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Enron Board Learned Of Executive's Concerns In Oct -Atty Dow Jones Energy Service, 01/23/2002 Enron's Board Ignored Signs of Losses, Dorgan Says Bloomberg, 01/23/2002 Enron Board Protected From Lawsuits, Experts Say Bloomberg, 01/23/2002 What Did They Know And...When Did They Know It?; Meet Sherron Watkins, who = sounded the alarm on Enron long before its collapse Time Magazine, 01/28/2002 Enron affiliate challenges PUC call for suspension, revocation Associated Press Newswires, 01/23/2002 USA: FACTBOX-US congressional hearings schedule on Enron. Reuters English News Service, 01/23/2002 Judge to consider lawyers' plan to investigate Arthur Andersen Associated Press Newswires, 01/23/2002 Enron suit cites racketeering charges CBS Marketwatch.com, 01/23/2002 Enron Employees Sue Andersen, Claiming Auditor Violated Racketeering Laws Dow Jones Business News, 01/23/2002 On Capitol Hill, Members of Congress Taking Up Where They Left Off; Enron E= mployees Scheduled Meeting Won't Happen Today CNN: Live Today, 01/23/2002 Judge Won't Allow Insurers Immediate Access To Enron Info Dow Jones News Service, 01/23/2002 Senate panel asks Enron to authorize public disclosure of tax returns since= 1985 Associated Press Newswires, 01/23/2002 Enron Asked to Release Its Tax Records Dating Back to 1985 Bloomberg, 01/23/2002 USA: U.S. Senate panel wants to release Enron tax data. Reuters English News Service, 01/23/2002 White House Cites Urgency In SEC Appointments Dow Jones International News, 01/23/2002 Andersen CEO won't show=20 CNN, 01/23/2002 Auditor Refuses To Testify In Enron Hearing KPRC Channel 2 Houston, 01/23/2002 USA: Former Andersen partner seeks to defer testimony. Reuters English News Service, 01/23/2002 Perspectives Newsweek, 01/28/2002 You're On Your Own ; The Enron lesson: in making critical decisions, consum= ers are at sea. Here is a survival guide Time Magazine, 01/28/2002 Your Money: Old Safety Nets Are Gone. Here's What To Do Time Magazine, 01/28/2002 What $6 Million Can Buy Time Magazine, 01/28/2002 The Enron Effect; As the accounting scandal spreads, regulators and politic= ians are pounding the table for reform. But will anything really change? Newsweek, 01/28/2002 The Great Giveback; Enron's turned a capital pastime upside down: the Beltw= ay's racing to give away, not pocket, the giant's cash Newsweek, 01/28/2002 'Events, Dear Boy, Events'; Enron is not--yet--much of a political scandal,= but has many facets awkward for Republicans Newsweek, 01/28/2002 Judicial nominee to face questions about Enron contributions Associated Press Newswires, 01/23/2002 Congress's Enron Hearings May Open Way to New Laws Bloomberg, 01/23/2002 State GOP sends $15,000 Enron contribution to employees' fund Associated Press Newswires, 01/23/2002 LOU DOBBS MONEYLINE; CNNfn CNNfn: Moneyline News Hour, 01/22/2002 ___________________________________________________________________________= __________ Enron Board Learned Of Executive's Concerns In Oct -Atty By Jason Leopold 01/23/2002 Dow Jones Energy Service (Copyright © 2002, Dow Jones & Company, Inc.) Of DOW JONES NEWSWIRES=20 LOS ANGELES -(Dow Jones)- Enron Corp.'s (ENRNQ) board of directors didn't l= earn until October that an Enron executive had serious concerns that accoun= ting improprieties could bring down the company, according to an attorney f= or the board, although word of those concerns had spread throughout the com= pany by early September. The executive, Sherron Watkins, raised her concerns with Chairman and Chief= Executive Ken Lay in August. But they weren't shared with board members be= sides Lay until it was too late to do anything, said attorney Neil Egglesto= n, who represents Enron's board in federal investigations of the company.= =20 "The first they remember hearing of this issue is in early October in conne= ction with the Vinson & Elkins review," Eggleston said.=20 Vinson & Elkins, Enron's outside law firm, conducted a review of Watkins' c= oncerns at Lay's request. The firm submitted its findings in a report dated= Oct. 15, concluding that the company's handling of its off-balance-sheet p= artnerships was proper but could be portrayed in a way that could be damagi= ng to Enron.=20 Enron's board is named in a number of civil and class action lawsuits assoc= iated with the company's collapse. The audit committee had reviewed some of= the off-balance sheet partnerships now at the center of federal investigat= ions, and the full board voted twice to suspend Enron's code of ethics to a= llow former Chief Financial Officer Andrew Fastow to run partnerships even = as he served as an officer for Enron.=20 Robert Jaedicke, the chairman of the board's audit committee, became aware = of Watkins' concerns a few days before the committee met on Oct. 8, Egglest= on said. Vinson & Elkins advised others on the committee at the meeting, an= d the rest of the board was informed a couple of days before the firm relea= sed its report.=20 The text of the Vinson & Elkins report supports that chain of events. Rober= t Bennett, an attorney representing Enron in federal investigations of the = company, wasn't sure when management first notified the board, but deferred= to Eggleston's account.=20 Board Committee Established Later=20 On Oct. 31, after news of losses related to transactions with partnerships = run by Enron executives had set off the energy company's spiral into bankru= ptcy court, Enron established a special board committee to look into the tr= ansactions. William Powers, dean of the University of Texas Law School, was= named to head the committee.=20 Watkins' concerns about accounting practices related to the off-balance she= et partnerships were already known in August by the company's general couns= el, Enron auditor Arthur Andersen and the company's top management.=20 Watkins detailed her concerns in a letter to Lay on Aug. 15. She met with L= ay on Aug. 22 to discuss the letter, in which she specifically cautioned La= y against using Vinson & Elkins to look into the matter "due to conflict."= =20 By September, lower-level employees at the company were also aware.=20 "I heard in September, maybe the first week in September, for the first tim= e that someone accused Enron of shady practices," said Inderpal Singh, a ma= nager of finance who works for Enron global markets in the finance and stru= cturing department. "Everybody in my division started talking about it, and= we were worried because we all thought everything was OK at Enron."=20 Philip Hilder, Watkins attorney, said his client tried in September and Oct= ober to contact other people in Enron, including the board of directors, to= warn them about accounting improprieties, because she wasn't satisfied wit= h the steps Lay was taking to ensure Enron's financial health.=20 "Yes, she did write additional letters to others at Enron about her concern= s after she met with Mr. Lay," Hilder said in an interview Sunday.=20 Eggleston said Monday that board members don't recall having received a pho= ne call, fax or email from Watkins.=20 "But then again, if the board received a call from Sherron Watkins, they wo= uldn't necessarily know who she is," Eggleston added.=20 Other Letters=20 Ken Johnson, a spokesman for the House Energy and Commerce Committee, which= released Watkins' Aug. 15 letter last week, said late Tuesday that the com= mittee is aware of additional written warnings sent by Watkins to others at= the company following her contacts with Lay.=20 "I can't say specifically who she sent them to at Enron, but we're in the p= rocess of reviewing them and at some point we intend to discuss them with h= er," Johnson said.=20 One Enron executive said Watkins appeared to be on a "mission," warning "ev= eryone she came in contact with" about the partnerships and questionable ac= counting practices she believed would ruin the company.