's lead au= ditor for the Enron account, David Duncan, who was fired last week after sh= redding of documents at the company's Houston office became public.=20 "Arthur Andersen tells us unilaterally what's going on and we won't allow t= hat to stand," said Bill Lerach, an attorney for Amalgamated Bank, a plaint= iff in the suit against Enron officials.=20 The attorneys had filed various motions with Harmon, seeking, among other t= hings, the assignment of U.S. marshals to protect documents at Enron and An= dersen, establishing a court-supervised repository for all documents, and a= llowing computer specialists to try to retrieve deleted electronic data.=20 During Tuesday's hearing, Lerach told Harmon that former Enron executive Ma= ureen Castaneda had said she saw documents being shredded as recently as la= st week, despite a Securities and Exchange Commission investigation that be= gan in October.=20 Lerach said Castaneda is only one of a handful of former Enron employees wi= th similar accounts of document shredding and other information.=20 "There is no question (Enron) destroyed documents," Lerach said while stand= ing near a box brimming with shredded paper Castaneda gave him.=20 "These people began shredding when they knew regulators would soon be comin= g after them."=20 New York-based Amalgamated Bank manages pension funds that lost $17 million= in Enron stock. In its lawsuit, Amalgamated alleges that 29 Enron executiv= es and board members sold $1.1 billion in Enron stock over three years know= ing that the stock was overvalued.=20 Enron attorney Ken Marks said in court that once the allegations about the = shredding surfaced, company officials went to the finance department to inv= estigate and found shredded paper in a trash bin. Authorities were then con= tacted, including the SEC, Justice Department and FBI.=20 Marks said Enron officials are unsure what documents were destroyed and tha= t there may be an "innocent" explanation for the shredding.=20 "People may have gotten rid of duplicates," Marks said. "We are treating th= is matter with the utmost seriousness."=20 Marks said during Tuesday morning's hearing that FBI agents already had sec= ured the two finance department floors at Enron's downtown office.=20 But FBI spokesman Bob Doguim said that two agents arrived at the building o= nly late Tuesday and had not been sent there at Enron's request.=20 "We're conducting a logical preliminary investigation," Doguim said.=20 In a statement, Enron officials announced that after the shredding allegati= ons surfaced, immediate steps were taken to preserve the "site where the al= leged document destruction took place" and that Enron would cooperate fully= with federal investigators.=20 Andersen officials admitted recently that documents were shredded after the= SEC began its investigation. Last week, Andersen said, it fired Duncan in = the wake of disclosures that he had ordered the destruction of thousands of= documents.=20 Andersen's attorney, Rusty Hardin, said at Tuesday's hearing that the firm = promptly "self-reported" the shredding.=20 Hardin assured Harmon that the "shredding is over" at Andersen and that the= firm could be trusted to preserve Enron documents.=20 Hardin also said Andersen has begun to collect laptops, Palm Pilots, 3,000 = backup computer tapes of existing documents and other materials relevant to= the Enron case.=20 Hardin also questioned the timing of Lerach's public announcement about pap= ers being shredded at Enron just hours before Harmon was to make her ruling= .=20 Lerach responded that the publicity had forced Enron's subsequent cooperati= on with investigators.=20 Chronicle reporter Dale Lezon contributed to this story.=20 Investigators issue four subpoenas Two witnesses described as resisting testimony=20 By JULIE MASON=20 Copyright 2002 Houston Chronicle Washington Bureau=20 Jan. 22, 2002, 11:54PM WASHINGTON -- Problems with two Arthur Andersen witnesses in the unfolding = probe of Enron Corp. forced congressional investigators to issue subpoenas = Tuesday night for a hearing on the destruction of evidence.=20 The House Energy and Commerce Committee subpoenaed Andersen CEO Joseph Bera= rdino, fired auditor David Duncan, attorney Nancy Temple and risk manager M= ichael Odom.=20 While the demands for testimony from Temple and Odom are regarded as "frien= dly," Berardino and Duncan are throwing up roadblocks, said committee spoke= sman Ken Johnson.=20 "Mr. Duncan's attorneys have indicated he will in all likelihood invoke his= Fifth Amendment constitutional right" against self-incrimination, Johnson = said.=20 A wave of congressional hearings into the collapse of Enron start Thursday = with testimony on document destruction scheduled by the oversight and inves= tigations subcommittee of the Energy Committee.=20 Andersen fired Duncan last week, saying he orchestrated the destruction of = thousands of documents after learning the Securities and Exchange Commissio= n was investigating Enron's books. Duncan has since been cooperating behind= the scenes with congressional investigators.=20 Johnson said House officials regard it as inconsistent for Duncan to provid= e detailed information to the committee while refusing to testify publicly.= =20 "There are many things he told the committee that we believe he can repeat = under oath without incriminating himself, and we expect him to do so," John= son said.=20 Robert Giuffra, Duncan's attorney in New York, said no decision has been ma= de regarding Duncan's testimony.=20 "We have not received a subpoena and we have not made a final decision on w= hether he will testify," Giuffra said.=20 If Duncan refuses to testify, Johnson said remedies under consideration by = the committee include charging him with contempt of Congress, the penalty f= or which can be a year in jail and a $10,000 fine.=20 Berardino, meanwhile, also is expected to testify Thursday, but Andersen of= ficials have told the committee he wants to postpone.=20 "Andersen has offered to provide the committee with the witness in a week o= r so, and that is not acceptable to us," Johnson said. "Mr. Berardino found= time to appear on Meet the Press last weekend, and we believe he should be= obliged to appear before Congress as well."=20 Berardino, who has been at the forefront of defending the Chicago-based Big= Five accounting firm's conduct in the Enron matter, made an appearance on = the Sunday talk show.=20 Patrick Dorton, spokesman for Andersen, said Berardino wants to cooperate w= ith the committee.=20 "We have directly told the committee we are willing to testify; it's only a= question of when," Dorton said.=20 The subpoenas follow a long weekend of back-and-forth between the committee= and its would-be witnesses, and signal a heightening of tension as the inv= estigation progresses.=20 Temple, Andersen's in-house counsel and author of an ambiguous Oct. 12 memo= on the company's document-retention policy, is expected to cooperate with = the committee summons, Johnson said.=20 Odom, Andersen's risk management partner in Houston who was the recipient o= f Temple's Oct. 12 e-mail, also is considered a friendly witness.=20 "They both have agreed to testify before the committee and cooperate with i= nvestigators," Johnson said. "Obviously they have certain client confidenti= ality concerns, and compelling them to testify provides them with some cove= r from any possible civil litigation by Enron."