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Enron Mail |
Enron Probe Dow Jones, 01/30/2002 Ex-Enron Workers Plead With Congress For Financial Help Dow Jones Energy Service, 01/30/2002 Former Enron Employee Warned Lay of Energy Contract Losses Bloomberg, 01/30/2002 Former Enron Employee Told Lay Earnings Misrepresented Dow Jones Energy Service, 01/30/2002 Ex-Enron Employees Ask Democrats for Secured Creditor Status Bloomberg, 01/30/2002 USA: New Enron president no stranger to corporate storms. Reuters English News Service, 01/30/2002 Enron Energy Services To Surrender Illinois License Dow Jones Energy Service, 01/30/2002 USA: UPDATE 1-Probe needed into Enron's California deals-FERC. Reuters English News Service, 01/30/2002 GAO to Sue White House for Energy Task Force Records FOX News, 01/30/2002 White House Confirms Lay Memo But Hasn't Seen Lawsuit Dow Jones Energy Service, 01/30/2002 Enron collapse memo details Cheney-Enron links Associated Press Newswires, 01/30/2002 Judge Delays Ruling On Halting Enron Suits In Texas Crts Dow Jones Energy Service, 01/30/2002 Enron collapse subjects British government, opposition to accusations Associated Press Newswires, 01/30/2002 Bank of America Fires Two Bankers Who Handled Enron Bloomberg, 01/30/2002 Lawmakers Fear 'Loopholes' In Electricity Deregulation Bill Dow Jones Energy Service, 01/30/2002 Shareholder Files State Lawsuit Against Enron Execs Dow Jones Energy Service, 01/30/2002 USA: Ex-Enron executive Baxter euologized for successes. Reuters English News Service, 01/30/2002 _________________________________________________________________________________ Enron Probe 2002-01-30 15:18 (New York) By Kathy Chu Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--The results of an internal investigation into Enron Corp.'s (ENRNQ) collapse may be released early next week, a company lawyer said Wednesday. The report will be posted online, at the Web site of the U.S. Bankruptcy Court of the Southern District of New York. The report is the culmination of Enron's three-month effort to account for off-balance sheet partnerships that the company used to keep debt off its books and to maintain a healthy credit rating. The transactions led the company last November to write down $1.2 billion of shareholder equity and to restate four years worth of earnings. Enron formed the special task force in October, hoping to restore investors' confidence in an energy-trading company that had begun to falter. The committee is made up of outside directors led by William Powers Jr., dean of the University of Texas law school. William McLucas - former head of the Securities and Exchange Commission's enforcement division and a partner at the Washington, D.C., law firm Wilmer Cutler Pickering - represents the task force. McLucas didn't return phone calls seeking comment, and Powers couldn't immediately be reached for comment. The committee served as a liaison between Enron and the SEC, which launched its own investigation into the company's accounting practices last year. Deloitte & Touche serves as the task force's independent accountant. The results of the investigation are expected to shed more light into the complex books of a company that had more than 3,500 units and numerous off-balance sheet partnerships. Edward Ketz, an associate professor of accounting at Penn State's Smeal College of Business, said that it's unlikely that more significant surprises will come out of the report. But, he said, "if there's any further bombshell, the real damage will be done with the accounting profession itself. It may give greater weight for Congress to do something (about accounting guidelines)." News of the internal report's release came during a hearing before Judge Arthur J. Gonzalez of the U.S. Bankruptcy Court of the Southern District of New York. Wednesday, Gonzalez approved the retention of two law firms, Weil Gotshal & Manges and Togut Segal & Segal, as attorneys for the debtor. In doing so, the judge overruled an objection by Enron creditor Wiser Oil Co. (WZR), which is owed about $7 million in trade debt, asking that a separate legal team be appointed for Enron's core unit, Enron North America. This subsidiary includes the wholesale energy-trading operations, which generated 90% of the company's $101 billion in revenue last year. Gonzalez noted that the creditor's concerns - one being that funds from the Enron North America unit will be used to benefit other subsidiaries - are likely to be addressed in the next month, at court hearings to consider motions for a trustee, examiner and a new cash-management system. The bankruptcy court, earlier this week, approved Milbank Tweed as the law firm for Enron's official creditors committee, after no objections were filed. Also Wednesday, Judge Gonzalez disclosed that his wife is part of a New York City pension fund involved in Houston litigation against Enron. But he said this doesn't disqualify him from presiding over the Enron case. "The court has examined and does not believe that my partiality will be compromised," said Gonzalez. When New York City pension matters are brought before the court, Gonzalez will "take steps" to ensure that no conflicts of interest exist, he said. The New York City pension funds along with the Florida State Board of Administration have asked the bankruptcy court to enter a detailed order requiring Enron to preserve its books and records. The hearing is set for Feb. 5. The city and state pension funds are seeking the role of co-lead plaintiffs in class-action lawsuits filed against Enron in Texas, claiming securities violations and fraud by company executives. In total, the New York City pension funds claim a loss of $109 million from Enron-related investments, while the Florida State Board claims losses of $334 million. The New York City pension funds made up about 20% of his wife's retirement fund, said Gonzalez. -Kathy Chu; Dow Jones Newswires; 201-938-5392; e-mail: kathy.chu@dowjones.com Ex-Enron Workers Plead With Congress For Financial Help 01/30/2002 Dow Jones Energy Service (Copyright © 2002, Dow Jones & Company, Inc.) WASHINGTON (AP)--Laid-off Enron (ENRNQ) workers pressed for help Wednesday on Capitol Hill, putting faces to some of the stories of retirement nest eggs lost when the company collapsed. Organized by the Rev. Jesse Jackson, several dozen workers piled in buses to make the 25-hour trip from Houston to appeal for help paying for mortgages, health care, groceries, children's tuition and other living expenses. "I lost everything, because I believed in Enron," Jessie Patterson told House Minority Leader Dick Gephardt, D-Mo, and other Democratic lawmakers. Earlier, the workers met with AFL-CIO officials. Gephardt pledged Democrats' help to assuage "this ... tragedy of great proportions." He said Enron's implosion, the largest bankruptcy filing in U.S. history, should spur changes in laws governing pension and 401(k) plans that would give people more control over investments and greater protection against corporate mismanagement. Enron's generous political donations and attempts to influence energy policy also should