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Enron Mail |
Joint Venture: A 1997 Enron Meeting Belies Officers' Claims They Were in th= e Dark --- Minutes Show Them Hearing Of Novel Partnerships That Inflated Ea= rnings --- Present: Lay, Skilling, Fastow The Wall Street Journal, 02/01/2002 Ex-Enron CEO Agrees to Testify Before Panel Energy: Appearance by Skilling = called critical by chairman of subcommittee looking into firm's downfall. Los Angeles Times, 02/01/2002 At Lay hearings, lawmakers out to lift 'shroud of secrecy'=20 Houston Chronicle, 02/01/2002 Enron Says It Can't Supply Data; Hill Probers Requested Partnership Informa= tion The Washington Post, 02/01/2002 Senator Says Enron Refuses To Cooperate The New York Times, 02/01/2002 Probe likely to blame former execs=20 Skilling, Fastow, auditors to be cited in report=20 Houston Chronicle, 01/31/2002 Few of Lay Family's Real-Estate Assets Are on the Market, Listing Records S= how The Wall Street Journal, 02/01/2002 Enron Report Ties the Company's Ruin To Executives Who Formed Partnerships The Wall Street Journal, 02/01/2002 Executive Privilege Enron's Top Dogs Still Flying Luxury Jets ABCNews.com, 02/01/2002 Enron exec concedes he gave poor advice=20 Student fund loses most of investment=20 Associated Press, 02/01/2002 Mighty J.P. Morgan in the Hot Seat Banking: Charges of collusion with Enron= and its recent hefty losses raise questions about firm's judgment. Los Angeles Times, 02/01/2002 Enron Bondholders Blame Brokers The Wall Street Journal, 02/01/2002 FERC to focus on Enron's role in Calif. energy crisis=20 Bush appointed 2 Lay choices to commission=20 Houston Chronicle, 02/01/2002 Bush to Unveil Proposals for Changing Pension Law The Wall Street Journal, 02/01/2002 Who Were the Friends of Enron?: Michael Lewis Bloomberg, 01/31/2002 Houston, we have a problem The city where deregulation is king is in Enron denial - and won't let go o= f its wildcatting ways. Salon.com, 02/01/2002 Texas law firm working to weather Enron storm Vinson & Elkins, one of state's largest firms, faces hard questions on its = work for company Austin American-Statesman, 02/01/2002 New Prosecutor Is an `Iron Fist In a Velvet Glove' The Wall Street Journal, 02/01/2002 Inside, Outside Enron, Audit Panel Is Scrutinized --- Links to Company Of C= ertain Members Are Called Too Cozy The Wall Street Journal, 02/01/2002 UT dean too close to Enron inquiry Editorial Board Austin American-Statesman, 01/31/2002 Watchdog Group Wants Investigation on Harvard Official The New York Times, 02/01/2002 Former Executive, Now in Washington, Denies Impropriety at His Unit The New York Times, 02/01/2002 Accountants Won't Fight Consulting Ban The Washington Post, 02/01/2002 TV Ad Assails Dole for Enron Fundraiser; In Election Year, Candidates Acros= s Country Could Face Similar Criticism The Washington Post, 02/01/2002 In Commercial, Elizabeth Dole Is Chastised For Enron Ties The New York Times, 02/01/2002 Enron Won Some and Lost Some in White House Energy Report The New York Times, 02/01/2002 Despite Recession, Perks for Top Executives Grow Pay: Hidden benefits mushr= oom as employees' retirement plans shrink. Los Angeles Times, 02/01/2002 Scribbler's Ethics The Wall Street Journal, 02/01/2002 Enron's Influence The Washington Post, 02/01/2002 Paper Giants As a Voice For Ideas The New York Times, 02/01/2002 __________________________________________________________________ Joint Venture: A 1997 Enron Meeting Belies Officers' Claims They Were in th= e Dark --- Minutes Show Them Hearing Of Novel Partnerships That Inflated Ea= rnings --- Present: Lay, Skilling, Fastow By John R. Emshwiller and Rebecca Smith Staff Reporters of The Wall Street Journal 02/01/2002 The Wall Street Journal A1 (Copyright © 2002, Dow Jones & Company, Inc.) HOUSTON -- On Nov. 5, 1997, the top echelon of Enron Corp. assembled for a = meeting that would help put the energy-trading giant on a fateful and ultim= ately disastrous course.=20 On that day, Enron's now-infamous outside partnership arrangements took a t= urn from the straightforward and mundane to the deceptive and possibly ille= gal. The seven-member executive committee of the company's board approved a= management proposal to provide several hundred million dollars in loan gua= rantees for a new partnership named for the Star Wars character Chewbacca. While Enron had done business with previous partnerships, Chewco Investment= s was different. Unlike others where Enron had an ownership stake, Chewco w= as supposed to be completely independent. But it would be run and partly ow= ned by an Enron executive, a young rising star named Michael Kopper.=20 Enron Chairman Kenneth Lay arrived a little late, according to minutes of t= he meeting obtained by The Wall Street Journal. He came in while Andrew Fas= tow, then senior vice president of finance, outlined a transaction that wou= ld allow Chewco to buy, for $383 million, part of Enron's stake in another = limited partnership known as JEDI. The deal kept JEDI in the Enron family, = but off its books. That's because under accounting rules, Chewco provided e= nough independent ownership of JEDI to let Enron treat it as separate.=20 However, with Enron financial guarantees and an Enron official at the helm,= there were questions from the beginning of how independent Chewco really w= as. Chewco thus set the pattern for a series of transactions that would mas= sively inflate Enron's earnings, while hiding billions in debt from shareho= lders and creditors.=20 Four years later, on Nov. 8 last year, Enron acknowledged in a federal fili= ng that it had overstated earnings by nearly $600 million since 1997. About= two-thirds of that, it told the Securities and Exchange Commission, was be= cause Chewco and JEDI had improperly been treated as separate entities able= to do income-producing deals with Enron. The disclosure sent a signal that= Enron hadn't been playing straight, and what had been an exodus of investo= rs and trading partners turned into a stampede. Within a month, Enron sough= t bankruptcy-law protection.=20 Federal investigators and private litigators are now intently trying to lea= rn who knew what about Chewco, and when. Top former officials have distance= d themselves from it. In October, after the Journal first disclosed Chewco'= s existence, Mr. Lay privately told other Enron officials that he had never= heard of the partnership, according to one company executive. His wife, Li= nda Lay, told NBC recently that her husband had been kept in the dark about= a lot of the company's doings. Mr. Lay, who resigned from Enron last month= , couldn't be reached for comment and his attorney didn't return calls.