=20 One of the letters Watkins wrote was sent to Enron Chief Financial Officer = Jeff McMahon on Oct. 16, the day Enron released third-quarter earnings that= showed a $618 million loss due in part to transactions with off-balance sh= eet partnerships run by the company's executives, Hilder said.=20 Watkins, 42, who currently earns $165,000 a year as a vice president of com= munications at Enron, wrote that her "worst nightmare" had come true, refer= ring to the scenario she had described in her much-publicized August letter= to Lay, Hilder said.=20 Watkins, who has done work for four off-balance sheet partnerships includin= g JEDI, Cash, Cactus I and Caribou, was upset that Enron officers made only= scant reference to the partnerships in the earnings announcement and faile= d to explain adequately the reasons behind the writeoffs, Hilder said.=20 McMahon didn't return a call seeking comment.=20 Richard Watkins, Sherron Watkins' husband, said his wife called him Oct. 16= after the earnings report to express her concerns.=20 "She was disappointed and frustrated no one listened to her," Richard Watki= ns said in an interview.=20 Sherron Watkins met with Lay again at the end of October, at which time Lay= told her a special board committee would be formed to look into her allega= tions, Hilder said.=20 Bennett confirmed the meeting.=20 According to Richard Watkins, when Enron said in early November that it was= restating four years' worth of earnings, his wife told him: "I'm going to = have to look for another job. This company is going to go bankrupt."=20 -By Jason Leopold, Dow Jones Newswires; 323-658-3874; jason.leopold@dowjone= s.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron's Board Ignored Signs of Losses, Dorgan Says 2002-01-23 14:46 (New York) Washington, Jan. 23 (Bloomberg) -- Enron Corp.'s board failed to act w= hen it knew partnerships that were used to hide debt and unprofitable inves= tments were leading to losses that shareholders would eventually absorb, Se= nator Byron Dorgan said. ``It seems to me they had some warnings, and probably even considered = those warnings and must have discarded them,'' Dorgan, who is leading an in= vestigation into Enron's bankruptcy, said in an interview. ``I'm very surpr= ised.'' The Consumer Affairs Subcommittee, led by Dorgan, a North Dakota Democ= rat, has received transcripts and minutes of meetings that show Enron's boa= rd discussed the roles played by former Chief Financial Officer Andrew Fast= ow and Chief Executive Officer Jeffrey Skilling in setting and running Enro= n's partnerships. Those partnerships had losses that forced Enron to restate $586 millio= n in income since 1996. That led lenders to cut off credit, impairing the c= ompany's main business, trading electricity and natural gas. Shareholders l= ost $26 billion in market value and $850 million in pension funds vanished. Dorgan, who will chair a hearing Feb. 4, said his panel received 41 bo= xes of documents from Enron. Chairman Kenneth Lay has agreed to testify. Fa= stow, who Enron ousted Oct. 24, and Skilling, who resigned Aug. 14, haven't= responded to requests they testify, Dorgan said. Information Needed The committee is still seeking some documents Enron hasn't supplied, i= ncluding details about who invested in the partnerships and evidence of the= board's approval, Dorgan said. He said he didn't have any independent info= rmation about document shredding at Enron that may have happened as recentl= y as two weeks ago. ``One would expect what has happened here probably includes some viola= tion of law,'' Dorgan said. ``At this point we don't know enough.'' Dorgan plans several hearings that will investigate possible conflicts= of interest in the accounting and investment banking industries that were = highlighted by the Enron bankruptcy, the largest in U.S. history. Nine othe= r House and Senate committees are examining other aspects of Enron's failur= e. Auditor Arthur Andersen LLP's acceptance of Enron's accounting has ren= ewed interest in passing laws preventing auditors from consulting and accou= nting for the same client. ``It's likely we'll want to evaluate some legislative changes,'' said = Dorgan, who served as North Dakota's tax commissioner from 1966 until 1980. Pensions, Analysts and Partnerships Dorgan said he saw good chances for legislation to restrict 401(k) ret= irement plans from being heavily invested in one stock. He said rules shoul= d also be changed to remove conflicts of interest in large investment banki= ng firms that may have caused stock analysts to rate Enron a ``buy'' or bet= ter until shares collapsed. The Senate Commerce Committee asked Enron in a Jan. 8 letter for a f= ull accounting of all affiliated partnerships the company formed. The partn= erships, set up throughout the 1990s, hid debt and investment losses and created buyers for power plants. Some of the= m were capitalized only with Enron stock, according to a letter an Enron ex= ecutive sent Lay in August. ``The construct of those partnerships played a significant role in the= destruction of this company,'' Dorgan said. The role of the board of directors in Enron's downfall has received ne= w scrutiny since the disclosure last week that an internal probe by the law= firm of Vinson & Elkins last October said the board's audit committee revi= ewed some partnerships. The directors approved the partnerships and they suspended the company= ethics code to allow partnerships to be created, the report says. The law = firm said it didn't uncover any wrongdoing. Conflict of Interest Enron lawyer Robert Bennett repeated earlier claims that many of the d= etails of the questionable transactions weren't shared with the board. ``What will become clear if the good senator is prepared to wait for t= he completion of his investigation is that a tremendous amount of informati= on was not known by members of the board,'' Bennett said. ``Why are we havi= ng hearings if conclusions have already been reached?'' Citing transcripts, Dorgan disagreed. ``They clearly talked about the= conflict of interest,'' he said. ``They actually had some discussions abou= t what Fastow was doing and what Skilling was learning.'' Under one arrangement, controlled by Fastow, Enron avoided $550 millio= n in losses through a partnership called Raptor, according to the letter se= nt to Lay. Raptor agreed to pay Enron if the energy trader's investment por= tfolio of Internet and energy shares fell. If those shares rose, Raptor boo= ked the gain and paid the income to Enron. Raptor's only asset was the prom= ise that Enron would issue enough shares to pay back the partnership for wh= atever it had paid to cover stock losses. `What Was Their Risk' In another case, Enron used stock to set up a partnership that sold $1= .2 billion in bonds and paid Enron $800 million for 14 power plants. Enron = booked the money as net income. ``We need to get information on who invested in the partnerships, what= are the names, what were their investment stakes, what were their returns,= what was their risk,'' Dorgan said. Besides Lay and Skilling, directors named in lawsuits include Wendy Le= e Gramm, a professor at George Mason University and wife of U.S. Senator Ph= il Gramm; Norman P. Blake Jr., the chief executive officer of Comdisco Inc.