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Enron Attorney Says FBI Is Probing Shredding at Company's Headquarters Dow Jones Business News, 01/22/2002 WSJ: Enron Says FBI Invited To Probe Document Shredding Dow Jones News Service, 01/22/2002 Paper Trail: Shredded Documents Taken to Court ABC News.com, 01/22/2002 Paper Chase: Congress to Probe Destruction of Enron Documents ABC News.com, 01/22/2002 Judge to hear request to halt shredding Associated Press Newswires, 01/22/2002 Lawyers Ask Houston Crt Order To Stop Enron `Tampering' Dow Jones Energy Service, 01/22/2002 ENRON PROBES ALLEGED SHREDDING DOCUMENT DESTRUCTION REPORTEDLY CONTINUED TO= AT LEAST START OF JAN. The Boston Globe, 01/22/2002 REPORT: ENRON KEPT ON SHREDDING ; FORMER EXECUTIVE: SUBPOENAS IGNORED Orlando Sentinel, 01/22/2002 Manager Says Enron Shredded Documents; Probe Allegedly Was Already Underway The Washington Post, 01/22/2002 Enron Ex-Executive: Previous Warnings Fell On `Deaf Ears' Dow Jones International News, 01/02/2002 New Accusations of Document Shredding at Enron American Morning with Paula Zahn, 01/22/2002 USA: Enron says ordered staff to preserve all papers. Reuters English News Service, 01/21/2002 Enron Notified Employees to Retain Documents PR Newswire, 01/21/2002 Enron says it checking shredding report The Globe and Mail, 01/22/2002 Enron Claims to Fire Andersen as Auditor. The Oil Daily, 01/22/2002 SMARTMONEY.COM: Special Report: The Enron Papers Dow Jones News Service, 01/21/2002 SMARTMONEY.COM: The Spreading Enron Stain Dow Jones News Service, 01/21/2002 Worker's concerns about Enron accounting brushed aside Associated Press Newswires, 01/21/2002 Enron Raised Funds In Private Offering; Shareholders in Dark, Documents Sho= w The Washington Post, 01/22/2002 Jesse Jackson to hold rally for laid off Enron workers Associated Press Newswires, 01/21/2002 USA: Profiles of major figures in Enron saga. Reuters English News Service, 01/21/2002 The Fall of Ken Lay CNN: The Point with Greta Van Susteren, 01/21/2002 Role of Andersen lawyer probed. Financial Times - FT.com, 01/22/2002 Enron's Law Firm Is in the Crosshairs; Vinson & Elkins' heavy reliance on t= he work it did for the energy giant is now a potential liability for the la= w firm BusinessWeek Online, 01/22/2002 Enron a Boon to Short-Sellers / Skeptics correctly read signs of sudden col= lapse Newsday, 01/22/2002 Andersen says Enron failed on business merits. The Saigon Times Daily, 01/22/2002 ENRON SPURS TEXAS-SIZE LEGAL QUAGMIRE ; MORE THAN 150 LAWSUITS HAVE ALREADY= BEEN FILED IN HOUSTON AGAINST THREE OF THE COMPANY'S TOP EXECUTIVES. Orlando Sentinel, 01/22/2002 Federal Judge Approves Sale Of Enron's Energy Trading Ops Dow Jones News Service, 01/22/2002 UBS Pumps Life Into New Enron Unit Newsday, 01/22/2002 Enron Creditors Express Skepticism About Proposed Sale of Trading Arm to UB= S. The Oil Daily, 01/22/2002 Enron To Pay GE Capital $138,474/Mo For Furniture Leases Dow Jones News Service, 01/22/2002 Enron Trying To Keep $7.92M In Funds From Some Creditors Dow Jones International News, 01/22/2002 USA: Lawmaker says set to subpeona Andersen in Enron case. Reuters English News Service, 01/22/2002 Enron auditor says Andersen shares blame Congressional subcommittee rejects= bid to delay public testimony set for Thursday The Globe and Mail, 01/22/2002 New US Judge In Enron Cases No Stranger To Controversy Dow Jones Energy Service, 01/22/2002 UK: UPDATE 1-Enron Europe creditors face $900 mln trading loss. Reuters English News Service, 01/22/2002 Two More Enron Units File Chapter 11, Total Reaches 37 Dow Jones Energy Service, 01/22/2002 Dark humour and a line in T-shirts from Enron victim - Ex-employees' websit= e reveals the real losses. The Guardian, 01/22/2002 US Treasury Responds To Waxman Request For Enron Info Dow Jones Capital Markets Report, 01/22/2002 SMARTMONEY.COM: Special Report: Enron Vs. Investors Dow Jones News Service, 01/22/2002 Tractebel bids for Enron's SKorean assets - report AFX News, 01/22/2002 Electrabel In Talks With Enron Over Spanish Power Plant Dow Jones International News, 01/21/2002 New BG Bid Soon For Enron's India Pete Fields' Stake -PTI Dow Jones Energy Service, 01/21/2002 Gov't hopes to close Enron deal this month. BusinessWorld (Philippines), 01/22/2002 INDIA PRESS: Dabhol May Be Sold In Two Parts Dow Jones International News, 01/21/2002 INDIA'S TROUBLED DPC READY TO HAND OVER EVIDENCE TO HIGH COURT Asia Pulse, 01/22/2002 Enron points to need for independent analysts The Globe and Mail, 01/22/2002 Where are market cops when we need them? The Globe and Mail, 01/22/2002 U.S. push on for independent auditors: Enron fallout National Post, 01/22/2002 Enron case steals Bush limelight Belfast News Letter, 01/22/2002 Politically Sensitive Enron Items Pulled Off EBay Friday Dow Jones News Service, 01/22/2002 ComPsych(R) Reports Rapidly Increasing Employee Stress Levels Caused by Rec= ent Financial Events PR Newswire, 01/21/2002 GETTING PERSONAL: 401(k) Woes? Might Be Your Own Fault Dow Jones News Service, 01/22/2002 Enron: No Taxes . . . The Washington Post, 01/22/2002 GEORGE W. CLINTON? IT SOUNDS CRAZY, BUT BUSH'S ENRON DEFENSE IS `BILL DID I= T, TOO' Pittsburgh Post-Gazette, 01/22/2002 Corruption festered in the dark Kitchener-Waterloo Record, 01/22/2002 Putting the `public' back in CPA Chicago Tribune, 01/22/2002 Bush Better See Enron Case as a Threat Newsday, 01/22/2002 WHITE HOUSE NOTEBOOK Dana Milbank Wrapping Up Tough Questions With Foil The Washington Post, 01/22/2002 Enron's Fatal Arrogance Australian Financial Review, 01/22/2002 Get Tough On Corporate Crime The Washington Post, 01/22/2002 ...Poisonous Enron The News & Observer Raleigh, NC, 01/22/2002 What a fall! Business Standard, 01/22/2002 ____________________________________________________________________ Enron Attorney Says FBI Is Probing Shredding at Company's Headquarters By John R. Emshwiller 01/22/2002 Dow Jones Business News (Copyright © 2002, Dow Jones & Company, Inc.) Staff Reporter of The Wall Street Journal=20 HOUSTON-- An attorney for Enron Corp. says Federal Bureau of Investigation = agents have been dispatched to the company's Houston headquarters to begin = interviews Tuesday about possible document shredding. The attorney said that following news reports of document shredding on the = 19th floor of the building, where some of the accounting operations are, En= ron (ENRNQ) contacted the Justice Department and Securities and Exchange Co= mmission and invited them to investigate what happened.=20 He added that Enron officials last night went to the 19th floor to look for= any evidence of shredding and located a "single trash can with shredded ma= terial." He said the material was secured and bagged. Security guards have = now been placed on the 19th and 20th floor of the building.=20 Three former Enron employees said Monday that they'd seen shredded document= s in the accounting department after federal investigators had begun a prob= e into possible illegalities at the energy giant.=20 Write to John R. Emshwiller at john.emshwiller@wsj.com=20 Copyright © 2002 Dow Jones & Company, Inc.=20 All Rights Reserved. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 WSJ: Enron Says FBI Invited To Probe Document Shredding By John R. Emshwiller 01/22/2002 Dow Jones News Service (Copyright © 2002, Dow Jones & Company, Inc.) Of The Wall Street Journal=20 HOUSTON -(Dow Jones)- An attorney for Enron Corp. (ENRNQ) says Federal Bure= au of Investigation agents have been dispatched to the company's Houston he= adquarters to begin interviews Tuesday about possible document shredding. The attorney said that following news reports of document shredding on the = 19th floor of the building, where some of the accounting operations are loc= ated, Enron contacted the Justice Department and Securities and Exchange Co= mmission and invited them to investigate what happened.