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Enron Mail |
Investigators To Take Hard Look At Enron's Board Dow Jones Energy Service, 02/01/2002 Enron May Have Compromised Its Internal Inquiry, Democrats Say Bloomberg, 02/01/2002 SEC Faulted Audit Oversight for Years, Letters Show Bloomberg, 02/01/2002 Enron Partnership Investors Sue to Force Out Former Executive Bloomberg, 02/01/2002 Happiness is a hot Enron hearing: Capitol competition National Post, 02/01/2002 Enron chairman gave list of favored names to White House; Bush named two as energy regulators Associated Press Newswires, 02/01/2002 Enron Executives Using Company Jets to Attend Bankruptcy Hearings Dow Jones Business News, 02/01/2002 Agent: Lays close to selling Aspen lot Associated Press Newswires, 02/01/2002 First-of-the-month bills leave ex-Enron employees in crunch Associated Press Newswires, 02/01/2002 Enron's Cooper Keeps The Faith On Firm's Reorganization Dow Jones, 02/01/2002 POWER POINTS: Enron On The Potomac - Anything Goes! Dow Jones Energy Service, 02/01/2002 Enron's fall darkens summit Leaders at global forum fear effects of giant's collapse The Globe and Mail, 02/01/2002 Accounting profession seeks to restore trust following Enron scandal Associated Press Newswires, 02/01/2002 Enron: A House Divided Forbes.com, 02/01/2002 From Enron to Cheney to California Salon.com, 02/01/2002 Democrats hope to use Enron 'to shape the entire political environment' Associated Press Newswires, 02/01/2002 CBOT CEO: Enron Fall May Pull Trade To Formal Exchanges Dow Jones Energy Service, 02/01/2002 INDIA: Bids come in for Enron Dabhol Indian power stake. Reuters English News Service, 02/01/2002 California Gov. Davis Calls for Enron Probe; Lawmaker Calls Enron 'Robber Baron' Dow Jones Business News, 02/01/2002 Enron to auction office equipment at European HQ Associated Press Newswires, 02/01/2002 Govt. Monitors Enron Subsidiaries. Business News Americas, 02/01/2002 Enron Property & Services Files For Bankruptcy Feb. 1 Dow Jones News Service, 02/01/2002 Fund targets employee ownership Enron aside, manager says firms with ESOPs a good bet CBS.Marketwatch.com, 02/01/2002 LOU DOBBS MONEYLINE; CNNfn CNNfn: Moneyline News Hour, 01/31/2002 Andrew Sullivan's selective Enron outrage Salon.com, 02/01/2002 The Five Dumbest Things on Wall Street This Week theStreet.com, 02/01/2002 ________________________________________________________________ Investigators To Take Hard Look At Enron's Board By Judith Burns 02/01/2002 Dow Jones Energy Service (Copyright © 2002, Dow Jones & Company, Inc.) Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- Investigation into the collapse of Enron Corp. (ENRNQ) has already put its top executives and accountants in the hot seat. Now they may be joined by the company's board, which includes former Commodity Futures Trading Commission Chair Wendy Gramm, the wife of Republican U.S. Sen. Phil Gramm of Texas. Lawmakers will hear from two Enron board members next week. Congressional committees probing the matter expect testimony from William Powers, who headed an internal investigation, and Robert Jaedicke, an accounting professor and former Stanford University business school dean who is the chairman of Enron's audit committee. Audit committees were put in the spotlight by former Securities and Exchange Committee chairman Arthur Levitt. Levitt pushed through rules to require audit committees to include independent members with financial expertise and require the auditors to ask tough questions about a company's accounting. Whether Enron's audit committee failed as badly as the company did remains to be seen. The Houston energy firm filed for bankruptcy in December after announcing it had overstated financial results for nearly five years. Enron and its accountants are under investigation by Congress, federal prosecutors and the SEC. Examination of audit committee members is standard in such cases, and given her expertise in derivatives, Gramm, director of regulatory studies at the Mercatus Center at George Mason University, could get special attention. She joined Enron's board after leaving the CFTC in 1993 and serves on its audit committee. As the wife of the Phil Gramm, Gramm won't get special treatment, however, said Charles Elson, director of the Center for Corporate Governance at the University of Delaware. "She will rise or fall based on her own conduct," he said. At a minimum, Elson said Enron's audit committee should have seen "a lot of red flags raised," starting with "highly unusual" off-the-books partnerships tied to Enron's former chief financial officer Andrew Fastow. Arthur Andersen LLP, Enron's outside auditor, also acted as its internal auditor and did significant consulting work for Enron. Moreover, Elson noted, a number of Andersen executives took high-ranking positions at Enron. He said that should have prodded the board to question Andersen's independence - which is required under the strict new SEC rules - and Enron's accounting treatment, including related-party deals kept off the company's books. "You have to ask yourself what these folks were thinking," said Elson. "If they were aware of it and didn't press it, they've got some problems." W. Neil Eggleston, the attorney representing Enron's independent directors, declined to comment on their behalf. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron May Have Compromised Its Internal Inquiry, Democrats Say 2002-02-01 15:38 (New York) Washington, Feb. 1 (Bloomberg) -- Enron Corp. may have compromised its own investigation of the events leading to the energy trader's bankruptcy by appointing one of its board members to the panel, Democratic lawmakers said. As a board member, Herbert Winokur Jr. approved many of the partnerships in which Enron hid about $600 million of its debt, contributing to the largest bankruptcy in U.S. history, wrote Representatives John Dingell, senior Democrat on the House Energy and Commerce Committee, and Peter Deutsch, the lead Democrat on an investigative subcommittee. Their letter went to William Powers, dean of the University of Texas law school, who's heading the internal Enron investigating commmittee. Powers is expected to release his report this weekend and answer questions next week before two congressional committees, including House Energy and Commerce Committee. The letter shows the line of questioning the Democrats are likely to take. Dingell and Deutsch said that Winokur had knowledge of the LJM partnership and recommended that an Enron ethics policy be waived so that then-Chief Financial Officer Andrew Fastow could invest in the LJM1 and LJM2 partnerships. Fastow made $30 million from his investments in the partnerships. "Mr. Winokur is essentially investigating his own actions and approving or disapproving the resulting report,'' the lawmakers wrote. ``You can understand why disinterested observers might conclude that the report's independence, or at least the appearance of independence, has been compromised.'' The other members of Enron's internal investigating panel are Frank Savage, chief executive officer of Savage Holdings LLC, and Paulo Ferraz Pereira, executive vice president of Brazil's Group Bozano. In the letter, the lawmakers said that Winokur's position as chairman of the board of Azurix Corp., a water company created in part by Enron, cast doubt on his ability to be part of an impartial probe. Winokur sold 22,500 shares of the company to Enron for $184,275 before shareholders sued the company, saying it misled investors. -- Jeff Bliss in Washington (202) 624-1975 or jbliss@bloomberg.net. Editor: Gettinger. SEC Faulted Audit Oversight for Years, Letters Show 2002-02-01 11:40 (New York) Washington, Feb. 1 (Bloomberg) -- Securities and Exchange Commission chief accountants pressured the accounting profession's oversight group for more than four years to strengthen safeguards intended to make sure audits are accurate, complete and objective, SEC documents show. In letters to the Public Oversight Board spanning more than four years, SEC