= ; Robert A. Belfer, former chairman of Belco Oil & Gas Corp.; Ronnie Chan C= hichung, chairman of Grand Hotel Holdings Ltd.; John H. Duncan, former pres= ident of Gulf & Western Industries Inc.; Charles Lemaistre, former chancell= or of the University of Texas system; and Robert Jaedicke, a Stanford Unive= rsity professor Emeritus. Those directors allowed Fastow to ``profit handsomely'' from managing = two partnerships known as LJM, receiving his salary and $30 million in comm= issions for overseeing them, Dorgan said. According to Dorgan, the transcripts show directors didn't know how mu= ch Fastow was being paid. ``It looks like they were surprised at the kind o= f compensation he received when they discovered later,'' he said. The board also oversaw Enron's transformation from a pipeline operator= into a trader dependent on income from derivatives transactions that were = hard for investors to understand, Dorgan said. ``Part of the fallout of this could very well be an interest in some c= oncern about regulation of hedge funds and derivatives,'' Dorgan said. --Alex Canizares and Russell Hubbard in Washington at (202) 624-1820 or aca= nizares@bloomberg.net. Editors: Willen, Sobczyk Enron Board Protected From Lawsuits, Experts Say 2002-01-23 14:50 (New York) New York, Jan. 23 (Bloomberg) -- Enron Corp.'s directors enjoy legal p= rotection that may make it difficult for investors to sue them successfully= , legal experts say. The directors are named as defendants in 40 investor lawsuits claiming= the company concealed losses that led to Enron's bankruptcy. The company a= nd its officials also are targets of government criminal and civil investig= ations. ``All it takes is a pencil to sue a board of directors,'' said Larry H= amermesh, a corporate law professor at Widener University. ``Making a case= against directors is a lot harder.'' Federal and state laws hold boards responsible for only the most serio= us fraud and misrepresentation, experts say. They are designed to shield di= rectors from legal liability to make service on the board more attractive. U.S. Senator Byron Dorgan said transcripts of Enron board meetings sho= w that directors discussed conflicts of interest and the roles of senior executives in partnerships used to shield the company's= debt. The transcripts show they ignored warnings about the company's problems, said Dorgan, a North Dakota Democrat leading a Sena= te Commerce Committee investigation. W. Neil Eggleston, attorney for Enron's outside directors, declined to= comment on the suits against his clients. He said none has been asked to testify before any congressional committee investigating = Enron. Robert S. Bennett, who represents board members who also are corpora= te officers, wasn't available for comment, his office said. Eggleston said a ``motion to dismiss'' for lack of grounds to sue is t= ypically the first step a lawyer for directors will take when a corporate b= oard is sued. ``In this suit, it is hard to say what will happen,'' he said= . Liability Insurance The Enron board and officers have liability insurance with the St. Pau= l Companies and the Associated Electric & Gas Insurance Services Ltd. ``We can't discuss the terms of the policy,'' said Pat Hirigo= yen, a spokesman for St. Paul. St. Paul said its policies provide Enron off= icers and directors with $19 million in coverage. The AEGIS policy provides $35 million in coverage for legal fees and r= elated expenses, according to the policy filed in the bankruptcy documents. Mark Palmer, a spokesman for Enron, said the company provides insuranc= e for the legal costs of directors and executives. He declined to comment on liability coverage. Elson said most policies don't pay off if the directors are successful= ly sued for fraud but may cover reckless behavior. Enron, once the largest energy trader and the nation's seventh largest= company, filed for bankruptcy in December after reporting its earnings ove= r five years were inflated by $586 million. The company admitted it hid muc= h of its debt in off-the- books partnerships. `Poor Judgment' ``Just having poor judgment or being sloppy isn't enough'' for a succe= ssful suit against the directors, said Charles Elson, director of the Center for Corporate Governance at the University of Delawa= re. ``If it was easy to sue directors, it would be hard to get anyone to sit on a board.'' Elson said shareholders, to be successful, must show directors were ``= reckless or fraudulent.'' Still, the board approved the partnerships and, according to a report = by Enron's counsel, Vinson & Elkins, suspended the company ethics code to let former Chief Financial Officer Andrew Fastow cre= ate partnerships between himself and Enron. ``The board determined that Mr. Fastow's participation in the partners= hips would not adversely affect the interest of Enron,'' the company said in a securities filing in November. Seven of 12 outside board members received consulting fees or business= deals from Enron, and four board members sold stock while Enron was issuin= g inaccurate financial statements. Material Disclosure ``This may make a securities action a little easier,'' Elson said. ``F= or it raises the question of whether the board failed to make a material disclosure it should have.'' Two corporate officers, Kenneth Lay, the chairman and founder of Enron= , and Jeffrey Skilling, chief executive officer before he resigned in August, also sat on the board. Besides Lay, Enron directors named in some of the lawsuits include Wen= dy Lee Gramm, a professor at George Mason University and wife of U.S. Senat= or Phil Gramm; Norman P. Blake Jr., the chief executive officer of Comdisco= Inc.; Enron Vice Chairman Mark A. Frevert; Robert A. Belfer, former chairm= an of Belco Oil & Gas Corp.; Ronnie Chan Chichung, chairman of Grand Hotel = Holdings Ltd.; John H. Duncan, former president of Gulf & Western Industrie= s Inc.; Charles LeMaistre, former chancellor of the University of Texas sys= tem; and Robert Jaedicke, a former Stanford University accounting professor= . Former Directors In addition to Skilling, former directors named in the suits include R= ichard Causey, Enron's chief accounting officer; Enron General Counsel James Vinson Derrick Jr.; former Enron Vice Chairman J. Cli= fford Baxter; Joe H. Foy, retired senior partner at the Bracewell & Patterson law firm; Ken L. Harrison, former chairman of Enr= on's Portland General Electric Co. unit; and former Enron Chairman Joseph W. Sutton. Federal securities laws say directors may be liable if they fail to re= sponsibly disclose all information, their behavior widely departs from acce= pted standards or as ``controlling individuals'' of the corporation. Dorgan said in an interview that the transcripts of board meetings tha= t his committee has obtained demonstrates that directors ``had some warnings, and probably even considered those warnings = and must have discarded them.'' Most state laws hold board members responsible for overseeing a compan= y and making timely disclosures of information. They also have to offer acc= urate information in their recommendations to stockholders. Hamermesh said that board members would be liable if they intentionall= y failed to disclose information to stockholders on an issue up for a vote. ``This doesn't seem to be the case with Enron,'' he sa= id. Self-Dealing Evidence of self-dealing by directors, taking official actions that be= nefit them personally, would also be grounds for a successful suit. Board m= embers also may be legally accountable if they demonstrated bad faith, expe= rts said. Both those tests impose standards of proof that are hard to meet, Elso= n said. ``It can't just be a bad decision or bad behavior,'' he said. ``It has to be really, really bad.'' Still, he said, evidence of conflicts of interest and insider trading = would aid any claim of self-dealing. Eli Gottesdiner, a lawyer for Enron employees who lost their retiremen= t savings in the company 401(k) stock plan, said board members would be listed as defendants in his clients' suit. ``We believe that there is evidence suggesting that the board aided an= d abetted others in breaching their fiduciary responsibility,'' he said. An Easier Case Elson said the directors may be able to withstand attack by saying man= agement misinformed the board. ``Now if management was telling them the sky= was red, and they accepted that, it wouldn't work,'' he said. That principle may make it easier to win a case against corporate offi= cers who serve on the board. They ``have much deeper liability than the outside members because of their information advantage,'= ' Elson