|
|
Enron Mail |
Enron Considers Postponing Announcement Of New CEO Dow Jones News Service, 01/25/2002 Enron Documents Dow Jones, 01/25/2002 Lay not likely to get severance pay Turnaround expert could be named Friday as Enron CEO CBS.Marketwatch.com, 01/25/2002 House Enron Probe Seeks Info On Lay's Loan Transactions Dow Jones Energy Service, 01/25/2002 Source: New York reorganization expert may replace Lay Associated Press Newswires, 01/25/2002 If You Could Pick Someone To Run Enron, It Would Be... Dow Jones News Service, 01/25/2002 O'Neill: Not Clear Enron Tax Havens Linked To Illicit Acts Dow Jones Capital Markets Report, 01/25/2002 U.S. signs agreement with Bahamas to crack down on tax evaders Associated Press Newswires, 01/25/2002 Enron Judge Says He Will Bar Destruction of Documents, E-Mails Bloomberg, 01/25/2002 US To Review Enron, Arthur Anderson Federal Contracts Dow Jones International News, 01/25/2002 Enron Partnership Investors Sought in House Probe Bloomberg, 01/25/2002 Fedl Judge Gives Enron 60 Days To Decide On Commodities Dow Jones News Service, 01/25/2002 Ill. Regulators Likely To Strip Enron Energy-Sale Rights Dow Jones Energy Service, 01/25/2002 Lay, Other Enron Directors' Seats On Boards Face Scrutiny Dow Jones Corporate Filings Alert, /25/2002 AFL-CIO takes aim at Enron directors Urges that they be kicked off other corporate boards CBS.Marketwatch.com, 01/25/2002 AFL-CIO To Cos: Purge Enron Directors From Your Boards Dow Jones News Service, 01/25/2002 Auditors for U.S. Contractors Restricted in Consulting Work Bloomberg, 01/25/2002 IN THE MONEY: Enron Loan Shrinks; Is Liquidation Next? Dow Jones News Service, 01/25/2002 POWER POINTS: Not So Fast On Enron Liquidation Theory Dow Jones Energy Service, 01/25/2002 USA: Grand jury investigating Milberg Weiss - source. Reuters English News Service, 01/25/2002 Enron's conscientious objector tried to challenge from inside Associated Press Newswires, 01/25/2002 Enron spread its net far and wide in bid to protect its business interests Associated Press Newswires, 01/25/2002 CAPITAL VIEWS: Enron, Stimulus & More On 'Phraseology' Dow Jones Capital Markets Report, 01/25/2002 Enron Asks Ct For Quick OK Of India Unit Sale To BG Grp Dow Jones News Service, 01/25/2002 Enron LNG Shipping Co Files For Chapter 11 Protection Dow Jones News Service, 01/25/2002 _________________________________________________________________________________ Enron Considers Postponing Announcement Of New CEO By Christina Cheddar 01/25/2002 Dow Jones News Service (Copyright © 2002, Dow Jones & Company, Inc.) Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- Enron Corp. (ENRNQ), said to be close to choosing a successor for former Chief Executive Kenneth Lay, may decide to postpone a formal announcement of its decision until after the weekend out of respect for the death of former Vice Chairman J. Clifford Baxter, a person familiar with the matter said. An announcement of Lay's successor had been anticipated as soon as late Friday. Baxter, who resigned from Enron last May, was found dead from a gunshot wound to the head early Friday morning in Sugar Land, Texas - the affluent Houston suburb where he lived. Although officials have ruled the death a suicide, an autopsy is being performed as a precaution. The contents of a suicide note left at the scene haven't yet been disclosed. Baxter's death comes just one day after the start of congressional hearings on Enron's collapse and the role of its auditor Arthur Andersen. Amid pressure from the bankrupt company's creditors committee, Lay resigned late Wednesday night. The Wall Street Journal reported Friday that Stephen Cooper is the front-runner to be named acting chief executive. Cooper, managing principal of consulting firm Zolfo Cooper, is an expert in corporate restructuring. He is known for his turnaround efforts at Federated Department Stores Inc. (FD) and Morrison Knudsen Corp. According to a source familiar with the matter, Enron would like the future chief executive to oversee the day-to-day operations and restructuring of the company, while a second person will be named chairman. The source said the chairman would be responsible for handling the more political aspects of the job. -By Christina Cheddar, Dow Jones Newswires; 201-938-5166; christina.cheddar@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Documents 2002-01-25 13:56 (New York) By Kathy Chu Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--A federal judge plans to issue an order Friday afternoon demanding that Enron Corp. (ENRNQ) employees hold on to company documents. Judge Arthur J. Gonzalez, at a Friday hearing at the U.S. Bankruptcy Court of the Southern District of New York, said that the court order will echo recent written directives by Enron executives to employees. Since the company became aware of possible investigations into its downfall, it has sent six e-mails regarding document retention to its workers, according to an Enron lawyer. One of the e-mails stated that "no company records, either in electronic or paper form, should be destroyed." The court order comes amid allegations by three Enron workers that others in the company may have shredded documents. Arthur Andersen LLP, Enron's former auditor, has admitted to destroying Enron-related paperwork. The Federal Bureau of Investigations has taken over the 19th and 20th floors of Enron's Houston headquarters, where some of the alleged shredding occurred, an Enron lawyer said. The agency may complete its investigation on Wednesday, according to Enron. Enron has removed all document-shredding machines from the building and is separating its paper and perishable waste. Under the bankruptcy code, those who "knowingly and fraudulently" dispose of documents in a Chapter 11 case can be sentenced to a five-year prison term and can be fined. Friday's proceedings were part of a status conference related to 11 insurers' requests to open Enron's books to determine if forward contracts guaranteed by $2 billion in surety bonds ever existed. The insurers - including Safeco Insurance Co., Hartford Financial Services Group Inc. (HIG) and Liberty Mutual Insurance Co., among others - contend that their obligations under these bonds depend upon whether energy was actually delivered in contracts made among Enron, Mahonia Ltd. and Mahonia Natural Gas Ltd. - offshore entities set up by J.P. Morgan Chase & Co. (JPM). J.P. Morgan served on Enron's official creditors' committee and is a lead lender in the company's debtor-in-possession financing. Judge Gonzalez, at a hearing earlier this week, had asked Enron to provide the insurers with witnesses' names and the location of documents relevant to the surety-bond contracts by Feb. 1. He also scheduled Friday's status conference to assess Enron's document-preservation policies. The judge has postponed until late May a decision on whether Enron must open its books, saying that pending litigation in a New York district court would likely address this request. J.P. Morgan on Dec. 11 filed a lawsuit against the insurers, seeking payment of $1.1 billion - including $965 million owed to the bank - under the surety bonds. The lawsuit, which was first recorded in a New York state court, was later moved to a U.S. District Court for the Southern District of New York. -By Kathy Chu, Dow Jones Newswires; 201-938-5392 Lay not likely to get severance pay Turnaround expert could be named Friday as Enron CEO By Lisa Sanders, CBS.MarketWatch.com Last Update: 1:29 PM ET Jan. 25, 2002 HOUSTON (CBS.MW) -- Former Enron CEO Ken Lay isn't likely to see much if any of his hefty severance pay in the face of opposition from creditors, shareholders and employees, bankruptcy experts said Friday. Lay, who resigned as CEO and chairman under fire late Wednesday, could be replaced with a turnaround specialist as early as Friday, a person familiar with the matter said. The Wall Street Journal reported that Stephen Cooper of the consulting firm Zolfo Cooper is the frontrunner. Cooper wasn't immediately available