chief accountants faulted the industry's ability to enforce audit standards and guard against conflicts of interest through "peer reviews,'' in which accounting firms check one another's systems for preventing bad audits. Then-SEC Chief Accountant Lynn Turner asked why peer reviews always gave the biggest firms good grades while the number of failed audits was growing. "We have seen more of these in the past six months than at any time during my three years,'' Turner wrote in July 2001 to oversight board Chairman Charles Bowsher. ``Why is there nothing showing up in the reports from the peer reviews regarding this increasing problem?'' Congress and the SEC are scrutinizing the accounting industry's ability to monitor audit quality and punish violations of auditing rules, as federal investigators probe auditor Arthur Andersen LLP's role in inaccurate financial statements at Enron. Documents sent by the SEC to the oversight board from 1997 to 2001 were released to Bloomberg News under the Freedom of Information Act. Enron stock tumbled 99 percent over seven weeks before the Houston energy trader filed for bankruptcy reorganization in December. The fall wiped out $26 billion in market value, wiped out 5,000 jobs and erased about $850 million in employees' 401(k) retirement investments in Enron shares. 'A Crisis First' "For anything to happen in government, there has to be a crisis first,'' former SEC accounting fellow Thomas I. Selling said, when asked whether the peer review process for auditors has become more rigorous under the SEC's prodding. ``I don't know of any profession where peer review works.'' Selling is an associate professor at Thunderbird, the American Graduate School of International Management in Glendale, Arizona. Bowsher's Public Oversight Board, a five-member body created in 1977 to monitor auditors' systems for catching audit flaws, voted yesterday for the second time to disband. The oversight board had announced on Jan. 22 that it would close to protest its exclusion from deliberations that led to a plan by SEC Chairman Harvey Pitt for creating a new body to oversee audit quality. A 'Very Difficult Time' Some audit controls, such as using computers to spot financial conflicts of interest with prospective clients, improved during four years of SEC prodding, Bowsher said. Other shortcomings continue because of resistance in the accounting industry, he said. "We were pushing on some of these issues, but we were having a very difficult time having these things improved,'' Bowsher said in an interview. Peer reviews and accounting oversight are in the forefront of debate about audit regulations in the wake of Enron's collapse. The energy trader blamed bookkeeping errors, in financial statements certified by Andersen, for the need to restate earnings going back to 1997. Still, Andersen got unqualified good marks in its latest peer review, released Jan. 2. Andersen's reviewer, Deloitte & Touche LLP, looked at 240 audits after Andersen asked its rival for tougher-than-normal scrutiny while questions swirled about Enron. Enron's audit was not among those examined. Pitt's Proposal Pitt's outline for change calls for the SEC to work with the biggest accounting firms to create a private oversight body, with funding from outside the accounting industry, to monitor and discipline auditors. Former SEC Chairman Arthur Levitt, who appointed Turner, said last week that Pitt's proposal ``needs more teeth.'' An April 1997 letter, the earliest released under the freedom of information request, questioned whether cost saving in the name of efficiency was hurting the quality of audits and producing fewer records than peer reviewers needed. "Some changes being undertaken in pursuit of operating goals, such as reducing audit hours and focusing audit objectives on increasing the perceived value of the audit to client management, may have the effect of compromising audit quality,'' wrote Michael Sutton, who was then SEC's chief accountant. He declined to comment on the letters. Peer Review In a Dec. 9, 1999, letter, Turner cited apparent lapses in peer reviews of PricewaterhouseCoopers LLP and one of its predecessors, Coopers & Lybrand LLP. A peer review of Coopers & Lybrand stated the firm had "extensive, appropriate'' policies for preventing conflicts of interest, while several cases were found in which people at the firm weren't notified about new clients with which they may have a conflict, Turner said. Pricewaterhouse wasn't taken to task in a peer review of its standards, Turner said, though the accounting firm settled SEC charges that executives and the firm's pension fund compromised its independence by holding stock in more than 70 audit clients. "We strongly recommend that the POB undertake a special review'' of possible independence violations, Turner wrote to Bowsher. A month later, in January 2000, Pricewaterhouse released a consultant's report saying 8,064 independence violations were discovered at the firm. "We did a very extensive review and put new systems in place a couple of years ago'' to alert employees about stock holdings that present a conflict of interest, Pricewaterhouse spokesman David Nestor said. The Wall Street Journal Wednesday reported Turner's comments about Pricewaterhouse and Coopers. 'A Systematic Failure' The released letters show the SEC staff often was at odds with the American Institute of Certified Public Accountants over the SEC's concern about conflicts of interest when auditing firms do consulting or other non-audit work for clients. The AICPA is the industry's professional group. Firms auditing public companies "may lack sufficient worldwide quality controls to assure their independence from audit clients,'' Turner wrote in the Dec. 9, 1999, letter. "The SEC staff has identified additional, troubling examples that suggest not only a lack of sufficient global safeguards, but also a systematic failure by professionals within certain firms to adhere to even their own firm's existing controls.'' Last year, Turner expressed disappointment that AICPA "failed to take any disciplinary actions'' in some cases where the SEC had found violations. In a Feb. 9, 2001, letter, Turner faulted the AICPA's disciplinary process for ``a lack of public accountability and reporting.'' 'Mutual Back Scratching' The SEC chief accountant said there was a perception within the industry that ``partners in large accounting firms are treated more leniently in the disciplinary process'' than other accountants. A March 20, 2001, letter expressed concern that the peer review process is little more than "mutual back scratching.'' In another letter, dated April 9, 2001, Turner said, "during the past three years, an alarming number of deficiencies and in some cases outright lack of quality controls within the accounting profession with respect to auditor's independence have been brought to the attention of the staff.'' The SEC letters span the 2000 debate over an SEC proposal to bar accounting firms from many kinds of consulting for audit clients. During the debate, accountants marshaled congressional allies to their side to beat back some of the tougher provisions. Levitt and big accounting firms reached a compromise, easing the proposed restrictions while requiring public disclosure of auditors' fees. SEC Audit Discipline Study Representative John LaFalce of New York, ranking Democrat on the House Financial Services Committee, has asked Pitt to provide SEC correspondence with the oversight board or the AICPA. LaFalce's request came after the Wall Street Journal reported that the SEC staff, under Turner, began a report on weaknesses in accounting self-regulation. Preparation of the report, which Turner said would have pointed in a different direction than Pitt's regulatory plan, stopped when Turner left the agency in August, SEC spokeswoman Christi Harlan said. The study of accounting shortcomings was a ``personal project'' of Turner and ``didn't get finished'' before he left the SEC last August, Harlan said. Because the project