=20 Jeffrey Skilling, who resigned suddenly as Enron's chief executive last sum= mer, said in press interviews late in December that he knew few details abo= ut the partnership. Yesterday, a spokeswoman for Mr. Skilling said, "We are= n't going to comment on leaks, counter-leaks, spin or speculation." An atto= rney for Mr. Kopper declined to comment. An attorney for Mr. Fastow said on= ly that his client didn't have any financial interest in Chewco.=20 The meeting's minutes and other recently obtained documents show plenty of = people at Enron knew about Chewco. Messrs. Lay, Skilling and Fastow were pa= rt of the 1997 executive-committee meeting. So were several board members. = One -- Herbert "Pug" Winokur Jr., chairman of Capricorn Holdings Inc. in Gr= eenwich, Conn. -- felt comfortable enough with Chewco that he approved its = creation from an airport while boarding a flight.=20 W. Neil Eggleston, an attorney for Mr. Winokur and other outside directors,= says the executive committee was told that "Chewco was a special-purpose v= ehicle not affiliated with the company. The board never waived the conflict= -of-interest policy for Mr. Kopper nor was the board told that Mr. Kopper w= as involved with Chewco." The meeting minutes indicate that Mr. Kopper was = in attendance, though the document misspells his name. The minutes don't sh= ow whether he was introduced or took part.=20 During the presentation about Chewco, the meeting minutes say, Mr. Fastow "= reviewed the economics of the project, the financing arrangements and the c= orporate structure." Among the benefits the partnership was supposed to bri= ng was "positive income impact to Enron," according to a handout appended t= o the minutes. The handout included diagrams of the complex financial struc= ture.=20 Chewco isn't an issue just for Enron. Joseph Berardino, chief executive of = longtime Enron auditor Arthur Andersen LLP, told Congress in December that = his firm never would have let Enron treat Chewco and JEDI as arm's-length, = separate entities had it known the entire truth about the entities' financi= ng arrangements. At the time Chewco was being formed, Enron officials told = Barclays PLC, a lender involved in the deal, that Andersen had reviewed the= transaction's structure and approved it, according to someone familiar wit= h the discussions.=20 A Barclays spokesman declines to comment. Andersen says Mr. Berardino, who = is scheduled to testify again next week before a House committee, stands by= his statement that his firm didn't know all the relevant facts about Chewc= o four years ago.=20 Chewco altered a financial tool long used by the energy industry. Enron had= at times relied on off-balance-sheet partnerships and similar entities, as= had many competitors. Traditional "off-balance-sheet financing is the tech= nique that has been used to build the independent power industry in the Uni= ted States," says Didi Lacher, a New York executive of the German financial= firm Helaba. With such entities, companies can share the cost and risk of = developing, say, a well or pipeline. By having the partnership borrow the m= oney, the company can also keep the debt off its own balance sheet.=20 This financing is "nonrecourse," meaning the sponsoring company isn't on th= e hook for the debt. But Enron kept off its balance sheet some debt in whic= h it had to cover any shortfalls, because of the partnerships' arrangements= . Over time, Enron accumulated billions of dollars of potential liability, = little of it publicly evident.=20 To do outside partnerships, some basic accounting guidelines have to be fol= lowed. The company has to relinquish control of any assets put into the par= tnership. It can't have side deals that oblige it to repurchase or redeem t= he assets during the partnerships' lives, typically five to 10 years. Since= 1996, a partnership also has had to attract outside equity equal to at lea= st 3% of its total capital in order to be considered separate from the spon= soring company. Enron's partnerships appear to have met these standards for= many years, but eventually Enron started to look at a higher-octane partne= rship.=20 Enron under Mr. Lay assembled a team of bright young executives intent on b= uilding a global energy power. Led by Mr. Skilling, a former McKinsey & Co.= consultant, the core of the team started working together at Enron Capital= and Trade Resources, which handled energy trading and marketing. His lieut= enants included Mr. Fastow, a former Continental Bank finance specialist, a= nd Richard Causey, a former Andersen official.=20 They figured that for Enron to grow quickly, it couldn't be weighed down wi= th debt. Too much debt would threaten the company's credit rating and make = its financing costs higher.=20 Mr. Skilling and his subordinates placed an emphasis on rapid-fire trading = and deal-making, rather than on long-term investments in power plants and o= ther "hard" assets. The traditional partnership approach was too cumbersome= and confining to achieve this. Enron would have to negotiate for months wi= th partners, banks and other outsiders before getting a deal going. "Enron = didn't like being told no," says one former senior Enron executive. So Mr. = Skilling and Mr. Fastow "found a way to avoid the discussion altogether."= =20 The solution: bring the partnerships in house, without appearing to do so, = say people involved in setting up the structures.=20 In 1995, according to people familiar with the matter, Mr. Fastow began app= roaching investment banks with a novel proposal. He wanted them to help him= recruit investors for partnerships that would do business with Enron. But = the partnerships would be partly owned and run by Enron executives. Donalds= on, Lufkin & Jenrette, for one, turned him down, figuring the potential con= flicts of interest were too great.=20 Mr. Fastow and other Enron officials continued their discussions with vario= us banks to no avail. All the while, pressure was building. By 1997, compan= y executives would later acknowledge, debt levels were getting worrisomely = high. The company was also having a tough time meeting its earnings project= ions.=20 That's when Chewco was presented to the board in the November 1997 meeting.= Having met resistance from investment banks, Enron officials turned to com= mercial banks to lend money to Chewco as well as to two small entities, als= o connected to Mr. Kopper. These two put the crucial 3% of outside equity i= nto Chewco that allowed it to be treated as separate from Enron.=20 After Chewco was set up, Enron's profit performance began to improve and it= s expansion pace intensified. Mr. Skilling and his team ascended the ranks.