=20 Duncan, Temple and Odom are central figures in the probe of document destru= ction relating to Andersen's work on behalf of Enron.=20 Duncan, who was Andersen's lead partner on the Enron account, is accused by= his former employer of ordering a massive destruction of documents beginni= ng Oct. 23, after learning the SEC was investigating Enron's books.=20 Duncan, who has said through his attorneys that he followed company policy = and did nothing wrong, was fired by Andersen Jan. 15 and began cooperating = with congressional investigators the next day.=20 The shredding at Andersen stopped after Temple, an in-house lawyer for the = firm in Chicago, wrote a memo telling employees to preserve documents.=20 Temple's instruction followed word on Nov. 9 that the SEC had subpoenaed An= dersen -- weeks after the SEC opened its probe of Enron.=20 House investigators want to know whether Andersen's legal department intent= ionally stalled on issuing the order to preserve documents until after thou= sands of Enron papers and e-mails had been destroyed.=20 Weeks earlier, Temple sent Odom the e-mail referencing the firm's policy on= document destruction and retention.=20 Coming as it did days before Enron's calamitous Oct. 16 third-quarter earni= ngs report, thee-mail has been the focus of zealous scrutiny by House and S= enate investigators tracking Andersen's destruction of evidence.=20 "Mike -- It might be useful to consider reminding the engagement team of ou= r documentation and retention policy," Temple wrote in the Oct. 12 memo. "I= t will be helpful to make sure that we have complied with the policy."=20 Temple's e-mail included a link to the company's policy, which outlines whi= ch sorts of documents should be destroyed and which retained.=20 Four days later, Enron reported a $638 million third-quarter loss and discl= osed a $1.2 billion reduction in shareholder equity.=20 The devastating report was the start of Enron's stunning free fall, culmina= ting in the largest-ever corporate bankruptcy on Dec. 2.=20 Andersen has acknowledged the apparent impropriety of its document shreddin= g, but said Temple's e-mail was aimed at preserving evidence.=20 Odom, who is still employed by Andersen, was moved out of management duties= in Houston the day Duncan was fired.=20 While the destruction of documents is crucial to the probe into Enron's col= lapse, the central issue is likely to be how involved Andersen management w= as in creating a corporate structure that misled creditors and shareholders= , experts and investigators said.=20 The House committee's investigation is one of 10 Enron-related probes under= way on Capitol Hill.=20 The SEC and Labor Department also are investigating, and the Justice Depart= ment has opened a criminal probe.=20 COMPANIES & FINANCE THE AMERICAS - Enron judge asks for a plan to stop shre= dding TRADER'S COLLAPSE ... By SHEILA MCNULTY. 01/23/2002 Financial Times © 2002 Financial Times Limited . All Rights Reserved COMPANIES & FINANCE THE AMERICAS - Enron judge asks for a plan to stop shre= dding TRADER'S COLLAPSE ARTHUR ANDERSEN MUST AGREE WITH PLAINTIFFS TO HALT = DESTRUCTION OF DOCUMENTS.=20 A US federal judge asked plaintiffs in a series of lawsuits against Enron t= o agree to a plan by today with Arthur Andersen to end the shredding of Enr= on-related documents by Enron's former accountant. The plaintiffs, whose representatives filled two tables in the packed court= room of US District Judge Melinda Harmon, had offered a variety of proposal= s, some giving Andersen 20 days and some demanding the court take immediate= custody of the remaining documents.=20 Rusty Hardin, representing Arthur Andersen, said there could be up to 20m d= ocuments involved. But plaintiffs were unsympathetic, noting the accounting= firm had admitted documents were destroyed, while four to five former Enro= n employees have confirmed trash bags were routinely filled on the 19th flo= or of the Enron building with shredded documents.=20 One of the employees, Maureen Raymond Castaneda, director of foreign exchan= ge and sovereign risk, seized a cardboard box overflowing with shredded pap= er when she was laid off last week, Paul Howes, of Milberg Weiss Bershad Hy= nes & Lerach, told the Financial Times.=20 Enron has denied any knowledge of shredding and vowed strict action against= anyone involved, saying it had sent out four emails warning staff against = destroying evidence. The company sealed off the site where the former emplo= yees said the shredding had taken place since November.=20 Mark Palmer, Enron spokesman, said the company's lawyer, Bob Bennett, conta= cted the Department of Justice yesterday and offered to co-operate in any i= nvestigation. The department and the FBI immediately sent investigators to = the Enron headquarters.=20 The plaintiffs pointed repeatedly at the box of shredded paper in making th= eir case. "These are not five-year-old payroll records," said Bill Lerach o= f Milberg, representing Enron shareholder Amalgamated Bank in the case. "Th= ey contain the names of the illicit partnerships. These were current docume= nts."=20 He said it was not enough to take the word of Enron and Arthur Andersen exe= cutives that no further documents would be destroyed.=20 Neil Rothstein of Scott and Scott of Connecticut, which is representing the= Archdiocese of Milwaukee Supporting Fund in the case against Enron, said: = "This is criminal behaviour. This has to stop now, today. We have no idea w= hether this is going on right this minute."=20 © Copyright Financial Times Ltd. All rights reserved.=20 http://www.ft.com. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 COMPANIES & FINANCE THE AMERICAS - Plaintiffs join to halt shredding. By SHEILA MCNULTY. 01/23/2002 Financial Times © 2002 Financial Times Limited . All Rights Reserved Plaintiffs in a series of lawsuits against Enron joined yesterday to ask a = federal court judge to order an immediate end to the shredding of documents= by Enron and its former accountant Arthur Andersen, and to take custody of= remaining documents.=20 The plaintiffs noted that Andersen had admitted that documents were destroy= ed, while several Enron employees confirmed trash bags were filled routinel= y on floor 19 of Enron's building with shredded documents. One former Enron employee brought a box of shreddings to the court. "These = are not five-year-old payroll records," said Bill Lerach of Milberg Weiss B= ershad Hynes & Lerach, representing Enron shareholder Amalgamated Bank in t= he case. "They contain the names of the illicit partnerships. These were cu= rrent documents."=20 The word of Enron and Andersen executives that no further documents would b= e destroyed was inadequate, Mr Lerach said, particularly as Andersen had be= en involved in similar cases, including that of Houston-based Waste Managem= ent.=20 Andersen agreed to pay the Securities and Exchange Commission $7m in June l= ast year without admitting or denying liability to settle SEC allegations o= f audit fraud after Waste Management had made the largest profits restateme= nt in US history. Andersen then agreed in November to pay a further $20m to= Waste Management shareholders for failing to uncover the problems.=20 Neil Rothstein of Scott & Scott of Connecticut, representing the Archdioces= e of Milwaukee Supporting Fund against Enron, objected to the suggestion by= some plaintiffs that the companies be given 20 days to get records in orde= r.