was ``already dead before (Pitt) came in the door,'' Harlan said there "was no reason to bring this to his attention.'' Turner now is head of the Center for Quality Financial Reporting at Colorado State University and a consultant for Bloomberg News. Levitt is a director of Bloomberg LP, the parent of Bloomberg News. - -Robert Parry and Vicky Stamas in Washington at (202) 624-1924 or rparry1@bloomberg.net and vstamas@bloomberg.net or (202) 624-1958, with Judy Mathewson in Washington. Editor: Arthur, Drummond Enron Partnership Investors Sue to Force Out Former Executive 2002-02-01 14:30 (New York) Wilmington, Delaware, Feb. 1 (Bloomberg) -- Investors who put at least $300 million into an Enron Corp. partnership used to cordon off debt from its books are battling in court to bar a former Enron executive from running the venture. Eleven investors in LJM2 Co-Investment LP, including Citigroup Inc. and The Travelers Indemnity Co., have sued in Delaware Chancery Court in Wilmington to remove Michael Kopper as general partner. Kopper, former head of Enron's North American division, took over in July as the partnership's head from former Enron Chief Financial Officer Andrew Fastow. The LJM2 partnership is a target of a dozen government investigations into the collapse of Enron, which filed the largest Chapter 11 bankruptcy in December. Enron's disclosure in November that Fastow made $30 million managing two off-book partnerships, including LJM2, hastened Enron's collapse. Control of more than $300 million may be at stake in the suit to remove Kopper. The court papers don't say, and lawyers on both sides declined to comment. Investors could be left with nothing if the partnership's assets are pulled into Enron's bankruptcy case, lawyers said. "Creditors are likely to make a move on anything left in this partnership in which Enron has an interest,'' said Chuck Tatelbaum, a Naples, Florida, attorney representing two Enron companies with claims against Enron in the bankruptcy case. Fastow set up dozens of private partnerships to buy and sell Enron assets. Kopper worked with Fastow at Enron to help market some of the partnerships to investors and left the company to run LJM2, according to company filings and court records. Partnership Assets Fastow formed LJM2 in 1999, and the partnership acquired energy and telecommunications assets from Enron, including an 18,000-mile fiber-optic network it bought in June 2000 in a transaction that resulted in a $67 million profit for Enron. LJM2 sold the network six months later for a $53 million profit, according to documents Enron filed with the U.S. Securities and Exchange Commission. "Mr. Fastow and Mr. Kopper are the architects of controversies that led to'' Enron's bankruptcy, Michael Goldman, a Wilmington lawyer representing the suing LJM2 limited partners, said at a Jan. 10 hearing in the case. "Mr. Kopper has interests that are in conflict with both the partnership and the limited partners,'' Goldman told Chancery Court Judge Jack B. Jacobs in seeking to bar Kopper from controlling the partnership while the case is litigated. Feb. 25 Trial Jacobs ordered Kopper on Jan. 15 to hand over the partnership's reins to turnaround specialist Jay Alix & Associates and make all "books, papers and records'' available to the firm pending a trial due to begin Feb. 25. Kopper and his lawyers didn't return calls seeking comment on the suit. In court papers, Kopper said the investors who are trying to remove him violated the partnership agreement. He said investors like Citigroup Inc.'s Citicorp and The Travelers Indemnity Co., which agreed to invest $10 million and $3.1 million in LJM2 respectively, missed a Jan. 4 deadline for providing funds owed the partnership. That included their share of a $70 million interest payment, he said. The loan is now in default, he added. The partnership agreement prevents them from banding together to force out the general partner because they defaulted on those payments, Kopper said. "We intend to continue serving as the general partner of the partnership with the goal, as always, of maximizing asset value for the partners,'' Kopper said in a Jan. 7 letter to the partners. A copy was included in the court file. Partnership Agreement Lawyers for the partners suing Kopper said in court papers that they've complied with the partnership agreement's requirements for ousting the general partner. Limited partners with a combined investment of more than 66 percent of the partnership voted to remove Kopper, the lawyers said. "Kopper has refused to acknowledge his removal and has taken numerous acts to jeopardize the partnership and the limited partners,'' Goldman said at the Jan. 10 hearing before Jacobs, according to a transcript. For example, Kopper is trying to direct defense lawyers representing LJM2 in a dozen suits in Texas state court over deals involving the partnership, Enron and other Enron-related units, Joseph McLaughlin, a New York-based lawyer representing limited partners, noted in court papers. "Plaintiffs believe that immediate removal of Michael Kopper is needed to ensure that the partnership and its limited partners receive adequate and conflict-free representation'' in the suits, McLaughlin said in the filing. Raiding Allegation Kopper also raided the partnership's accounts after learning of the bid to remove him, partners allege in court papers. The day before limited partners voted to force him out, Kopper transferred $4 million from the partnership to pay half his annual management fee though he was only owed about $70,000, the partners alleged. He also took improper steps to disqualify the partners, they said. "The limited partners, including some of the largest financial institutions in this country, want to stop the bleeding and the threats of Mr. Kopper,'' Goldman told Jacobs. Among other investors who agreed to invest in LMJ2 are the American Home Assurance Co., $22.7 million; the Arkansas Teachers Retirement System, $30 million; AIG Private Equity Portfolio, $7.2 million; the John D. and Catherine T. MacArthur Foundation, $15 million; CIBC Capital Corp., $15 million; Merrill Lynch LP Holdings Inc., $16.6 million, and RHO Fund Investors II LLC, $15 million, according to court filings. Merrill Lynch is a passive, minority investor in Bloomberg LP, the parent of Bloomberg News. --Jef Feeley in Wilmington, Delaware (302) 984-3372, or jfeeley@Bloomberg.net, with reporting by Loren Steffy in Dallas through the Washington newsroom (202) 984-3372. Editor: Rubin News Happiness is a hot Enron hearing: Capitol competition Brian Hutchinson National Post 02/01/2002 National Post National A01 / Front © National Post 2002. All Rights Reserved. A vicious rash of "Enron envy" has spread across Washington, D.C., with no fewer than 11 separate congressional committees competing for the chance to interrogate witnesses to the biggest corporate scandal in American history. Publicity-seeking politicians and their minions are battling for the spotlight; everyone wants a whack at Ken Lay. The former Enron Corp. chief is scheduled to appear before the Senate commerce committee on Monday. "This is the best committee," crowed Nu Wexler, press secretary to Ernest Hollings, chairman of the commerce committee. "I'd say that, of all the hearings, this is the big one. We've got Lay. It's his first committee [appearance], and the only one, as far as I know. It will definitely get lots of attention. Every committee wants press." Enron is the hottest story in town. Once the largest energy trader in North America, the company declared bankruptcy on Dec. 2, after a series of accounting irregularities came to light. Investigators are also looking into Enron's practice of shifting millions of dollars in debt into partnerships held by its executives, allowing the company to overstate its financial health. Some congressional workers in Washington have claimed victory for merely scheduling Enron committee inquiries ahead of their colleagues. A brief exchange published in the latest edition of The New Republic