for comment. Enron spokesmen weren't available for comment Friday. On Thursday, a spokesman said that Lay's compensation was still being determined. David Bennett, an attorney representing a group of about 20 energy companies with claims against Enron, said that if anyone sought payment for an employment agreement from the bankruptcy court it would be subject to "court scrutiny." What's more, Lay would have to request the payment. "There will be lots of parties lining up to question the appropriateness of paying out those kinds of funds given the circumstances," said Bennett, a partner with the law firm Thompson & Knight. "For the most part, setting aside any claims the estate may have against Mr. Lay, he shouldn't be paid ahead of unsecured creditors for sure," Bennett added. Rick Tilton, a bankruptcy specialist in New York, said that the creditors' committee, or a trustee if one is appointed, could assert there was cause for his dismissal. Though Lay resigned, he was asked to do so by the creditors' committee. His employment contract voids his severance if he was "terminated with cause." According to an SEC proxy statement filed on March 27, 2001, Lay's contract calls for him to receive a "lump sum payment for each full calendar year of the remaining term of the agreement equal to base salary, performance bonus, and long-term grant value received in calendar year 2000, offset against amounts payable under the severance plan maintained by Enron." Lay's employment agreement, which commenced in December 1996 and runs through Dec. 31, 2003, provides for a minimum salary of $1.3 million a year. According to the proxy statement, Lay in 2000 was paid a $1.3 million salary and a bonus of $7 million. Taking both figures into account and doubling them translates into $16.6 million, not counting the long-term grant value. Also in 2000, Enron paid Lay restricted stock awards worth $7.5 million; other annual compensation, including personal benefits, worth $381,000; a $1.2 million cash payment under the Enron performance plan; and $782,830 in stock options. He also exercised stock options to the tune of $123.4 million in 2000. Exercisable options, which he chose not to enact, amounted to $257.5 million, while unexercisable options totaled $104.1 million. Enron also paid a $4 million, interest-bearing line of credit in full in 2000, which yielded $110,174 in interest. The proxy statement notes that if his severance package "is held to constitute an 'excess parachute payment,' and Mr. Lay becomes liable for any tax penalties ... Enron will make a cash payment to him in an amount equal to the tax penalties plus an amount equal to any additional tax for which he will be liable as a result of the receipt of the payment." Lay, who will remain on the company's board, will assist the board and Enron's creditors committee in selecting a "restructuring specialist" to help turn around the company and serve as chief executive on an interim basis. "What the company is looking for is a chief reorganization specialist," Bennett said. "But various creditor groups are seeking the appointment of a Chapter 11 trustee -- an outright bankruptcy trustee who supersedes current management. Whoever comes in, even if they're technically hired by the board, will have to quickly establish credibility with the creditors' committee." Enron's board plans to name a new chairman as soon as possible. Until then, the chief financial and operating officers will handle the chairmanship duties. Shares of Enron lost 1 cents to 44 cents in over-the-counter trading Friday. Lisa Sanders is a Dallas-based reporter for CBS.MarketWatch.com. House Enron Probe Seeks Info On Lay's Loan Transactions By Bryan Lee 01/25/2002 Dow Jones Energy Service (Copyright © 2002, Dow Jones & Company, Inc.) OF DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- A House panel investigating the financial collapse of Enron Corp. (ENRNQ) expanded its probe Friday to include stock-related loan transactions by Kenneth Lay, who resigned this week as the company's chairman and chief executive. Ranking members of the House Energy and Commerce Committee issued a formal request for the information in the wake of published reports that Lay had a $4 million revolving line of credit from Enron, which was raised to $7.5 million last year. According to the reports, Lay borrowed from the credit line 15 times between February and October of last year, and repaid the amounts in Enron stock. "We are concerned about the unreported nature of these transactions and their effect upon Enron shareholders and employees, particularly during the stock's steep decline in 2001," the lawmakers said in a letter to Lay. It was signed by Reps. Billy Tauzin, R-La., John Dingell, D-Mich., James Greenwood, R-Pa., and Peter Deutsch, D-Fla. Lay isn't required to report the details of the transactions until Feb. 14, the letter noted. The lawmakers asked for the information by Jan. 28 to assist the committee's "intensive investigation of the demise of the company." Lay is slated to testify Feb. 4 before two congressional panels, the House Financial Services Committee and the Senate Commerce Committee. The letter also asked for details of similar transactions involving: Jeffrey Skilling, Enron's former chief executive; Andrew Fastow, the former chief financial officer, and other senior Enron executives. -By Bryan Lee, Dow Jones Newswires; 202-862-6647; Bryan.Lee@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Source: New York reorganization expert may replace Lay By ALAN CLENDENNING AP Business Writer 01/25/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. NEW YORK (AP) - The front-runner to replace Kenneth Lay as chief executive of embattled Enron Corp. is a New York bankruptcy reorganization expert whose past clients include Bradlees, Cumberland Farms and Pegasus Gold Corp., a person familiar with the situation said. Stephen Cooper, managing principal of the reorganization adviser Zolfo Cooper, could be named to run Enron within several days and planned to fly to Houston Friday to meet with company executives, said the source, who spoke on condition of anonymity and confirmed earlier published reports. Enron spokesman Eric Thode declined to comment on Cooper or the company's progress in selecting a successor to Lay, who resigned as chairman and chief executive Wednesday night. Zolfo Cooper officials did not immediately return a phone message seeking comment. On its Web site, Zolfo Cooper says its executives "have hands-on leadership experience under adverse conditions." "Working as senior management or as part of a crisis team, we stabilize the business," the site says. "Thus, we gain the necessary time to assess the situation, design, and implement programs to restore business' vitality and profitability. We maximize value by rebuilding the management process and reorganizing the business or prepare it for sale." Enron's collapse began in mid-October after the company announced a $618 million third-quarter loss and a $1.2 billion reduction in the company's equity. Subsequent revelations showed that the company masked debt in questionable partnerships that benefited some company executives. The company - once No. 7 on the Fortune magazine list of the 500 largest companies - filed for bankruptcy protection to reorganize on Dec. 2. Last week, a judge approved a plan that allows investment bank UBS Warburg to take over the company's energy trading operation, which accounted for 90 percent of Enron's $101 billion in revenue in 2000. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. If You Could Pick Someone To Run Enron, It Would Be... By Kaja Whitehouse 01/25/2002 Dow Jones News Service (Copyright © 2002, Dow Jones & Company, Inc.) Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- Enron Corp. (ENRNQ) has quickly become the Rodney Dangerfield of corporate America. It gets no respect. Afterall, everyone hates the firm that collapsed in a wave of accounting scandals last November. Investors hate it because they lost a ton of money. Employees of the company hate it, because they lost their jobs and a ton of money from their pension plan. Houston hates it, because its become an embarrassment to the city Enron called home. Washington hates it so much that it decided to hold multiple Congressional hearings. Come to think of it, even you probably hate it. But apparently some Enron insiders seem to think Enron will continue to press on as long as it cleans up its act. As a first step, Kenneth Lay, center of many of probes, stepped down as Enron CEO Wednesday, saying that he wants the company to "survive." Talk has it that the Enron execs are seeking out hardcore restructuring expert Stephen F. Cooper to repair what's broke. According to the Wall Street Journal, Enron wants a leader who can manage complex daily operations and work through this troubles of bankruptcy. But in order to truly revive to the downtrodden company, Enron requires more than a technical fix-it man. It needs a well-known leader who can restore respectability to the Enron name - if that's possible. That person would have to win back the confidence of investors and Wall Street and would need to negotiate successfully with regulators and lawmakers. If you had the power to select anyone for this seemingly Herculian task, who would that person be? That's the question Dow Jones Newswires posed to people from Wall Street to Congress and the answers were an interesting mix. "Enron needs to have a trustworthy person that is well-known to the public," said Art Hogan, chief market strategist at Jefferies & Co. "Right now everyone feels adversely affected" by Enron, and people want someone who will make them feel confident again, added Hogan, who voted for former television newscaster Walter Cronkite to run the downtrodden company. "He's a sort of elder statesman, the perfect candidate," Hogan said. Mayor, Diplomat or TV Journalist? Some predict Enron is too rife with foul-play to regain any credibility. "You could put Mother Teresa in there and I don't think it's ever going to bring it back," said Tom Salerno, partner of Squire, Sanders & Dempsey. But reviving companies smeared with scandal through a popular and respectable leader has worked in the past. Just look at Salomon Brothers, the debt trader that was on the brink of extinction in the early 1990s after it was discovered that the firm tried to skirt federal regulations. Instead, investment guru Warren Buffet took control and kept the company from folding under. Similar tactics might be necessary for Enron. If not in the CEO position, then at least in Lay's remaining role as chairman. No one wants to invest in that company again unless someone honest is placed at the wheel, said Rep. Stephanie Tubbs Jones, a Cleveland Democrat, who voted for Fannie Mae CEO Franklin Raines. "It's like people telling us to get back on the plane" after Sept. 11, she said. It should come as little surprise then, that former New York City Mayor Rudy Giuliani was a popular candidate among interviewees. The popular mayor gained America's favor after pulling NYC through the Sept. 11 crisis. Giuliani can "turn around a bad situation and make us all feel good about it," said Peter Flaherty, president of the National Legal and Policy Center in Washington, DC. Many cited Giuliani's ability to handle crisis, while others touted him as a hard-working, honest individual. It isn't known if Giuliani is up for the post. After leaving public office this fall, the former mayor said he was setting up a consulting firm with New York accountants Ernst & Young. Other names that resounded with people as honest, hardworking leaders included U.S. Secretary of State Colin Powell, former General Electric CEO Jack Welch and Ben Cohen, co-founder of Ben & Jerry's ice cream. John Challenger, CEO of outsourcing firm Challenger, Gray & Christmas, in Chicago, who voted for Powell, saying that Enron requires someone with "extraordinary diplomacy." There are so many people who were burned by the company's fall that it will take a very diplomatic person to make everyone happy, he said. With Powell, people might walk away afterwards and say "it wasn't what I wanted, but they will think it was fair." -By Kaja Whitehouse, Dow Jones Newswires, 201-938-2243, kaja.whitehouse@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. O'Neill: Not Clear Enron Tax Havens Linked To Illicit Acts 01/25/2002 Dow Jones Capital Markets Report (Copyright © 2002, Dow Jones & Company, Inc.) WASHINGTON -(Dow Jones)- It isn't clear if Enron Corp.'s use of Caribbean tax havens is linked to the illicit financial activities that the U.S. is seeking to crack down on through tax treaties with offshore financial havens, U.S. Treasury Secretary Paul O'Neill said Friday. "It's not clear that it's related in any way to the issue of illicit financial activities," O'Neill told reporters when asked whether he was worried about the use of offshore subsidiaries by bankrupt energy-trading giant Enron (ENRNQ). The New York Times, citing company papers filed with the Securities and Exchange Commission, reported last week that Enron paid no income taxes in four of the last five years by using hundreds of subsidiaries in tax-haven nations. The Senate Finance Committee has asked Enron to disclose its corporate income tax returns. O'Neill's remarks came after he signed a new tax-information exchange agreement with the Bahamas, a Caribbean nation that is one of 35 nations the Organization for Economic Cooperation and Development cited in a June 2000 report as tax havens with harmful tax practices. The Bahamas is still on the OECD list, Treasury said. "The importance of these treaties is that they close off loopholes and windows of opportunities for illicit activities, and we are dedicated to interdicting and confiscating money that's related to terrorist financing and drug trade and other types of illicit activities," O'Neill said. O'Neill hailed the signing of the tax agreement as "another important step forward" in the relationship between the U.S. and the Bahamas. "By signing this agreement, the Bahamas leaves no doubt that it should be counted among the financial centers of the world that are committed to upholding international standards and simply will not tolerate the abuse of their financial institutions for illicit purposes," O'Neill said. Bahamian Finance Minister William Allen said the Bahamas is firmly opposed to the use of its financial system for illicit purposes and is determined that the same financial standards apply in the Bahamas as in other financial centers. "We are gratified by the U.S. government's recognition of the integrity of the Bahamas as a financial center," Allen said. The tax agreement with the Bahamas follows similar accords the Bush administration struck with Antigua and Barbuda and the Cayman Islands last year. O'Neill testified before Congress last July that the U.S. is going to seek to negotiate tax treaties with foreign jurisdictions that would require information be shared on suspected tax evaders. -By Deborah Lagomarsino, Dow Jones Newswires; 202 862 9255; deborah.lagomarsino@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. U.S. signs agreement with Bahamas to crack down on tax evaders By JEANNINE AVERSA Associated Press Writer 01/25/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. WASHINGTON (AP) - Treasury Secretary Paul O'Neill signed an information-sharing agreement with the Bahamas Friday designed to help U.S. authorities crack down on the use of offshore tax havens to hide illegal money. The agreement with the Caribbean nation, long considered a haven for tax evaders, marks the Bush administration's latest effort to open up financial institutions to greater scrutiny to prevent tax evasion. The Senate Finance Committee is investigating whether Enron Corp. used hundreds of partnerships and affiliates in tax-haven countries to mask its true financial condition. The company filed for bankruptcy in December. Citizens for Tax Justice, a liberal tax research