= By 1998, he was Enron's chief operating officer, Mr. Fastow was chief fina= ncial officer and Mr. Causey was chief accounting officer.=20 Chewco became a template. In June 1999, the board held a special meeting to= hear Messrs. Skilling and Fastow outline plans for a new partnership known= as LJM Cayman LP. It was designed to resolve "certain challenges" in prote= cting the value of a growing portfolio of volatile telecommunications asset= s, according to an excerpt from the meeting's minutes. The LJM name came fr= om the initials of Mr. Fastow's wife and two children.=20 Four months later, the Enron executives proposed to the board an even more = ambitious partnership, dubbed LJM2 Co-Investment LP, to serve as a reposito= ry for other risky bets made by the company.=20 Both LJMs were managed and partly owned by Mr. Fastow. In an SEC filing, En= ron recently estimated he made more than $30 million from his participation= in the entities. At least several million dollars of this was management f= ees -- a generous sum given that, in one presentation, Mr. Fastow said he w= orked just three hours a week on partnership matters.=20 A spokesman for Mr. Fastow declines to comment on how much he made from the= partnerships or on LJM generally. In the past, representatives of the form= er CFO have pointed to Enron statements that its board and top management r= eviewed and approved both the creation and operation of the LJM partnership= s.=20 Some Enron insiders say that whatever Mr. Fastow earned from the LJM partne= rships was a pittance compared with the benefits they provided the company.= As Enron's growth exploded in the late 1990s, worries mounted over debt le= vels, and the company needed help producing cash flow and earnings. Increas= ingly, Enron came to rely on the partnerships to take debt and troubled ass= ets off its books and produce transactions that could be reported as profit= s. How much Mr. Fastow made from the LJMs was of little concern to top mana= gement, says one former Enron executive, because the CFO was the one person= who could consistently pull "their nuts out of the fire with some fancy tr= ansactions."=20 By the year 2000, the LJM partnerships were providing more than 40% of Enro= n's reported pretax income of about $1.4 billion, according to a recent SEC= filing by the company.=20 All told, the LJM partnerships raised about $400 million from outside inves= tors and eventually did billions of dollars of transactions with Enron. Sub= structures of the LJM latticework proliferated with the creation of other e= ntities. In a May 1, 2000, presentation to the finance committee of Enron's= board, management described how an LJM offshoot called Project Raptor woul= d "hedge the profit & loss volatility of Enron investments," according to i= nternal documents from that meeting.=20 As part of the project, another entity called Talon was to be created with = seed capital of $400 million and an initial capacity to provide "approximat= ely $200 million of P&L protection" to Enron, according to one document. LJ= M2 would be the outside investor in Talon and "be entitled to a 30% annuali= zed return plus fees," it said.=20 At the finance-committee meeting, its minutes show, Mr. Causey said Anderse= n "had spent considerable time analyzing the Talon structure and the govern= ance structure of LJM2 and was comfortable with the proposed transaction." = The committee approved the Raptor-Talon plan.=20 Mr. Causey's attorney, J.C. Nickens, says that his client believes the trea= tment of the partnerships "was an appropriate interpretation of the account= ing rules as they existed then and as they still exist today."=20 Though the minutes said there was "discussion" of the Raptor arrangement, n= either those minutes nor similar recountings of other board gatherings indi= cate that directors seemed particularly concerned about what was happening = under the LJM umbrella. They might well have been. By last fall, public con= cern over the transactions had plunged Enron into crisis. Now, investigator= s are trying to make sense of hundreds of other Enron-related entities with= names like Braveheart, Rawhide and Bobcat. The big question: Which, if any= , may contain LJM-like problems?=20 ---=20 John R. Wilke contributed to this article. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Financial Desk THE NATION THE FALL OF ENRON Ex-Enron CEO Agrees to Testify Before Panel En= ergy: Appearance by Skilling called critical by chairman of subcommittee lo= oking into firm's downfall. EDMUND SANDERS; RICHARD SIMON TIMES STAFF WRITERS 02/01/2002 Los Angeles Times Home Edition A-34 Copyright 2002 / The Times Mirror Company WASHINGTON -- Jeffrey K. Skilling, who unexpectedly quit as Enron Corp. chi= ef executive in August, has agreed to testify next week before Congress, a = Senate subcommittee chairman said Thursday.=20 Congressional investigators are eager to hear from Skilling, who has denied= any wrongdoing in the events leading to the energy company's Chapter 11 ba= nkruptcy filing Dec. 2. But another Enron executive, Sherron S. Watkins, wrote to Enron Chairman Ke= nneth L. Lay in August that Skilling had been warned about the company's pr= oblems by other executives, including former Vice Chairman J. Clifford Baxt= er, who died last week in an apparent suicide.=20 "Skilling is critical," said Sen. Byron L. Dorgan (D-N.D.), who chairs the = Senate Commerce Committee's subcommittee on consumer affairs.=20 The committee also has asked for the testimony of fired Enron Chief Financi= al Officer Andrew S. Fastow, who allegedly set up many of the off-the-books= partnerships that were instrumental in the company's collapse. Fastow has = not responded to the committee, Dorgan said.=20 A spokeswoman for Skilling confirmed that he had agreed to testify voluntar= ily and would do so without a grant of immunity.=20 "He wants to be open and forthcoming with all committees investigating this= matter," Judy Leon said.=20 Exactly when and where Skilling will testify next week is unclear. He is li= sted as a witness at a House Energy and Commerce Committee hearing Thursday= . Dorgan's committee and others among the dozen congressional panels invest= igating the Enron collapse also are seeking his testimony.=20 "There are competing invitations, and that is complicating the scheduling,"= Leon said.=20 Lay, who replaced Skilling as chief executive and was ousted from that posi= tion last week, is scheduled to testify before Dorgan's committee Monday.= =20 Dorgan said both men are likely to say Enron's collapse was due to circumst= ances beyond their control, but that his panel was prepared to counter such= claims with internal documents showing that Enron's board of directors kne= w about the partnerships.