magazine reveals how nasty the competition has become. A spokesman for Jeff Bingaman, a New Mexico Senator, bragged that a committee chaired by his boss was "the first to announce we were having [an Enron-related] hearing, back on Nov. 29." This was bitterly contested by the press secretary to Bryon Dorgan, a Senator from North Dakota and chairman of the congressional subcommittee on consumer affairs. "Dorgan held the first hearing" on Dec. 18, his spokesman told the magazine. That is also incorrect. In fact, the first hearing related to the Enron bankruptcy took place on Dec. 12, under the auspices of the House financial services committee. Not only did it get a head start on the others, that committee boasted the most important witness to date: Joseph Berardino, chief executive of Arthur Andersen, the accounting firm that approved Enron's fallacious financial reports. Though he tried to deflect blame away from Andersen for the Enron disaster, Mr. Berardino admitted to "a crisis of confidence in my profession ... The accounting profession will have to reform itself." Then Congress broke for Christmas; since the holiday, Enron has become an even bigger story, with a suicide and allegations of favouritism levelled at the Bush administration. Everyone seems to have forgotten Mr. Berardino's provocative remarks. One congressional committee generating heavy interest has not even released a witness list or scheduled its Enron hearing. Yet the permanent subcommittee on investigations is on every Washington reporter's "must attend" list. Why? It has the power to subpoena Enron documents. It is also notorious for tackling juicy topics. This, after all, was the forum used by the late Senator Joseph McCarthy to conduct his anti-communist crusade. Then there are the also-rans, such as the Senate banking, housing and urban affairs committee. A complete stranger to controversy, this committee plods into the Enron fray in mid-February. "We will not be rushed," the committee's press secretary, Jesse Jacobs, said. "If there's any Enron envy out there, we don't feel it. We're in last place. Our senators are not after the limelight." No kidding. Mr. Jacobs says no Enron witnesses are scheduled to appear before the committee. Instead, members will take a "sober and historical" look at regulatory and investor protection issues. Bor-ing. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron chairman gave list of favored names to White House; Bush named two as energy regulators By MARCY GORDON AP Business Writer 02/01/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. WASHINGTON (AP) - A few months after the White House got a list of recommended candidates from former Enron Chairman Kenneth Lay, a friend and backer of President Bush, two of them were appointed to a federal energy commission. Lay gave the list of names to Clay Johnson, Bush's personnel director, White House spokeswoman Anne Womack said Thursday. Among the eight or so names were Pat Wood, now chairman of the Federal Energy Regulatory Commission, and Nora Brownell, a member of the commission. "It was one of many, many recommendations that he (Johnson) received" from industry executives, members of Congress and state officials, Womack said in an interview. Disclosure of Lay's recommendations to the White House last spring comes as congressional panels investigate the relationship between Houston-based Enron Corp., which filed for bankruptcy Dec. 2, and the Bush administration. The Justice Department and the Securities and Exchange Commission are investigating Enron's complex accounting and what role its auditor, Arthur Andersen, played in the Houston-based company's collapse. Andersen has acknowledged destroying Enron-related documents. A senator leading an investigation said Thursday that Enron had not cooperated in providing important information on the complex web of partnerships used by the company to conceal massive debts. The company's attorney said it doesn't have the documents sought. As head of a major campaign donor, Enron, wielding significant influence in Washington, Lay enjoyed access to top government officials of both parties. The White House has acknowledged that Lay met once privately last year with Vice President Dick Cheney, who headed a task force that formulated the administration's national energy policy. Lay disclosed the existence of the list of Enron favorites in an interview being broadcast Friday on PBS' "NOW with Bill Moyers." "I brought a list, we certainly presented a list. ... As I recall, I signed a letter which in fact had some recommendations as to people that we thought would be good (FERC) commissioners," Lay said in the interview, which was taped in May but never aired. Bush, as Texas governor, had appointed Wood in 1995 as head of the state's Public Utilities Commission. Wood has been an advocate of market-oriented regulation of utilities, a position espoused by Enron, a big, aggressive energy trader that had become a favorite of Wall Street. Bush appointed Wood as FERC chairman in August, replacing Curt Hebert. Hebert said in the PBS interview that Lay "has asked me to take certain positions but I've had those conversations with Ken Lay for a long time. And have disagreed with him for a long time." Brownell, a member of Pennsylvania's Public Utility Commission, was nominated by Bush in March. During her time on the state commission, Brownell helped oversee Pennsylvania's electricity deregulation. Lay will be the star witness next week as a blizzard of hearings by several congressional panels put the Enron collapse under intense public scrutiny. Enron officials "just simply have not cooperated" in providing the documents sought, said Sen. Byron Dorgan, D-N.D., chairman of a Senate Commerce subcommittee. "We again renew our request." An estimated 3,000 partnerships, some with names of "Star Wars" characters such as Jedi, were created by Enron, which took a 97 percent stake in each of them and brought in outside investors for the remainder. The partnerships were kept off Enron's books and helped create the accounting debacle that pushed the company into the biggest U.S. corporate bankruptcy filing ever. Dorgan said the committee had no immediate plan to subpoena the documents from the company. Robert Bennett, a Washington attorney representing Enron, said, "We have been fully cooperating with them." Bennett said the committee has asked Enron for documents that the company doesn't have and must be obtained from the partnerships or people representing them. "We are exercising enormous good faith in cooperating with that committee," the attorney said in a telephone interview. In a related dispute between Congress and the Bush administration, investigators at the General Accounting Office told the White House on Wednesday they would sue to make officials identify the industry executives, including some from Enron, who met last year with Cheney's energy task force. --- Associated Press White House Correspondent Ron Fournier contributed to this report. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Executives Using Company Jets to Attend Bankruptcy Hearings 02/01/2002 Dow Jones Business News (Copyright © 2002, Dow Jones & Company, Inc.) Associated Press HOUSTON -- Since Enron Corp. filed the largest bankruptcy in history last year, the company has used its two jets for eight round-trip flights to New York where the case was filed, a spokesman said Thursday. Seven of those flights carried a total of 43 passengers to bankruptcy hearings before U.S. Bankruptcy Judge Arthur Gonzalez in New York, spokesman Mark Palmer said Thursday. The eighth flight this week transported family members of former Enron executive J. Clifford Baxter to his funeral on Wednesday in his hometown of Amityville, N.Y. Mr. Baxter, 43 years old, was found dead in his car in an affluent Houston suburb early Jan. 25. Police determined that he shot himself in the head with a .38-caliber revolver found beside him. "We have had in the past two months a total of eight round-trip flights," and the one for Mr. Baxter's family was for personal reasons, Mr. Palmer said. Some friends of the Baxter family joined that flight, including one Enron employee who was close to the family, Mr. Palmer said. Mr. Baxter resigned as Enron's vice chairman in May last year after working for the company for a decade. He was named in an August letter written by another executive, Sherron Watkins, as complaining to former chief executive Jeff Skilling about accounting practices that helped fuel the fallen energy giant's collapse last year. Mr. Palmer said before Enron (ENRNQ) filed bankruptcy Dec. 2, the company owned two jets and leased three. After the filing, the leases were canceled. Of the remaining two jets, "both are for sale and have been for sale. They haven't sold because the market for airplanes is terrible," Mr. Palmer said. Deborah DeFforge, laid off from Enron Dec. 3 after working for the company for five years, said the continued use of jets is hard to swallow when former workers are living on unemployment benefits and trying to find jobs in a tight economy. "I think just using the plane is obscene, but for that family it's not obscene," she said. "My heart goes out to that family." Copyright © 2002 Dow Jones & Company, Inc. All Rights Reserved. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Agent: Lays close to selling Aspen lot 02/01/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. ASPEN, Colo. (AP) - An undeveloped lot owned by former Enron Chairman Kenneth Lay that has been listed for $2.95 million could be sold in the next few weeks, said a real estate agent. But the asking prices of two homes owned by Lay and his wife, Linda, have been reduced, said Joshua Saslove, the broker handling the transactions. The sale of a fourth Aspen property, a cottage, is being negotiated privately, said Saslove, who wouldn't discuss any of the asking prices. Linda Lay said in an interview Monday on NBC's "Today" that she and her husband are struggling to avoid personal bankruptcy and are selling nearly everything they own. Lay, former chairman and chief executive officer of Enron, will appear before Congress next week to answer questions about the collapse of the energy giant, which is embroiled in the nation's largest ever bankruptcy. The Pitkin County assessor's office listed the taxable value of the Lays' three-bedroom Aspen cottage at about $4 million. The couple's other two homes in the glitzy resort were initially listed at $6.5 million each, but Saslove said the prices have been reduced. One is now advertised for $6.125 million, and the other for $6.15 million. Saslove said the price reductions reflect market conditions. "They (the Lays) just want to be marketing their properties realistically," he said. Lawyers suing Lay and other Enron executives claim he sold 1.8 million shares of Enron stock for $101 million from October 1998 to November 2001, though it's not clear how many of those sales were required under stock option rules. Thousands of employees with the Houston-based energy conglomerate lost their jobs, and a class-action lawsuit was recently filed by workers claiming Enron is liable for billions of dollars in losses from employee 401k accounts. Enron's downfall also has come under scrutiny in the political arena, because the company has had ties to President Bush and was one of his biggest corporate supporters. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. First-of-the-month bills leave ex-Enron employees in crunch By LISA FALKENBERG Associated Press Writer 02/01/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. HOUSTON (AP) - Credit card in hand, a laid-off Enron Corp. employee went to the supermarket last month to buy all the Lean Cuisine meals he could stuff in his freezer. David Hunker allows himself to eat two a day, and that's it. The 27-year-old former associate analyst said Friday he hasn't bought food since. "It's getting tougher," said Hunker, one of 4,500 Houston employees laid off in November after the energy giant's financial implosion. "I'm going to try to figure out a way to pay this month's rent, but after that, I don't know that I'll be able to pay anything else." For many laid-off Enron employees, the first-of-the-month bill collectors' harvest was even harder to face this week than it was last month. The bills are due, the money is running out. "Most of the people I know still have not found other jobs," Hunker said. "The one payment that we got from Enron pretty much runs out right about now." Rebekah Rushing, a former Enron employee who set up the Enron Ex-Employee Relief Fund, said requests for money grow even more desperate around the first of the month. "I've been getting more calls," Rushing said. "I'm hearing people who are crying on the phone for the money." Rushing said her fund has taken in about $160,000. She has handed out $100,000 so far to 80 people who have asked for her assistance in paying their mortgages, utility and food bills. Rushing, who found a job at another Houston energy firm, said she plans to give out at least 50 more checks next Thursday. She's received 400 requests for assistance. "It's really heartbreaking for me," she said. "I'm trying to help as many people as possible." Meanwhile, Hunker is perpetually pushing the resume, working the cell phone, exhausting his Rolodex of people who might know about an open job. But since November, there has been nothing, so he sits in his $1000-a-month, one-bedroom apartment in downtown Houston, trying to dig his way out of a financial hole that just gets deeper. His apartment complex has offered to restructure leases, but it won't reduce rent. He's considered moving out, but the lease termination fee is almost as much as rent and he hasn't gotten an unemployment check because he moved from a different state just two months before he lost his job. There are options, but they're not desirable for the 27-year-old who thought Enron was the key to a successful career. "We've talked about all trying to move in together," Hunker said of his former colleagues. "Trying to fit another person in my one bedroom apartment may be kind of tough, but it may be what we have to do." Sylvia Brooks, president of the Houston Area Urban League, which is helping ex-Enron employees find jobs, deal with bill collectors, and in some cases just vent about their situation, says some, but not any, mortgage companies have agreed to extend payment deadlines for ex-Enron employees. "It's done every day. We work out deals," she said. "The companies are flexible. They're responding to layoffs. We've experienced this before so many of the companies know how to respond." But even understanding companies won't wait longer than two months, Brooks said. "The bottom line is that they're businesses and they're looking for their payment," she said. Houston utility Reliant Energy, Inc. doesn't have a special plan to help displaced Enron employees pay their utility bills, said spokesman Richard Wheatly. "We do have normal policies and procedures that can be looked at on a case-by-case basis, as we do with all customers," Wheatly said. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron's Cooper Keeps The Faith On Firm's Reorganization 2002-02-01 16:00 (New York) By Christina Cheddar and Kathy Chu Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--In his first public appearance as Enron Corp.'s new chief executive, Stephen Cooper spoke in the firm tones that lived up to his reputation as a no-nonsense kind of guy. "I do not see this as a liquidation," he said, adding that his view historically has been that creditors receive more cents on dollar when a company reorganizes than when it liquidates. "Regardless of how effectively you run that liquidation ... there is a patina of distress," Cooper said. "People will attempt to put you over a barrel." By Cooper's account, Enron will emerge as a smaller company, one without the powerful energy trading operation that became its identity. But a survivor, nonetheless. His task now is to move in and organize. But while Cooper is keeping the faith that Enron will be able to reorganize, creditors appear to be losing their confidence. They wish him well, but believe that he'll have to overcome significant odds to get Enron back on its feet. "I've got the highest regard for Steve Cooper, you can't really be a bankruptcy professional and not know him or know of his reputation," said Scott Baena, an attorney at Bilzin Sumberg Dunn Baena Price & Axelrod LLP in Miami. Baena, whose firm represents a group of former Enron employees, said he believes Cooper is intent on reorganizing - even though it's too soon to know if this is possible. "For Steve Cooper, reorganization is an aspirational goal, but we don't always get what we want," Baena said. Cooper has more than 30 years' experience in leading companies through operational and financial reorganizations. He will be joined in his efforts by professionals from the restructuring consultancy, Zolfo Cooper LLC, that he helped create. That experience carries clout, and that could make a difference in the case. "I think his appointment makes it less likely that a trustee will be appointed," said Richard Tilton, a New York bankruptcy lawyer. Judge Arthur Gonzalez, who is presiding over Enron's bankruptcy, is likely to deem the appointment of an independent trustee - to take over Enron's daily operations - as excessively disruptive to already complex court proceedings, according to Tilton. It's more likely, he said, that the judge will name an examiner to probe certain aspects of fraud or misdeed in the case. To be sure, Enron's bankruptcy, the largest in U.S. history, will likely remain prominent in the public eye as long as Congress continues its numerous investigations. Turnarounds are always sensitive matters, but it is rare for the reorganizational efforts to be this public. Cooper's experience may help him make the quick decisions that will be needed to tackle the job. But creditors will be looking for results fast, according to Charlie Rhoads, a partner at the Houston office of Boyden Global Executive Search. "There is no honeymoon period because an interim CEO really falls under the role of a consultant," he said, explaining that there is less patience for results from an individual with this type of experience. On Wednesday, Cooper gave a rough outline of his plan, and in it the new Enron looked very much like old pipeline company that gave birth to the original Enron. The company would retain its gas pipelines, and would assess whether to preserve or sell the rest. The businesses that might be sold include money-losing power plants in India and Brazil, Enron's broadband assets, and the water and wastewater business that were once part of Azurix Corp. One way to do this would be to combine the assets and the liabilities of all Enron subsidiaries. This move, called a substantive consolidation, would put some creditors at a disadvantage and result in them getting paid less for their claims. With this in mind, some creditors have petitioned the court to segregate the cash flowing into one of Enron's units because they claim the parent company can't be trusted to keep accurate records and divvy up the funds among the business units. The creditors want detailed accounts of the cash flows into Enron units. Given Enron's legal structure, Cooper believes it is "highly probable" that not all creditors will be treated equally. In other words, in the end, there just might not be enough to pay off all creditors after the web of off-balance-sheet partnerships are untangled. -By Christina Cheddar, Dow Jones Newswires; 201-938-5166; christina.cheddar@dowjones.com -By Kathy Chu, Dow Jones Newswires; 201-938-5392; kathy.chu@dowjones.com POWER POINTS: Enron On The Potomac - Anything Goes! By Mark Golden 02/01/2002 Dow Jones Energy Service (Copyright © 2002, Dow Jones & Company, Inc.) A Dow Jones Newswires Column NEW YORK (Dow Jones)-It's still too early for cherry blossoms in Washington, D.C., but at congressional hearings on Enron the silly season is in full bloom. In particular, any attempt to tie Enron and the California energy crisis of a year ago into a unifying theory on the evils of deregulation grabs big headlines. So what if there isn't an important connection? Never let the facts stand in the way of a good story, especially with so much money on the line and an election to win. At Senate Energy Committee hearings Tuesday, an energy consultant from the Northwest, Robert McCullough, made a reasonable pitch for more transparency in energy markets and for enforced disclosure of all corporations' off-balance sheet subsidiaries. But McCullough, a registered Republican in favor of electricity deregulation, supplied the Democratic Party with a plum. Almost as a side note, McCullough said that forward prices for wholesale electricity in the Northwest fell 30% when Enron filed Chapter 11 on Dec. 2. "The clear implication is that Enron may have been using its market dominance to 'set' forward prices," he surmised. The rest of McCullough's testimony was shunted aside. Outraged Senators Dianne Feinstein, D-Calif., Ron Wyden, D-Calif., and Maria Cantwell, D-Wash., demanded congressional hearings and a federal investigation into this new revelation: Nasty Enron had been manipulating the power market right up until the day it declared bankruptcy. It must have been the culprit behind the western electricity crisis a year ago! "Where there's smoke, there's fire," Cantwell said. Investigations were launched, and Wednesday's newspapers across the country ran with headlines like "Enron Witness Raises Specter of Price Fixing." Someone Tell The Traders Western energy traders, meanwhile, grunted a collective, "Huh?" The people in the market every day don't remember a price collapse like that at the time of Enron's bankruptcy filing. "What is he talking about?" asked one. If senators or their staff had bothered to look at the prices McCullough submitted with his testimony, they might have questioned his math. McCullough's data, taken from trade publisher Platt's, show power prices in Washington state for 2002 through 2004 falling from $37 a megawatt-hour before Enron's bankruptcy filing to $31/MWh 10 days later. That's a 16% drop, not a 30% drop. Platt's immediately disowned the 30% figure, as well as the consultant's explanation for the modest decline. In an interview Thursday, McCullough said his 30% figure came from confidential bids he obtained for clients, not from the Platt's prices he submitted. His bids fell from $40/MWh the week before Enron's filing to $30/MWh the week after. "The fundamental question is what happened that weekend (that Enron declared bankruptcy)," he said. "Will we know what happened more if it's 15% or 30%? I don't think so." The size of the move might not mean that much to McCullough, but this is an election year, and California Gov. Gray Davis is facing an uphill race for reelection because of his handling of the energy crisis. Though prices and blackout fears have long since receded, the state is stuck with some $50 billion in overpriced long-term contracts negotiated by his appointees. Democratic senators saw an opportunity to lay the blame for Davis' mismanagement on yet another scapegoat. First it was the merchant generators' fault, but then it turned out they charged much lower prices than California's municipal utilities. Then it was El Paso Corp. (EP), accused of withholding supply to drive up prices of natural gas. Now, it's Enron. The Democrats must deflect all blame from Davis in 2002's most important single race. What Really Happened So, why did northwest electricity prices fall even 16% at the time of Enron's bankruptcy? The price history submitted by McCullough backs up what traders have been saying for months: Enron had been seen shorting western power since last spring, making money as prices collapsed. That view was confirmed this week by the Bonneville Power Administration, the federal power marketer in the Northwest. A year ago, Enron was selling to Bonneville at an average price