organization, has estimated that Enron paid no corporate income taxes in four of the past five years. Enron paid $17 million in taxes in 1997 and got refunds totaling $381 million in all other years between 1996 to 2000, according to the group's analysis. Asked whether he was concerned about Enron's use of offshore tax havens, O'Neill responded: "It's not clear that it's related in any way to the issue of illicit financial activities." The administration has signed information-sharing agreements with Antigua and Barbuda, and the Cayman Islands, countries also long considered tax havens. "The importance of these treaties is that they close off loopholes and windows of opportunity for illicit activities," O'Neill said. Friday's agreement is designed to allow the Internal Revenue Service to pierce the secrecy of accounts at financial institutions in the Bahamas, paving the way for audits that could uncover tax evasion or money-laundering activities. William Allen, the Bahamas finance minister, said he was pleased that the United States and his country were able to reach a "balanced" information-sharing agreement "The Bahamas is firmly against the use of its financial system for illicit purposes," he said. Senators last year heard testimony that the United States loses an estimated $70 billion in tax revenue each year because assets are concealed in offshore tax havens. Led by O'Neill, the Bush administration has shifted the U.S. focus in dealing with tax haven countries away from international efforts to overhaul tax structures toward negotiated agreements that allow easier U.S. pursuit of suspected cheaters. The Paris-based Organization for Economic Cooperation and Development has identified various nations, including the Bahamas, as tax havens and O'Neill has pledged to negotiate within a year agreements with nations covering at least half of the offshore bank accounts. Previous administrations had strongly supported the OECD's efforts to curb the use of offshore accounts to evade taxes, but O'Neill and congressional Republicans have complained that the OECD approach was an attempt to punish countries with low taxes. PHOTO Number WX103 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Judge Says He Will Bar Destruction of Documents, E-Mails 2002-01-25 13:31 (New York) New York, Jan. 25 (Bloomberg) -- A federal bankruptcy judge said he will issue an order today barring Enron Corp. from destroying any more documents. The order also will cover e-mails and other records. The order by U.S. Bankruptcy Judge Arthur Gonzalez was sought by property insurers and backed by Enron creditors. Enron filed for bankruptcy protection last month, in the largest Chapter 11 filing ever. Allegations of document destruction have been raised this week at congressional hearings. Enron shares fell less than a cent to 44.5 cents in afternoon trading. -- Christopher Mumma in New York (212) 233-2257, or cmumma@bloomberg.net, through the Washington newsroom (202) 624-1862. Editor: Hendrie US To Review Enron, Arthur Anderson Federal Contracts 01/25/2002 Dow Jones International News (Copyright © 2002, Dow Jones & Company, Inc.) WASHINGTON (AP)--The White House on Friday ordered a review of $70 million worth of federal contracts with Enron Corp. (ENRNQ) and the Arthur Andersen (X.AND) accounting firm to determine whether the embattled companies are worthy of government business. In a letter to the General Services Administration, which oversees government contracts, budget director Mitchell E. Daniels said charges of document shredding, manipulative accounting practices and other activities "could reflect poorly" on the companies and their ability to meet government ethics standards. "These agencies should ensure that existing contracts with Arthur Andersen and Enron are being performed in accordance with contract terms and proper business practices," Daniels wrote. Enron, a Texas-based company with deep ties to President George W. Bush, filed for bankruptcy late last year after investors and workers lost fortunes in company stocks. Bush, a friend of former Enron Chairman Kenneth Lay, ordered a review of the nation's pension laws and approved a Justice Department criminal investigation into the company's actions. Arthur Andersen, which kept the company's books, is also under investigation. Congress is holding hearings on the Enron collapse. Daniels' letter does not say how many federal agencies have contracts with the firms, but an aide said Enron and Arthur Andersen hold $70 million worth of federal contracts. "Recent reports have highlighted potential irregularities in work done by the accounting firm of Arthur Andersen LLP and the Enron Corp. Some of these allegations are serious in nature," Daniels wrote. He said federal rules require firms seeking or doing business with the government to have "a satisfactory record of business ethics and integrity." The federal agencies were asked to determine whether Enron and Arthur Andersen still met that standard. The agencies were given a summary of contracts awarded to the firms. Enron and Arthur Andersen, both of which were given copies of Daniels' letter, had no immediate comment. In a somber development elsewhere on Friday, a former Enron executive was found shot to death in a car in a suburb of Houston - an apparent suicide, police said. The executive, 43-year-old J. Clifford Baxter, had challenged the company's questionable financial practices and resigned last May. He was mentioned by name in a warning about hidden losses that Enron executive Sherron Watkins wrote last August to company Chairman Kenneth Lay. Meanwhile, a separate auditor's memo from last October shows that some officials at Arthur Andersen were worried about a "heightened risk" of fraud in Enron's books a week before the energy company shocked stockholders with huge losses. The e-mail by Andersen auditor Mark Zajac warned that a computer analysis of Enron's financial activities in the third quarter of last year indicated "a red alert: a heightened risk of financial statement fraud," according to investigators. The Andersen auditor's October e-mail warning of possible fraud, released by Rep. John Dingell, D-Mich., added to mounting evidence that Enron's outside accounting firm had strong misgivings about Enron business practices. "We have considerable rascality," Dingell, ranking Democrat on the House Commerce Committee, summed up Friday on CBS' "The Early Show." "We have to find out who is at fault for what." A House hearing Thursday into the Enron collapse left lawmakers certain of only one thing: Thousands of documents were destroyed by Enron's blue-ribbon accounting firm. Questions about who ordered the shredding, and whether it was intended to stifle government investigations, were left unresolved after a House panel concluded its first public hearing into the largest and perhaps most devastating bankruptcy in history. A week after the "red alert" memo, Enron reported a $638 million third-quarter loss and disclosed a $1.2 billion reduction in shareholder equity, partly because of hidden debt built up by a complex web of partnerships. On the same day that Zajac wrote his memo to the head of the Enron auditing team, Andersen also hired a law firm in anticipation of possible lawsuits involving Enron, the Houston-based energy giant that spiraled into bankruptcy Dec. 2. Andersen played down the significance of the computer analysis. And Zajac in the memo acknowledged the system produces "false alarms." Enron and its employees contributed more than $500,000 to the Bush campaign last year. Kenneth Lay, who this week resigned as Enron chairman, has been one of Bush's strongest supporters over the years. Andersen gave Bush $146,000 during the past three years, according to the nonpartisan Center for Responsive Politics. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Partnership Investors Sought in House Probe 2002-01-25 15:03 (New York) Washington, Jan. 25 (Bloomberg) - Congressional investigators examining the collapse of Enron Corp., armed with subpoenas, are looking for investors who put money into partnerships that the bankrupt energy trader used to inflate earnings and hide debt. The partners, many of whom have never been named, may include Wall Street firms, institutional investors and pension funds, securities lawyers and investors said. Enron lured them with promised returns of 100 percent or more, one pension fund manager said. Enron needed partners to satisfy accounting rules that allowed the company to shift assets and liabilities from its balance sheet. ``It sounds like they were renting the (investors') names so they could keep this off their books,'' said Larry Soderquist, director of Vanderbilt Law School's Corporate Securities Law Institute. Through court documents or their own spokespeople, institutions identified as investors in the partnerships include General Electric Co.'s GE Capital; Canadian Imperial Bank of Commerce; and state retirement systems in Arkansas and California. Citigroup Inc. units Citicorp and Travelers Insurance Co. made total equity investment of more than $10 million in one of the investment partnerships, LJM2, a person familiar with the matter said. Court documents also identified the Citigroup investment as well as an investment partnership affiliated with Morgan Stanley Dean Witter & Co. and American International Group Inc.'s American Home Assurance Co. as investors, the New York Times reported. Records Requested Senator Joseph Lieberman, Democrat of Connecticut, said the Senate Governmental Affairs Committee's Permanent Investigations Subcommittee has subpoenaed documents related to the financing of Enron's partnerships. ``One of its focuses is going to be on the use of insider trading of separate entities that were dealing with one another without any understanding by the public that it was happening,'' he said. Representative Billy Tauzin, a Louisiana Republican who chairs the House Energy and Commerce Committee, said yesterday investigators have requested partnership records from Enron in an effort to identify investors. He spoke at a hearing at which executives of Enron's auditor, Arthur Andersen LLP, testified about the firm's destruction of Enron audit documents. ``There obviously are many members of Congress who would like to know who these secret partners were,'' said committee member Henry Waxman, a California Democrat. Wall Street firms could be a target of a congressional inquiry, said Republican Representative Jim Greenwood of Pennsylvania. ``Well if that's where our investigation leads us we certainly will,'' Greenwood said. ``We will leave no stone unturned.'' Enron Assets An Andersen internal memo released by the committee refers to CIBC, Canada's third-largest bank, as an investor in LJM2, a partnership set up and run by Enron's former chief financial officer, Andrew Fastow. LJM2, which eventually raised $349 million, was used to hold or sell a number of Houston-based Enron's assets, including fiber-optic cable that it bought at a premium from Enron in June 2000 and resold six months later to another Fastow-controlled partnership. LJM1 and LJM2 were incorporated in the Cayman Islands. The investment banking arm of Merrill Lynch & Co. underwrote the LJM2 offering and was made aware of information concerning Enron's off-balance sheet partnerships, according to the New York Times. In 2000, potential investors were told that Enron, through its partnerships, controlled 50 percent more assets than it disclosed in Securities and Exchange Commission filings, the paper reported. The Arkansas Teacher Retirement System invested $5 million in LJM2 starting in 1999, Chief Financial Officer George Snyder said. The pension fund hasn't been contacted by congressional investigators, he said. `Good Investment' ``The board at the time felt it was a good investment,'' said Snyder, who didn't work for the fund at the time. LJM2 was sold as a vehicle for purchasing and building companies, Bill Shirer, a fund manager for the Arkansas system, said in October. ``We had a limited investment of less than $5 million in LJM2,'' said GE Capital spokesman Peter Stack. ``It was some type of drawdown and I don't think we got up to the $5 million cap.'' AIG spokesman Ned Burke, CIBC spokesman Rob McLeod and Morgan Stanley spokesman Bret Gallaway all declined to comment. Citigroup spokesman Richard Howe had no immediate comment. Dozens of Partnerships Enron used dozens of partnerships to hold assets such as power plants. Accounting rules allowed the company to keep partnership debt off its books if an independent investor provided at least 3 percent of partnership funding. The hidden debt grew to billions of dollars, helping Enron meet 20 percent annual earnings growth forecasts. ``They had to do more off-balance-sheet financings, to get the debt off the books, to present the right balance sheet that Wall Street wanted to see,'' said Danny Bowers, chief investment officer for the Houston Firefighters Relief and Retirement Fund, which manages about $1.7 billion and represents 5,000 firefighters and retirees in Houston. In September 2000, an Enron trust called Osprey Trust raised $2.4 billion from institutional investors such as Putnam Investments, American Express Co., the Vanguard Group, Travelers and Prudential in a private placement of notes due in 2003 to help finance some of its partnerships, according to the New York Times. Because the notes were backed by Enron shares, they probably have lost 60 percent of their value, the newspaper said, citing estimates by McCullough Research, a Portland, Oregon-based utility consultant. Bowers said Fastow approached him about investing in LJM2 in January 2000. At the time, Fastow wanted to raise $400 million to buy and sell Enron assets, Bowers said. Bowers declined because of Fastow's dual role as Enron's CFO and LJM2's general partner. `Blatant Conflict' ``There was a pretty blatant conflict of interest,'' he said. ``It was kind of a stinky deal.'' Fastow, through a spokesman, has declined to comment since being ousted from Enron in October. In exchange for the investment, Fastow promised ``in the neighborhood of 100 percent, 150 percent returns,'' Bowers said. ``He didn't present it as no risk, he just presented it as a very high return opportunity.'' Enron executives tried unsuccessfully to get the University of Texas endowment to invest in about a dozen partnerships and other entities over a three-year period in the late 1990s, coming by to pitch transactions as often as every other month, said Austin Long, who was in charge of private equity investments at the university at the time. `Incredibly Favorable' ``These deals had one thing in common: they were incredibly favorable to Enron and they were incredibly overreaching,'' he said. In one case, Enron was trying to raise $200 million for a retail energy startup, valuing it at $2 billion even though it had no revenue and wasn't legally registered in any state. Many banks and investors who dealt with Enron have declined to comment on whether they invested in partnerships. J.P. Morgan Chase & Co., the second-biggest U.S. bank, wrote off $456 million in trading losses and loans to Enron in the fourth quarter. It still has exposure to potential losses of $2.06 billion. J.P. Morgan spokeswoman Kristin Lemkau declined to comment on whether any of those losses were related to partnership investments. Bank of America Corp., the third-largest U.S. bank, Wachovia Corp., and SunTrust Banks Inc. have written off Enron-related loans. None would comment on whether they invested in Enron partnerships. Calpers The California Public Employees' Retirement System, the nation's largest public pension fund, invested in Enron partnerships dating to 1993, when the company was trying to finance an expansion into energy trading. Calpers invested $250.5 million in Joint Energy Development Investments, or JEDI, which bought stakes in independent natural gas producers. In 1998, Enron approached Calpers about buying into a second JEDI partnership. Calpers