also spark congressional passage of long-stalled legislation aimed at reducing the influence of big money in politics, Gephardt said. "I believe with all my heart that we have to clean up politics in this country," he said. Gwen Gray, who worked in Enron human resources, said she processed millions of dollars in bonuses that were paid to retain key executives in the two months leading up to the bankruptcy, while workers were given 30 minutes to get out of the building without severance pay. Almost 95% of Gray's 401(k) was invested in company stock. She said she has $109 left, "and that will pay my light bill that's due Monday." Several workers said they were having difficulty finding work because companies in the Houston area have been reluctant to hire Enron workers. Many feared that speaking out would hurt job prospects or target them for retaliation. "We're not here just for a handout," said Kathy Benedict, who can't afford the $300 a month to extend her health insurance benefits. "We need jobs." Several workers said lawmakers should change federal bankruptcy laws to make workers and their retirement plans secured creditors that would be at the top of the list for available assets. Workers now come after secured creditors. "Maybe it's too late for us, but there are other people out there," said Dennis Vegas. "This could happen to other Americans." Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Former Enron Employee Warned Lay of Energy Contract Losses 2002-01-30 16:00 (New York) Washington, Jan. 30 (Bloomberg) -- A former Enron Corp. manager warned then-Chief Executive Kenneth Lay in August that the company was hiding at least $500 million in losses on energy contracts, adding to evidence that senior executives knew about the company's growing debt, U.S. lawmakers said. Enron Energy Services, the unit that advised businesses and property owners on energy use and operated heating, lighting and air conditioning equipment on their behalf, "had been doing deals for two years and was losing money on almost all the deals they booked,'' Margaret Ceconi, a former EES manager, wrote to Lay in an Aug. 29 e-mail. "They are trying to cover up their dumb decisions.'' Representatives Billy Tauzin, chairman of the House commerce committee, and John Dingell, the panel's senior Democrat, included a copy of the e-mail in a letter to Lay asking him whether he responded to Ceconi and or discussed her allegations with Enron's accounting and legal departments. The commerce committee is one of 10 congressional panels investigating Enron's collapse. The Justice Department and the Securities and Exchange Commission also are looking into what led Enron, whose stock rose as high as $82 a share last year, to file the largest bankruptcy in U.S. history on Dec. 2. Lawmakers have predicted that changes in the law and criminal indictments would result from the probes. Ceconi's e-mail echoed one sent by Sherron Watkins, an Enron vice president, in mid-August to Lay. In that note, Watkins said that said former Chief Executive Officer Jeffrey Skilling had ignored warnings from other company executives about conflicts of interest in partnerships the company created to hide the size of its debt. "One can only surmise that the removal of Jeff Skilling was an action taken by the board to correct the wrong doings of the various management teams at Enron,'' Ceconi wrote. Skilling quit Enron last August and Lay returned to the job. Lay resigned last week as chief executive. One area investigators are looking into is whether executives of Enron, once the largest energy trader, misled shareholders and employees before it restated earnings in November. -- Jeff Bliss and Russell Hubbard in Washington (202) 624-1975 or jbliss@bloomberg.net Former Enron Employee Told Lay Earnings Misrepresented By Bryan Lee 01/30/2002 Dow Jones Energy Service (Copyright © 2002, Dow Jones & Company, Inc.) Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- Kenneth Lay, the former chairman and chief executive at Enron Corp. (ENRNQ), received at least two warnings last August that questionable - and potentially illegal - accounting practices would become the company's financial undoing. Both memos warned that skepticism and increasing scrutiny in the wake of the surprise resignation that month of Enron Chief Executive Jeffrey Skilling would bring the company's financial plight to light. The first, now widely reported, came from Enron Vice President Sherron Watkins, and discussed the various off-the-books transactions the company had engaged in, which ultimately contributed to the company's financial undoing later in the year. "I am incredibly nervous that we will implode in a wave of accounting scandals," Watkins wrote prophetically. Now congressional investigators have released another memo, sent to Lay on Aug. 29 via e-mail, from a recently laid-off employee who worked in sales for nine months at Enron Energy Services. Margaret Ceconi, who had been recruited from GE Capital (GE), asked her e-mail be forwarded to Enron's board, warning, "The house of cards (is) falling." Democratic staff on the House Energy and Commerce Committee released the e-mail Wednesday, with Lay being scheduled to testify Monday before both the House Financial Services Committee and the Senate Commerce Committee. Ceconi's e-mail goes into some detail about huge losses stemming from a number of retail electricity deals with commercial customers, and complains she was "fraudulently" recruited to the company. The e-mail ticks off a number of money-losing deals, and warns of potential Securities and Exchange Commission violations for "knowingly misrepresent(ing) EES's earnings" by hiding the losses in Enron's profitable wholesale electricity business. Ceconi warned the losses would add up to more than $500 million. "Rumor on the 7th floor is that it is closer to $1 billion," she wrote. "But somehow EES, to everyone's amazement, reported earnings for the 2nd quarter," she continued, warning of accounting standards violations. That EES misrepresented its earnings "is common knowledge among all the EES employees, and is actually joked about. But it should be taken seriously," Ceconi warned, citing industry analysts who "know what's going on, they just can't confirm it. YET." Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Ex-Enron Employees Ask Democrats for Secured Creditor Status 2002-01-30 16:33 (New York) Washington, Jan. 30 (Bloomberg) -- Former Enron Corp. employees today asked lawmakers to give them the same status as secured creditors in the company's bankruptcy and a bailout like the one the ailing airline industry received after Sept. 11. "If I was a flood victim, the Red Cross would have been at my door the next morning,'' said Deborah Johnson, an ex-employee. "We want relief.'' About a dozen former Enron staffers from Houston went to the Capitol to meet with House Democrats today on a trip sponsored by the AFL-CIO federation of labor unions and the Reverend Jesse Jackson, chairman of the Rainbow-PUSH Coalition. The fired employees said they were frustrated that retention bonuses were granted to executives days before Enron filed for bankruptcy, while they can't cash their $4,500 severance checks because that money is tied up in bankruptcy court. ``They got bounced $4,500 checks and executives get a sound $100 million check the day before,'' Jackson said. As unsecured creditors, many Enron employees will receive money they're owed by the company only after secured creditors are paid. Shareholders are suing Enron, once the world's No. 1 energy trader, claiming that the company and its accountants hid some $600 million in losses from investors, triggering the biggest bankruptcy in U.S. history. Representative Shelia Jackson Lee, a Democrat from Houston, called for hearings to examine bankruptcy laws during an informal meeting with the employees. "The bankruptcy court closed the door on your severance,'' said Jackson Lee, adding that House hearings would look into ways Enron could be forced to set aside money for employees before it continues its restructuring. Not Forthcoming The employees also asked for legislation to give them the same status as secured creditors in the bankruptcy case and said they're seeking the same sort of bailout that lawmakers gave the ailing airline industry following Sept. 11. Many of the employees blamed Enron executives for not being forthcoming about the company's financial situation. "I've lost my job, I've lost the money I contributed to the 401k plan, and I had stock options I did not exercise,'' because company officials predicted the stock value would rise, said Monique VanVooren-Shankel, a former Enron employee. "It evaporated.'' A handful of Texas Democrats at a press conference with House Minority Leader Richard Gephardt of Missouri and the fired workers vowed to push legislation that would give employees higher status in bankruptcy cases. "The current bankruptcy code doesn't provide secured creditor status for 401k participants, and that needs to change,'' said Representative Ken Bentsen. Bentsen's bill would place 401k plan participants at the top of the list of unsecured creditors in the event of a bankruptcy where the plan fiduciary misled investors. Bentsen and Jackson Lee, along with 43 percent of the rest of the House, received contributions from Enron. -- Amy Strahan Butler in the Washington newsroom USA: New Enron president no stranger to corporate storms. By Dan Wilchins 01/30/2002 Reuters English News Service (C) Reuters Limited 2002. NEW YORK, Jan 29 (Reuters) - Jeff McMahon, promoted Tuesday to president and chief operating officer at scandal-wracked Enron Corp. , has a knack for finding himself in the middle of corporate maelstroms. His ability to deal with trouble in a straight-shooting style was likely attractive to a company desperately needing some truth serum. McMahon is said to have openly questioned some of the major off-balance sheet partnerships set up by Enron that contributed to the energy giant filing the largest bankruptcy in U.S. history in December. As a company insider, he understands the inner workings of Enron's complex dealings. That asset could help Enron in its survival strategy. But it could also prove to be a liability, if inquiries about off-balance sheet structures raise concerns about McMahon's involvement. The boyish-faced McMahon, a trained accountant known for his political savvy and strong sales ability, has held a number of senior roles at Enron, including executive vice president of finance and treasurer for Enron Corp., and president and chief executive officer of Enron Industrial Markets. Enron isn't the first place in which McMahon, 41, has found himself at the center of a major corporate controversy. A decade ago, he was a young internal auditor caught up in a case that gained almost as much notoriety as Enron, as trading losses at his former employer, the U.S. subsidiary of German industrial giant Metallgesellschaft AG, nearly bankrupted the parent company. A HEDGE GONE AWRY In the early 1990s, McMahon was an internal auditor at the U.S. unit of Metallgesellschaft, MG Corp., which eventually lost more than $1 billion from oil futures trading, making headlines throughout the world. He wrote a series of internal audit reports critical of risk management and accounting procedures at the MG Corp. subsidiary responsible for the losses, MG Refining and Marketing, Inc. (MGR&M). "(McMahon) was one of the heroes at MG Corp.," said Bob Bernstein, a lawyer at Kaye Scholer LLP in New York, who represents Metallgesellschaft, now known as mg Technologies . Figuring out exactly what went wrong at MG Corp. is a cottage industry. The case is studied in business schools, and many former employees of the company and some academics insist that in the long-term, the MG trading strategy would have made money. MG Corp. was caught out in a trading strategy that amounted to a huge bet on oil futures prices. When oil prices dropped in 1993, the futures positions hemorrhaged cash, threatening the collapse of the entire company. "They were involved in giant speculation," said Jeff Parsons, an economist at Charles River Associates in Boston, who has studied MG Corp. The oil futures were meant to hedge longer-term supply contracts, but also provide a source of profit. RAISING RED FLAGS Internal audit reports obtained by Reuters indicate that McMahon's audit team was sounding alarms even before MG Corp. began hemorrhaging cash, and continued to do so as the problems persisted. An audit of risk management procedures at MGR&M dated August 27, 1993, found that risk management "require(d) improvement," The amount of risk capital committed to the trading was "much larger than anticipated in the original business plan," according to the report. Although the internal audit team was told that the Board of Directors had approved changes to the business plan, there was no formal written approval of the changes, the report continued. "The lack of formal approval presents the risk that deviations from the approved plan occur, go undetected, and expose the Company to financial loss," McMahon's report said. Management at the time ignored him, but after the losses were sustained, new management was brought in, saw McMahon's reports, considered additional evidence, and fired the architects of the strategy, Kaye Scholer's Bernstein said. MG managed through the crisis and continued to operate, though with significant help from bankers in a major bailout operation. A SIMILAR ROLE At Enron, McMahon may have played a role similar to that at MG Corp. According to a letter sent from Sherron Watkins, a vice president at Enron, to former Chairman Kenneth Lay, which was written after Enron CEO Jeffrey Skilling resigned in August, McMahon was highly concerned about the off-balance sheet LJM partnerships, a series of deals set up by Enron. McMahon, then Enron's treasurer, demanded that five issues regarding LJM be addressed, if he was to remain in that position, Watkins said. Three days later, Skilling offered him the chief executive officer spot at Enron Industrial Markets, the letter said. For his part, Skilling has said that McMahon did raise concerns - but his primary issue was the impact of LJM on his compensation, according to Judy Leon, a spokeswoman for Skilling in Washington, D.C. OFF-BALANCE SHEET DEALS MAY PROVE NETTLESOME McMahon reports to Stephen Cooper, who on Tuesday was named acting chief executive. This joins Cooper, an outsider with a restructuring background, with McMahon, an insider not implicated directly in any wrongdoing. Still, McMahon was a senior financial official while a series of off-balance-sheet transactions were structured, and many of them had cross investments in one another, a banker who knows McMahon said. McMahon has so far successfully avoided criticism for his involvement with off-balance sheet structures, the banker said. "But who knows if he'll get dragged into this?," he added. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Energy Services To Surrender Illinois License By Jon Kamp 01/30/2002 Dow Jones Energy Service (Copyright © 2002, Dow Jones & Company, Inc.) Of DOW JONES NEWSWIRES CHICAGO -(Dow Jones)- Enron Energy Services is voluntarily giving up its certificate to serve commercial and industrial customers in Illinois, once a key growth area for the Enron Corp. (ENRNQ) unit, a spokeswoman confirmed Wednesday. The Illinois Commerce Commission decided Tuesday to revoke the retail electric provider certificate held by Enron Energy Services, because its parent's debt rating is below investment grade. Though EES could fight the order, it doesn't plan to, spokeswoman Peggy Mahoney said. "It became clear that we weren't going to be able to keep our license because of the debt rating," she said. EES is now facing similar issues in other states, including Texas and California, where it has a particularly large presence, Mahoney said. While it is fighting to keep customers in other areas, the clear financial benchmarks required for suppliers in Illinois leave EES with few options, she said. Mahoney was unable to list the number of customers EES had in Illinois, but the company was establishing a strong foothold in Chicago before it joined Enron in bankruptcy court in December. EES signed its first Chicago-area energy management deal with the Archdiocese of Chicago in 1998, then added other high-profile customers like the City of Chicago and PepsiCo Inc. (PEP) unit Quaker Oats Co., among many others. EES had aggressive growth plans in the region. In an early October interview, before Enron's troubles became widely known, EES Chief Operating Officer Jeremy Blachman said Enron planned to build its share of the Chicago energy sales market to 8% to 10% from less than 1%. Chicago accounts for the lion's share of the $6 billion to $8 billion Illinois market. Now, the company is quietly moving in the opposite direction, trimming its profile in Illinois. The City of Chicago, Quaker and the Archdiocese have all recently walked away from their contracts with EES. In early January, a New York bankruptcy judge approved Enron's request to terminate many other Chicago-area deals, Mahoney said. Nationwide, EES received the power it needed to fulfill contracts from Enron's wholesale unit. Once Enron all but ceased power trading, EES was left to scramble for power from other suppliers. To date, it has managed to keep most of its 32,000 contracts while it tries to figure out how to restructure and maintain service, Mahoney said. But EES wasn't actually supplying Illinois customers with power. Instead, it was serving primarily as a billing agent, helping its Illinois clients manage their power needs, Mahoney said. It's still unclear whether EES needs its state certificate to serve as a billing agent, ICC Commissioner Ruth Kretschmer said Tuesday. Regardless, the company may not want to continue those operations, Mahoney said. EES was waiting for Illinois' young competitive retail market to mature before it signed actual deals to supply energy, using its billing-agent business to get its foot in the door. "We were in the process of putting in place the ability for us to supply physically," Mahoney said. "We had thought that was imminent." Now, Enron must decide whether it is still worth maintaining billing-agent and energy-management deals in Illinois when there is no possibility they will evolve into energy-supply contracts, Mahoney said. EES could also apply for a new supplier certificate in the future. "That's exactly what we're reviewing right now," Mahoney said. "It's unclear what we will ultimately do in Illinois." -By Jon Kamp, Dow Jones Newswires; 312-750-4129; jon.kamp@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: UPDATE 1-Probe needed into Enron's California deals-FERC. By Chris Baltimore 01/30/2002 Reuters English News Service (C) Reuters Limited 2002. WASHINGTON, Jan 30 (Reuters) - A member of the Federal Energy Regulatory Commission said Wednesday that the agency should investigate whether bankrupt Enron Corp. manipulated wholesale electricity prices in California. Enron, accused by Western politicians of raising prices in long-term supply contracts following California's power crisis, has denied any wrongdoing. "We need to clear up that lingering doubt," said FERC commissioner Nora Brownell, a Republican appointee to the agency last summer. "If there was market manipulation, we need to find it and we need to deal with it." Brownell, speaking to reporters after a routine FERC meeting, made her comments after FERC Chairman Pat Wood testified on Tuesday before the Senate Energy Committee about Enron's impact on U.S. energy markets. Wood indicated during the hearing a willingness to open an agency investigation of Enron at the request of West Coast politicians. Enron supported Brownell's appointment to FERC because she was a free market advocate while a member of the Pennsylvania public utilities commission. The Houston-based company was among several independent power producers that enjoyed big increases in revenues early last year after Western spot market prices for wholesale power soared tenfold, to as high as $400 per megawatt hour. The electricity crisis was linked to California's failed deregulation scheme that did not encourage new plant construction and barred the state's utilities from passing through higher wholesale prices to consumers. The state eventually signed long-term supply contracts for some $42 billion worth of wholesale power supplies during coming years. Those contracts have been criticized by activist groups and some politicians as locking in prices well above market levels. ALLEGED OVERCHARGES Still pending before a FERC administrative judge is California's demand for some $9 billion in alleged overcharges by Enron and a dozen other wholesale suppliers. That case is unlikely to be determined for several more months. Brownell was noncommittal on what action FERC should take if any market manipulation was found to have occurred with Enron's sales into California. "I think there are tools we have to deal with the conclusion that someone manipulated the market," Brownell said. So far, there is no price data to show Enron did anything wrong, she said. "We need to get to the underlying facts of the case," she added. FERC has not officially opened an investigation yet but is expecting a formal request from Democratic Senators Dianne Feinstein of California and Maria Cantwell of Washington, an agency spokesman said. Enron is accused of raising electricity prices in long-term supply contracts negotiated with the state of California following its power crisis. Data presented at the Senate panel's Tuesday hearing by an independent power market analyst showed West Coast forward prices for wholesale power plunged by 30 percent on Dec. 3, the day after Enron declared the biggest bankruptcy in U.S. history. Some Western senators said the data indicated Enron had inflated power prices before its bankruptcy. Sen. Ron Wyden, an Oregon Democrat, said he wanted to "lift the veil of secrecy" around Enron's wholesale power transactions in the West. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. GAO to Sue White House for Energy Task Force Records Wednesday, January 30, 2002 FOX News WASHINGTON - In an unprecedented move, the General Accounting Office will sue the White House for access to Vice President Dick Cheney's energy task force records, Fox News has learned. Unless the "GAO gets the information they want or is in good faith negotiations, we're headed for court" a GAO official told Fox News on Wednesday. The official said that in recent GAO discussions with congressional investigators, it has been "clear the White House is telling their side of the story, significantly misrepresenting certain facts" GAO officials were calling congressional leaders at the Capitol Wednesday morning to tell them of the decision. An official announcement explaining the GAO's reasoning was expected after noon. It will be the first time in the GAO's 80-year existence that it has sued the executive branch. The process of filing the lawsuit in U.S. District Court in Washington is expected to take two to four weeks. A decision had been expected from GAO Comptroller General David Walker, leader of Congress's investigative arm, all week. The GAO wants to force Cheney, who ran the task force, to turn over documents on the meetings held last year with business executives as the Bush administration crafted a new national energy policy. Some of the meetings included officials from the now-collapsed Enron Corp., a Houston-based energy broker with deep ties to Bush. Although lawyers for the White House and the agency had continued talks this week, Cheney said on Sunday that the dispute "probably will get resolved in court." In resisting the GAO, Cheney insists that providing the list of industry executives would harm his ability to receive advice in the future, and that the congressional investigators are overstepping their bounds. The GAO, as a congressional agency, insists it has the authority to request the information. Any GAO lawsuit would be highly controversial on Capitol Hill. The agency's investigation began after Democrats on April 19 requested that the GAO investigate the conduct, operations and funding of the Cheney energy task force. On Tuesday, some Republicans had threatened to try to block the suit. "I think it may come to that," said Sen. Orrin Hatch, R-Utah, the top Republican on the Senate Judiciary Committee. Congress' investigative arm shouldn't be "trying to impose disclosure on internal White House meetings to determine policy," Hatch said. "If you have to do that, pretty soon there wouldn't be any meetings." House Majority Leader Dick Armey, R-Texas, said he and House Speaker Dennis Hastert, R-Ill., planned to "talk to the agency." Sen. Arlen Specter, R-Pa., said he was researching to see whether the GAO would be overstepping its authority by taking on the administration. "My concerns are that it would encroach upon the deliberative process and make it impossible for the vice president at the direction of the president to make a recommendation," Specter said. "It's also a tricky area on executive privilege." The San Francisco Chronicle reported Wednesday that then-Enron Chairman Kenneth Lay gave Cheney a three-page document last April detailing the energy trading company's arguments against price caps or other measures to stabilize electricity prices in California. "Events in California and in other parts of the country demonstrated that the benefits of competition have yet to be realized and have not reached consumers," the memo said. The newspaper said some of the positions included in the memo were included in Cheney's energy plan. An Enron spokesman told the newspaper that Lay gave the memo to Cheney. Mary Matalin, an adviser to Cheney, said the energy plan included input from many sources. On Tuesday, an energy consultant suggested to the Senate Energy and Natural Resources Committee that Enron may have been using largely secret trades to manipulate energy markets. Robert McCullough, a consultant whose clients include several Northwest utilities, testified that in the week after Enron announced its bankruptcy, the "forward price" of electricity in the West fell sharply. Enron had been a key trader in this market, which is used as a hedge against future power price changes and is unregulated. "That certainly raises the question about whether Enron was manipulating the West Coast market" by keeping prices artificially high, Sen. Ron Wyden, D-Ore., said in response to the consultant's testimony. McCullough said "the clear implication is that Enron may have been using its market dominance to set forward prices." Other energy experts said other reasons may have been behind the price decline. Lawrence Makovich, a power industry expert at Cambridge Energy Research Associates, said it would be impossible to determine simply from the decline in price whether prices were manipulated. The Federal Energy Regulatory Commission told the Senate panel it would investigate Enron's influence on wholesale electricity prices. The Associated Press contributed to this report. White House Confirms Lay Memo But Hasn't Seen Lawsuit 01/30/2002 Dow Jones Energy Service (Copyright © 2002, Dow Jones & Company, Inc.) WASHINGTON (AP)--The White House said Wednesday it hadn't received notification of the lawsuit to be filed by the General Accounting Office, the investigative arm of Congress. A congressional source said Wednesday that GAO has decided to sue the White House for access to documents from President George W. Bush's energy task force. White House spokesman Ari Fleischer said, "The president will stand on principle and for the right of presidents and this president to receive candid advice without it being turned into a news release." GAO officials were calling congressional leaders Wednesday to tell them of the decision. An official announcement was expected later in the day. The White House also said Kenneth Lay, then chairman of Enron Corp. (ENRNQ), gave Vice President Dick Cheney a three-page document in April arguing for federal authorities to refrain from imposing price caps or other measures sought by California officials to stabilize electricity prices. "Events in California and in other parts of the country demonstrated that the benefits of competition have yet to be realized and have not reached consumers," the memo said. Cheney spokeswoman Mary Matalin dismissed the significance of the memo first reported by the San Francisco Chronicle. Nine of Lay's 11 suggestions weren't included in the White House energy plan - and the two that made the report were non-controversial, she said. A decision had been expected all week from Comptroller General David Walker, GAO's chief. The GAO wants to force Cheney, who ran the energy task force, to turn over documents on the meetings held last year with business executives as the Bush administration crafted a national energy policy. Some of the meetings included officials from the now-collapsed Enron, whose executives have had deep ties to Bush. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron collapse memo details Cheney-Enron links 01/30/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. SACRAMENTO (AP) - A memo outlining discussions between Enron officials and the White House reveals the extent to which the Houston energy giant lobbied to influence government policy, despite White House insistence that the details remain secret. The memo was given by former Enron Chairman Ken Lay to Vice President Dick Cheney last April when the two met to discuss the administration's response to California's energy crisis, the San Francisco Chronicle reported Wednesday. The White House said Tuesday that aspects of the memo resembled elements of Cheney's energy plan, but refused to say whether the document was included in notes that Cheney now refuses to divulge to congressional investigators. The memo contains eight points spelling out Enron's case for why federal authorities should refrain from imposing price caps or other measures sought by California officials to stabilize runaway electricity prices. The key point for California was whether soaring wholesale power prices should be limited or whether such prices were just a reflection of normal supply-and-demand dynamics. The memo blames California officials for having made only "limited progress" in tackling the state's power woes. Steve Maviglio, a spokesman for Gov. Gray Davis, said it was no surprise that Enron had a voice in the formation of the Bush administration's stance on California's difficulties. "What the federal government did during the energy crisis was pretend that the problem didn't exist and say that the markets can solve everything, and that's the same thing Ken Lay told the governor," Maviglio told The Chronicle. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Judge Delays Ruling On Halting Enron Suits In Texas Crts By Michael Rieke 01/30/2002 Dow Jones Energy Service (Copyright © 2002, Dow Jones & Company, Inc.) Of DOW JONES NEWSWIRES HOUSTON -(Dow Jones)- A U.S. district court judge delayed ruling Wednesday on a motion to stop plaintiffs from filing lawsuits in Texas state courts against Arthur Andersen L.L.P.; some of its employees and former executives of Enron Corp. (ENRNQ). Plaintiff and defense attorneys involved in federal class-action lawsuits in the Southern District of Texas related to the collapse of Enron argued against allowing such cases to proceed, saying they violated the spirit of federal law governing securities law and could interfere with their own suits. Lawsuits have been filed in state courts in both Washington and Brazos counties in Texas on behalf of individual investors who lost money as a result of the collapse of Enron. Those suits name as defendants Andersen, four current Andersen employees, one former Andersen employee, and three former Enron executives. The cases filed in state courts are intended to circumvent federal securities laws, said Bruce Collins, an attorney for former Enron Chairman and Chief Executive Ken Lay. Lay is a defendant in the suits filed in Washington and Brazos counties. Federal law calls for such cases involving 50 or more plaintiffs to be removed to federal courts where similar cases have been filed, Collins said. Although the suits filed in Washington and Brazos counties have fewer than 50 plaintiffs, they should be moved to federal courts, said Rusty Hardin, representing Andersen. Such suits are liable to be a recurring problem because, "There are 252 counties left" in Texas where such suits could be filed. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron collapse subjects British government, opposition to accusations By ROBERT BARR Associated Press Writer 01/30/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. LONDON (AP) - Enron's collapse has cast a shadow over Downing Street, with Prime Minister Tony Blair under pressure to explain how Enron won favorable government decisions after giving financial support to the Labor Party. Questions also are being raised about Labor's relationship with Arthur Andersen, Enron's auditors. Opposition Conservatives are seeking to capitalize. But they also accepted Enron's support, and Enron's board included John Wakeham, a well-connected senior figure in past Conservative governments who now may face questioning about the company's collapse. "What you have here is thousands of words, very little story," Blair's official spokesman told reporters Wednesday, speaking on condition of anonymity. The Labor Party has confirmed that Enron gave the equivalent of 36,000 pounds (dlrs 50,760) between 1997 and 2000 - at a time when Enron was pressing the government to lift a moratorium on new gas-fired power generating plants. The moratorium stopped Enron's plans for a 1,200-megawatt station in southeastern England. By the time the moratorium was lifted in November 2000, gas prices had doubled and Enron did not pursue the project. Opposition critics note that Enron spent 15,000 pounds (dlrs 21,000) to host a reception at the Labor party conference in 1998, shortly after the government approved Enron's takeover of Wessex water, which supplies domestic water and sewer service in southwestern England. Ralph Hodge, former chairman of Enron Europe, said he had advised the company to sponsor events in conjunction with political parties rather than make direct donations. "Meetings were held with ministers and officials on a number of occasions before and after Enron sponsored events at party conferences and conventions. I am certain that these meetings would have taken place irrespective of any sponsorships," Hodge said. Opposition Liberal Democrat Matthew Tayler has sharply questioned Enron's courting of the Blair government. "We know that in the United States Enron used extensive political contacts to seek to further its interests, and there is good evidence of the same happening here in the UK," Taylor said. "Taking on former Labor employees to lobby for a change in gas policy and bingo, gas policy changes; paying for tables at the Labor Party conference and seeking direct contact at the time of the takeover of Wessex Water and bingo, that is approved." But the Labor Party's general secretary, David Triesman, scoffed at such charges in a television interview this week. "The idea that a government switches its policy on energy a week after having a gala dinner is really among the more absurd claims I've heard in my political life," Triesman