of $50/MWh. Later, Enron bought the power back at about $18, according to Bonneville. In October, as Enron's credit quality and survival were being severely questioned, the company ordered its traders to "flatten their books." For Enron's western traders, that meant getting out of their short positions by buying back power to reduce the risks in their portfolio. Prices rebounded for a few weeks on Enron's buying, but that stopped in early November after Enron became unable to do many more deals. The bear market for all U.S. energy markets - which has continued to this day - resumed for western power. Aside from the politics, we're talking big bucks. Several western utilities hold hundreds of millions of dollars in long-term contracts with Enron that are now way above the market. Those contracts didn't go away with Enron's bankruptcy filing. Just the opposite - they became major assets of the estate. If they hold up, the utilities will have to pay the entire difference between their contracts and the current market up front, in cash. If the utilities can prove Enron manipulated the market, they might be able to get federal energy regulators to invalidate the contracts. Even high-priced contracts signed with suppliers other than Enron - like Davis' - might be nullified based on Enron's market manipulation. As for Feinstein's rush to judge Enron as the culprit behind California's energy crisis, McCullough called that "a leap of faith." That crisis was in the spot market for power needed on a daily and hourly basis. As big as Enron was, it was never big enough to control the spot market for western electricity, which was enormous until California started buying everything under long-term contracts last summer. For all its questionable activities, Enron isn't to blame for California. The state botched deregulation under the leadership of the previous governor, Republican Pete Wilson. The Davis ignored the crisis for eight months, until after the state's two largest utilities were flat broke, and then largely botched the solution. End of story? Not a chance. McCullough is scheduled to testify Wednesday before a House committee on market power abuse. -By Mark Golden, Dow Jones Newswires; 201-938-4604; mark.golden@dowjones.com (Bryan Lee in Washington, D.C., contributed to this column.) Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Report on Business: International Enron's fall darkens summit Leaders at global forum fear effects of giant's collapse MIRO CERNETIG 02/01/2002 The Globe and Mail Metro B1 "All material Copyright © Bell Globemedia Publishing Inc. and its licensors. All rights reserved." NEW YORK -- Forget the bomb squads roaming Park Avenue, the potential riots from anti-globalization protesters and the police armed with submachine guns guarding what some are calling "Davos on the Hudson." What's bothering the 3,000 businesses and political leaders brainstorming in the plush confines of the Waldorf-Astoria is the fallout from Enron Corp., the biggest bankruptcy filing in U.S. business history. Gathered in Manhattan for the World Economic Forum, this is a $25,000-(U.S.)-a-head salon for business and political titans to chew over the world's challenges. Many of the delegates are expressing fear, however, that revelations of late-night paper shredding in Houston and suspicious accounting practices are a serous blow to the stock markets they are relying on to end a near-global economic downturn. "The Enron debacle creates a crisis within the entire capital market," said Samuel DiPiazza Jr., who yesterday was named the global CEO of PricewaterhouseCoopers. "Our profession is right in the middle of that." With many market watchers predicting that more companies will falter under billions of dollars in debt not properly cited on their books, Mr. DiPiazza said business leaders have realized that transparency in accounting is one of the major challenges facing Corporate America. "I absolutely believe it's on the minds of the CEOs walking these halls," he said. To deal with the public perception that accounting firms may have too incestuous a relationship with the clients they are supposed to be auditing, Mr. DiPiazza said PricewaterhouseCoopers believes it is crucial to separate its auditing arm from its lucrative consultancy work. "We believe the perception of conflict is something we must deal with," he said. "It will not make us better accountants. But if it helps change the public perception, we think it's positive." In a sense, the Enron scandal has gone global, the business leaders say. The world economy is relying on the U.S. economy to put an end to a recession felt around the globe, and if Enron is only the tip of the iceberg of similar bookkeeping tactics, it could slow down a Wall Street recovery. Gail Fosler, chief economist of the U.S. Conference Board, said the Enron implosion, following the collapse of stocks of companies such as Xerox Corp. and Lucent Technologies Inc., definitely has the world's investors wondering where the bad news will stop. "I wouldn't call it the Enron contagion, but it does undergird the sense of risk aversion that was already in play," she said, adding that the scandal has also hurt other companies seeking to take on debt to survive hard times. "I would even say Kmart was a victim of Enron," she said, adding that there was a broad tightening of credit when the energy giant entered Chapter 11 bankruptcy protection. "This is in some way an impediment to global liquidity." For the first time in 31 years, the World Economic Forum is being held outside of Davos, a sleepy village in the Swiss Alps. It's an attempt by organizers to help New York recover from the Sept. 11 terrorist attack on the World Trade Center and throw leaders a Big Apple party: Tonight they will get to hear Paul Simon, Bono and Peter Gabriel in the Grand Ballroom of the Waldorf-Astoria. But the cozy nature of the conference has been altered by the move to Manhattan. Security is at an all-time high, with thousands of police and secret service agents in the hallways of the hotel, which is off-limits to all but registered delegates. That makes the chances of buttonholing those in attendance, from the likes of Microsoft Corp.'s Bill Gates to an artist like Bono -- something that was possible in Davos -- next to impossible. A survey of 1,161 CEOs from around the world, however, many of whom are in the boardrooms of the Waldorf-Astoria, has found that the obliteration of the World Trade Center has deflated the buoyant mood that usually marked the Davos summits. "Nearly 60 per cent [of CEOs] focus on two probabilities," said the PricewaterhouseCoopers survey. "Continuing stagnation in the global economy and the vulnerability of global supply chains." The survey found that since the Sept. 11 attacks, about half of the world's corporate leaders have laid off workers, outsourced non-core businesses and imposed travel restrictions (although not necessarily their $300-and-up rooms at the Waldorf-Astoria). The survey found that the CEOs regarded these cutbacks as long term, although they believed that budgets for research and development would be restored. Perhaps most interesting, though, is that globalization protesters, who promise major demonstrations tomorrow, appear to be getting the attention of a large number of business leaders. One-third of the CEOs surveyed said they believe the "anti-globalization movement" is a threat to their business. Another third agreed that globalization is likely to increase the gap between rich and poor countries, precisely what the protesters will be chanting in the days ahead when they begin protests on the other side of the concrete barriers around the Waldorf-Astoria. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Accounting profession seeks to restore trust following Enron scandal By SETH SUTEL AP Business Writer 02/01/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. NEW YORK (AP) - Stung by a collapse in public confidence following the Enron scandal, the accounting profession is taking steps to eliminate the appearance of conflicts of interest in the kinds of services they offer their audit clients. The American Institute of Certified Public Accountants, a professional group, said Friday for the first time that it would support any future proposal to impose certain limits on services accounting firms may provide to the companies they audit. The statement came a day after KPMG, one of the five major accounting firms, reversed its opposition to limits proposed two years ago, which would have prevented auditing firms from providing information technology consulting or internal audit services to the companies whose financial statements they audit. The two actions came on the heels of an announcement from the leading accounting firm, PricewaterhouseCoopers, that it would spin off its consulting business into a separate entity. The plans, which had been in the works for many months, were accelerated because of concerns that the public perception of the accounting profession was hurting because of the Enron scandal. Enron's auditor, Arthur Andersen LLP, acknowledged destroying documents and e-mails that were sought by federal and congressional investigators looking into questionable accounting practices which led to the swift collapse last fall of the energy trading giant. The non-audit consulting fees are often much more lucrative to the accounting firms than fees for auditing companies' books. For example, in 2001, The Walt Disney Co. paid PricewaterhouseCoopers $8.6 million for its auditing and $32 million for other services, according to its proxy statement. Critics contend the high fees could taint an auditor's objectivity when reviewing its client's books. On Thursday, Disney said it will not use its outside auditing firm for new consulting projects and will review those currently under way. Linda Dunbar, a spokeswoman for the AICPA, said that even though the group would support future limits on the bans that such restrictions were not the solution to the profession's problems and "would not prevent the next Enron." "Given where we are on public concerns on conflict of interest, it seems that some restrictions are necessary so that we can move on to more substantive issues," Dunbar said. Likewise, Stephen G. Butler, chairman of KPMG, called the controversy of service limits a "red herring" in a statement released Thursday, but he said the firm would now support the limits in order to move on to substantive reform of financial accounting practices. Spokesmen for PricewaterhouseCoopers and Ernst & Young, two of the other five major accounting firms, both said their firms supported the limits on information and internal auditing consulting when they were first proposed two years ago under Arthur Levitt, the former chairman of the Securities and Exchange Commission, and that their position hadn't changed. "When this was being debated two years ago we supported it then, and we support it now," Larry Parnell, a spokesman for Ernst & Young, said. "This is not a new position for us," Peter Horowitz, a spokesman for PricewaterhouseCoopers, said. "We supported those positions two years ago." A spokesman for Andersen didn't return a phone call seeking comment. The New York Times quoted an Andersen official as saying that his firm would make an announcement soon that would "substantially change the way Andersen does business." Deloitte & Touche released a statement Thursday calling the issue over the scope of services that accounting firms can offer "principally one of perception. But it is a huge perception problem." Nonetheless, the firm said "it is premature to accept or reject any proposal, whether we agree with it or not, because the effectiveness of a complete set of reforms is what ultimately needs to be assessed." Auditing firms can still provide certain non-auditing services to the firms they audit, subject to certain rules. But most accounting firms have already separated from their consulting divisions, including Andersen, whose consulting arm split off into a unit called Accenture. KPMG has spun off its consulting business, and In early 2000, Ernst & Young sold its consulting business to Cap Gemini SA, a French computer and management services company. Once PricewaterhouseCoopers' stock offering is complete, Deloitte will remain the only major accounting firm that is still united with its consulting arm. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Top Of The News Enron: A House Divided Dan Ackman, Forbes.com, 02.01.02, 9:26 AM ET "Divide and conquer" is often a winning strategy. Enron's wrinkle has long been "divide and disavow," and it seems that, for the bankrupt energy trader and its lawyers, old gambits die hard. One of the principal components of the Enron scandal was the company's practice of creating partnerships and then using them to push its assets or debts off its books. Technically this can be legal, so long as the partnerships are truly separate, which, among other things, means that outside investors control as little as 3% of the partnership equity. The myth of separation--while still strongly believed by Enron itself--is losing support among the accounting firms who have been tainted by Enron and other recent scandals. The Big Five accounting firms are coming around to the idea that providing certain consulting services to the same company it is auditing creates an inherent conflict and is bad business. Until recently, the accounting profession bitterly opposed any limits on its consulting services, beating back rule changes proposed by Arthur Levitt when he was chairman of the Securities and Exchange Commission. But the Enron taint has spread past Enron's own auditor, Arthur Andersen, and the firms are seeking to police themselves lest others--such as the SEC--do it for them. PricewaterhouseCoopers and KPMG said yesterday said they would support such proposals. Andersen itself is said to be leaning in that direction and that it will soon announce substantial changes in how it does business. The Walt Disney Co. approved of the new regime of separation yesterday when its chairman, Michael Eisner, said the company would not use its independent auditor, PricewaterhouseCoopers, for any new consulting work and would evaluate the current projects the accounting firm's consultants are currently doing for the company. Disney in 2000 paid PricewaterhouseCoopers $8.7 million in audit fees and around $32 million in non-audit fees. PricewaterhouseCoopers, for its part, said it intended to spin off its consulting arm in an IPO, which could mollify Disney and others. Arthur Andersen, in 2000, separated from its old consulting arm, now known as Accenture, after a long-running dispute between the two sides of the firm. But since then, Andersen itself has beefed up its own consulting practice. According to a report in The New York Times, just over half the $52 million it billed Enron in 2000 was for consulting. Enron, of course, has fired its auditor--as if Andersen forced Enron's hand rather than the other way around--and it appears to be clinging to its old religion at least in the early innings of the Enron investigation. Sen. Byron Dorgan (D-N.D.), accused the company yesterday of failing to provide records for thousands of Enron-backed partnerships that were long known to--and approved by-- company directors. Dorgan is chairman of the Senate Commerce subcommittee on consumer affairs, one of nine congressional panels probing Enron. A lawyer for Enron, Robert Bennett, responded to reporters, "The senator is terribly misinformed. We have been totally cooperating with the committee." Bennett added, "The senator may be operating under the misimpression that we have possession of many of these special partnership entity documents, which we don't." The documents would have to be obtained from the partnerships themselves. Instead of one subpoena, Bennett wants Dorgan to issue 3,000. In the unique dialect native to planet Enron, this stance is called cooperation.
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