agreed on the condition that Enron repurchase its interest in the first JEDI partnership. To do that, Enron set up Chewco Investments LP to buy Calpers' stake for $383 million. The transaction resulted in a $133 million profit for Calpers, spokesman Brad Pacheco said. The fund has received $171 million from JEDI II, he said. Because Enron controlled both Chewco and JEDI II, it lacked the independent funding needed to keep the partnerships and their debt off the company's balance sheet. Restated Earnings In November, Enron restated earnings to 1997, lowering profit by $586 million and adding $2.6 billion in Chewco debt to the company's books, according to filings with the U.S. Securities and Exchange Commission. Calpers spokeswoman Patricia Macht said the fund was unaware of Enron's Chewco arrangement. ``When Calpers cashed out of JEDI I, the investment managers believed that the cash was coming from Enron,'' she said. ``The first we heard about Chewco was in the newspaper. To this day, we have no evidence that shows there was anything improper about JEDI I and JEDI II.'' The earnings restatement marked the beginning of Enron's demise. On Dec. 2, the company filed the largest Chapter 11 bankruptcy ever. ``Based on the investigation so far, it's clear to us that these off-the-balance sheet partnerships eventually contributed to the company's financial meltdown,'' said Ken Johnson, a spokesman for the House commerce committee. The committee is one of 10 in Congress investigating Enron's collapse. The SEC and the Justice Department have begun their own probes. Investigators said they want to determine who invested in the Enron partnerships and for what reason. ``I think we have to understand who were the investors, why, who sold the investments in the partnerships, what were the gains to understand, was there activity here you could call bilking?'' said Senator Byron Dorgan, a North Dakota Democrat who leads the Senate Consumer Affairs Subcommittee, which also is investigating Enron. Fedl Judge Gives Enron 60 Days To Decide On Commodities By Kathy Chu 01/25/2002 Dow Jones News Service (Copyright © 2002, Dow Jones & Company, Inc.) Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- A federal judge will give bankrupt Enron Corp. (ENRNQ) 60 days, or until April 2, to decide whether it wants to commit to five commodities contracts. "Forcing an early decision to accept or reject could result in a loss of value to the estate," said Judge Arthur Gonzalez, during a Friday hearing at the U.S. Bankruptcy Court of the Southern District of New York. With this ruling, the judge rejected motions by Enron's creditors - Natural Gas Pipeline of America, Trailblazer Pipeline Co., Southern California Gas Co., San Diego Gas & Electric Co. and Superior Industries International Inc. (SUP) - aimed at forcing the company to immediately decide upon the agreements. The creditors claim that since Enron's bankruptcy, the company hasn't fully honored its commitments. This has required third parties to step in to supply natural gas and electricity. But Judge Gonzalez told creditors Friday that their businesses haven't been significantly impaired by Enron's bankruptcy, as sufficient supplies of gas and electricity continue to be available. Also, Enron has said that its supply of the commodities to two California public utilities - Southern California Gas Co. and San Diego Gas & Electric Co. - as well as other creditors are nearing 100% of levels prior to the Dec. 2 bankruptcy filing. -Kathy Chu; Dow Jones Newswires; 201-938-5392; e-mail: kathy.chu@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Ill. Regulators Likely To Strip Enron Energy-Sale Rights By Jon Kamp 01/25/2002 Dow Jones Energy Service (Copyright © 2002, Dow Jones & Company, Inc.) Of DOW JONES NEWSWIRES (This article was originally published Thursday.) CHICAGO (Dow Jones)--The Illinois Commerce Commission will likely vote next week to revoke an Enron Corp. (ENRNQ) unit's permission to sell energy to end users in the state, a spokeswoman for the commission said Thursday. The unit, Enron Energy Services, continues to operate and is still managing the energy needs of hundreds of industrial and commercial customers around the country despite having joined its parent in bankruptcy court. But the Dec. 2 Chapter 11 filing sets the unit at odds with Illinois law, which requires providers like Enron to have solid financial standing before serving customers. "It's being revoked primarily because their financial rating has been downgraded," commission spokeswoman Beth Bosch said of Enron Energy Service's license to do business in Illinois. "They lost one of the legs of their stool." The commission punted the expected ruling Thursday, but is likely to follow a staff recommendation to cancel Enron Energy Services' retail-provider certificate when it picks up the issue again next Tuesday, Bosch said. If the commission issues the order to revoke Enron Energy Services' certificate, the company will have an undefined period of time to show why it believes its certificate should remain intact, Bosch said. The company could also voluntarily back out of the certificate and could reapply for a new certificate at a later date. It wasn't immediately clear what effect revocation of the certificate would have on Enron Energy Services' Illinois operations. In some cases, the unit supplies energy; in others, it acts as a billing agent. While the former activity requires the certificate, the latter falls into a gray area. Most Enron contracts in Chicago were for energy management or billing agent services, Bosch said. But some of those contracts might have evolved into electricity provider deals. In its eight-year contract signed with the City of Chicago last summer, for example, Enron was to provide management services for the first few years and then actual electricity for the remainder of the deal. Representatives of Enron Energy Services couldn't be reached for comment. Enron Energy Services in recent years signed many high-profile contracts in the Chicago area, with customers ranging from the City of Chicago itself to PepsiCo Inc. (PEP) unit Quaker Oats Co. Under the contracts, which often run for several years, Enron Energy Services usually serves as an energy manager for its Illinois customers by helping them arrange power deals with their local utility, Bosch said. But the Enron unit's scope of operations has shrunk, notably in the Chicago area, where it once had aggressive growth plans. A New York bankruptcy court judge approved in early January Enron's request to terminate 600 to 700 energy supply contracts. Enron was granted a request to terminate more than 50 Chicago-area deals, Crain's Chicago Business has reported. The University of Chicago decided to cancel its seven-year Enron deal last week and is now receiving service directly from Exelon Corp. (EXC) unit Commonwealth Edison Co., spokesman Larry Arbeiter said. The university has no immediate plants to seek another provider. "At the moment the price we're paying is lower with ComEd," Arbeiter said. Quaker spokesman Mark Dollins said the company backed out of its 10-year energy management contract with Enron Energy Services, signed in February last year, after the bankruptcy judge ruled they could leave earlier this month. "We have already secured other providers," Dollins said. The City of Chicago used a clause in its Enron contract to cancel the deal in early December. -By Jon Kamp, Dow Jones Newswires; 312-750-4129; jon.kamp@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Lay, Other Enron Directors' Seats On Boards Face Scrutiny 01/25/2002 Dow Jones Corporate Filings Alert (Copyright © 2002, Dow Jones & Company, Inc.) ISSUER: NEWPOWER HOLDINGS INC. SYMBOL: NPW WASHINGTON -(Dow Jones)- Enron Corp. (ENRNQ) Chairman and Chief Executive Ken Lay's career as a corporate board member could end this spring, corporate governance experts said. Pressure is starting to build on companies to remove Lay and other Enron board members from their