said. Enron board members have refused to comment on the company's collapse = and didn't return calls regarding their liability. Jaedicke, chairman of the board's audit committee, declined to comment= on legal issues. ``I'm sorry. I can't discuss anything,'' he said from his= home in Bozeman, Montana. -- Mark Jaffe in New York at (212)-893-4159 or at mjaffe3@bloomberg.net, wi= th reporting by Alex Canizares and Jeff St. Onge in Washington, through the= Washington newsroom (202) 624-1862. Editor: Rubin/Hendrie. Business What Did They Know And...When Did They Know It?; Meet Sherron Watkins, who = sounded the alarm on Enron long before its collapse Michael Duffy; Reported by Cathy Booth Thomas/Houston, Bernard Baumohl ; an= d Deirdre van Dyk/New York, James Carney, ; Michael Weisskopf and Adam Zago= rin/Washington, and ; Sally Duros and David Thigpen/Chicago 01/28/2002 Time Magazine Time Inc. 16 (Copyright 2002) You can smell the fish sticks from lunch in Sherron Watkins' 60- year-old h= ouse near downtown Houston, see the framed pictures of the family vacation = and the baby in bunny ears and even one of her country-crooning second cous= in, Lyle Lovett. Things have been so hectic, Watkins apologizes, that the C= hristmas ornaments haven't been put away yet. The daughter of two educators= , Watkins grew up in nearby Tomball, where she worked the cash register at = the family grocery store and began saving her money. By 1982, she'd picked = up two accounting degrees in Austin and quickly found a job with Arthur And= ersen. She eventually landed a job with Enron, Houston's red-hot energy tra= ding firm, rising in eight years to vice president for corporate developmen= t. Her quick ascent surprised no one, says her husband Rick: "She always ha= d a flair for numbers."=20 That flair led Watkins last summer to conclude there was something rotten a= t Enron. The numbers didn't add up. A pair of letters that she wrote to Cha= irman Kenneth Lay exposed top officials--perhaps including Lay himself--who= for months had been trying to hide a mountain of debt, and started a chain= reaction of events that brought down the company. Watkins' letters, along = with thousands of other documents, are now in the hands of congressional an= d criminal investigators who are probing how Enron, its pet-rock auditors a= t Andersen and a host of other supporting actors allowed the country's seve= nth largest company to suddenly go bankrupt in December. "I am incredibly n= ervous that we will implode in a wave of accounting scandals," Watkins wrot= e of Enron's financial health. "I have heard one manager-level employee fro= m the principal investments group say, 'I know it would be devastating to a= ll of us, but I wish we would get caught. We're such a crooked company.'" Maybe you can only glimpse the soul of a company when it breaks open right = before your eyes. But we know now, thanks to Watkins, that Enron hid billio= ns of dollars in debts and operating losses inside private partnerships and= dizzyingly complex accounting schemes that were intended to pump up the bu= zz about the company and support its inflated stock price. We also learned = last week that executives at Andersen, the accounting giant that enabled En= ron's every move, fretted about the arrangement but saw the chance to doubl= e their fees if they just kept their heads down. And now that the party's o= ver and the damage control is in full swing from Houston to Chicago to Wash= ington, just about everyone who helped create this mess is busy pointing fi= ngers, scapegoating the other guys, firing the lower- downs and diming out = the higher-ups. Last week what was once envisioned as a new kind of company= resembled little more than a circular firing squad of executives, accounta= nts, consultants and lawyers, all fighting to stay in business or, at least= , out of jail.=20 As these characters tell their self-serving stories, the fall of Enron is t= he most revealing sort of failure. It is a failure of the old-fashioned ide= a that auditors, directors and stock analysts are supposed to put the inter= ests of shareholders above their own thirst for fees. It is a failure of go= vernment: having greased nearly every campaigner's palm in Washington, Enro= n worked overtime to keep the regulators from looking too closely at a bala= nce sheet gone bad. And it is a failure of character, especially inside Enr= on, where managers who knew something was badly wrong did not say anything = publicly until the subpoenas began to arrive.=20 About the only thing that didn't fail was Sherron Watkins' flair for number= s. In the sad tale of Enron's collapse, Watkins is the closest thing to a h= ero in sight. When she goes out for coffee, strangers stop to give her "att= agirls" and ask for her autograph. She still goes to work each day at the c= ompany's headquarters in downtown Houston, where the tilted logo out front = has yielded Enron a new nickname: the Crooked E.=20 Normally when public companies flame out in scandal, top executives can be = seen running from headquarters mumbling that they are shocked to learn that= there was gambling going on in the casino. But there's not much of that he= re. Enron and Andersen officials hardly deny the dubious deals, the 881 off= shore tax havens or the stupid accounting tricks. That's partly because nob= ody can be sure that those dodges were inherently illegal. Many companies m= aintain similar arrangements, usually intended to avoid taxes--a benefit of= interest to Enron too. Enron avoided paying federal income tax for four ou= t of the last five years and instead received millions of dollars in federa= l-tax refunds.=20 For now, the House Energy and Commerce Committee and federal agents probing= Enron's fall are skipping over the accounting schemes and other questionab= le business practices--including a bizarre sex angle: a scheme to offer por= nography via the Internet. The investigators instead have zeroed in on what= officials from Enron and Andersen did and did not do once they realized th= at the debts were mounting, that the stock price was falling and that the l= ast people to learn of the looming reckoning were going to be millions of E= nron shareholders. Watkins' two letters provide the road map for their inqu= iry.=20 It took Watkins weeks to work up the nerve to write her first letter to Lay= . She had been working for chief financial officer Andrew Fastow last summe= r, looking for assets to sell as Enron ran into financial trouble while tra= nsforming itself into a company that traded energy, water, weather derivati= ves and anything else it could turn into a commodity. Watkins wanted to hel= p, but everywhere she looked she ran into off-the-books arrangements that n= o one could explain or seemed to want to investigate. She knew that others = who had pressed then CEO Jeffrey Skilling about the investments had run int= o trouble. One of her friends, then company treasurer Jeff McMahon, had bee= n transferred when he "complained mightily" to Skilling about the "veil of = secrecy" surrounding the outside deals.=20 Watkins learned Enron was losing money on two equity investments: network-e= quipment supplier Avici lost 98% of its value, and another, New Power, an e= nergy retailer that had Ken Lay on the board, dropped more than 80%. Becaus= e both firms were backed by Enron stock, Watkins knew their downfall was dr= agging down Enron too. None of that was being reflected in the company's pu= blic filings, as far as she could tell. As her lawyer Philip Hilder explain= s, "The numbers just didn't add up."=20 Already known as outspoken, Watkins didn't want to approach Skilling direct= ly for fear of losing her job, Hilder says. "She thought it would be fruitl= ess while he was there." When Skilling suddenly quit on Aug. 14, Lay called= an all-employees meeting two days later and asked for comments from worker= s beforehand. That's when Watkins finally sat down to write a one-page anon= ymous letter on her computer at work. She dropped it in the box at headquar= ters the next day.