=20 "This is criminal behaviour," he said pointing to the box of shreddings. "T= his has to stop now."=20 © Copyright Financial Times Ltd. All rights reserved.=20 http://www.ft.com. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 BACK PAGE - FIRST SECTION - Shredding storm may leave Enron's defence in ta= tters. By PETER SPIEGEL. 01/23/2002 Financial Times © 2002 Financial Times Limited . All Rights Reserved BACK PAGE - FIRST SECTION - Shredding storm may leave Enron's defence in ta= tters - Revelations raise questions about what group was trying to hide, sa= ys Peter Spiegel.=20 It has become axiomatic in the world of US political and financial scandals= that it is not the original wrongdoing that brings down the powerful - it = is the cover-up. During Watergate, the measure by which all American scandals are judged, th= e break-in at Democratic party headquarters by a handful of amateur burglar= s would not have led to President Richard Nixon's resignation. It was his e= ffort to conceal the burglars' ties to his campaign that forced him out of = office.=20 Similarly, in the past week the escalating Enron controversy has shifted fr= om a complicated inquiry into possibly improper use of accounting principle= s, to an examination of document-shredding at both Enron and its Andersen a= uditors - and what they were trying to hide.=20 Enron said yesterday that the question had already become the subject of a = Federal Bureau of Investigation probe. Following accusations by aformer emp= loyee that Enron officials were destroying records, the company's lawyers y= esterday asked the Justice Department to send in FBI agents to find out wha= t happened.=20 On Capitol Hill, the shredding has also turned perceptions of Enron. Once v= iewed as a high-flyer with a failed business model and some questionable ac= counting practices, top investigators are increasingly convinced there was = long-term dishonesty at the heart of the company.=20 "There's no question in my mind the conduct of Enron and some key figures a= t Andersen served to deprive investors of information they should have had,= " Republican James Greenwood, head of one of the most important congression= al inquiries, said in an interview this week. "That was done for very uneth= ical reasons."=20 When the collapse of Enron, once the US's seventh largest company, remained= a question of accounting rules, defences were plausible. Off-balance sheet= partnerships are, after all, perfectly legal and they enabled the company = to avoid scrutiny of its debts.=20 But when the losses were fully disclosed on October 16, investors fled and = the giant energy trader sank into bankruptcy.=20 The closeness of the relationships between Enron and the partnerships have = led to questions about whether they were truly independent companies operat= ing at arm's length, but Enron lawyers have repeatedly pointed out that the= practice of using them can be found in any graduate accounting text book.= =20 Shredding documents, however, is not in any text book. Record destruction b= y itself can be a crime, particularly when it occurs after the opening of a= federal investigation or the filing of a lawsuit.=20 Andersen's shredding began in earnest on October 23, the day after Enron pu= blicly acknowledged it had been contacted by the Securities and Exchange Co= mmission, the US financial regulator. It continued until November 9, the da= y after Andersen received an SEC subpoena.=20 If former Enron employees are to be believed, Enron itself was shredding do= cuments about the private partnerships just last week - months after the op= ening of a formal SEC investigation, weeks after the filings of dozens of l= awsuits and days after the Justice Department acknowledged it had launched = a criminal inquiry into the company.=20 Beyond the potential criminality of the record destruction, however, the ac= t of shredding brings with it practical and legal assumptions which call in= to question the very defences Enron and Andersen have made of their account= ing practices. If the partnerships were indeed perfectly legitimate, why th= e need to destroy documents?=20 There are also signals that the shredding revelations have moved the Enron = controversy from the realm of hard-core scandal-watchers into US living roo= ms. Early last week, Gallup issued a poll that showed only 18 per cent of t= he American public was following Enron news very closely. But yesterday, Ma= ureen Castaneda, the former Enron executive accusing the company of shreddi= ng, could be seen everywhere on television news.=20 In their defence, Enron and Andersen have insisted there was no company-wid= e order to destroy papers. Andersen has attempted to point the finger at it= s Houston office, where it has fired David Duncan, its lead Enron auditor, = and disciplined seven colleagues. But it is a defence that has been difficu= lt to maintain following revelations that officials from Andersen's Chicago= head office were having frequent discussions with Mr Duncan about Enron's = troubles well before the shredding began.=20 It is now Enron's turn to make its case, arguing that it sent repeated miss= ives ordering staff to gather documents, as legally required of companies f= acing litigation. One such e-mail, obtained by the Financial Times and sent= on October 31, congratulated employees on their "excellent work" at securi= ng electronic data. "Please err on the side of retention of documents," the= e-mail said.=20 The shredding storm may prove immaterial for the company, already in bankru= ptcy. But the revelations could make all the difference when the time comes= to judge whether anyone at Enron should land in prison. DIY chain fraud tr= ial, Page 3 US watchdog to vanish, Page 21 Enron collapse, Page 27 www.ft.c= om/enroninquiry.=20 © Copyright Financial Times Ltd. All rights reserved.=20 http://www.ft.com. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Bush defends actions on Enron President says his mother-in-law was one of collapse's victims=20 By BENNETT ROTH=20 Copyright 2002 Houston Chronicle Washington Bureau=20 Jan. 22, 2002, 9:52PM WASHINGTON -- President Bush on Tuesday defended his administration's handl= ing of the Enron debacle and portrayed his mother-in-law as a victim of the= sudden collapse of the energy company's once-soaring stock.=20 Although he visited West Virginia to promote his energy and economic plans,= Bush was also forced to address the controversy over Enron, which contribu= ted generously to his campaigns and unsuccessfully sought White House help = last fall as its financial situation soured.=20 In his first comments on the issue since it was revealed that members of hi= s administration had spoken with Enron chief Ken Lay last fall, Bush said h= e was not worried that the issue would hurt his reputation or was distracti= ng from his agenda.=20 "Our administration has done the exact right thing," Bush said. "There have= been a couple of contacts with people in my Cabinet. And my Cabinet office= rs said, `No help here.' "=20 The president said he sympathized with the Houston company's investors, inc= luding his mother-in-law, Jenna Welch, who lost nearly all of her investmen= t.=20 "What I am outraged about is that employees didn't know all the facts about= Enron. My own mother-in-law bought stock last summer, and it's not worth a= nything now," Bush said.