boards, said Patrick McGurn, director of corporate programs at Institutional Shareholder Services Inc., which advises large institutional investors on voting matters. Earlier Friday, the AFL-CIO announced it sent letters to 21 public companies encouraging them not to renominate any Enron board members to their own boards when they send out proxies this year. "Typically, you want directors to bring praise, not scrutiny," McGurn said, "it would be surprising to see (Lay) serve on any board after annual meeting season," McGurn said. Lay, who resigned as head of Enron on Wednesday, once served on the boards of a number of high-profile public companies. Over the past 12 months, he has resigned from the all the corporate boards on which he served except for NewPower Holdings Inc. (NPW) and Enron. Richard Koppes, an attorney with Jones, Day, Reavis & Pogue who advises companies on corporate governance issues, said Enron board members will have a much harder time now keeping and obtaining corporate board seats. "If I'm on a board and somebody said we wanted to bring on a former Enron board member, I'd start looking for another nominee," Koppes said. Lay resigned from the board of I2 Technologies Inc. (ITWO) in October 2001 and stepped down as a director at Compaq Computer Corp. (CPQ) and Eli Lilly & Co. (LLY) in December. He also had served on the board of EOTT Energy Corp. (EOT), but resigned in May. NewPower hasn't decided whether it will renominate Lay as a director for the coming year, according to spokeswoman Terri Cohen. The energy company plans to mail proxies to shareholders in mid-April for an annual meeting tentatively scheduled for sometime in May. "I can't speculate whether Mr. Lay will or will not be on the proxy" for the upcoming annual meeting," Cohen told Dow Jones Newswires. Cohen said that "if someone wanted to resign that's one thing, but that hasn't been discussed with Mr. Lay." -Robert L. Grant; Dow Jones Corporate Filings Alert; 202-393-7851 robert.grant@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. AFL-CIO takes aim at Enron directors Urges that they be kicked off other corporate boards By Lisa Sanders <mailto:lsanders@marketwatch.com<, CBS.MarketWatch.com Last Update: 12:04 PM ET Jan. 25, 2002 WASHINGTON (CBS.MW) - The AFL-CIO on Friday called on companies with Enron directors on their boards to refuse to re-nominate the 10 people, citing the group's failure to properly oversee the bankrupt energy merchant's accounting practices. Enron directors serve on boards ranging from Motorola to Lockheed Martin. "Directors who permitted the accounting deception that led to the collapse of a company worth over $70 billion are not suited to serve on other boards," the AFL-CIO's Richard Trumka said in a statement. Enron directors, among other things, failed to question the company's use of off-balance sheet financings to cover up debt and losses. The directors also waived conflict-of-interest rules to allow Enron executives to create limited partnerships that led to a $1.2 billion equity reduction, and they approved the annual report without confirming it was "straightforward and comprehensible," the AFL-CIO said. The AFL-CIO pointed out that shareholders could retaliate against board members they feel are unsuitable by withholding votes. "Barring Enron's directors from future service at other companies will hopefully prevent this type of catastrophic loss for workers from happening again," Trumka said. Enron director Robert Belfer also sits on the board of Westport Resources Corp.; Norman Blakes serves on Comdisco and Owens Corning boards; Ronnie Chan is a member of the boards of Hang Lung Group, Standard Chartered PLC, and Motorola; John Duncan sits on the board of Group 1 Automotive; Wendy Gramm, serves as a director for AMVESCAP PLC/Invesco Funds Group; Robert Jaedicke is a member of the board of the California Water Service Group; Ken Lay, who has resigned from Eli Lilly and Compaq's boards, sits on the NewPower Holdings board; John Mendelsohn is a member of the ImClone Systems board; Frank Savage serves as a director for Lockheed Martin, Qualcomm, and Alliance Capital Management; John Wakeham is a board member to Bristol & West PLC, Vosper Thornycroft Holding PLC, Michael Page International PLC, and Rothchilds Continuation Holdings; and Herbert Winokur is a board member at NATCO Group, CCC Information Services Group and DynCorp. Lisa Sanders is a Dallas-based reporter for CBS.MarketWatch.com. AFL-CIO To Cos: Purge Enron Directors From Your Boards By Phyllis Plitch 01/25/2002 Dow Jones News Service (Copyright © 2002, Dow Jones & Company, Inc.) Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- Faulting Enron Corp.'s (ENRNQ) board of directors for its role in the energy company's collapse, the AFL-CIO is calling on other companies to refrain from renominating the directors to their own boards. In letters sent to 21 companies, the labor federation's secretary-treasurer, Richard Trumka, cited the Enron directors' decision to waive conflict-of-interest rules to let Enron executives participate in related-party transactions, among other things. "The future retirement security of practically every American worker was hurt by the collapse of Enron," Trumka said in a press release. "In our opinion, directors who permitted the accounting deception that led to the collapse of a company worth over $70 billion dollars are not suited to serve on other boards." Trumka noted Enron's bankruptcy filing, multiple investigations into its accounting practices and the "evaporation" of $70 billion in market capitalization. He criticized board members for their failure to raise questions about "Enron's extensive use of off-balance-sheet entities to remove debt and losses" from financial statements and "for the company's overall lack of transparency." AFL-CIO affiliate union sponsored benefit funds have more than $400 billion in assets and the organization estimates the funds lost more than $1 billion. An Enron spokesman said it was premature to make comments about issues under investigation. Individual board members either didn't immediately return a call for comment or couldn't immediately be reached. -By Phyllis Plitch, Dow Jones Newswires; 201-938-2357; phyllis.plitch@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Auditors for U.S. Contractors Restricted in Consulting Work 2002-01-25 16:59 (New York) Washington, Jan. 25 (Bloomberg) -- Accounting firms auditing federal payments to Lockheed Martin Corp., General Dynamics Corp. and other contractors will be barred from many kinds of consulting work for those clients. U.S. Comptroller General David M. Walker, who oversees U.S. government auditing standards, announced the restrictions as Congress considers similar limits on accounting firms working in the private sector, following Enron Corp.'s collapse. The new consulting restrictions apply to all federal agencies, nearly all state and local agencies, and defense contractors, health maintenance organizations, hospitals or other organizations that get federal money. For private-sector companies, the restrictions apply to the parts of their businesses funded by the federal government. ``This standard represents an important step to enhance the independence of external auditors and better protect the public,'' said Walker, who heads the U.S. General Accounting Office. The consulting limits will take effect on Oct. 1. Congressional investigations are examining the issue of auditor independence as part of the investigation of Arthur Andersen LLP, which made $27 million from non-audit work for Enron in 2000, more than the $25 million it was paid as auditor. Restrictions on Audits The comptroller general's standards would prohibit auditors from reviewing their firm's own consulting work or performing management functions or decisions. Accounting firm employees who work as consultants won't be permitted to assist with audits. Accounting firms opposed the new rule on grounds it would be inconsistent with the standards in