=20 "It's sufficient to say that the board of directors discussed on various oc= casions the creation of partnerships, the structure of the business deals,"= Dorgan said.=20 In other developments, Rep. George Miller (D-Martinez) called on House Spea= ker J. Dennis Hastert (R-Ill.) to be the "gatekeeper" in determining whethe= r immunity is granted to witnesses in the Enron investigation and what docu= ments are made public.=20 Complaining about leaks of documents that damaged other cases, Miller wrote= Hastert: "The failure to honor confidentiality, the untimely release of in= formation or the inappropriate granting of immunity all have great potentia= l to compromise and undermine [potential] criminal prosecutions of Enron an= d [accounting firm] Arthur Andersen."=20 Sen. Barbara Boxer (D-Calif.) called on the Federal Energy Regulatory Commi= ssion to provide her with a list of all meetings and phone calls that took = place between Enron executives and FERC commissioners.=20 "Every day more and more alarming information is revealed concerning Enron'= s role in prolonging the California electricity crisis," she said in a lett= er to FERC Chairman Patrick H. Wood III.=20 The FERC said this week that it would investigate allegations that Enron us= ed its market clout to artificially inflate long-term electricity prices on= the West Coast. On Thursday, at a FERC-sponsored conference in New York on= power supplies in the Northeast, Wood told Reuters news service that its i= nquiry had begun.=20 In a letter to Wood on Thursday, Gov. Gray Davis urged FERC to expedite the= inquiry and expand it to include other energy marketers.=20 "California has a special interest in getting to the bottom of such charges= , since this state bore the brunt of the marketers' price gouging," Davis w= rote. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 At Lay hearings, lawmakers out to lift 'shroud of secrecy'=20 By JULIE MASON=20 Copyright 2002 Houston Chronicle Washington Bureau=20 Feb. 1, 2002, 12:21AM WASHINGTON -- Lawmakers signaled Thursday that their questioning of former = Enron Corp. Chairman Ken Lay on Capitol Hill next week is likely to be conf= rontational when he delivers his first public explanation of the company's = collapse.=20 Congressional investigators want to know how Enron executives were able to = cash out millions of dollars in company stock while employees saw their ret= irement savings wiped out.=20 The so-called "lockdown," which prevented employees from selling stock, and= Enron's use of partnerships to shield its debt also are among issues lawma= kers want to pursue.=20 In negotiating Lay's Monday appearances before the Senate Commerce and the = House Financial Services committees, his attorneys did not seek immunity or= any restrictions on what he could say, lawmakers and Lay's attorney said T= hursday.=20 "The shroud of secrecy that has surrounded so much of what this corporation= has done shall not be allowed to stand," said Sen. Byron Dorgan, D-N.D., a= member of the Senate Commerce Committee, where Lay is to testify first.=20 Lawmakers are complaining that Enron is not cooperating with requests for i= nformation.=20 "Every day it becomes more clear that this corporation resorted to a variet= y of legal, regulatory and accounting contortions to keep investors and the= American public in the dark," said Sen. Ron Wyden, D-Ore., also a member o= f the Senate committee.=20 Dorgan said the committee has repeatedly asked Enron to provide information= about the estimated 3,000 related partnerships the company had on its book= s.=20 "To date, the corporation has provided no information to the committee abou= t these partnerships," Dorgan said. "We have sent a second letter to the co= rporation asking for that information, and again they are failing to cooper= ate."=20 Bob Bennett, attorney for Enron in Washington, said Dorgan is mistaken.=20 "I am terribly disappointed he would say that because we have been fully co= operative with them," Bennett said. "There have been some documents they as= ked for that we did not have dealing with these partnerships, nor would we = be expected to have them."=20 The disputed documents, according to Bennett, involve independent partnersh= ips and records that Enron does not have.=20 Enron's Dec. 2 bankruptcy was the largest in corporate history. The collaps= e of the company cost thousands of employees their jobs and wiped out most = of their retirement accounts, much of which were tied up in Enron stock.=20 Lawmakers want to know when Lay became aware of the company's financial pro= blems, and whether executives hid Enron's true financial picture from emplo= yees and investors.=20 "We know for example that bankruptcy didn't treat everyone alike, we know t= here are some who made millions while others lost their life savings," Dorg= an said. "We also know that this corporation created off-the-books partners= hips in a very aggressive way, thousands of them, with strange-sounding nam= es but even stranger architecture in terms of how they were created."=20 Wyden compared the conduct of Enron executives to captains on a rapidly-sin= king ship.=20 "They locked the workers down there in the boiler room," Wyden said.=20 The House and Senate hearings set for Monday are among at least 10 congress= ional investigations under way into the collapse of the one-time energy gia= nt.=20 In addition to Lay, witnesses before the House committee Monday will includ= e Arthur Andersen CEO Joseph Berardino and Harvey Pitt, chairman of the Sec= urities and Exchange Commission.=20 Since Enron's troubles first garnered national attention months ago, Lay, w= ho resigned as chairman last week, has remained publicly silent as various = investigations unfolded into possible malfeasance at the company.=20 Last week, Lay's wife, Linda, discussed the couple's troubles on a televisi= on morning show.=20 Dorgan said the Senate committee has a tentative agreement with Enron's for= mer chief executive officer, Jeff Skilling, to testify at a later date.=20 The committee also has tried to arrange for testimony from Andrew Fastow, f= ormer chief financial for Enron, with no success.=20 "We, in my judgment, will have to hear from Mr. Fastow, the question is how= ," Dorgan said. "At this point we have had no response at all from register= ed letters we've sent."=20 Skilling and Fastow, central figures in the free fall at Enron, are both sc= heduled to testify next week before the House Energy and Commerce Committee= 's subcommittee on oversight and investigation.=20 Dorgan said that more than 40 boxes of documents previously submitted by En= ron to the committee contain notes from meetings of the Enron board of dire= ctors.