=20 The president said his mother-in-law, like other investors, "didn't know al= l the facts" about the company's financial situation.=20 "And that's wrong," Bush said.=20 The White House later explained that on Sept. 21, 1999, Welch purchased 200= shares of Enron stock at $40.90 a share for a total investment of $8,180.= =20 Last Dec. 4 -- two days after the company declared bankruptcy -- Welch sold= her Enron stock at 42 cents a share for a total of $84.=20 The daily revelations about Enron and the company's contacts with the Bush = administration have lately overshadowed the White House's efforts to focus = attention on terrorism and the economy.=20 Even during the trip to Belle, W.Va., reporters peppered Bush with question= s on Enron as he toured a machinery company.=20 With a number of congressional committees set to begin hearings on Enron th= is week, Bush warned lawmakers about dwelling too much on the issue.=20 "The Congress needs to stay focussed on the American people," Bush said. "W= e're running a war. We've got to make sure our homeland is secure. And we'v= e got to make sure people can find work."=20 To respond to Enron's problems, Bush has called for more corporate disclosu= re of financial information and directed the Labor Department to look into = tighter regulation of 401(k) retirement accounts.=20 But the president has balked at releasing information about all administrat= ion contacts with Enron unless there is an accusation of wrongdoing.=20 "If somebody has an accusation of wrongdoing, just let me know," he said. T= he administration recently revealed that Treasury Secretary Paul O'Neill an= d Commerce Secretary Don Evans spoke with Lay last fall but concluded nothi= ng should be done to help the company.=20 White House economics adviser Lawrence Lindsey also studied the Enron situa= tion and reached the same conclusion.=20 Bush also defended the administration's decision not to release records of = Vice President Dick Cheney's energy task force, which met six times with En= ron officials last year.=20 "We laid out the energy report. It's fully disclosed," Bush said.=20 But critics, including many Democratic lawmakers and environmentalists, arg= ued that accounts of the task force meetings may reveal how Bush's top cont= ributors in the energy industry, including Enron, played a major role in sh= aping the energy blueprint.=20 Sen. John Kerry, D-Mass, who unveiled an alternative to Bush's energy plan = on Tuesday, said that Enron and other companies were allowed an "access bon= anza " to Cheney's task force.=20 "As a result, those most heavily invested in the current energy system have= set a course for the future, which, surprisingly, champions status-quo pol= icies at the expense of new ideas and innovation," Kerry said.=20 The Massachusetts senator and possible presidential contender in 2004 said = energy policy should focus on raising fuel standards for large vehicles and= increasing government incentives for renewable energy like wind and solar = power.=20 Kerry opposed Bush's proposal for drilling in Alaska's environmentally sens= itive Arctic National Wildlife Refuge.=20 The president renewed his call for drilling in Alaska in a speech to worker= s in West Virginia. And deep in the heart of the coal mining belt, Bush dre= w cheers when he said, "We need to use coal."=20 Bush spokesman Ari Fleischer denied the allegation by Democrats and environ= mentalists that Cheney's task force was largely influenced by the energy in= dustry and said environmentalists such as the Sierra Club had equal access.= =20 "The president thinks that access should be across the board. And that's wh= y the Sierra Club, for example, as you know, met repeatedly with the energy= task force," Fleischer said.=20 However, a Sierra Club official said the group met just twice with the admi= nistration and only after the energy task force report was unveiled last Ma= y.=20 "I think Mr. Fleischer is mistaken. Enron had three times the meetings we d= id," said Daniel Becker, the director of global warming and energy programs= at the Sierra Club.=20 Becker said Sierra officials met with Cheney on June 6 after the environmen= tal group had blasted the energy task force recommendations. The environmen= tal group also met with administration officials in July to discuss fuel mi= leage standards for cars.=20 Chronicle reporter Julie Mason contributed to this story.=20 Andersen Ex-Staffer May Invoke Fifth Amendment on Capitol Hill --- Hearings= Approach as FBI Seizes Shredded Papers, Bush Defends Stance By Tom Hamburger Staff Reporter of The Wall Street Journal 01/23/2002 The Wall Street Journal A3 (Copyright © 2002, Dow Jones & Company, Inc.) The Arthur Andersen LLP executive fired for destroying documents related to= Enron Corp. has told a House committee through counsel that he may invoke = his Fifth Amendment right against potential self-incrimination to avoid tes= tifying at a hearing tomorrow, people familiar with the matter say.=20 David Duncan, the head of Andersen's Houston office, oversaw the auditing o= f Enron's books and is at the center of a congressional investigation into = the destruction of documents. The shredding continued after the Securities = and Exchange Commission began an inquiry during the fall into Enron's accou= nting practices, which helped force the giant Houston energy company into b= ankruptcy-court proceedings last month. "We are sending Mr. Duncan what we call an unfriendly subpoena," said Ken J= ohnson, a spokesman for the House Energy and Commerce Committee's chairman,= Republican Rep. Billy Tauzin of Louisiana. During talks with Mr. Duncan's = lawyers, "we were told in all likelihood that he would take the Fifth," Mr.= Johnson said.=20 A lawyer for Mr. Duncan, Vince DiBlasi, said, "No decision has been made" a= bout whether his client would decline to testify.=20 The committee also plans to issue subpoenas to three other Andersen executi= ves, including Chief Executive Joseph Berardino, who had resisted testifyin= g again this week after appearing before another House panel late last year= , Mr. Johnson said. A spokesman for Mr. Berardino said, "We have said repea= tedly that we will testify. It's only a question of when."=20 The other two agreed to testify at tomorrow's hearing before the Oversight = and Investigations Subcommittee but requested subpoenas, Mr. Johnson said. = One of them is Nancy Temple, a lawyer in the firm's Chicago headquarters wh= ose e-mailed reminder of the firm's document-destruction-and-retention poli= cy has been cited by Mr. Duncan in explaining his actions. The other is Mic= hael Odom, head of risk management in Andersen's Houston office, who forwar= ded Ms. Temple's e-mail to Mr. Duncan.=20 Another Andersen executive in the Houston office, meanwhile, pointed a fing= er yesterday at the Chicago headquarters in explaining the document destruc= tion, according to a person familiar with the House committee's interview w= ith him. That development followed a decision by the Federal Bureau of Inve= stigation to begin looking into the reported shredding of documents at Enro= n's headquarters in Houston. Mr. Johnson said the committee plans to hold a= dditional hearings into alleged document destruction at Enron "very soon."