said. On Tuesday, Blair's office released details of seven meetings between ministers and Enron executives between April 1988, when Enron chief executive Kenneth Lay met then-Industry Minister John Battle, and October 2000. The Department of Trade and Industry said it did not keep records of who initiated each of the meetings. Enron's outlay for political contacts - including some 25,000 pounds (dlrs 35,000) to the Conservative Party - pale in comparison to political contributions of dlrs 5.77 million in the United States in the last 12 years. The opposition apparently doesn't yet sense a major opportunity to attack Blair over Enron. During the prime minister's question session in Parliament on Wednesday, Conservative leader Iain Duncan Smith decided instead to probe Blair about problems in the National Health Service and the Labor Party's financial support from a union that is currently disrupting rail service with a series of 48-hour strikes. A decade ago, Enron successfully lobbied Margaret Thatcher's Conservative government for permission to build one of the first gas-fired electric generating plants in Britain. The minister who approved that project, John Wakeham, joined Enron's board as a non-executive director in 1994 - and now finds himself under fire. Nick Harvey, a Liberal Democrat lawmaker, has called for Wakeham to give up one of his most prominent jobs: chairman of the Press Complaints Commission, a politically sensitive post in which he has dealt with complaints from people aggrieved by newspapers, including Blair and the royal family. Wakeham has not responded. Conservatives also have questioned Labor's relationship with Arthur Andersen, which was banned from doing business with the government because of its association with the De Lorean sports car venture in Northern Ireland. The company went bankrupt in 1982 after its founder, John de Lorean, was arrested in California on drug charges. Successive Conservative governments barred contracts with Andersen and sought to reclaim 200 million pounds (dlrs 280 million at current rates) in compensation. Shortly after Blair won power in 1997, the government settled the case for 21 million pounds (dlrs 25.8 million). Energy Minister Brian Wilson said former Conservative Prime Minister John Major's government set up the machinery which led to the decision to reinstate Andersen. John Morris, now Lord Morris, Blair's attorney general from 1997 to 1999, said he made the decision to settle "entirely on legal advice." "The advice from departmental lawyers was that the sooner the better the litigation ... should be brought to an end," he told British Broadcasting Corp. radio. Conservative Party vice-chairman Tim Collins complained that the decision was entirely made by Blair's government. "It was the Labor Party that decided to settle for only 10 percent of the money the taxpayer was, in our view, owed." Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Bank of America Fires Two Bankers Who Handled Enron 2002-01-30 14:40 (New York) New York, Jan. 30 (Bloomberg) -- Bank of America Corp. fired two employees who managed the firm's business with Enron Corp. after the third-biggest bank lost $231 million when the energy trader filed for bankruptcy, people familiar with the matter said. The bank dismissed Jo Tamalis, the client manager for Enron, and Marcia Bateman, who oversaw loans to the energy firm, the people said. Tamalis said she no longer worked for the bank and declined to say why. Bateman couldn't be reached. Bank of America spokeswoman Georgie Shields declined to comment. Bank of America is the first bank to fire executives because of Enron's collapse. Other financial firms from J.P. Morgan Chase & Co. to Citigroup Inc., which wrote off more than $2.7 billion in the fourth quarter because of Enron and Argentina's debt default, may take similar steps, investors say. "If you assume they were responsible, you as an investor like to see people held accountable,'' said Phil Larkins, market strategist for Legacy South Inc., which manages $400 million in assets and owns 200,000 Bank of America shares. ``Bank of America has a very large exposure to Enron.'' The Bank of America firings are some of the ripple effects in the financial services industry from Enron's collapse. Congressional investigators are demanding names of investors in limited partnerships Enron used to inflate earnings and hide debt from shareholders. Merrill Lynch & Co. executives invested in one of the partnerships, which also drew money from Citigroup, American International Group Inc. and other firms. Bondholders Money managers including Putnam Investments, the fourth largest U.S. mutual fund company, Federated Investors Inc. and Dreyfus Corp. bought bonds issued by Enron trusts, according to regulatory filings. Northern Trust Corp., the trustee for Enron's retirement plan, owned the bonds, and also said this month it held more than $24.5 million in unsecured Enron debt. Bank of America was one of the biggest lenders to Enron as part of a $3 billion credit facility that was arranged by J.P. Morgan and Citigroup. Bank of America shares gained 1.37 to $60.56. "Bankers have made a lot of bad judgment calls regarding Enron,'' said Carl Domino, president of Northern Trust Value Investors, which holds Bank of America shares. Tamalis, reached at her home in Houston, declined to comment. "I don't want to give an interview,'' she said. The largest bankruptcy helped push J.P. Morgan and FleetBoston Financial Corp. into their first quarterly losses in years. J.P. Morgan Chase wrote off $456 million of trading losses and loans to Enron and still has exposure to potential losses of $2.06 billion. Bank of America said this month loans and other business with Enron cost the company $231 million. For Bank of America, the losses on loans to Enron came after a string of bad loans hurt the firm's earnings. The bank wrote off a total of $1.19 billion of bad loans in the fourth quarter, up 11 percent from a year earlier. ``Enron may well have been the straw that broke the camel's back,'' Domino said. Congress will be looking into the role of Enron's financiers, especially those in the limited partnerships, in hiding debt from investors, said Representative Henry Waxman, a California Democrat. ``This needs to be thoroughly investigated,'' he said. ``One of the big mysteries about Enron is who the secret partners were, what they knew about Enron's precarious financial situation, and whether they did anything wrong.'' Other Cuts Bank of America said last year it planned to cut 600 jobs in corporate and investment banking to help reduce costs. As part of those cuts, the bank is firing three loan syndication executives who worked in project finance: Parker Knight, managing director and head of international syndicated finance, Brian Goldstein, head of U.S. project finance syndications, and John O'Neill, head of Asian project finance. Their jobs are being cut as part of Bank of America's restructuring of its global corporate and investment bank, said William Hodges, the bank's head of debt capital markets. ``The impact on these three