=20 The letter laid out what many executives knew but no one had the courage to= say. Watkins homed in on two sets of transactions called Condor and Raptor= (Enron had a penchant for names inspired by Jurassic Park and Star Wars) a= nd argued that the accounting treatment was unsound, if not dishonest. Enro= n had booked huge profits from these entities while its stock price soared = in 2000, despite the fact that neither Condor nor Raptor had any hard asset= s. But now that Enron's price was dropping, the company had to note these d= evaluations or pour more money into the companies when cash was short. "It = sure looks to the layman on the street that we are hiding losses in a relat= ed company and will compensate that company with Enron stock in the future.= "=20 But what gave the brief letter its power was its overwhelming sense of doom= . "Skilling is resigning now for 'personal reasons' but I would think he wa= sn't having fun, looked down the road and knew this stuff was unfixable and= would rather abandon ship now than resign in shame in two years."=20 At the Aug. 16 companywide meeting, Lay invited anyone troubled by Skilling= 's departure to meet with him. Four days later Watkins called a friend at A= ndersen and asked for advice. On Aug. 21 the friend drafted a memo detailin= g Watkins' concerns for Andersen auditors on the Enron account. Meanwhile, = Watkins went to Lay seeking a meeting. The next day she met with the chairm= an.=20 The session was businesslike, and Lay seemed genuinely concerned. Watkins b= rought along a six-page letter detailing her worries, and Lay promised to h= ave a team of lawyers review the controversial deals. But he decided to use= Enron's law firm, Vinson & Elkins, despite Watkins' unease about a conflic= t of interest. Vinson & Elkins had been paid for work on Condor and Raptor = transactions. But Lay went ahead with the review--whose scope he kept stric= tly limited.=20 By then, Lay was in the middle of a personal stock sell-off. On Aug. 20 he = exercised options to buy 25,000 shares at $20.78 a share. The next day he e= xercised an additional 68,000 shares at $21.56. On both days, the stock clo= sed around $36, which meant Lay netted nearly $1.5 million before taxes. He= continued to be a huge booster for the stock for another month. As late as= Sept. 26, Lay would try to reassure Enron employees that "our financial li= quidity has never been stronger." But as the stock fell last fall, company = employees were told that they would be unable to move any assets held in En= ron stock into other securities in their 401(k) plan while the company swit= ched plan administrators.=20 The end was near. On Oct. 15 Vinson & Elkins issued a nine-page report stat= ing that Andersen approved of the Condor and Raptor deals and that Enron ha= d done nothing wrong. On Oct. 16 the company announced a $618 million third= -quarter loss and a $1.2 billion reduction in shareholder equity. On Oct. 3= 1 the SEC opened a formal inquiry into Enron. Last week, a Vinson & Elkins = spokesman said the law firm was "not in a position to talk about our engage= ment with Enron or any other client."=20 Enron too said as little as possible last week as the company tried to reor= ganize itself and as Lay and other top executives tried to fend off lawsuit= s filed by angry employees and other investors. The law makes it extremely = difficult to confiscate the personal assets of corporate officers in punish= ment for actions on behalf of the company, but if there were ever a chairma= n who courted that fate, it is Lay. Last week he put three properties in As= pen up for sale, for $16 million, and huddled with his lawyers in preparati= on for congressional hearings next month. Few in business have ever fallen = so far so fast: the man who once could raise Cabinet officials with a singl= e telephone call and rated the only one-on-one meeting with the Vice Presid= ent on energy policy last year can't show his face in Houston for fear of r= eprisals.=20 While Enron suffered in silence last week, Andersen was tripping over its o= wn attempts at damage control. Andersen has the most to gain by coming clea= n because if it doesn't, it stands to lose a lot of business. So with help = from an army of just-hired p.r. agents, the Chicago company worked overtime= to show that in its work for Enron, it was merely trying to serve a secret= ive and aggressive client who was pushing the envelope on accounting rules = that aren't very clear anyway. Last week, two days after TIME reported that= Andersen ordered the destruction of documents in October, the company sent= CEO Joe Berardino out in public to strike a contrite tone. Andersen placed= three auditors in its Houston office on leave and took out full-page ads i= n the newspapers promising to "deal with these issues, candidly and directl= y... Without question, this is the most difficult and challenging episode i= n our firm's history."=20 And it abruptly fired David Duncan, who managed the Enron account in Housto= n, saying he had "without any consultation with others in the firm" organiz= ed the destruction of documents as Enron's losses mounted in October. Seeki= ng to put as much distance as possible between the home office and a waywar= d Houston branch, the company pointed out that all shredding had ceased onc= e the SEC issued a subpoena in the Enron matter. As a former Andersen partn= er in Chicago told TIME, "The issue of document deletion is entirely depend= ent on when the organization was aware that there might be a liability issu= e. Liability begins once there is knowledge."=20 Which explains why things got worse--much worse--for Andersen a few days la= ter, when it was revealed that officials at the company's headquarters in C= hicago had discussed the questionable Enron accounting very early in the ga= me--in a conference call last Feb. 5. Enron was no longer a problem that An= dersen's Houston office had kept to itself.=20 Nor were the top Andersen officials worrying about the actions of some low-= level, rogue Enron trader back on Feb. 5. What concerned the auditors that = morning was how to account for losses piling up in an off-the-books partner= ship between the company and a firm called LJM. The manager of LJM was none= other than Enron's chief financial officer, Fastow. Putting aside the Texa= s-size conflict of interest for Fastow--whose day job involved vouching for= Enron's financial health--Andersen knew that Enron's debts to LJM were ris= ing to a level that required public disclosure no matter who was in charge.= Such a disclosure would have sent Enron's stock into a dive. But no disclo= sure was made in the company's next quarterly report. Why not? One memo of = the Feb. 5 conference call noted that Enron "often is creating industries a= nd markets and transactions for which there are no specific rules."=20 And yet Andersen's understanding of Enron's strange business practices was = extensive enough that Andersen executives, during the same conference call,= contemplated dropping Enron as a client. That would have been a kick in th= e teeth for the auditing firm: Enron was paying Andersen some $50 million a= year in auditing and "consulting" fees--and officials said in the conferen= ce call that they envisioned billings doubling in the coming years. Ultimat= ely, Andersen decided to stick with Enron because, according to an e-mail r= ecord of the call, "we had the appropriate people and processes in place to= serve Enron and manage our engagement risks." That engagement ended late l= ast week when, in a largely symbolic move, Enron fired Andersen instead.