=20 (This report and related background will be available at the Journal's Web = site, WSJ.com.)=20 He added that Enron officials last night went to the 19th floor to look for= any evidence of shredding and located a "single trash can with shredded ma= terial." He said the material was secured and bagged. Security guards have = now been placed on the 19th and 20th floor of the building.=20 Three former Enron employees said yesterday that they'd seen shredded docum= ents in the accounting department after federal investigators had begun a p= robe into possible illegalities at the energy giant. -Jonathan Friedland; T= he Wall Street Journal; 323-658-3820 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Paper Trail Shredded Documents Taken to Court =20 Jan. 22 - An attorney handed over shredded Enron documents to a federal cou= rt in Houston today, claiming they were important papers company workers ha= d attempted to destroy as recently as last week.=20 The attorney, William Lerach, who has filed a class-action suit against the= failed energy firm on behalf of employees and stockholders, said he though= t the court should begin to take physical possession of evidence from the f= irm and its now-fired auditor Arthur Andersen, and appoint independent expe= rts to try to restore deleted e-mail.=20 "It may be necessary that we put a U.S. marshal or someone on the premises = there at Enron to make sure these people behave themselves," argued Lerach = on ABCNEWS' Good Morning America today.=20 Shredders Were 'Working Overtime'=20 Document-shredding continued at Enron's headquarters up until at least last= week, former Enron executive Maureen Castaneda told ABCNEWS, despite feder= al subpoenas and court orders since last October forbidding the destruction= of documents.=20 Castaneda, the former director of Enron's foreign investments section, said= the shredding was done in an accounting office on the 19th floor of the co= mpany's Houston headquarters.=20 "I left the second week of January and the shredding was going on until the= day I left, and I have no idea if it continues," said Castaneda, who worke= d across the hall from the accounting office.=20 "After Thanksgiving, there was great interest in the accounting documents s= tored," she said. "They pulled out all the boxes and people had to go throu= gh every box."=20 Castaneda added in a Good Morning America interview this morning: "I think = the accountants were probably working a lot of overtime. You could tell by = the pizza boxes and trash cans."=20 The former executive says she had no idea what was going on - even used the= shreddings to pack up her belongings - until she received an e-mail from t= he corporate attorney reiterating company policy forbidding document shredd= ing.=20 "That's when the light bulb went on," recalled Castaneda, "And I said, 'Wel= l, wait a minute, if they're not supposed to destroy them, why are they des= troyed?' "=20 'It Will Not Be Tolerated'=20 Enron attorney Bob Bennett said that all employees had been forbidden to sh= red any documents as of Oct. 25.=20 "At a very early time, the legal team made all employees aware of the pendi= ng litigation and that all documents should be retained," Bennett told ABCN= EWS. "If anyone has disobeyed that policy or if anyone is discovered to hav= e shredded documents, it will not be tolerated and severe action will be ta= ken."=20 He also said the company was investigating the reports.=20 Castaneda said she discovered the shredded documents when she was cleaning = out her office and looking for packing material. She showed ABCNEWS boxes f= ull of shredded documents dated from November and December, which she found= in the hallway.=20 "I got these when I was leaving work, to basically use for packing material= ," she said. "I only took one box."=20 The word "confidential" can be seen on the shredded papers, which were dens= ely packed into the box she showed ABCNEWS.=20 "A lot are accounting documents," said Castaneda. "You can tell because of = the colors yellow and pink."=20 Also, she said she found shreds with references to some of Enron's off-the-= books partnerships, which the company used to mask its financial problems. = Lawyers in the case regard this as likely evidence of a criminal act: Destr= oying documents in the middle of a federal investigation is potential obstr= uction of justice.=20 Enron's accounting practices have come under heightened scrutiny since the = company's stunning October announcement that it lost $638 million in the th= ird quarter of 2001 and was worth $1.2 billion less than it had previously = claimed.=20 ABCNEWS' Brian Ross contributed to this report. Paper Chase Congress to Probe Destruction of Enron Documents By Pete Yost The Associated Press W A S H I N G T O N, Jan. 21 - A House panel plans to issue subpoenas if ne= cessary to compel testimony from Enron's accounting firm and the auditor it= fired for the destruction of thousands of documents. Arthur Andersen LLP chief executive Joseph Berardino criticized his firm's = lead auditor on the Enron account, David Duncan, saying he displayed "at th= e least ... extremely poor judgment" for his part in discarding documents i= n October and November. Enron filed for bankruptcy Dec. 2.=20 Duncan has told investigators he was simply following the advice of Anderse= n's legal department when he directed the shredding. The House Energy and C= ommerce subcommittee on oversight and investigations has scheduled a hearin= g for Thursday.=20 The tentative witness list includes Duncan, Andersen attorney Nancy Temple = and Berardino or another top-ranking Andersen official.=20 It was uncertain whether Duncan would appear voluntarily.=20 "We have made it clear that we'll be prepared to subpoena any reluctant wit= nesses," said committee spokesman Ken Johnson.=20 Johnson said "a number of people have approached the committee about immuni= ty" from prosecution, "but we have not offered it to anyone, nor have we se= riously considered it up to this point."=20 "We're very interested in finding out where Andersen is, in its internal in= vestigation" of the Enron controversy, "and we want to examine administrati= ve and disciplinary actions taken in the wake of the disclosure that docume= nts were destroyed," Johnson said.=20 Focus on Stock Sales=20 A variety of federal law enforcement agencies and congressional investigato= rs are looking into Enron's sudden collapse, the largest bankruptcy in U.S.= history and one that cost many employees their retirement savings.=20 Among the avenues of interest: actions taken by Enron managers to sell some= of their own stock in the company even as employees were encouraged to con= tinue investing.=20 A lawyer for Kenneth L. Lay, Enron's chairman and chief executive, said Lay= disposed of millions of dollars in Enron stock because he needed to raise = cash to repay loans, not because of concerns about the health of his compan= y, The New York Times reported today.=20 Attorney Earl J. Silbert said Lay had put up shares of his Enron stock as c= ollateral for other investments. On at least 15 occasions between February = and October of last year, Silbert told the Times, Lay returned shares in En= ron to the company to repay $4 million he had received through a credit lin= e.=20 The House panel meeting Thursday hoped to get to the bottom of Andersen's s= hredding of the documents.=20 Temple, a lawyer at Andersen headquarters in Chicago, e-mailed a copy of th= e firm's document destruction policy to the Houston office where Duncan and= other accountants worked on the Enron account.=20 Temple sent the e-mail just four days before Enron announced more than $600= million in third-quarter losses. At the same time, the energy company took= the first step to fully disclose details of partnerships that had kept hun= dreds of millions of dollars in Enron debt off the company's balance sheet.