the private sector, the comptroller general said. The firms also contended that the new standards ``could cause a hardship'' on clients who pay the same firm for audit and consulting services, the announcement said. The Securities and Exchange Commission, Congress and accountants have debated for years whether consulting fees may make auditors reluctant to challenge questionable accounting by clients. In 2000, accounting firms blocked a proposed SEC ban similar to the new federal rule. Spokesman for the American Institute of Certified Public Accountants declined immediate comment. Spokesmen at Lockheed Martin and General Dynamics, both of which have headquarters in Washington suburbs, couldn't be reached. Walker's plan had been opposed by the AICPA, the trade group that blocked the SEC's attempt two years ago to prevent possible conflicts of interest at firms that do other work for audit clients. Congressional Demands The GAO standards were announced a day after members from both parties in Congress urged tougher standards during hearings yesterday on Enron's collapse and its implications for auditors. Former SEC Chairman Arthur Levitt, who led the fight for a consulting ban two years ago, asked Congress to consider a legislative response. Among the most common consulting services provided by accounting firms are to set up and manage computer networks for clients and establish financial management systems that provide data used in their financial reports. In 2000, Lockheed Martin paid Ernst & Young LLP $6 million for its audit and $16 million for other services, and General Dynamics paid Andersen $4.2 million in audit fees and $9.5 million for other work, according to filings with the SEC. Spokesmen at Andersen, Ernst & Young, and the Deloitte & Touche firm couldn't be reached. Walker urged the large accounting firms to tighten their own conflict-of-interest standards for the private sector. The firms are in talks with SEC Chairman Harvey Pitt about forming a private sector group to oversee accountant discipline and audit review. Pitt, a Republican, has opposed a consulting ban. --Neil Roland in Washington (202) 624-1868 or nroland@bloomberg.net. Editor: Drummond, Parry. IN THE MONEY: Enron Loan Shrinks; Is Liquidation Next? By Carol S. Remond 01/25/2002 Dow Jones News Service (Copyright © 2002, Dow Jones & Company, Inc.) A Dow Jones Newswires Column NEW YORK -(Dow Jones)- The financing is disappearing fast. Will the company follow? Enron Corp.'s (ENRNQ) much trumpeted $1.5 billion interim financing, designed to help the distressed energy company get back on its feet as it restructures under bankruptcy protection, has quickly and quietly been shrinking. The loan was preliminarily approved by Judge Arthur J. Gonzalez on Dec. 3, just a day after the company filed for bankruptcy. But Enron's lead bankers J.P. Morgan Chase & Co. (JPM) and Citigroup (C) soon found out that other banks, worried about their own exposure to Enron, weren't willing to take on any new Enron financing, and the loan was halved. The original loan agreement, referred to as debtor-in-possession financing, or DIP, was conditional on a full syndication of the financing and the return of $550 million in credit that J.P. Morgan and Citigroup had extended to Enron in November. Court documents show that meetings to approve Enron's interim financing have been postponed three times already. A meeting is now scheduled for Feb. 13. The final size of Enron's financing is yet to be decided, but the credit facility could "shrink down south of $500 million," a banker familiar with the financing said. Meantime, now that Enron has unloaded its most valuable asset, its energy trading operations, to UBS AG in exchange for a share of future revenues, it's unclear just how much, if anything, remains to be salvaged. This might mean that Enron's bankruptcy could turn into a liquidation rather than the earlier-described rescue operation, some observers suggest. "It's possible that they won't need a DIP after all," a bankruptcy lawyer said. "They're going to focus on asset sales, and it's possible that very little will be left at the end." Indeed, J.P. Morgan Chase and Citigroup made the first $250 million DIP installment available to Enron in early December, but Enron has yet to tap the credit facility. "We don't need the money right now," said Martin Bienenstock, an attorney for lawfirm Weil, Gotshal & Manges LLP which represents Enron. He said Enron currently has around $1 billion in cash. Regardless, additional financing from the DIP lenders is contingent upon J.P. Morgan Chase and Citigroup approving Enron's new business plan. The two banks turned back a plan submitted by the company in early January, asking Enron to provide more details about asset sales and receivables, people familiar with the matter said. A banker said Enron is now in the process of doing "a more thorough 'bottom up' analysis of its actual cash needs." Creditors of a bankrupt company often fight to minimize the interim financing because of the high cost of such loans. Enron's DIP loan carries an interest of 350 basis points, or 3.5 percentage points, over the London Interbank Offered Rate, or LIBOR. Given that under bankruptcy law, DIP financing is senior to all other loans, Enron creditors are also likely to resist letting assets already used to securitize some of Enron's numerous liabilities be subrogated to the collaterization of Enron's interim financing. Enron lawyer Bienenstock said the company and its banks will agree on the new DIP amount before the meeting scheduled for Feb 13. -By Carol S. Remond; Dow Jones Newswires; 201 938 2074; carol.remond@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. POWER POINTS: Not So Fast On Enron Liquidation Theory By Mark Golden 01/25/2002 Dow Jones Energy Service (Copyright © 2002, Dow Jones & Company, Inc.) A Dow Jones Newswires Column NEW YORK -(Dow Jones)- The Enron Corp. (ENRNQ) story of the week is that it's really headed toward a liquidation, not reorganization. Don't buy the idea too quickly, but don't buy Enron stock, either. While it seems clear that Enron's debts will greatly outweigh its assets, there are several profitable parts of Enron that could easily continue to operate under a reorganized company, though almost certainly after changing its name. "In most large cases, if there's a reasonable expectation that a profitable company will emerge, the creditors' committee will support reorganization," said bankruptcy attorney Bruce Borrus of Riddell Williams in Seattle, a member of the American Bar Association's bankruptcy committee. "The company as a going concern will often be more valuable than the value of the liquidated assets." Enron's natural gas pipelines, except for the one that it must sell to Dynegy Inc. (DYN), could form the basis for a profitable future Enron that is worth more to creditors than total liquidation. To that foundation, Enron's coming reorganization proposal likely will add its share of the UBS/Enron future trading profits and its Enron Energy Services division. Even if recent reports of hidden losses are true, EES is almost certainly profitable now as a result of the bankruptcy process, which allowed the unit to shed hundreds of contracts. That's not the "Big E" of old, but it's not a small company, either. Enron Jr. could have several billion in assets. In addition, creditors will get a tax benefit from an ongoing Enron which could carry forward operational losses for years, said Lynn LoPucki, bankruptcy professor at UCLA law school. Congress has been trying to crack down on the trafficking of such tax benefits for decades, LoPucki said. A company that has real assets and a real operational business is much more likely to carry forward the losses and tax benefits successfully. First, The Shedding Enron is already selling its noncore assets as well as its oft-described "crown jewel" - its U.S. wholesale energy trading unit, including traders, back-office systems and EnronOnline technology. The sale to UBS AG
|