=20 In Washington, of course, the politicians weren't just firing Enron and And= ersen; they were plucking them from their Rolodexes and sending back their = gifts. Lawmakers of both parties--led by those in close contests this Novem= ber--scrambled to give back hundreds of thousands of dollars in campaign co= ntributions Enron employees had sprinkled across the political landscape la= st year. Just for good measure, lawmakers have launched seven separate Enro= n probes.=20 The Republican White House, which received the vast majority of the Enron m= oney, struck an unbothered pose, relieved that neither Treasury Secretary P= aul O'Neill nor Commerce Secretary Don Evans had lifted a finger when Enron= came calling for help last fall. Still, the Bush team made one tiny bow to= the explosive potential of the Enron scandal, hinting for the first time t= hat it might fork over the details of Vice President Cheney's closed-door m= eetings with energy- industry officials last spring if a congressional comm= ittee requested them. Bush spokesman Dan Bartlett predicted that those pape= rs, if released, would provide no evidence of a smoking quid pro quo betwee= n the Administration and Enron. "News flash," dry-quipped Bartlett. "We wan= t to increase domestic natural-gas production. Tell me what Democrat doesn'= t."=20 If anyone was having trouble making Enron go away, it was Harvey Pitt, a la= wyer who represented the Big Five accounting firms before Bush named him to= chair the Securities and Exchange Commission last year. Until the Enron sc= andal broke, Pitt had waved away demands for stronger regulation of corpora= te accounting and auditing. There were calls from lawmakers for Pitt to rec= use himself from the SEC probe of Enron, but Pitt refused--after a fashion,= anyway--saying that such a step would hurt the agency's standing. He added= , however, that director of enforcement Stephen Cutler would run the probe = anyway. Bush last month named two other accounting executives to empty seat= s on the SEC: Paul Atkins, a partner with Pricewaterhouse Coopers, and Cynt= hia Glassman of Ernst & Young.=20 These rookies, like Pitt, face a rough season. "There could be other Enron-= like situations out there," says Arthur Levitt, the activist former SEC cha= irman. "Financial legerdemain from seduced audit committees, compromised ac= countants and inadequate standards could certainly crop up again at other U= .S. companies." At the moment, the public's best protection against that so= rt of surprise is other brave whistle-blowers like Sherron Watkins.=20 --Reported by Cathy Booth Thomas/Houston, Bernard Baumohl and Deirdre van D= yk/New York, James Carney, Michael Weisskopf and Adam Zagorin/Washington, a= nd Sally Duros and David Thigpen/Chicago=20 Feb. 5: In a meeting and subsequent e-mail, some senior Andersen officials = discuss dropping Enron as a client=20 Feb. 12: Jeffrey Skilling becomes Enron's CEO. Kenneth Lay stays as chairma= n=20 May: Vice-Chair Clifford Baxter complains of the "inappropriateness" of Enr= on's partnership deals, one of three executives to do so. He later resigns= =20 June 26: $44=20 Aug. 15: Lay receives Watkins' warning letter=20 Aug. 20, 21: Lay sells 93,000 shares, earns $2 million=20 Through August 2001, Lay cashes out $16.1 million in stock. Skilling gets $= 15.5 million from selling his shares=20 Sept. 26: $25 Lay urges employees to buy stock=20 Oct. 16: Enron reveals $1.2 billion decrease in company value=20 Oct. 23: Arthur Andersen accelerates disposal of Enron-related documents=20 Nov. 8: Andersen receives a subpoena from the SEC. Enron admits inflating i= ncome almost $600 million since 1997=20 Nov. 9: Duncan's assistant e-mails other secretaries to "stop the shredding= "=20 Nov. 30: 26[cents]=20 Dec. 2: Enron files for bankruptcy=20 Jan. 15: Enron suspended from New York Stock Exchange=20 PLAYING THE BLAME GAME As information trickles out and the finger pointing = begins, it's clear that many people involved had spotted warning signs of E= nron's accounting malfeasance long before the company's fall=20 AUGUST Rising Suspicions=20 AUG. 14 CEO Jeffrey Skilling resigns abruptly, and Kenneth Lay takes over. = As Enron's Broadband division reports losses of $137 million, Lay tries to = calm investors. Unappeased, analysts lower Enron's rating.=20 AUG. 15 Enron vice president Sherron Watkins anonymously sends a brief lett= er to Lay, warning him that Skilling's sudden departure could "raise suspic= ions of accounting improprieties."=20 AUG. 20 Watkins voices her worries in a call to a former Andersen colleague= .=20 AUG. 21 Lay assures Enron employees in an e-mail that the company is on sol= id footing. Over two days, though, Lay makes $1.5 million by exercising opt= ions. Four Andersen officials, including lead partner David Duncan, meet to= discuss Watkins' concerns.=20 AUG. 22 After telling her bosses that she wrote the memo, Watkins is invite= d to meet with Lay and hands him a more detailed letter.=20 OCTOBER Shredding, Calling, Crumbling=20 MID-OCTOBER A White House study, led by top economic adviser and former Enr= on consultant Lawrence Lindsey, looks at the possible economic consequences= of an Enron failure.=20 OCT. 15 As a result of the Watkins letter, Enron commissions a report from = law firm Vinson & Elkins. It concludes that Enron did no wrong.=20 OCT. 16 Enron discloses a $618 million loss in the third quarter and a $1.2= billion value write-off, tied mostly to its investment partnerships, run b= y Enron CFO Andrew Fastow.=20 OCT 23 Lay reassures investors in a conference call. Andersen's Duncan call= s an urgent meeting to step up disposal of Enron documents.=20 OCT. 24 Enron ousts CFO Fastow.=20 OCT. 31 Enron announces the SEC has begun an inquiry.=20 LATE OCTOBER-EARLY NOVEMBER Lay phones various Administration officials to = warn of Enron's dire straits.=20 LATE OCTOBER Treasury officials conclude Enron's collapse won't hurt market= s. Lindsey's White House study concurs.=20 JANUARY Clear Culpability=20 JAN. 10 Andersen admits destroying documents.=20 JAN. 15 Andersen fires Duncan for shredding documents. N.Y.S.E. takes Enron= off the board, saying "the company's securities are no longer suitable for= trading on the N.Y.S.E."=20 JAN. 16 Duncan tells congressional investigators that Andersen officials ta= lked about Enron last February and says he was aware that the account posed= a "significant risk."=20 JAN. 17 White House reveals it conducted a review of Enron's troubles in mi= d-October. Enron fires Andersen.=20 JAN. 18 White House confirms that Vice President Cheney met in June with a = politician from India about an Enron project.=20 AGGRESSIVE ACCOUNTING By capitalizing its web of complex partnerships with = its own stock, Enron managed to make losses look like gains=20 THE STRATEGY When Enron wanted to invest in other companies' stocks--a comm= onplace transaction for large corporations--it could have negotiated a fair= price with a competitor to raise capital to make the stock purchases. Inst= ead, it created thousands of complex partnerships, including two called Con= dor and Raptor, to allow the transactions to be treated as gains rather tha= n liabilities on Enron's books. According to Enron vice president Sherron W= atkins' August memo, here's how these partnerships worked:=20 THE TACTIC In order to sell its own assets at the price it wanted, Enron le= nt Condor $800 million in Enron stock, which Condor then used to buy the as= sets. Enron listed the transaction as a cash gain.=20 Enron lent the Raptor partnership more than $550 million in stock so Raptor= could invest in entities like the New Power Co. and Avici. Enron listed th= e Raptor loan as an asset. As guarantor of its own loan, Enron promised to = issue more stock if Raptor defaulted. The tactic worked as long as stock pr= ices rose.=20 THE COMPLICATION Instead of rising, Raptor's stock holdings plummeted in va= lue. Whistle-blower Watkins warned in her memo that to offset Raptor's sign= ificant losses--Avici's stock dropped 98%, from $178 million to $5 million,= and the New Power Co. shares dropped from $40 to $6--Enron would have to i= ssue even more stock to keep Raptor afloat.