= =20 E-mail Defended=20 Appearing Sunday on NBC's "Meet the Press," Berardino defended Temple's sen= ding of the e-mail, saying "Nancy just told people to use their judgment. S= he did not instruct them to do anything, to my knowledge."=20 According to congressional investigators, Duncan said last week that genera= l discussions began at Andersen in September about what Enron-related docum= ents to discard.=20 "It was unusual" to emphasize the document-destruction policy, Duncan told = the investigators, according to congressional sources familiar with what he= said. The sources spoke on condition of anonymity.=20 Asked why Temple reminded the Houston office of the policy to do away with = some documents, Berardino replied, "Because accountants are pack rats ... W= e save lots of stuff that's not relevant."=20 Asked about the timing of Temple's e-mail, Berardino said "we were in the p= rocess of putting our files together to make sure that all of the third-qua= rter events were properly documented in our work papers." Copyright 2002 The Associated Press. All rights reserved. This material may= not be published, broadcast, rewritten or redistributed.=20 Judge to hear request to halt shredding By KRISTEN HAYS Associated Press Writer 01/22/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. HOUSTON (AP) - An attorney representing shareholders suing 29 current and f= ormer Enron Corp. executives and directors carried a box of shredded docume= nts into federal court Tuesday, claiming employees of the fallen energy tra= ding giant were destroying records through at least mid-January.=20 "This is the shredded evidence that we got out of Enron," attorney William = Lerach said as he hurried into the downtown Houston courthouse, where he wa= s prepared to ask a judge to ban any shredding by Enron or its former audit= or, Arthur Andersen. A state judge's order already prohibits Andersen's Houston office from shre= dding Enron-related documents. Chicago-based Andersen acknowledged earlier = this month its Houston office had destroyed a significant but undetermined = amount of audit-related work.=20 Lerach's law partner, Paul Howes, released a court brief late Monday in whi= ch a former Enron executive saw staffers in the accounting and finance depa= rtment review and shred thousands of documents.=20 Maureen Raymond Castaneda, who was laid off as Enron's director of foreign = exchange and sovereign risk, told Howes the "gather-review-shred" process s= tarted Oct. 31, when the Securities and Exchange Commission announced a for= mal investigation into Enron finances, and continued through at least Jan. = 14.=20 In a statement released Monday, Enron reiterated that it has had a strict a= nti-shredding policy in place since last autumn.=20 "Since Oct. 25, Enron has notified employees in no uncertain terms that the= y are to preserve all documents and materials. The company has sent out fou= r e-mails to that effect from Oct. 25, 2001, through Jan. 14, 2002," said t= he statement.=20 Castaneda confirmed she saw at least two such e-mails from Enron general co= unsel James Derrick.=20 Houston-based Enron cited Andersen's shredding issues when it fired the ven= erable accounting firm last week.=20 Neil Rothstein, attorney for another plaintiff, the Archdiocese of Milwauke= e Support Fund, said Tuesday morning that justice can be served only with i= ntact evidence.=20 "We are entitled to see what they have," Rothstein said, referring to anyon= e with pertinent Enron documentation. "No one should have destroyed documen= ts."=20 Lerach said Castaneda took some boxes of shredded documents home, intending= to use them as packing material in a move to a more affordable house. She = gave Lerach's team the spindly documents, which Howes said were clearly mar= ked as related to debt-laden partnerships that fueled the company's downfal= l.=20 "Enron's communications with its employees were very clear on the destructi= on of documents, and any breach of the company's policy will be dealt with = swiftly and severely," the company said. "Enron has been cooperating fully = with congressional investigators and handed over to various government inve= stigators 41 boxes of documents and materials."=20 Drowning in a sea of exposed questionable accounting methods, massive third= -quarter losses and elimination of millions in profits since 1997 with rest= ated earnings, Enron on Dec. 2 filed the largest bankruptcy in history.=20 Lerach's firm last month sued current and former top Enron executives and b= oard members who sold $1.1 billion in stock from October 1998 through Novem= ber last year, just before the company imploded.=20 The lawsuit differs from more than 60 filed on behalf of shareholders and i= nvestors across the country because it names only the individuals as defend= ants, not Enron Corp. Suits targeting the company are on hold until the ban= kruptcy is resolved in a Manhattan court.=20 The suit alleges the defendants, including Enron chairman Ken Lay and Texas= Sen. Phil Gramm's wife, Enron board member Wendy Gramm, engaged in a three= -year pattern of fraud and deception that caused Enron shares to fall from = a high of about $80 a year ago to less than a dollar.=20 Amalgamated Bank, the lead plaintiff, claims it lost more than $10 million = in the meltdown, and the suit is seeking $25 billion in damages. Pension fu= nds for several states have joined the suit since it was filed. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Lawyers Ask Houston Crt Order To Stop Enron `Tampering' 01/22/2002 Dow Jones Energy Service (Copyright © 2002, Dow Jones & Company, Inc.) WASHINGTON (AP)--Lawyers suing Enron Corp. (ENRNQ) say a massive number of = company documents were shredded in the face of a federal investigation and = want a court to step in to prevent more tampering.=20 "It was a major accounting fraud and now they have been caught destroying t= he evidence," attorney William Lerach said Tuesday on NBC's "Today." "I'd s= ay they've got trouble on their hands." Robert Bennett, a Washington lawyer representing Enron, said the company to= ld employees after coming under investigation that they were not to destroy= relevant documents. He said the company is looking into charges papers wer= e destroyed despite that directive.=20 Lerach told the Associated Press the shredding was "open and notorious and = widespread," consuming "hundreds of thousands of documents" and taking plac= e even on Christmas Day.=20 Former Enron executive Maureen Castaneda said on morning talk shows Tuesday= that the shredding began after Thanksgiving on the 19th floor accounting o= ffice of the company's Houston headquarters and continued at least until th= e middle of this month.=20 Lerach was bringing some of the shredded documents to federal court Tuesday= to seek court custody of relevant Enron papers, as part of a class-action = lawsuit against the company by aggrieved investors.=20 "We're going to ask the court to take extraordinary measures...to prevent a= ny further tampering or destruction," he said on ABC's "Good Morning Americ= a."=20 "It may be necessary that we put a U.S. marshal or someone on the premises.= "=20 The reported shredding follows revelations over the past two weeks about do= cument destruction at Arthur Andersen LLP, Enron's auditor.=20 Another attorney in the lawsuit, G. Paul Howes, said in court papers that s= ome of papers destroyed at Enron headquarters were marked Jedi II and Chewc= o - partnerships through which the energy giant concealed hundreds of milli= ons of dollars in debts.=20 The partnerships, described by lawmakers as slick financial gimmicks, helpe= d drive the company into the largest bankruptcy in U.S. history.=20 The Securities and Exchange Commission began looking into Enron's accountin= g practices in mid-October, after the company reported more than $600 milli= on in third-quarter losses, and a congressional committee began asking for = documents in mid-December. The SEC opened a formal investigation at the end= of October, including demands for financial documents from Enron and Ander= sen.