= =20 Also yesterday, President Bush offered his most extensive defense to date o= f his administration's handling of the Enron debacle, saying officials acte= d properly in refusing to help the company avoid bankruptcy court and portr= aying his own family as a victim of the collapse.=20 Asked about Enron by a reporter while visiting a West Virginia factory to p= romote his economic agenda, Mr. Bush said Treasury Secretary Paul O'Neill a= nd Commerce Secretary Donald Evans did the "exact right thing" in refusing = to help Enron CEO Kenneth Lay when he called during the fall seeking federa= l intervention. "My cabinet officers said: `No help here,' " he said.=20 Mr. Bush said his mother-in-law, Jenna Welch, bought 200 shares of Enron st= ock on Sept. 21, 1999, at $40.90 each for a total of $8,180. Mrs. Welch sol= d them on Dec. 4, two days after Enron filed in bankruptcy court, for 42 ce= nts a share, for a loss of $8,096. "If she had known all the facts, I don't= know what her decision would have been," the president said. "But she didn= 't know all the facts."=20 One of Congress's most powerful Democrats weighed in on the scandal, too. "= Enron raises serious questions about whether we can contemplate the deregul= ation of electric utility sales," said Michigan Rep. John Dingell, the Ener= gy and Commerce Committee's ranking minority member, who has longstanding c= oncerns about such proposals. Mr. Dingell also said he favors new rules to = restrict the ability of accounting firms to obtain lucrative consulting con= tracts from companies they audit.=20 In Houston, FBI agents began interviewing Enron employees and seized a tras= h can full of shredded documents. An Enron lawyer, Kenneth Marks, disclosed= the FBI action, later confirmed by FBI officials in Washington, at a packe= d federal court hearing in Houston on one of numerous private-investors sui= ts against the company.=20 Plaintiff lawyer William Lerach brought a large cardboard box containing sh= redded papers that he said had been supplied by a former Enron worker, one = of three who asserted in interviews during the week that documents had been= destroyed after the SEC began investigating Enron in October. If intended = to thwart investigators, document destruction could amount to criminal obst= ruction of justice.=20 The former employees said they saw shredded documents on the 19th floor of = Enron headquarters, home to accounting operations at the center of investig= ations into its collapse. The shreds reportedly contained the names of priv= ate partnerships that are the focus of the probes.=20 Mr. Marks, the Enron attorney, said company officials "located a single tra= sh can with shredded material." The material was "secured and bagged," and = guards were stationed on the 19th and 20th floors, he said. "We don't know = what happened here," he added, asserting that there were various possible e= xplanations, some "completely innocent." Enron informed the Justice Departm= ent and the SEC about the matter, he said, adding that the Justice Departme= nt dispatched the FBI to the scene.=20 The House committee's investigators yesterday interviewed another Andersen = executive from Houston, Thomas Bauer. Mr. Bauer's account, relayed by a per= son familiar with his interview, appears to bolster Mr. Duncan's defense. M= r. Duncan has told investigators he oversaw the destruction of Enron docume= nts after receiving Ms. Temple's Oct. 12 e-mail reminder of the company's d= ocument-disposal-and-retention policy and immediately halted it after recei= ving word from her on Nov. 9 that Enron-related documents had been subpoena= ed.=20 Mr. Bauer told investigators that he assumed document destruction and reten= tion should continue per the policy until told differently by Andersen lawy= ers. Like Mr. Duncan, Mr. Bauer also said he didn't think it was necessary = to preserve all Enron-related documents because Andersen hadn't received a = subpoena at that point.=20 Congressional investigators are dubious of that defense, especially given t= hat Andersen's Houston office in early November was sent a copy of a direct= ive from Enron executives to its own employees to preserve all documents. "= It sounds like they are pleading idiocy," said Mr. Johnson, the Tauzin spok= esman.=20 Experts say Mr. Duncan appears to be preparing an "advice-of-counsel" defen= se -- that he had no criminal intent because he was following a policy sent= by Ms. Temple, the Andersen lawyer. Reliance on counsel's advice can be "a= powerful defense," says Stanley Arkin, a New York attorney not involved in= the case. But "if the advice is on its face patently outrageous, patently = stupid or violates common sense, it won't excuse the conduct."=20 ---=20 Jeanne Cummings, John R. Emshwiller and Michael Orey contributed to this ar= ticle. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Accounting for Enron: Enron Pensions Had More Room at the Top --- Executive= s' Benefits Grew As Retirement Plans Of Employees Were Cut By Ellen E. Schultz and Theo Francis Staff Reporters of The Wall Street Journal 01/23/2002 The Wall Street Journal A4 (Copyright © 2002, Dow Jones & Company, Inc.) At a time when Enron Corp. was cutting back on its employee retirement plan= s to save money, executive benefits at the energy company kept getting rich= er.=20 Beginning in the 1990s, Enron joined many other U.S. companies in trimming = its employee-pension and savings-plan benefits to cut costs. But throughout= the same period, Enron also was continuing to offer a lavish set of pensio= n and retirement plans for its top executives. Those benefits, including a lifelong pension and company-paid insurance pre= miums for Chief Executive Kenneth Lay, are likely to come under more scruti= ny, given the effect of Enron's collapse on the company's employees. The U.= S. Department of Labor today will hold a briefing on its investigation of E= nron's retirement plan.=20 Not only did Enron workers lose their benefits when they lost their jobs, b= ut they also have seen their retirement plans gutted as Enron's stock, whic= h accounted for as much as 60% of the company's 401(k) plan, has dropped to= about 50 cents a share from a peak of $90 last year.=20 At the same time that employees were locked into much of the Enron stock in= their 401(k) plans, executives last year sold shares valued at about $128 = million, on top of $486 million in sales in 2000, according to Thomson Fina= ncial/Lancer Analytics, which tracks insider transactions. Mr. Lay alone so= ld shares valued at $29.8 million during that period.=20 According to company filings, Enron will pay Mr. Lay a pension estimated at= $475,042 a year for life. In addition, as part of an agreement Mr. Lay sig= ned with the company in 1996, it agreed to pay a total of $1.25 million in = insurance premiums through 2001 on a $12 million life insurance policy. Oth= er executives have similar pension or insurance agreements with Enron.=20 Such so-called "split-dollar" policies are used to channel executive pensio= n benefits into vehicles that executives can tap or pass on to their heirs,= mostly tax-free.=20 Enron also has a kind of executive 401(k), established in the 1980s, which = guarantees executives in the plan minimum returns of 12%.=20 In addition, at the time the company was reducing pensions for most of its = employees, Enron set up an executive savings plan that lets participating e= xecutives contribute 25% of their salaries and 100% of their cash bonuses e= ach year. The participants were guaranteed a 9% return on the first two yea= rs of the plan, and they were allowed to put their money into an array of i= nvestments -- not just Enron stock.