=20 THE WRITE-DOWN As of last week, these transactions were not accounted for o= n Enron's books. What this means is that Enron may have to restate its earn= ings yet again, posting even bigger losses.=20 Quote: Skilling's abrupt departure will raise suspicions of accounting impr= oprieties and valuation issues... --Excerpts from the letter Watkins sent t= o Lay on Aug. 15, 2001 I am incredibly nervous that we will implode in a wa= ve of accounting scandals... It sure looks to the layman on the street that= we are hiding losses in a related company... COLOR PHOTO: JAMES MCGOON--GAMMA JEFF SKILLING: Former CEO, Enron COLOR PHO= TO: STEVE LISS--GAMMA FOR TIME SHERRON WATKINS: Enron vice president COLOR = PHOTO: GREG SMITH--CORBIS SABA FOR FORTUNE KENNETH LAY: CEO, Enron COLOR PH= OTO: JAY MALLIN--PICTUREDESK INTERNATIONAL Duncan COLOR PHOTO: MIKE SEGAR--= REUTERS Fastow COLOR CHART COLOR PHOTO: SHAWN THEW--AFP FEDS MOVE IN House = investigators pore over documents in the Enron case COLOR PHOTO: GRAHAM/ROL= L CALL--CORBIS SYGMA Berardino FOUR COLOR ILLUSTRATIONS COLOR PHOTO: MICHAE= L BRANDS ON THE BLOCK This $6.5 million home is one of three Aspen properti= es Lay is selling COLOR PHOTO BIDDING ON ENRON The name now fetches profits= on eBay, where opportunists are capitalizing on the company's demise by se= lling its goods Firm manual COLOR PHOTO [See caption above] Tiffany key rin= g COLOR PHOTO [See caption above] Quartz watch COLOR PHOTO [See caption abo= ve] Candleholder bearing the name of a shell company=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron affiliate challenges PUC call for suspension, revocation 01/23/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. AUSTIN (AP) - An Enron Corp. affiliate is challenging the Texas Public Util= ity Commission's attempt to block it from marketing power as a retail elect= ric provider.=20 Enron Energy Services had about 11,600 customers, mostly small business cus= tomers, the PUC staff said in a petition this month. The PUC claims the company should have its retail electric provider certifi= cate suspended or revoked because it has failed to meet the minimum level o= f financial resources.=20 Enron Energy Services relied on the investment credit rating of Enron for i= ts financial qualifications as a power provider, but Enron lost its investm= ent grade rating on Nov. 28, the PUC petition said. The company and some of= its subsidiaries, including Enron Energy Services, filed for bankruptcy on= Dec. 2.=20 In a filing with the PUC last week, an EES attorney said the company has no= t violated the public utility regulatory act "such that its (retail electri= c provider) certificate should be suspended or revoked."=20 The filing said that while EES has experienced "material changes in the fin= ancial and technical conditions" since it was certified as a retail electri= c provider, it still meets the criteria necessary to retain its certificate= to operate in Texas.=20 An attorney for the company did not immediately return telephone calls from= The Associated Press.=20 A hearing before PUC commissioners is scheduled for Feb. 27. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 USA: FACTBOX-US congressional hearings schedule on Enron. 01/23/2002 Reuters English News Service (C) Reuters Limited 2002. WASHINGTON, Jan 23 (Reuters) - Following are the eight hearings which Congr= ess has firmly scheduled on the collapse of Enron Corp. and related regulat= ory issues over the next four weeks.=20 Jan 24, 9:30 a.m. EST (1430 GMT), House of Representatives Energy and Comme= rce Subcommittee on Oversight and Investigations. Chairman Pennsylvania Rep= ublican Rep. James Greenwood. Witness list undetermined. Focus on Andersen,= Enron and destruction of documents sought by investigators. Jan 24, 10:00 a.m EST (1500 GMT), Senate Governmental Affairs Committee. Ch= airman Connecticut Democratic Sen. Joseph Lieberman. Witnesses: former SEC = Chairman Arthur Levitt, former SEC Chief Accountant Lynn Turner. Focus on p= ensions rules, investor confidence, derivatives trading and the energy mark= et.=20 Jan 29, 9:30 a.m. EST (1430 GMT), Senate Energy and Natural Resources. Chai= rman New Mexico Democratic Sen. Jeff Bingaman. Witnesses: Federal Energy Re= gulatory Commission Chairman Pat Wood, federal and state energy market regu= lators. Focus on energy markets.=20 Jan. 29, 3:30 p.m. EST (2030 GMT), House Energy and Commerce Committee. Cha= irman Louisiana Republican Rep. Billy Tauzin. Takes opening statements for = Jan. 30 full hearing.=20 Jan. 30, 9:30 a.m. EST (1430 GMT), House Energy and Commerce Committee. Cha= irman Tauzin leads full hearing. Focus on Enron and its relationship with A= ndersen.=20 Feb 4, 9:30 a.m. EST (1430 GMT), Senate Commerce Committee. Chairman South = Carolina Democratic Sen. Ernest Hollings. Witnesses: Enron Chairman Kenneth= Lay has agreed to testify. Broad focus.=20 Feb 7, 10:00 a.m. EST (1500 GMT), Senate Health, Education, Labor and Pensi= ons Committee. Chairman Massachusetts Democratic Sen. Edward Kennedy. Witne= ss list undetermined. Focus on pension law, 401(k) retirement plans and how= to better protect investors.=20 Feb 12, 10:00 a.m. (1500 GMT), Senate Banking, Housing and Urban Affairs Co= mmittee. Chairman Maryland Democratic Sen. Paul Sarbanes. Witnesses include= five former SEC chairmen: Arthur Levitt, Richard Breeden, David Ruder, Har= old Williams and Roderick Hills. Focus on accounting and investor protectio= n issues related to Enron.=20 Feb 26, 10:00 a.m. (1500 GMT), Senate Banking, Housing and Urban Affairs Co= mmittee. Chairman Maryland Democratic Sen. Paul Sarbanes. Witnesses include= three former SEC chief accountants: Walter Schuetze, Michael Sutton and Ly= nn Turner; and former Financial Accounting Standards Board chairman Dennis = Beresford. Focus on accounting and investor protection issues.=20 In addition to the above, several other congressional panels are probing th= e Enron affair, but have not firmly established dates for public hearings:= =20 Senate Finance Committee: Investigating Enron compliance with tax laws.=20 Senate Governmental Affairs Committee's Permanent Subcommittee on Investiga= tions: Investigating ties between Enron and Andersen. Has issued 51 documen= t subpoenas.=20 House Education and the Work Force Committee: Tentative initial hearing in = a series beginning week of Feb. 4. Focus on oversight of retirement plan la= ws.=20 House Financial Services Committee: Focused on impact on commodities market= s, 401(k) plans, potential securities fraud and accounting irregularities. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Judge to consider lawyers' plan to investigate Arthur Andersen By KRISTEN HAYS Associated Press Writer 01/23/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. HOUSTON (AP) - Lawyers for shareholders suing 29 current and former Enron C= orp. executives and board members added finishing touches Wednesday to a pl= an intended to bar the fallen energy giant's auditor from any further shred= ding of documents related to its audits.=20 U.S. District Judge Melinda Harmon scheduled an afternoon hearing to consid= er the plan. Plaintiffs include Amalgamated Bank, the University of California Regents a= nd pension funds for Florida, New York City, Georgia, Ohio and other states= .=20 William Lerach, who represents Amalgamated, said lawyers want Harmon to all= ow them to inspect Arthur Andersen's Enron-related documents and their stor= age; eliminate any Andersen policies that would allow shredding of Enron do= cuments after a certain amount of time; and allow them to take depositions = from top Andersen personnel.=20 Meanwhile, former Enron employees who lost $1.3 billion in retirement funds= when the company collapsed late last year sued the Chicago-based auditor, = Arthur Andersen LLP, and several current and former Enron executives, alleg= ing that they violated federal racketeering laws by conspiring to hide Enro= n's true financial condition.