=20 Enron said in a statement late Monday that it had issued four e-mails from = Oct. 25 to Jan. 14 warning employees against destroying documents, specific= ally those related to Enron's complex web of partnerships.=20 "We are investigating the circumstances of the reported destruction of docu= ments," Bennett said.=20 Bennett said anyone who violated directives against destroying documents "w= ill be dealt with appropriately."=20 Castaneda, who was laid off last week, said she did not know who ordered em= ployees to do the shredding. "I think they were just doing what they were t= old," she said.=20 She said she brought shredded paper home to use as packing material.=20 The Justice Department announced on Jan. 9 that it was pursuing a criminal = investigation of Enron, which entered the biggest bankruptcy in U.S. histor= y on Dec. 2 following a six-week downward spiral.=20 Andersen last week fired its lead Enron auditor for destroying Enron-relate= d documents. The auditor, David Duncan, has told congressional investigator= s he was just following the advice of Andersen's legal department when he d= irected the shredding.=20 Lawyers for Duncan have been seeking to delay his public testimony, schedul= ed for Thursday before the investigative panel of the House Energy and Comm= erce Committee, saying Duncan needs more time to prepare.=20 But Rep. Jim Greenwood, R-Pa., the subcommittee's chairman, rejected the re= quest, arguing that Duncan "doesn't really need to recall every detail of w= hat he did for Enron. We're focused on the destruction of documents. We'll = subpoena him if we have to."=20 Said Ken Johnson, spokesman for the House Energy and Commerce Committee: "T= his whole sorry affair keeps getting uglier by the minute, and we're determ= ined to get to the bottom of it. ... Making bad business decisions is one t= hing, but trying to cover up bad business decisions is another." Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business ENRON PROBES ALLEGED SHREDDING DOCUMENT DESTRUCTION REPORTEDLY CONTINUED TO= AT LEAST START OF JAN. Pete Yost, Associated Press 01/22/2002 The Boston Globe THIRD F.1 (Copyright 2002) WASHINGTON - Enron is looking into the reported destruction of documents th= at allegedly took place at its Houston headquarters after the federal gover= nment began investigating the company, an attorney for the bankrupt energy = giant said last night.=20 In an on-air interview with ABC News, a former Enron executive, identified = as Maureen Castaneda, said the shredding of documents took place in an acco= unting office on the 19th floor. Castaneda displayed one box of the shredded material which "I got . . . whe= n I was leaving work to basically use . . . for packing material.=20 "There were . . . a lot more than this," she said, standing next to the box= .=20 Castaneda said the destruction began after Thanksgiving. "I left the second= week of January and the shredding was going on until I left. And I have no= idea if it continues." Castaneda was identified as a director in the forei= gn investments section at Enron's Houston headquarters.=20 "They even shredded on Christmas Day," Bill Lerach, an attorney who is suin= g Enron's board and officers, said in an interview. He said he was taking s= ome of the shredded documents to court today where he will demand court cus= tody of all relevant Enron documents.=20 "From what we have learned, destruction of evidence at Enron was open and n= otorious and widespread," Lerach said.=20 The Securities and Exchange Commission began looking into Enron in mid-Octo= ber.=20 "We are investigating the circumstances of the reported destruction of docu= ments," Washington attorney Robert Bennett, who is representing Enron, said= in a statement.=20 "In October 2001 the company issued several directives to all Enron employe= es worldwide that all relevant documents should be preserved in light of pe= nding litigation," Bennett added. "If anyone violated those directives, the= y will be dealt with appropriately."=20 The reported shredding at Enron follows revelations over the past week and = a half about document destruction at Arthur Andersen, Enron's accounting fi= rm.=20 Some of the shredded Enron paper displayed in the ABC story contained the w= ord "Jedi," one of the entities involved in an array of off-the-books partn= erships which kept millions of dollars in Enron debt off the firm's balance= sheet for several years.=20 Enron's inquiry into shredding at its headquarters came as congressional in= vestigators pressed for public testimony by an Andersen auditor fired over = the destruction at the accounting firm.=20 "This whole sorry affair keeps getting uglier by the minute, and we're dete= rmined to get to the bottom of it," said Ken Johnson, spokesman for the Hou= se Energy and Commerce Committee, which has been investigating the destruct= ion of papers at Andersen.=20 Fired Andersen auditor David Duncan told investigators that Andersen had am= ple information when it evaluated the controversial partnership arrangement= s at Enron that were a big factor in its bankruptcy.=20 Duncan's lawyers sought to delay his public testimony, scheduled for Thursd= ay before the House Oversight and Investigations Subcommittee, arguing that= Duncan needs more time to prepare.=20 But Representative Jim Greenwood, a Pennsylvanian Republican who chairs the= subcommittee, rejected the request, saying Duncan "doesn't really need to = recall every detail of what he did for Enron. We're focused on the destruct= ion of documents."=20 In other developments:=20 Consumer advocate Ralph Nader said a special counsel should investigate Enr= on rather than the Justice Department's criminal division. Nader also said = Bush administration officials should have alerted the Justice Department an= d the Securities and Exchange Commission last fall when contacted by Enron = chairman Kenneth Lay about the company's growing problems.=20 The State Department disclosed that Secretary of State Colin Powell referre= d to Enron's problems regarding a power plant in India in a discussion with= India's foreign minister last April 6. Caption: Ralph Nader said yesterday a special counsel should investigate En= ron. / AP PHOTO=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 A SECTION REPORT: ENRON KEPT ON SHREDDING ; FORMER EXECUTIVE: SUBPOENAS IGNORED William Neikirk, Washington Bureau 01/22/2002 Orlando Sentinel METRO A1 (Copyright 2002 by The Orlando Sentinel) WASHINGTON -- A former Enron Corp. executive said Monday that company docum= ents were destroyed at its Houston headquarters even after the federal gove= rnment issued subpoenas for the bankrupt company's records last fall.=20 The startling accusation of document shredding prompted Enron's attorney, R= obert Bennett, to say that the company would immediately look into the alle= gation made by former executive Maureen Castaneda in an ABC News interview. Displaying a box of shredded material, Castaneda, identified by ABC as the = former director of Enron's foreign-investments section, said the document d= estruction began after Thanksgiving and continued as late as last week in t= he 19th-floor accounting office of the company's Houston headquarters.=20 She said she got the box of paper to use for packing material and that ther= e were "a lot more" boxes like the one she showed on the air.=20 Federal authorities and congressional committees are already investigating = the shredding of documents by Enron's auditor, Arthur Andersen LLP, in conn= ection with Enron's failure. The revelations that Enron may have done the s= ame thing added a new dimension to the burgeoning scandal.=20 "It's one thing to make bad business decisions; it's another thing to cover= up bad business decisions," said Ken Johnson, spokesman for Rep. Billy Tau= zin, R-La., chairman of the House Energy and Commerce Committee, one of the= panels investigating the firm. "If it's true, this is an even bigger mess = than we thought."