=20 The Washington Post on Thursday reported that Enron's board received detail= ed briefings and signed off on the use of related partnerships, dating back= at least four years.=20 Dorgan declined to provide significant details about the documents his comm= ittee received.=20 "It's sufficient to say that the board of directors discussed, on various o= ccasions, the creation of partnerships, the structure of the business deals= . But I think you will hear more about that in the hearings," Dorgan said.= =20 The controversial partnerships are a key element in the investigation of En= ron's collapse because the company used the vehicles to shield its debt and= appear more profitable.=20 President Bush, whose administration has come under scrutiny for its close = ties to Lay and Enron, made an indirect reference to the controversy Thursd= ay.=20 Speaking of the need for a "responsibility culture," he said companies must= be honest in their financial reporting.=20 "Let's make sure when you account for losses and profits that you put it al= l on your books so everybody understands," Bush said in Atlanta.=20 In addition to questions about the partnerships, Wyden said lawmakers will = have questions about Enron's foray into California energy markets, and part= icularly whether Enron manipulated markets on the West Coast.=20 "The common culprit in my view has been secrecy and a lack of cooperation f= rom this company," Wyden said. "It is now high time for Congress to flip on= the light and get to the bottom of this situation."=20 Chronicle reporter Bennett Roth contributed to this story.=20 Financial Enron Says It Can't Supply Data; Hill Probers Requested Partnership Informa= tion Kathleen Day Washington Post Staff Writer 02/01/2002 The Washington Post FINAL E01 Copyright 2002, The Washington Post Co. All Rights Reserved An attorney for Enron Corp. said yesterday that the company cannot provide = Congress with the names of the investors in the controversial partnerships = the company used to move millions of dollars in debt off its books and whos= e losses triggered the company's fall into bankruptcy.=20 "You have to go to the entities to get that information," Robert Bennett, a= Washington lawyer representing Enron, said of the partnerships. "We do not= have control over those documents. They are separate entities." Bennett made his statement after Sen. Byron L. Dorgan (D-N.D.) held a news = conference criticizing Enron for failing to provide congressional investiga= tors on the Senate Commerce Committee with the names of investors and other= information about the partnerships. The committee is holding hearings Mond= ay at which former Enron chairman Kenneth L. Lay is expected to give his fi= rst public account of the company's collapse. Lay was not granted immunity = from prosecution in exchange for his testimony, officials said.=20 "I know that Enron has some records about these entities or that would be m= alfeasance," Dorgan said. "Essentially they are just stalling."=20 Dorgan said he thinks Enron created more than 3,000 partnerships, known as = special-purpose entities. Written minutes from meetings of the company's bo= ard of directors suggest that the partnerships were a key part of Enron's g= rowth strategy and show that they were regularly reviewed by the board.=20 The partnerships are a major focus of investigators trying fathom what led = to Enron's Dec. 2 bankruptcy filing, which came less than a month after Enr= on disclosed that since 1997 financial statements audited by the big accoun= ting firm Arthur Andersen had overstated Enron's profits by almost $600 mil= lion and understated its debts by more than $1 billion.=20 A dozen congressional committees, as well as the Justice Department and the= Securities and Exchange Commission, are probing Enron's demise, which cost= investors and employees billions of dollars. A focus of the inquiries is w= hether Enron hid debt and inflated its profits by using the private partner= ships run by its chief financial officer, Andrew Fastow.=20 Dorgan said that as of yesterday evening, Fastow has failed to respond to r= epeated requests to testify before the senator's subcommittee. He said that= Jeffrey K. Skilling, Enron's former chief executive, has said he will appe= ar, but not on Monday.=20 Fastow and Skilling are scheduled to appear before the House Energy and Com= merce subcommittee on oversight and investigations next Thursday. Two other= former Enron executives and one board member are also expected to testify.= The subcommittee has subpoenaed another former executive, Michael Kopper. = Kopper handled financial transactions at Enron and headed at least two off-= the-books partnerships.=20 Skilling resigned in August. Fastow was ousted in October. When it was then= disclosed that Fastow made $30 million running partnerships with names suc= h as LJM, Raptor and Jedi, Lay announced that the board was setting up a co= mmittee to investigate.=20 Enron board member William C. Powers Jr. chairs that special committee and = is expected to testify Monday before the House Financial Services Committee= . The Powers special committee is about to release a report on its findings= .=20 Bennett has said that while Enron's board of directors was aware that speci= al-purpose entities were being set up, there was "a great deal of informati= on regarding their operation and execution that was unknown to the board of= directors."=20 Asked about the report yesterday, Bennett said he doesn't know when it will= come out or what will be in it.=20 In December, Dorgan's subcommittee sent a letter to Enron requesting "the n= umber of partnerships, the investors in the partnerships and a range of inf= ormation about these 'off the books' partnerships," Dorgan said. "To date t= he corporation has provided no information to the committee about these par= tnerships."=20 In response, Bennett said, "I think that's grossly unfair, and I'm sorry th= e senator would say that. I wish the senator had called me. I can only assu= me he's terribly misinformed. We're cooperating fully with this committee a= nd the dozen others that have contacted us." But, he said, the company can'= t produce documents it has no control over.=20 Dorgan called that explanation "implausible."=20 As to whether board members knew the names of investors in the partnerships= , W. Neil Eggleston, an attorney for the outside directors, referred questi= ons to the company.