individuals leaving the company is not related to Enron in any way,'' Hodges said. The bank is scaling back lending for capital projects, such as refineries and generation plants, in the U.S. and Asian energy and power industries, Hodges said. That type of lending ties up capital, and Bank of America isn't willing to continue doing it unless borrowers agree to give the bank more lucrative business as well. "It entails risk factors that are less than highly desirable,'' Hodges said. Loan syndication employees in Latin America and Asia who previously reported to Knight now report to executives in those regions. ``In Latin America and Asia, we now have a regional model,'' Hodges said. "The head of the region is now responsible for all of our client coverage and business development.'' Hodges said Bank of America is ceasing, on a stand-alone basis, traditional project finance in the U.S., a unit headed by Goldstein, and in Asia, a unit headed by O'Neill. --Mark Lake in the New York newsroom (212) 893-5989, or mlake1@bloomberg.net, and Chris Burritt in Charlotte (704) 331-6589. Editor: Serafino, *Quinson/ *Merz Lawmakers Fear 'Loopholes' In Electricity Deregulation Bill 01/30/2002 Dow Jones Energy Service (Copyright © 2002, Dow Jones & Company, Inc.) WASHINGTON -(Dow Jones)- Mutual fund investors could be stung by future Enron-type collapses if Congress adopts an electricity bill with "potentially dangerous loopholes," some House Democrats warned Wednesday. In a Jan. 30, letter to Securities and Exchange Commission Chairman Harvey Pitt, Rep. John Dingell, D-Mich., and Edward Markey, D-Mass., said they fear fund investors could be stung by loopholes in the bill, HR 3406. The bill, sponsored by Rep. Joe Barton, R-Texas, would deregulate markets for electric power. A section of the bill would "grandfather" existing holding companies, allowing them to avoid rules governing mutual funds. Dingell and Markey said they are "extremely wary" of that, fearing it might allow grandfathered utility holding companies to spinoff firms that wouldn't be subject to the same rules as other mutual funds. "They could therefore engage in some of the risky and speculative investment strategies pursued by hedge funds," exposing investors to enormous risks, the lawmakers wrote. A House subcommittee may act on the bill as early as next month. Given that, Democratic lawmakers asked the SEC to analyze the bill, including the proposal to grandfather holding companies in existence at the end of 2001. In a related area, lawmakers asked the SEC to provide information on a 1997 SEC staff decision to exempt Enron from being regulated as a mutual fund. Among other things, the Democrats asked whether "some of the potentially fraudulent actions subsequently undertaken by Enron might have been prevented" if it had been subject to mutual fund rules. -By Judith Burns, Dow Jones Newswires, 202-862-6692; judith.burns@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Shareholder Files State Lawsuit Against Enron Execs By Erwin Seba 01/30/2002 Dow Jones Energy Service (Copyright © 2002, Dow Jones & Company, Inc.) Of DOW JONES NEWSWIRES HOUSTON -(Dow Jones)- An Enron Corp. (ENRNQ) shareholder filed a class action lawsuit Friday in state court in Houston against Enron's current and former executives and directors. Henry P. Blaskie, Jr., of Columbus, Ohio, is also suing Enron's former auditor Arthur Andersen LLP. Among the defendants, the suit names "the estate of J. Clifford Baxter." Baxter, a former Enron vice chairman, was found dead in his car early Friday morning by Sugar Land, Texas, police. Police said Baxter suffered a self-inflicted gunshot wound to the head and have described his death as an apparent suicide. The suit was filed late Friday afternoon in Harris County District Court. Former Chairman Kenneth Lay, former Chief Executive Jeffrey Skilling and former Chief Financial Officer Andrew Fastow were also named in the suit. Blaskie alleges the executives and directors "breached their fiduciary duty" by releasing misleading financial statements which encouraged shareholders to continue ownership of Enron stock. Blaskie also alleges Andersen aided in the breach of fiduciary duty by certifying the company's financial statements. Blaskie is represented by Houston Attorney John Emerson. Blaskie is suing on behalf of himself and all those people who bought Enron stock before Oct. 16, 1998, and held the stock through Oct. 16, 2001. Blaskie owned 700 shares of Enron common stock. Attorneys for the defendants were unavailable for comment Wednesday afternoon. -By Erwin Seba, Dow Jones Newswires; 713-547-9214; erwin.seba@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Ex-Enron executive Baxter euologized for successes. By Nicole Volpe 01/30/2002 Reuters English News Service (C) Reuters Limited 2002. AMITYVILLE, New York, Jan 30 (Reuters) - Family and friends of J. Clifford Baxter, the 43-year-old former Enron vice chairman who died of an apparent suicide last week, gathered on Wednesday to recall a life they said should not be eclipsed by the way it ended or by scandal at the company he led for seven months. "The shame is that the whole world is going to know him as the vice chairman of this big company where things went crazy," said John Bochicchio, a friend who graduated with Baxter from Amityville High School. "We knew him here in Amitvyille growing up as a great guy, playing ball and climbing trees. It's a very sad day." The Houston-based energy trading company's murky accounting practices led to its December spiral into the largest U.S. bankruptcy in history. Baxter, who complained about questionable financial deals at Enron before resigning in May, seven months after being promoted to vice chairman, was found dead of a gunshot to the head near his suburban Houston home last Friday. Baxter's death came a day after the start of congressional hearings in Washington on Enron's collapse. He resigned for what the company said was a desire to spend more time with his family in the Houston suburb of Sugar Land. But an August memo from an Enron whistleblower indicated Baxter had feuded with the then-chief executive about methods the company was using to hide billions of dollars in debt. About 150 of Baxter's family and friends filled the St. Martin of Tours Church in this small Long Island town. One of his 35 cousins, Steven Garry, gave the eulogy. "It is for them and for us an unimaginable day," he said. "We will always remember what a decent, hard-working, upstanding person he was, not a bad bone in his body," said Garry. "He always knew the right thing to say, he was always there, he was the go-to guy." Large groups of reporters gathered in front of the church, filming the family as church bells tolled at the end of the service. Baxter is survived by a wife and two children. Baxter was a defendant in lawsuits targeting Enron's top executives, accusing them of cashing in on insider information. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Sarah Palmer Internal Communications Manager Enron Public Relations (713) 853-9843
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