=20 Johnson said the committee undoubtedly would look into the new allegation a= nd probably call Castaneda to testify. Meanwhile, the panel will hold a ses= sion Thursday to hear evidence on the shredding of documents at Andersen, a= nd is threatening to force a former Andersen auditor, David Duncan, to test= ify. Duncan has sought a postponement.=20 Castaneda told ABC she found shredded paper with references to some of Enro= n's controversial businesses partnerships, such as "Jedi," which the firm u= sed to hide millions of dollars in debt.=20 "A lot are accounting documents," she added. "You can tell because of the c= olors yellow and pink."=20 "I left the second week of January, and the shredding was going on until th= e day I left, and I have no idea if it continues," said Castaneda.=20 Bennett issued a statement after the broadcast, saying that "we are investi= gating the circumstances of the reported destruction of documents. In Octob= er, the company issued several directives to all Enron employees worldwide = that all relevant documents should be preserved in light of pending litigat= ion. If anyone violated these directives, they will be dealt with appropria= tely."=20 The Securities and Exchange Commission began investigating Enron in mid-Oct= ober and this month the Justice Department said it had opened a criminal in= vestigation. Other federal agencies are looking into various aspects of Enr= on's collapse.=20 The shredding of documents also is becoming a major issue in a suit against= Enron's board and its officers. William Lerach, attorney for plaintiffs wh= o have sued the firm's board and its officers, said he plans to take the bo= x of shredded documents to federal court, according to The Associated Press= .=20 "They even shredded on Christmas Day," Lerach said. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 A Section Manager Says Enron Shredded Documents; Probe Allegedly Was Already Underway Peter Behr Washington Post Staff Writer 01/22/2002 The Washington Post FINAL A01 Copyright 2002, The Washington Post Co. All Rights Reserved An Enron project manager has told attorneys suing the company that she saw = evidence of widespread shredding of documents at Enron Corp.'s Houston head= quarters, beginning after the start of a former federal securities investig= ation was announced Oct. 31 last year.=20 Maureen Castenada, a manager in Enron's foreign-investments section who was= laid off in mid-January, said the names of outside partnerships that are a= t the center of ongoing investigations of Enron are legible on scraps of sh= redded paper. The shredding took place inside offices on the 19th floor of = the headquarters building, where she worked, she said. Castenada's allegations are contained in a sworn affidavit by attorney G. P= aul Howes, whose firm is suing Enron's top officials and directors on behal= f of Enron shareholders and investors whose retirement savings were devasta= ted by the company collapse and bankruptcy filing in December. She repeated= the allegations in an interview yesterday on ABC News.=20 Howes said that according to Castenada, boxes of documents from throughout = Enron's headquarters were gathered on the 19th floor beginning about Thanks= giving. She said she saw Enron employees going through the boxes' contents = page by page and removing documents, Howes's account states.=20 At the end of the day, trash bags and boxes full of shredded documents were= stacked up in the hallway, she said, adding that the shredding was continu= ing as recently as the second week of January.=20 One scrap described a division of revenue between Enron and one of the off-= balance-sheet entities the company created named Raptor, attorneys said.=20 "We are investigating the circumstances of the reported destruction of docu= ments," Washington attorney Robert S. Bennett, who is representing Enron, s= aid in a statement.=20 "In October 2001 the company issued several directives to all Enron employe= es worldwide that all relevant documents should be preserved in light of pe= nding litigation," Bennett added. "If anyone violated those directives, the= y will be dealt with appropriately."=20 Enron reported on Oct. 22 that the Securities and Exchange Commission had b= egun an inquiry into the company's financial dealings. A week later, the SE= C upgraded the probe to a formal investigation.=20 The destruction of documents by Enron's outside accounting firm, Arthur And= ersen, already is a key issue for investigators. Andersen fired David B. Du= ncan, its top Houston auditor on the Enron account, last week after learnin= g he ordered the shredding of documents related to the Enron audit.=20 Attorney William Lerach, a senior partner in Howes' firm, said last night t= hat he will take a box of shredded material obtained by Castenada into fede= ral court in Houston today to back up his demand that relevant Enron docume= nts be put under the court's control.=20 "You just have to conclude, based on what we know to date, this was a delib= erate, coordinated effort to destroy evidence," Lerach said.=20 Castenada told ABC News she could tell that a lot of the shredded papers we= re once accounting documents. "You can tell because of the colors -- yellow= and pink," she said. She took one box of shredded paper away with her to g= ive to attorneys. "There were . . . a lot more than this," she said.=20 Congressional investigators said yesterday that they are still negotiating = with Duncan's attorney to secure his testimony at a hearing on the document= destruction at Andersen scheduled for Thursday before the House Energy and= Commerce Committee's oversight and investigations subcommittee.=20 Duncan's lawyers sought to delay his public testimony, arguing that Duncan = needs more time to prepare.=20 The subcommittee chairman, Rep. James C. Greenwood (R-Pa.), turned down tha= t request. He said the committee will subpoena Duncan if necessary.=20 Andersen's chief executive, Joseph F. Berardino, appearing Sunday on NBC's = "Meet the Press," criticized Duncan and defended Andersen attorney Nancy Te= mple, who sent an Oct. 12 e-mail to Andersen's Houston office as a reminder= of the firm's document-destruction policy.=20 Berardino said Duncan displayed "at the least . . . extremely poor judgment= " for his part in destroying the documents in October and November. He said= Temple sent the reminder "because accountants are pack rats. . . . We save= lots of stuff that's not relevant."=20 Staff writer David S. Hilzenrath contributed to this report. http://www.washingtonpost.com=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron Ex-Executive: Previous Warnings Fell On `Deaf Ears' 01/22/2002 Dow Jones International News (Copyright © 2002, Dow Jones & Company, Inc.) NEW YORK -(Dow Jones)- The former executive who first disclosed document-sh= redding at Enron Corp. (ENRNQ) said Tuesday that she hadn't informed her su= periors because her previous warnings about risky deals had fallen on "deaf= ears."=20 Interviewed on ABC's "Good Morning America," Maureen Castaneda said she did= n't know the names of those who had shredded the documents and didn't know = who had ordered the shredding. Castaneda, former Enron director for foreign exchange and risk management, = said she wasn't surprised by the destruction of documents because she had "= seen a lot" over the past three years - "things that weren't forthright."= =20 She referred to deals that she called "incredibly risky," citing countries = that she said "nobody in the world would lend capital to" but where Enron d= evelopers wanted to go into.=20 Castaneda, who was separated from Enron earlier this month, said she had se= en "accountants" looking through documents after Thanksgiving on her way to= her office on the 19th floor, which housed the accounting and research dep= artments.