=20 While the existence of Enron's executive benefits is outlined in company fi= lings and Securities and Exchange Commission documents, the total cost of t= he pension and retirement promises to Enron executives is nearly impossible= to measure. The cost of the split-dollar arrangements is largely invisible= (only the premiums are reported as an expense), and the benefits that accr= ue in the executive savings plans (also known as deferred-compensation plan= s) aren't required to be disclosed. An Enron spokesman didn't respond to re= quests for comment.=20 However, filings show that the liability for the executive pensions was $56= million in 2000, or about 8% of the total pension liability for all employ= ees and retirees.=20 The documents do show that at the same time that Enron was beefing up retir= ement benefits for its top executives, it was cutting them for its other wo= rkers.=20 According to SEC filings, in 1986 Enron set up an employee stock-ownership = plan, which bought 8.7 million shares of Enron stock in exchange for a note= of $335 million. To pay off much of this debt, the company in January 1987= terminated its overfunded pension plan, and transferred the $230 million i= n surplus assets, tax-free, to the ESOP.=20 Meanwhile, the company set up a new pension plan, transferring into it the = assets and liabilities from the old plan; the new plan, though no longer ov= erfunded, was less costly than the old one.=20 But even though Enron set up an ESOP and a new pension, this doesn't mean E= nron employees were to enjoy benefits from both a pension and an ESOP. That= is because Enron created a so-called "floor-offset" arrangement between th= e pension and the ESOP. That meant the benefits employees earned in one pla= n essentially erased benefits earned in the other. These arrangements have = been used by many companies, including Hewlett-Packard Co. and Airborne Inc= .=20 A major reason why companies set up these arrangements is to reduce their p= ension expense. And, indeed, the "offset" contributed to a significant decl= ine in Enron's pension expense, which was $3.6 million in 1987. After the o= ffset was established, instead of an expense, Enron's pension actually cont= ributed $9.6 million to Enron's bottom line in 1988.=20 In an unusual step, Enron calculated the ESOP "offsets" based on the price = of the stock from 1996 to 2000, when it was trading between $37.75 and $43.= 44. As previously reported in The Wall Street Journal, it then used the hig= her locked-in value of the ESOP accounts to permanently cut the value of pe= nsions that employees had earned between January 1987 and January 1995. Acc= ording to filings, employees had $116 million in ESOP assets at the end of = 2000. The assets now are nearly worthless.=20 Some Enron employees still will receive their pensions -- albeit at the red= uced values. How much employees lost depends on the size of the pensions th= ey had earned, and the value of their ESOP accounts from 1996 to 2000.=20 This arrangement comes to light because Enron sought -- and received -- per= mission from the Labor Department to change its plan in this fashion; compa= ny documents also indicate that Mr. Lay's pension wasn't affected by the ES= OP offset.=20 Not only were the past pensions permanently erased, but the pension going f= orward, in 1996, also was reduced. At that time, Enron converted the tradit= ional pension to a cash-balance pension, which reduces the benefits build-u= p for longer-term, older workers.=20 This fall, as the company slid toward bankruptcy, Enron said it might freez= e the pensions of all employees, and it stopped contributing to the 401(k).= =20 ---=20 Cassell Bryan-Low contributed to this article.=20 --- Do Unto Others . . . What Enron did to its retirement plans: -- Used ESOP to get surplus assets from pension plan, tax free. -- Used ESOP to cut pension expense. -- Used ESOP to offset pension benefits. -- Stopped contributing to ESOPs. -- Converted pension to cash balance pension plan. -- Froze pension plan of union employees. -- Locked employees in 401(k) into Enron stock until age 50. -- In late 2001, stopped contributing to 401(k). How this affected employees: -- Pensions earned before 1996 are reduced. -- Pension earned after 1996 are cut. -- Pensions for union workers frozen; investment risk increased. -- ESOPs are now worthless. -- 401(k)s are devastated. Source: company documents Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business/Financial Desk; Section C ENRON'S COLLAPSE: THE CHAIRMAN Chief's Words Paint Hands-Off Image, but Actions Offer Different View By ALEX BERENSON 01/23/2002 The New York Times Page 7, Column 1 c. 2002 New York Times Company Kenneth L. Lay, the chairman of the Enron Corporation, more than once made = a point last year of telling people how little he understood about the fina= nces of the company he has run since 1986.=20 In August, Mr. Lay said in an interview that questions about the deals that= Enron used to shift debt off its books were ''way over my head.'' In Novem= ber, Mr. Lay told Chuck Watson, the chairman of Dynegy, which at the time h= ad agreed to buy Enron, that he had never fully read the financial statemen= ts Enron filed with federal regulators, according to Mr. Watson. But if Mr. Lay's comments left the impression that he was a hands-off chair= man, a different picture has emerged over the last 10 days as to what Mr. L= ay knew about the company's accounting practices and when he knew it.=20 Disclosures by Congressional investigators and lawyers suing Enron showed t= hat Mr. Lay helped create and oversee some of the company's suspect financi= al arrangements. He knew that doubts had been raised about Enron's accounti= ng, even as he encouraged employees to buy Enron shares. About the same tim= e in September and October, Mr. Lay, to avoid facing margin calls as invest= ments in his portfolio lost value, repaid millions in loans from Enron with= company stock.=20 Now, employees who retained their faith in Mr. Lay even as the company was = collapsing are criticizing him for breaching their trust. At worst, experts= in securities law say, investigators may view Mr. Lay's professions of ign= orance as a deliberate effort to distance himself from Enron's problems.=20 ''He's got a lot of trouble,'' said James D. Cox, professor of corporate an= d securities law at Duke University. Mr. Lay is at risk of facing criminal = charges of fraud or insider trading, Mr. Cox said.=20 ''He's going to be spending a lot of time with lawyers; the real fear is on= the criminal side,'' Mr. Cox said. ''He could be the next Charles Keating,= '' a reference to the savings and loan operator who pleaded guilty to fraud= in the 1989 failure of Lincoln Savings and Loan.=20 Lawyers for Mr. Lay and Enron did not return calls seeking comment.=20 The first blow to Mr. Lay came Jan. 14, when the House Energy and Commerce = Committee released a letter showing that as he publicly proclaimed his igno= rance of Enron's financial structure in August, he had been warned by Sherr= on S. Watkins, an Enron vice president, that the company might ''implode in= a wave of accounting scandals.'' In response to the letter, Mr. Lay direct= ed Vinson & Elkins, Enron's law firm, to conduct a limited inquiry -- a rev= iew that a lawyer for Ms. Watkins has called a whitewash.