=20 The names of the investors in one partnership, LJM2 Capital Management LP, = were disclosed in a court filing by Alpine Investment Partners, the lead pl= aintiff in a suit against the partnership, Bloomberg News reported. About 9= 0 employees of Merrill Lynch invested a total of $16 million in the partner= ship. Merrill had been hired by Enron to raise money for the fund. Other in= vestors listed in the document include units of American International Grou= p, J.P. Morgan Chase & Co., Citigroup, Travelers Insurance Co., the Arkansa= s Teachers Retirement System, and the John D. and Catherine T. MacArthur Fo= undation.=20 Meanwhile, a group of students and alumni has asked Harvard University to r= eview its ties to Enron and questioned whether Enron board member Herbert W= inokur broke insider-trading laws as a member of the board that oversees Ha= rvard's investments. A report by the group questions whether Harvard made a= s much as $50 million through investments managed by Highfields Capital at = a time when Enron stock began falling. "Mr. Winokur had no involvement in H= ighfields Capital, and any suggestion that he tipped the fund to short-sell= Enron stock is just plain wrong," Eggleston said. http://www.washingtonpost.com=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business/Financial Desk; Section C ENRON'S MANY STRANDS: THE INVESTIGATION Senator Says Enron Refuses To Cooperate By RICHARD A. OPPEL Jr. 02/01/2002 The New York Times Page 1, Column 2 c. 2002 New York Times Company WASHINGTON, Jan. 31 -- Enron has refused to turn over to a Senate panel rec= ords of controversial partnerships that are crucial to understanding the co= mpany's downfall, the panel's chairman said today.=20 The chairman, Senator Byron L. Dorgan, said that despite repeated requests,= Enron continued to refuse to turn over records of 3,000 partnerships. Inve= stigators say Enron used the arrangements to bolster the company's financia= l statements while hiding hundreds of millions of dollars in losses. ''They just simply have not cooperated,'' Mr. Dorgan said, adding that ''th= e shroud of secrecy that surrounds so much of what this corporation has don= e will not be allowed to stand.'' But he did not say whether the committee = was considering a subpoena.=20 Mr. Dorgan, a North Dakota Democrat who is chairman of the consumer affairs= subcommittee of the Senate Commerce Committee, said lawyers for Kenneth L.= Lay, Enron's former chairman and chief executive, assured his staff on Wed= nesday that Mr. Lay would appear on Monday to testify before Congress. His = lawyers have not sought immunity for the testimony, Mr. Dorgan said.=20 Mr. Dorgan also said another former Enron chief executive, Jeffrey K. Skill= ing, had agreed to testify in coming weeks. But he said the company's forme= r chief financial officer, Andrew S. Fastow, who Enron says made more than = $30 million from his dealings with the partnerships, has not responded to r= epeated registered letters asking him to testify. A spokesman for Mr. Fasto= w declined comment today.=20 Late today, another Congressional committee investigating Enron's downfall,= the House Energy and Commerce Committee, said both Mr. Skilling and Mr. Fa= stow would testify next Thursday, along with Enron's chief accounting offic= er, Richard A. Causey; its chief risk officer, Richard B. Buy; and the boar= d of directors' audit committee chairman, Robert K. Jaedicke. A former Enro= n executive who was involved in the partnerships, Michael Kopper, has also = been subpoenaed to appear.=20 A lawyer for Enron, Robert S. Bennett, disputed Mr. Dorgan's characterizati= on of the company's cooperation, saying the senator had been ''terribly mis= informed.''=20 ''We have been fully cooperative with that committee,'' Mr. Bennett said. '= 'There are some documents that the committee would like to get that we have= no access to and no control over, and I believe that may be what is raisin= g this issue. But he is getting bad information.''=20 At the Senate hearing on Monday morning, Mr. Lay, who was ousted from his j= ob by Enron's creditors last week, is expected to testify that important de= tails of the partnerships and investments were kept from him and the board.= =20 Many investigators doubt his claims of ignorance, and Mr. Lay may be presse= d about why he sold millions of dollars of Enron stock last year even as he= promoted the value of the shares to Wall Street and his own employees. Min= utes of Enron board meetings also show that Mr. Lay was present when the pa= rtnerships were discussed. Mr. Lay's lawyer, Earl J. Silbert, declined comm= ent today, but in the past he has said that Mr. Lay was disposing of stock = last year to pay down loans outside the company and that the sales did not = reflect any doubts about Enron's future.=20 Today, Mr. Dorgan said investigators had received 41 boxes of materials fro= m Enron, which he declined to characterize. But he did say it was clear tha= t members of the company's board had a fair degree of knowledge about the d= eals.=20 Some people involved in the Congressional investigations had thought Mr. La= y was unlikely to testify before first reviewing a long-awaited report by a= special committee of Enron directors into the company's deals with the par= tnerships.=20 People close to the company said the report was expected to be finished som= etime over the weekend. Before being released publicly, the report would ha= ve to be approved by the special committee and then have to be reviewed by = the full board.=20 The report is likely to draw distinctions about how much various people at = Enron, including board members, Mr. Lay and other executives, knew concerni= ng the partnerships, and how much responsibility various officials bear, a = person close to the matter said. The report may also say board committees h= ad differing levels of information about the deals, this person said.=20 In an interview today, Mr. Dorgan said he intended to spend a lot of time d= uring the hearing delving into details about the partnerships. But he said = it was ''pretty hard to limit inquiries in circumstances like this.''=20 ''I expect there will be attention to virtually all of the areas: 401(k) pl= ans, insider trading, partnership construction, a whole series of things.''= =20 Enron, he added, has said that some partnership information does not techni= cally belong to the company and that as a result it does not have all that = information. But, Mr. Dorgan said, ''in many cases, they own 97 percent of = the partnerships,'' so they should be able to get it.=20 William C. Powers Jr., the dean of the University of Texas School of Law, w= ho is chairman of the Enron special committee preparing the report, decline= d to discuss the timing of the report's release or to give details. He woul= d not even disclose whether he would be testifying before Congress next wee= k, even though he is scheduled to do so.