=20 Repeating remarks to ABC on Monday evening, Castaneda said she realized wha= t had happened when she took home shredding to use as packing material afte= r being separated. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 News; Domestic New Accusations of Document Shredding at Enron Jack Cafferty, Ed Lavandera 01/22/2002 American Morning with Paula Zahn © Copyright eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House,= Inc.). All Rights Reserved. new accusations of document shredding at Enron have surfaced just as a fede= ral judge in Houston is set to hold hearings this morning on an injunction = to get accounting firm Arthur Andersen to stop destroying Enron related doc= uments.=20 JACK CAFFERTY, CNN CORRESPONDENT: The other big story, of course, new accus= ations of document shredding at Enron have surfaced just as a federal judge= in Houston is set to hold hearings this morning on an injunction to get ac= counting firm Arthur Andersen to stop destroying Enron related documents. According to a former Enron employee, documents were being systematically s= hredded at the company as late as last week. Maureen Castaneda, who's part = of a shareholder lawsuit against Enron, told ABC News the shredding began i= n late October after the SEC began their investigation into the company's a= ccounting practices.=20 CNN's Ed Lavandera joins us now with more in a live report from Houston -- = Ed.=20 ED LAVANDERA, CNN CORRESPONDENT: Good morning, Jack.=20 The attorneys in this case sat down with reporters late last night inside a= 19th floor posh downtown Houston hotel room, showing off what they say are= those shredded documents that Maureen Castaneda witnessed being shredded i= nside the Enron building. They say that over the last 12 weeks they've talk= ed with several dozen witnesses here at Enron who say that they did witness= this shredding of documents in the finance and accounting department. Maur= een Castaneda worked in an office just across the hallway from this departm= ent.=20 They say the shredding started heavily after Thanksgiving and it continued = in through Christmas and into, as you said, last week. And this, of course,= if this indeed is true, happened well after the federal investigators star= ted taking over in this case and issued subpoenas in efforts to claim much = of these documents.=20 Enron spokespeople say that they have issued several e-mails telling all em= ployees not to tamper with any documents whatsoever and to preserve every m= aterial that they can get their hands on, as well. But the attorneys in thi= s case aren't convinced by what Enron is saying.=20 (BEGIN VIDEO CLIP)=20 UNIDENTIFIED MALE: It is an absolute smoking gun. You've got, the auditor s= aid we destroyed thousands of pages of documents. They've admitted that. Th= e company now can't get around the fact that in the face of three directive= s not to do it, personnel were directed to do it because the personnel that= were doing this clearly wouldn't have acted unilaterally.=20 (END VIDEO CLIP)=20 LAVANDERA: We spent some time last night looking at some of those shredded = documents and trying to find any kind of evidence ourselves. The attorneys = say that in many of these slices of paper that you can see the names of Rap= tor and Jedi, which, of course, are the names of these partnerships that ha= ve become infamous for bringing down Enron.=20 We were only able to find one slip of paper that had Raptor on it, but they= , indeed, say that this is the only box that they do have but that they do = fear that hundreds of thousands of documents, there are witnesses that say = that they saw this as a systematic shredding of documents over the course o= f the last month and a half and they say that they're, even though this is = the only box that they do have, that there is much more out there that has = been shredded -- Jack, back to you.=20 CAFFERTY: Ed, thank you.=20 Ed Lavandera live in Houston this morning.=20 Coming up in the next hour of AMERICAN MORNING, the woman who blew the whis= tle on Enron. Maureen Castaneda says the company was shredding documents ri= ght up until last week. Also, a family struggling to survive after Enron le= ft them out in the cold.=20 TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SE= CURE ONLINE ORDER FORM LOCATED AT www.fdch.com=20 THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY B= E UPDATED.=20 Content and programming copyright 2002 Cable News Network, Inc. ALL RIGHTS = RESERVED. Prepared by eMediaMillWorks, Inc. (f/k/a Federal Document Clearin= g House, Inc.) No license is granted to the user of this material other tha= n for research. User may not reproduce or redistribute the material except = for user's personal or internal use and, in such case, only one copy may be= printed, nor shall user use any material for commercial purposes or in any= fashion that may infringe upon Cable News Network, Inc.'s copyright or oth= er proprietary rights or interests in the material; provided, however, that= members of the news media may redistribute limited portions (less than 250= words) of this material without a specific license from CNN so long as the= y provide conspicuous attribution to CNN as the originator and copyright ho= lder of such material. This is not a legal transcript for purposes of litig= ation. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 USA: Enron says ordered staff to preserve all papers. 01/21/2002 Reuters English News Service (C) Reuters Limited 2002. NEW YORK, Jan 21 (Reuters) - Bankrupt energy trader Enron Corporation said = on Monday it had repeatedly ordered all its employees since October 25, 200= 1 to refrain from destruction of any official documents.=20 The company said this after a Monday news report on ABC Television quoted a= former employee as saying that she saw shredded documents in an accounts o= ffice at the company's Houston headquarters. A company spokesman said Enron, which is facing a string of investigations = into its demise, would probe into the interview given by the former employe= e identified as Maureen Castaneda.=20 Enron, which has already handed over 41 boxes of documents and materials to= federal investigators said it had sent four emails to all employees betwee= n October 25 and January 14 asking them to preserve all documents regarding= Enron's activities and also with regard to the partnerships which Enron ha= d set up outside the company's main operations. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron Notified Employees to Retain Documents 01/21/2002 PR Newswire (Copyright © 2002, PR Newswire) HOUSTON, Jan. 21 /PRNewswire-FirstCall/ -- Enron Corp. released the followi= ng statement in response to an ABC News story broadcast today:=20 Since October 25th Enron has notified employees in no uncertain terms that = they are to preserve all documents and materials. The company has sent out = four emails to that effect from Oct. 25, 2001 through January 14, 2002. Specifically, Enron employees were warned on October 25th to "Please retain= all documents (which include handwritten notes, recordings, emails, and an= y other method of information recording) that in any way relate to the Comp= any's related party transactions with LJM1 and LJM2 ... You should know tha= t this document preservation requirement is a requirement of Federal law an= d you could be individually liable for civil and criminal penalties if you = fail to follow these instructions."=20 In subsequent messages sent on October 26 and October 31, 2001, employees w= ere specifically instructed that the requirement to preserve and retain all= documents extended not only to LJM documents but included all documents re= lating to: the Broadband Services Division, Chewco, Azurix, New Power, the = accounting for any Enron investments, and Enron public statements to invest= ors, the Securities and Exchange Commission or other regulatory bodies.