=20 Last Friday, a lawyer representing employees who have sued Enron released a= 10-page transcript of an online chat between Mr. Lay and Enron employees o= n Sept. 26. In the chat, Mr. Lay repeatedly promoted Enron's stock while pr= omising employees that the company's financial reporting was ''legal and to= tally appropriate.''=20 Congressional investigators, meanwhile, made public the Vinson & Elkins rep= ort. It showed that Mr. Lay approved the creation in 1999 of two of the par= tnerships, LJM Cayman and LJM2 Co-Investments, that have figured prominentl= y in questions about the company's accounting practices.=20 In the process, Enron's board, under Mr. Lay's leadership, waived the compa= ny's code of ethics to let its chief financial officer, Andrew S. Fastow, r= un them and profit from them. Losses at those partnerships subsequently for= ced Enron to erase more than $500 million in shareholders equity, a measure= of the company's value.=20 Finally, on Sunday, Earl J. Silbert, Mr. Lay's lawyer, acknowledged that Mr= . Lay had sold some of his Enron stock back to the company in September and= October, while Vinson & Elkins was investigating Ms. Watkins's claims. Det= ails of the sales, repayments of a revolving line of credit extended to Mr.= Lay by Enron, do not have to be disclosed to the Securities and Exchange C= ommission until Feb. 14.=20 The revelation that Mr. Lay encouraged Enron employees to buy stock after h= e was warned about accounting problems may open him to charges of securitie= s fraud, said Joel Seligman, dean of the Washington University School of La= w in St. Louis and co-author of an 11-volume treatise on securities law. Th= e fact that he was disposing of shares at the same time could open him to c= harges of insider trading, Mr. Seligman added.=20 ''If he knowingly made false statements while he traded stock, he will face= criminal liability,'' Mr. Seligman said. Mr. Lay may also face S.E.C. proc= eedings and already is a defendant in scores of lawsuits.=20 Even if Mr. Lay did not know the details of the partnerships used by Enron = to inflate its earnings, he could be held criminally liable, Mr. Seligman s= aid. As long as Mr. Lay ''understood why they were created, what they were = intended to do,'' he said, ''the fact that he didn't know whether they were= created in Panama or the Cayman Islands is a detail that would not be mate= rial.''=20 Ira Lee Sorkin, a former director of New York office of the S.E.C. who is n= ow a defense lawyer, cautioned against rushing to judgment. But Mr. Sorkin = said the fact that Mr. Lay had disposed of shares after the warning from Ms= . Watkins might be difficult for Mr. Lay to explain.=20 Other securities lawyers have said the fact that Enron, which presumably ha= d the same information about its prospects as Mr. Lay, acquired his shares = might protect him from charges of insider trading.=20 But Mr. Sorkin disagrees. ''If he knew of the information that we now suspe= ct he knew about and paid back the company, knowing full well that this sto= ck is going to drop like a lead balloon,'' Mr. Sorkin said, ''then he's goi= ng to have an issue.'' Chart: ''Filling in the Details'' Last summer and fall, as energy prices an= d Enron's stock fell, Kenneth L. Lay, the company's chairman and chief exec= utive, repeatedly reassured investors and employees, urging them to buy sto= ck and telling them that he knew of no problems at the company. Recent disc= losures show that he had been told of concerns about Enron's accounting pra= ctices and had disposed of millions of dollars worth of Enron stock to meet= obligations on his investments. Public Comments and Disclosures AUG. 14 Wh= en Jeffrey K. Skilling suddenly resigns as chief executive, citing ''person= al reasons,'' Mr. Lay retakes the job. He says, ''Absolutely no accounting = issue, no trading issue, no reserve issue, no previously unknown problem is= sues''are behind the departure. What Was Going On Behind the Scenes AUG. 15= In the wake of Mr. Skilling's resignation, Sherron S. Watkins, a vice pres= ident for corporate development, drops a one-page letter in Mr. Lay's sugge= stion box. In it she raises questions about Enron's accounting practices. P= ublic Comments and Disclosures AUG. 16 Mr. Lay meets with employees to disc= uss the departure of Mr. Skilling. What Was Going On Behind the Scenes AUG.= 20 Ms. Watkins calls a former colleague at Arthur Andersen, Enron's accoun= ting firm, to tell him of her concerns. Mr. Lay exercises options on 25,000= shares at $20.78 with a total value of $519,500. The stock closes at $36.2= 5. A lawyer for Mr. Lay subsequently explains that he used some of the stoc= k to help repay a line of credit from Enron. Public Comments and Disclosure= s AUG. 21 Mr. Lay sends an e-mail to employees assuring them that the compa= ny is on solid footing. He says in the e-mail that ''one of my highest prio= rities is to restore investor confidence in Enron. This should result in a = significantly higher stock price.'' What Was Going On Behind the Scenes AUG= . 21 Four Andersen officials, including David B. Duncan, the lead partner o= n the Enron account, meet to discuss Ms. Watkins's concerns. According to a= n Andersen memo, they ''agreed to consult our firm's legal adviser about wh= at actions to take'' in regard to Ms. Watkins's accusations. Mr. Lay exerci= ses options on 68,620 shares at $21.56 with a total value of $1,479,447. Th= e stock closes at $36.88. A lawyer for Mr. Lay said he still holds these sh= ares, which are now trading for less than a dollar. AUG. 22 Ms. Watkins mee= ts with Mr. Lay. She gives him a seven-page letter in which she says that E= nron may be an ''elaborate accounting hoax.'' She urges him to look into it= , but not to involve the company's outside law firm, Vinson & Elkins, becau= se it has potential conflicts of interest. Despite Ms. Watkins's concerns a= bout Vinson & Elkins, the firm is asked to determine if a broad inquiry is = necessary to deal with the accusations. It is specifically told not to spen= d time ''second-guessing the accounting advice and treatment.'' Public Comm= ents and Disclosures SEPT. 26 In an online chat with employees, Mr. Lay say= s that Enron stock is a good buy and that the company's accounting methods = are ''legal and totally appropriate.'' He also says that he and other senio= r executives are so confident about Enron's prospects that they have bought= stock within the previous two months. He concludes by saying that the comp= any's third-quarter results will be very good. OCT. 16 Enron reports a thir= d-quarter loss of $618 million. One day later, it reduces shareholder equit= y by $1.2 billion to account for transactions involving Enron and some part= nerships created by Andrew S. Fastow, Enron's chief financial officer. What= Was Going On Behind the Scenes OCT. 15 The lawyers at Vinson & Elkins issu= e a report saying that Arthur Andersen approved of the practices mentioned = in Ms. Watkins's letter. The lawyers conclude that Enron did nothing wrong.= Public Comments and Disclosures OCT. 22 The Securities and Exchange Commis= sion opens an inquiry into the partnerships. OCT. 23 In a conference call, = Mr. Lay reassures investors and tells them there was no conflict of interes= t stemming from the transactions with the partnerships. Directors, he adds,= ''continue to have the highest faith and confidence'' in Mr. Fastow. The n= ext day, Mr. Fastow is forced out. What Was Going On Behind the Scenes OCT.