=20 Andersen's acknowledgment two weeks ago that its Houston office had destroy= ed a significant but undetermined number of Enron-related documents prompte= d the racketeering lawsuit filed Tuesday in federal court.=20 "That kind of tipped the scale," said Seattle attorney Steve Berman. "Ander= sen has admitted that it knew of serious accounting issues."=20 Neither Rusty Hardin, a Houston attorney representing Andersen, nor an Ande= rsen spokesman immediately returned calls for comment Wednesday.=20 Hardin assured Judge Harmon Tuesday that Andersen's Enron-related documents= were under guard, and nothing more is being destroyed.=20 Berman also is suing Enron in a separate case on behalf of its employees. T= hat lawsuit, like many of the more than 60 others filed across the country = that name Enron as a defendant, is on hold as Enron works to emerge from ba= nkruptcy. The company filed the largest Chapter 11 reorganization in histor= y on Dec. 2 in New York.=20 Lerach's lawsuit names individuals rather than Enron Corp. as defendants, s= o it can proceed despite the bankruptcy. The plaintiffs seek more than $1 b= illion in proceeds executives and board members made by selling Enron stock= from October 1998 through November 2001.=20 Andersen is under a Texas judge's order prohibiting any further shredding o= f Enron-related documents. Lerach's team wants Harmon to issue a similar or= der to help them investigate its case.=20 Lerach also wants to take depositions from Enron chairman and chief executi= ve Kenneth Lay and others regarding Andersen shredding. He said Harmon shou= ld consider that issue later.=20 On Tuesday, Enron invited the FBI to investigate allegations from a former = executive that employees shredded their own financial documents from Hallow= een through as recently as last week. The executive, Maureen Raymond Castan= eda, said she saw the shredding until she was laid off last week.=20 FBI spokesman Jay Spadafore declined comment on whether agents remained at = Enron on Wednesday. Spokespeople for Enron and the Justice Department did n= ot immediately return calls about the FBI investigation.=20 The Rev. Al Sharpton appeared briefly at Enron Wednesday morning, calling f= or a government bailout of employees left without retirement funds after th= e company's collapse.=20 "Why can't we bail out people we allow to be victimized?" he asked. "Had th= ey been more proficient in regulating this, it would not have been such a d= ebacle."=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron suit cites racketeering charges By Lisa Sanders, CBS.MarketWatch.com Last Update: 12:53 PM ET Jan. 23, 2002 HOUSTON (CBS.MW) -- Enron employees are citing alleged violations of racket= eering laws in a new lawsuit that blames company officers and fired auditor= Andersen for employees losing some $1.3 billion in retirement savings. The litigation marks the first Enron-related class-action lawsuit, among do= zens, to cite the Racketeering Influences and Corrupt Organizations Act. Ha= gens Berman, a Seattle-based law firm, filed the suit in U.S. District Cour= t in Houston on Tuesday. An Andersen spokesperson did not immediately have a comment. Enron declined= to comment.=20 In addition to Andersen, the suit names Ken Lay, Enron's chairman, Jeffrey = Skilling, Enron's former chief executive, Andrew Fastow, the former chief f= inancial officer, the Northern Trust Co., and David Duncan, the former Enro= n audit partner fired by Andersen last week. The suit charges the parties with conspiring to hide Enron's true financial= status by "withholding critical information." "Now that the facts of Andersen are coming to light, it shows that Andersen= was well aware of the accounting problems, and it was so bad that Andersen= was destroying documents," attorney Steve Berman said in an interview.=20 "We have a strong basis for suing Andersen for racketeering. There is a spe= cific provision of RICO, which makes it a crime to embezzle or convert the = asset of any employee welfare benefit plan, and we're alleging that Anderse= n engaged in a conspiracy with Enron to do just that." The suit also claims that Northern Trust and administrators of the Enron sa= vings plan breached their fiduciary duty to company employees by locking do= wn the retirement savings plan. Judge Melinda Harmon, who's overseeing all the Enron-related lawsuits filed= in Houston, has scheduled a Feb. 25 hearing to come up with a case managem= ent plan, Berman said. Lisa Sanders is a Dallas-based reporter for CBS.MarketWatch.com. Enron Employees Sue Andersen, Claiming Auditor Violated Racketeering Laws 01/23/2002 Dow Jones Business News (Copyright © 2002, Dow Jones & Company, Inc.) Dow Jones Newswires=20 HOUSTON -- Enron Corp. employees filed suit against Enron officials and the= energy trader's auditor, Arthur Andersen LLP, alleging violations of feder= al racketeering laws by illegal manipulation of retirement funds. Wednesday's action is the latest in a flurry of lawsuits related to the col= lapse of Enron, but it is the first suit to charge Andersen with violations= under the Racketeering Influences and Corrupt Organizations law, known as = the RICO Act.=20 The law firm Hagens Berman said in a news release that it filed the action = on behalf of more than 100 named plaintiffs and seeks to represent an estim= ated 21,000 Enron savings plans participants.=20 The suit claims Andersen and individual Enron officers conspired to hide En= ron's true financial condition by withholding critical information, causing= employees to lose more than $1.3 billion from their retirement funds.=20 It also alleges David Duncan, Andersen's chief Enron auditor, repeatedly ce= rtified financial statements he knew were false in an attempt to cover debt= s and losses. Enron Chief Executive Kenneth Lay then knowingly used that fa= lse information to promote the overvalued Enron stock to employees as "comp= ensation," to secure their loyalty and to have stock holdings available to = fend off any hostile takeovers, the suit contends.=20 The 1970 RICO law increases penalties against enterprises that carry out cr= iminal acts that affect interstate commerce and prohibits any person from u= sing the assets of an employee pension plan for personal gain.=20 The suit charges that Mr. Lay and several Enron officers violated RICO by c= onspiring to defraud Enron employees by contributing worthless Enron stock = to retirement plans as part of what the suit calls a "retirement plan consp= iracy."=20 The suit also claims wrongdoing by Northern Trust Corp. (NTRS), a trustee o= f the Enron retirement plan, as well as by retirement plan administrators.= =20 Representatives from Andersen and Enron weren't immediately available for c= omment.=20 Enron faces suits from shareholders as well as former employees over billio= ns of dollars lost in the company's collapse, while the company's Chapter 1= 1 filing promises to be one of the largest and most complex bankruptcy case= s in U.S. history.=20 In addition, eight congressional committees and three federal agencies are = investigating various aspects of Enron and its collapse. The Justice Depart= ment is leading a criminal investigation, the Department of Labor is probin= g Enron's retirement plan and the Securities and Exchange Commission is loo= king into the auditing practices of Andersen.=20 Also this week, the House Subcommittee on Oversight and Investigations set = a hearing for Thursday on alleged shredding of thousands of company documen= ts by Enron officials.=20 In late-morning trading, shares of Enron (ENRNQ) were down seven cents to 3= 6.5 cents on the over-the-counter Bulletin Board. Enron traded at more than= $90 a share a year ago on the New York Stock Exchange; the Big Boar
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