=20 Enron's communications with its employees were very clear on the destructio= n of documents, and any breach of the company's policy will be dealt with s= wiftly and severely. Enron has been cooperating fully with congressional in= vestigators and handed over to various government investigators 41 boxes of= documents and materials.=20 MAKE YOUR OPINION COUNT - Click Here=20 http://tbutton.prnewswire.com/prn/11690X24687138 /CONTACT: Mark Palmer, +1-713-853-4738, or Steve Lipin of Brunswick, +1-212= -333-3810, both for Enron/ 21:37 EST=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 International News Briefing Enron says it checking shredding report Associated Press 01/22/2002 The Globe and Mail Metro A12 "All material Copyright © Bell Globemedia Publishing Inc. and its licenso= rs. All rights reserved." Washington -- Enron is looking into the reported destruction of documents t= hat allegedly took place at its Houston headquarters after the federal gove= rnment began investigating the company, a lawyer for the bankrupt energy gi= ant said last night.=20 In an on-air interview with ABC News, a former Enron executive identified a= s Maureen Castaneda said the shredding of documents took place in an accoun= ting office on the 19th floor. "We are investigating the circumstances of the reported destruction of docu= ments," Washington lawyer Robert Bennett, who is representing Enron, said i= n a statement. AP Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron Claims to Fire Andersen as Auditor. 01/22/2002 The Oil Daily © 2002 Energy Intelligence Group. All rights reserved. Enron tried to restore some of its badly tarnished image late last week by = claiming to fire outside auditor Andersen for destroying Enron financial do= cuments.=20 The firing, however, is about as credible as Capt. Louis Renault's statemen= t in the classic movie Casablanca that he was "shocked" to learn that gambl= ing was taking place in Rick's Cafe Americain, just as he was handed his ev= ening's winnings. In fact, the relationship with Andersen terminated last month after Enron m= ade its Chapter 11 filing in the US Bankruptcy Court (OD Dec.4,p1). Bankrup= tcy rules require that a new auditor be named, so Andersen has been out for= more than a month.=20 Still, Enron Chairman and Chief Executive Kenneth Lay indicated that the pr= oblems at Andersen were news to him and that action on the matter couldn't = await the outcome of an internal investigation the company initiated in lat= e October.=20 "While we had been willing to give Andersen the benefit of the doubt until = the completion of that investigation, we can't afford to wait any longer in= light of recent events," he said in a statement.=20 Andersen disclosed on Tuesday that employees had shredded some paper docume= nts and deleted electronic files after it was aware of a Securities and Exc= hange Commission investigation of Enron (OD Jan.16,p1). The company fired t= he head of the Enron account in its Houston office, put three others on adm= inistrative leave, and demoted another four executives.=20 The fired auditor, David Duncan, apparently doesn't plan to fall on his swo= rd to protect others. He was already talking to the US House Committee on E= nergy and Commerce before his termination by Andersen and continued his tes= timony in what a committee spokesman described as a cooperative manner.=20 Enron's shares continue to be traded actively in the over-the-counter marke= t since going off the New York Stock Exchange last week. Shares now are lis= ted in the National Quotation Bureau "Pink Sheets." The price has ranged be= tween 22? and 57.5? since making the move.=20 "This is purely a penny stock now," said analyst John Olson of Sanders, Mor= ris, Harris in Houston. He said he is becoming less confident that UBS Warb= urg can resurrect the company's trading business soon enough to satisfy Enr= on's multitude of creditors and salvage any vestige of the company.=20 Olson noted that Enron owes about $15 billion just to banks and has another= $19 billion in derivative exposure - and creditors will want whatever they= can get as soon as possible.=20 Another regulatory figure walked the plank last Friday after admitting to a= n Enron taint. Max Yzaguirre, who once headed Enron's operations in Mexico = and served in other Enron jobs, resigned as chair of the Texas Public Utili= ty Commission.=20 Yzaguirre succeeded Pat Wood, now chair of the Federal Energy Regulatory Co= mmission, last summer.=20 Barbara Shook.=20 © Copyright 2002. The Oil Daily Co.=20 For more infomation, call 800-999-2718 (in U.S.) or=20 202-662-0700 (outside U.S.). Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 SMARTMONEY.COM: Special Report: The Enron Papers By Matthew Goldstein 01/21/2002 Dow Jones News Service (Copyright © 2002, Dow Jones & Company, Inc.) Of SMARTMONEY.COM=20 (This report was first published late Friday.)=20 MANY VOICES on Wall Street have professed bafflement at the sudden collapse= of Enron (ENRNQ). According to the many investment bankers and trading par= tners who did business with the company, the commercial banks that lent it = money, and the securities analysts who followed it, the accounting maneuver= s Enron allegedly used to inflate its profits and hide its debts were so co= mplex and so hidden from view that no one could have foreseen the outcome. It turns out, however, that some of the biggest names in American finance w= ere active participants in Enron's strategy. SmartMoney.com has obtained a = number of financial documents and partnership records related to LJM2 Co-In= vestment partnership, one of the key entities relied on by Enron. The docum= ents - four books altogether measuring more than two inches high - reveal t= hat a virtual Who's Who of financial institutions invested in the $394 mill= ion fund established in 1999 by former Enron Chief Financial Officer Andrew= Fastow. The documents provide a breakout of the estimated rates of return = on the more than a dozen investments made by LJM2. They even offer an expla= nation for how those mysterious Raptors worked - the subsidiaries LJM2 esta= blished to carry on hedging activities with Enron. We're making selections = from the documents available for download in PDF format.=20 The documents make one thing clear: LJM2 was anything but an arm's-length e= ntity for Enron - as it would've had to be for Enron's accounting treatment= of it to have been legitimate. "The Partnership expects that Enron will be= the Partnership's primary source of investment opportunities and that the = Partnership will co-invest with Enron," according to one document. As the d= ocuments state, the partnership was created and managed by then-CFO Fastow = and was "focused on acquiring energy and communications assets primarily ow= ned by Enron." And while Jeffrey Skilling, Enron's former chief executive w= ho suddenly resigned last August, told the New York Times in December that = he didn't have many details about partnerships like LJM2, the records show = Skilling was a guest speaker at LJM2's annual partnership meeting on Oct. 2= 6, 2000.=20 Some highlights from the documents:=20 "LJM Rationale": LJM2 was formed in October 1999 with the stated goal of ac= quiring assets primarily owned by Enron and generating a 30% average annual= return for its limited-partner investors. Why focus on Enron assets? The d= ocuments explain that some of those assets were diluting Enron's earnings a= nd harming the ratios on which its credit ratings were based. It wanted to = "deconsolidate" those assets and "create structures which accelerate projec= ted earnings and cash flows."=20 A selling point to potential investors in LJM2: "The Partnership expects to= benefit from having the opportunity to invest in Enron-generated investmen= t opportunities that would not be available otherwise to outside investors.