= 26 Mr. Lay calls the Federal Reserve chairman, Alan Greenspan, about Enron= 's problems. OCT. 28 Mr. Lay talks to Treasury Secretary Paul H. O'Neill. O= CT. 29 Mr. Lay asks Commerce Secretary Donald L. Evans for help.=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron creditors seek outside supervision Court to review options=20 By ERIC BERGER=20 Copyright 2002 Houston Chronicle=20 Jan. 22, 2002, 11:24PM Lawyers for Enron creditors have asked a U.S. bankruptcy judge to appoint a= n outsider to supervise the current management or take control of the troub= led company.=20 The motion, filed Tuesday by the Dallas-based Wiser Oil Company and several= other energy companies, contends that Enron executives should no longer be= entrusted with leading the company through the biggest bankruptcy ever.=20 The action by creditors is backed up by growing evidence of mass shredding = of Enron's financial documents.=20 "Particularly disturbing are reports that employees of the debtors have bee= n destroying Enron documents since the federal government began investigati= ng their collapse," the motion states.=20 On Tuesday FBI agents visited Enron's headquarters following the latest all= egations of destruction of documents that could be used as evidence of wron= gdoing.=20 An Enron spokesperson said the company has posted security guards to restri= ct access to floors holding financial records.=20 Nancy Rapoport, dean of the University of Houston Law Center and an expert = in bankruptcy law, believes it is not a coincidence Tuesday's filing by cre= ditors was made as shredding allegations mount.=20 "This is a one-for-one response," she said. "They are pissed."=20 A hearing on the motion has been set for Feb. 20 in the court of Judge Arth= ur Gonzalez.=20 He is hearing Enron's Chapter 11 bankruptcy case.=20 Enron hopes to pare down its assets during the bankruptcy process to pay cr= editors and emerge as a smaller, profitable company. Removal of its managem= ent team may make that a more difficult goal.=20 Rapoport believes it's likely at least an examiner will be appointed, but s= he wouldn't not rule out the possibility of the judge taking the more drast= ic step of appointing a trustee.=20 An examiner is an independent counsel of sorts.=20 Such an appointee would have the power to look into what caused Enron's dec= line and investigate whether the company's officials are acting in the best= interest of all the creditors during the bankruptcy process.=20 A trustee has much broader powers to run the company, and essentially wrest= s control of it from current executives.=20 "A judge appointing a trustee is telling a debtor we don't trust you a seco= nd longer," Rapoport said. "But my instinct is that the bankruptcy judge is= going to pick the lesser of the two evils and will appoint an examiner alo= ng with giving a strong lecture to the debtors."=20 Bankruptcy lawyers for Wiser, who filed the motion, and Enron, who can be e= xpected to challenge it, did not return telephone calls seeking comment Tue= sday night.=20 The motion presents several arguments in favor of a trustee or examiner.=20 First, the motion says access to Enron's financial records has been limited= , and it is difficult to get accurate accounts of the company's assets and = debt.=20 The motion also objects to the sale of assets from Enron's once-robust trad= ing business to UBS Warburg last week. Last week the judge approved the sal= e, which provided no money up front and will only offer revenue if the busi= ness succeeds.=20 Finally, the motion cites the civil and criminal investigations by the Secu= rities and Exchange Commission, the Department of Labor, Congress and the D= epartment of Justice.=20 Previously, Wiser has announced it stands to lose about $6 million because = Enron will not live up to oil and gas hedges -- contracts that were suppose= d to ensure Wiser would reduce its risk of losses on price fluctuations.=20 Security team leaves Enron to form firm Group to continue working through consulting contract=20 By ALAN BERNSTEIN=20 Copyright 2002 Houston Chronicle=20 Jan. 22, 2002, 11:26PM Enron's top security team, including four former CIA officers and and ex-FB= I agent, has left the company to form a private consulting firm.=20 An Enron spokesman said Tuesday the move is unrelated to allegations that e= xecutives hid financial problems from investors and that employees shredded= documents after the company filed for bankruptcy.=20 The new firm, Secure Solutions International, will continue security work f= or Enron through a consulting contract, which enables it to work for other = clients, spokesman Vance Meyer said.=20 He said that after Enron filed for Chapter 11 bankruptcy protection on Dec.= 2, the security officers were at risk of being laid off and suggested they= form an independent firm with Enron as a client.=20 John W. Presley of Katy, a former FBI agent who was Enron's director of cor= porate security and now leads SSI, could not be reached for comment.=20 The Enron team included Presley, four Central Intelligence Agency veterans = and a former investigator for the Florida Department of Environmental Prote= ction.=20 It acted as an in-house detective agency, probing a variety of allegations = of fraud and other kinds of rule-breaking by Enron workers.=20 Other duties included guarding executives, securing Enron's computer operat= ions and protecting the corporation's power plant in India.=20 Team member David M. Cromley, a former CIA agent who was Enron's director o= f business analysis, gave Enron executives "detailed and unique information= " allowing them to make decisions on "investments, sales of assets, joint v= entures and products," according to his business biography. It also says he= worked for the CIA in war zones in Somalia, Liberia and Romania and specia= lized in counter-terrorism operations.=20 Andre Le Gallo, a business intelligence consultant in California, said Tues= day that he was the first person recruited from the CIA by Enron. Le Gallo = worked at Enron for about five years, ending in December 1999.=20 "They were looking for people who knew where the international buttons were= ," Le Gallo said.=20 Enron's international projects included the politically sensitive Indian el= ectricity generation plant. The CIA gathered information about the risks of= the project and about British companies that were competing with Enron to = build it, The New York Times reported in 1995.=20 Le Gallo said the former agents' switch to private consulting is not unusua= l in the security industry, especially in light of Enron's collapse.=20 "I'm sure they moved because they found better things to do than at a sinki= ng firm," he said.=20 Business/Financial Desk; Section A ENRON'S COLLAPSE: THE OVERVIEW In Shift, Bush Assails Enron Over Handling of Collapse By DAVID E. SANGER with DAVID BARBOZA 01/23/2002 The New York Times Page 1, Column 5 c. 2002 New York Times Company BELLE, W.Va., Jan. 22 -- Abruptly changing his tone about a company that co= ntributed heavily to his political campaigns, President Bush said today tha= t he was ''outraged'' that the Enron Corporation misled its employees and i=
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