=20 Mr. Powers said the work of the committee he heads ''is not precluding any = other investigation from going forward with investigation, charges, punishm= ent, whatever.'' The report, he said, will stand on its own, and ''governme= nt agencies can build on that if they find it useful.''=20 People at the law school said Mr. Powers was outraged at a suggestion publi= shed today in The Washington Post that he would be taking part in a concert= ed defense of Enron in his testimony before Congress. Mr. Powers has conten= ded from the beginning of his investigation that his role is to produce an = impartial report.=20 Mr. Powers has come under fire from advocacy groups and from the local news= paper, The Austin American-Statesman, over accusations that his impartialit= y is compromised by the close ties between the University of Texas, and Enr= on and the law firms that have represented the company, especially Vinson &= Elkins.=20 The critics have said that the appearance of a conflict of interest is so g= reat that Mr. Powers should not have taken on the assignment.=20 ''Dean Powers is a nice guy and a great professor, but unfortunately, looki= ng at the facts, he has multiple apparent conflicts that, rightly or wrongl= y, cast a shadow on this report,'' said Cristen Feldman, a lawyer for Texan= s for Public Justice, a group that tracks campaign contributions in the sta= te.=20 In other Enron-related developments today, Representative George Miller, De= mocrat of California, asked that no witness in the House's various Enron he= arings be given immunity without approval from Speaker J. Dennis Hastert, a= Republican.=20 Separately, the General Accounting Office, which is preparing to sue the Wh= ite House to obtain records of meetings of executives at Enron and other en= ergy companies with administration officials working on Vice President Dick= Cheney's energy task force last spring, said it had hired the law firm of = Sidley, Austin, Brown & Wood.=20 In addition, Senators Max Baucus, a Montana Democrat who is the chairman of= the Finance Committee, and Charles E. Grassley of Iowa, the committee's se= nior Republican, sent letters to the United States Export-Import Bank, the = Overseas Private Investment Corporation and the Trade and Development Agenc= y requesting information on what help the federal agencies had given Enron.= The committee is preparing for hearings into the company later.=20 The chairman of an accounting ethics board, meanwhile, reaffirmed the board= 's decision to disband in light of the sketchy proposals by the Securities = and Exchange Commission to restructure disciplinary rules. The chairman, Ch= arles A. Bowsher, had announced that the Public Oversight Board would resig= n as a group partly in protest of the proposals by Harvey L. Pitt, the comm= ission's chairman.=20 --------------------=20 Governor Seeks Inquiry=20 SACRAMENTO, Jan. 31 (AP) -- Gov. Gray Davis of California and Senator Barba= ra Boxer are asking regulators to investigate possible price manipulation b= y Enron during the state's energy crisis.=20 Mr. Davis sent a letter today to the Federal Energy Regulatory Commission a= fter the release of a memo from Enron officials to the White House that out= lines discussions between executives and the administration's energy task f= orce headed by Vice President Cheney.=20 In the memo, Mr. Lay urged Mr. Cheney to reject price caps on wholesale ele= ctricity that Mr. Davis and a host of other state officials wanted. Photos: Senator Byron L. Dorgan, Democrat of North Dakota, above left, with= Senator Ron Wyden of Oregon, said yesterday that Enron had not cooperated = in handing over partnership documents. Mr. Dorgan also said Andrew S. Fasto= w, left, a former Enron executive, had not responded to requests to testify= . (Stephen Crowley/The New York Times)(pg. C1); Jeffrey K. Skilling, a form= er chief executive, is to testify in hearings. (Paul Hosefros/The New York = Times); William C. Powers Jr., the University of Texas law school dean, lea= ds an Enron committee preparing a report on the company's partnerships. (Fr= ank Curry for The New York Times)(pg. C4)=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Probe likely to blame former execs=20 Skilling, Fastow, auditors to be cited in report=20 By TOM FOWLER=20 Copyright 2002 Houston Chronicle=20 Jan. 31, 2002, 11:14PM Enron Corp.'s internal probe of partnerships that helped bring the company = down will likely focus the blame on former executives Jeff Skilling and And= y Fastow and the company's auditors, say sources familiar with the investig= ation.=20 The report, expected to be released this weekend, will probably say the two= and the accounting firm of Arthur Andersen failed to give Enron's board of= directors adequate information on the nature of the partnerships.=20 Though Enron has acknowledged the board approved the formation of the partn= erships and many of the deals, officials say the report will claim vital de= tails were withheld.=20 The leader of the investigation, William Powers, dean of the University of = Texas School of Law, is expected to testify before the House Energy and Com= merce Committee Tuesday.=20 One source critical of the board said the directors were trying to deflect = the blame.=20 "It's like blaming a roofer for cracks in the foundation of your house," th= e source said.=20 Enron's internal investigation began in late October shortly after the Secu= rities and Exchange Commission started a formal investigation of off-balanc= e-sheet partnerships formed by Fastow, then the chief financial officer. Th= e partnerships enlisted outside investors to buy Enron assets as a means of= helping the company artificially keep its debt level low and earnings high= .=20 Mistakes in the reporting of some transactions with two partnerships, LJM-C= ayman and LJM2 Co-Investment, forced the company to restate 4 1/2 years of = earnings, including a reduction in reported profit by $586 million and add = $2.5 billion in debt to its books.=20 In November, the internal committee determined that Fastow and other employ= ees had profited from investments in the partnerships. Those employees were= fired.=20 The report will be the first official word from the committee since then. A= t the insistence of creditors, it will be posted on Web sites of Enron and = the U.S. bankruptcy court in New York.=20 Enron officials declined comment on the report, as did representatives for = Fastow and Skilling.=20 An Andersen spokesman said Enron officials simply made some bad business de= cisions and are trying to blame the auditors.=20 "The notion that the leaders on the board were not aware of these issues is= absolutely implausible," said Andersen spokesman Patrick Dorton. "These we= re sophisticated people with sophisticated business advisers."