= "=20 Investors: The papers contain a partial list of the biggest companies and f= inancial institutions that are known to have invested in LJM2, either direc= tly, through subsidiaries or on behalf of third parties: American Internati= onal Group (AIG), AON (AOC), Citigroup (C), CIBC, Credit Suisse First Bosto= n, Dresdner Bank, General Electric (GE), J.P. Morgan Chase (JPM), Lehman Br= others (LEH), Morgan Stanley (MWD), Merrill Lynch (MER) and Wachovia Bank (= WB).=20 Smaller institutional investors were also involved, including pension funds= and private equity funds. These included Aero Capital, Alpine Investment P= artners, C&I Partners, Cramer Rosenthal McGlynn, Fort Washington Private Eq= uity, Freidenrich Family Trust (associated with Bay Partners, a big Califor= nia venture-capital firm), Lakeview Capital Management, Mousse Partners, Rh= o Management, the State of Arkansas Teachers Retirement Fund, Ulysses Partn= ers and Weyerhaeuser Employee Retirement Trust (WY).=20 LJM2 Key Employees: As of early 2000, LJM2 was being managed by Fastow; Mic= hael Kopper, former managing director of Enron's Global Equity Markets Grou= p; and Kathy Lynn, a former Enron vice president. Fastow, during his tenure= at LJM2, earned roughly $30 million in management fees.=20 Advisers: The partnership employed Big Five accounting firm Pricewaterhouse= Coopers and Chicago-based law firm Kirkland & Ellis, where Whitewater prose= cutor Kenneth Starr is a partner.=20 Bankers: Two banks were LJM2's main lenders: Chase Manhattan Bank, part of = J.P. Morgan Chase, and Germany's Dresdner Bank, a division of Dresdner Klei= nwort Wasserstein. On Nov. 30, 2001, just days before Enron would file for = bankruptcy, Dresdner Bank sent LJM2 a letter informing it that it had defau= lted on a provision of its loan agreement.=20 Working Capital: As of April 2000, LJM2 had raised $394 million. Of that am= ount, 42% came from top-rated financial institutions and insurance companie= s, 36% was invested by individuals and private equity funds and the remaini= ng 22% came from employee pension funds. The value of the assets held by th= e partnership as of Sept. 30, was $156 million, down 39% from Dec. 31, 2000= .=20 Investments: LJM2 invested in a total of 23 investments - most of them invo= lving Enron-related entities - with odd-sounding names like Bobcat, Osprey = Trust, Apex, Rawhide and Talon. The five biggest investments were: NewPower= Holdings (NPW), $50 million; Bobcat I, $30 million; Osprey Trust, $26 mill= ion; Apex, $25 million and Zenith Telecom Trust, $21 million.=20 NewPower is a deregulated electrical power company that Enron spun off in O= ctober 2000. Bobcat is a so-called special entity, like the Raptors that En= ron and LJM2 used to hedge investments. Osprey Trust is an investment vehic= le set up by Enron and another limited partnership, Whitewing, which sold $= 1.4 billion in corporate bonds. Apex is a collaterized loan obligation - a = derivative security whose underlying instrument is a commercial loan - that= LJM2 has with First Union, which since has been acquired by Wachovia Bank.= Zenith is one of the few non-Enron investments made by LJM2. It was an inv= estment in an off-balance-sheet partnership established by TXU (TXU) called= Pinnacle One Partners.=20 The Raptors: These are a structured finance vehicle - usually capitalized w= ith Enron stock and an investment from LJM2 - that enters into derivative, = or hedging, transactions all designed to reduce the risk associated with En= ron's own investment portfolio. There were at least six Raptors created by = LJM2. The Raptors helped manage the impact of price volatility of Enron's s= tock investments by purchasing put and call options on those shares. (A cal= l option is a bet a stock will rise in price, while a put option is a bet i= t will fall.) But the Raptors posed a problem if Enron's stock dropped belo= w $48 a share - something that first occurred in early August, around the t= ime Skilling suddenly resigned. In the event of such a drop, Enron would ha= ve to give the Raptors more of its stock in an attempt to keep them solvent= , and this would be potentially dilutive to the stock.=20 For more information and analysis of companies and mutual funds, visit Smar= tMoney.com at http://www.smartmoney.com/ Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 SMARTMONEY.COM: The Spreading Enron Stain By Robert Hunter 01/21/2002 Dow Jones News Service (Copyright © 2002, Dow Jones & Company, Inc.) Of SMARTMONEY.COM=20 (This report was first published late Friday.)=20 ON WEDNESDAY AFTERNOON, my editor and I got together to think of a fresh wa= y to approach the Enron (ENRNQ) scandal for my column this week. We wanted = to try to offer investors some guidance as the sordid details of Enron's of= f-balance-sheet activities continue to unfold. I decided that I would argue that while the Enron blowup is a shocking exam= ple of greed, cunning and guile, it was an isolated incident. The underpinn= ings of our financial system are still fundamentally sound.=20 Now, I'm not so sure.=20 It's true that Enron was unlike any company that makes its living - or a bi= g chunk of it - in the derivatives markets. Derivatives? Wasn't Enron prima= rily an energy trader? Yes, but many energy trades involve forward sales (a= kin to futures) and options. And Enron dealt in dozens of other, more exoti= c derivatives markets, from credit to weather to advertising. Derivatives w= ere a bigger part of Enron's revenue stream than they are at any other publ= icly traded company that deals in them, even powerhouses like Goldman Sachs= (GS), Lehman Brothers (LEH) and Morgan Stanley (MWD).=20 Yet Enron didn't resemble other derivatives dealers in the least. Wall Stre= et firms that are active in these highly sophisticated, highly lucrative an= d highly risky markets have elaborate risk-management systems in place to p= revent Enron-like disasters from happening. Ever notice that most of the de= rivatives blowups you've heard about in the past - from Orange County to Pr= octer & Gamble (PG) to Gibson Greetings - involved relatively unsophisticat= ed investors being burned by Wall Street bandits? (The delicate term for th= at on the Street is ripping someone's face off.) Yes, Barings Bank and Kidd= er Peabody were brought down by derivatives - but those cases involved rogu= e traders circumventing their company's risk-management systems for fun and= profit. Because derivatives can blow up in their faces, dealers pay slavis= h attention to the risk they undertake. Risk managers are some of the best-= paid people on Wall Street. Their job is to keep their companies from going= boom - and by and large, they succeed.=20 Some years ago, as scandals started becoming more common, derivatives becam= e something of a four-letter word. Wall Street came up with an ingenious fi= x, one that just happened to add some safety to the derivatives world: In t= he early 1990s, dealers began creating AAA-rated offshore subsidiaries that= do some of their bidding for them. (No big investment bank carries that ra= ting, or anything close.) To get those ratings, the subs had to be incredib= ly well capitalized and maintain impeccable books. That helped allay certai= n nervous counterparties, as well as institutional investors permitted to d= eal only with triple-A-rated entities. Even in the unlikely event that, say= , Goldman Sachs imploded, its triple-A sub would still have the cash on han= d to settle its bets, which often mature far into the future. Nowadays, big= banks and insurers often have several of these entities. And that helps th= em lower their overall risk profiles. Everyone wins: The corporate trader g= ets to deal with a safer partner, while the bank's positions, on an aggrega= te level, are less risky. In the derivatives world, subsidiaries exist sole= ly in the service of the corporate parent.=20 Enron was an entirely different story. While many of the infamous
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