=20 Patrick McGurn with Institutional Shareholders Services, a company that adv= ises shareholders on corporate governance issues, said Enron's board may ha= ve a valid argument if it can show it didn't know enough details to assess = the risk involved.=20 "There's a question as to who had the ability to see the big picture, if th= e board was so compartmentalized that they could only know one part of it a= t a time," McGurn said.=20 It's not unusual for boards to see only summaries of very complicated deals= and issues, McGurn said.=20 "But even if all of this is true, it still means either the board wasn't di= ligent enough, it willingly went along with something that was wrong, or th= ey were just stupid," he said.=20 It's not clear if the report will also criticize Enron's longtime law firm,= Vinson & Elkins. The firm did not help set up the LJM partnerships, but wa= s asked to look into concerns raised by Enron executive Sherron Watkins in = a now well-known October 2001 memo to Lay and the board.=20 In an Oct. 15 letter to Enron general counsel James Derrick, V&E's Max Hend= rick addressed some of those concerns, including the potential for conflict= s of interest in Fastow's dual roles as Enron CFO and chief partner in the = LJM partnerships, and the board's waiver of its code of ethics in meetings = on June 28, 1999, and Oct. 11, 1999, to allow him to run the partnerships.= =20 The letter concluded that -- based on its interviews -- no outside counsel = or auditors were needed to investigate the issues further. Hendrick did say= , however, that "bad cosmetics" on the LJM partnerships and its investments= in certain Enron technology and communications assets, coupled with the po= or financial performance of those assets, could lead to a "serious risk of = adverse publicity and litigation."=20 The day after the letter was written, Enron began to unwind those investmen= ts with LJM.=20 The fact that the code of ethics was waived to allow Fastow to run LJM is f= urther indication that the board should have been more vigilant, said McGur= n.=20 McGurn and other observers are already questioning the impartiality of the = investigation, given that many board members who approved parts of LJM are = involved. But the presence of William McLucas, the former director of the S= ecurities and Exchange Commission's division of enforcement, on the committ= ee as general counsel will lend it more credibility, said one source.=20 "Lucas is a notorious hard-ass," said the source, who asked not to be ident= ified. "So I can't imagine he'll go too soft on anyone."=20 Few of Lay Family's Real-Estate Assets Are on the Market, Listing Records S= how By Gary McWilliams Staff Reporter of The Wall Street Journal 02/01/2002 The Wall Street Journal A8 (Copyright © 2002, Dow Jones & Company, Inc.) Earlier this week, Linda P. Lay, the wife of former Enron Corp. Chairman Ke= nneth L. Lay, told a national television audience that nearly everything th= e couple owns is for sale as they struggle with a personal financial crisis= .=20 But few of the couple's vast real-estate holdings are on the market, accord= ing to Multiple Listing Service records. Altogether, Mr. and Mrs. Lay own real estate valued at more than $30 millio= n in Texas and Colorado, according to local tax records. They own 18 proper= ties in Houston, Galveston, Texas, and Aspen, Colo., according to real-esta= te records. But only two of the properties, vacation homes in the resort to= wn of Aspen, are being offered for sale.=20 On NBC's "Today," Mrs. Lay described the couple's plight in the wake of the= Enron bankruptcy as a fight for liquidity because most of their wealth was= tied up in Enron stock, now nearly worthless. "Other than the home we live= in, everything we own is for sale," she said.=20 The comments stirred a torrent of criticism in Houston, where about 4,000 E= nron employees have seen their jobs and stock holdings evaporate. Belo Corp= .'s Houston television station, KHOU, reported that the couple's Houston an= d Galveston properties didn't show any sign of being for sale.=20 The family's Houston-based investment office didn't return a call requestin= g clarification. According to tax and real-estate records, the Lays live in= a Houston penthouse valued at $7.1 million and continue to hold a home nea= r Aspen's riverfront valued at $4.1 million, as well as property valued at = $2.1 million. Two other homes, valued at more than $6.1 million each, were = listed with an Aspen real-estate firm on Nov. 12, two weeks before Enron fi= led for bankruptcy. Mr. Lay also sold a third of his stock in Compaq Comput= er Corp. at the end of October, two months before resigning from its board.= =20 However, Mr. Lay has retained significant stock holdings in Compaq, Eli Lil= ly & Co. and other companies where he once served as a director. Those shar= es are currently valued at more than $10 million.=20 Still, along with Enron, the Lays have seen some investments sour. Through = private partnerships, they are the largest individual investors in a strugg= ling Houston online company that has cut its work force four times in the p= ast year.=20 The Lays invested between $18 million and $20 million out of the more than = $150 million that Questia raised since its inception in 1998, according to = people close to the firm.=20 Questia sells access to online books to college students for $20 a month. I= nvestors say it has fallen far short of its original goal of recruiting 10%= of the 14 million U.S. college students to sign up for its service.=20 Last month, Questia cut its work force to just 28 employees from 300 a year= ago. A spokesman said recently the job cuts would enable the company to co= ntinue operations while it seeks new investors. While Mr. Lay has resigned = his seats on the boards of Compaq, Eli Lilly and i2 Technologies, he remain= s on the board of Questia, according to the company. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Economy Enron Report Ties the Company's Ruin To Executives Who Formed Partnerships A Wall Street Journal News Roundup 02/01/2002 The Wall Street Journal A2 (Copyright © 2002, Dow Jones & Company, Inc.) A much-anticipated report on an internal investigation into the collapse of= energy company Enron Corp. is expected to point fingers at former and curr= ent Enron executives who were behind the questionable partnerships that led= to the company's ruin, congressional aides said.=20 The report, which may be released as early as this weekend, also is expecte= d to outline the failure of internal controls at the company, the aides sai= d. The report is already being denounced by some defense lawyers and others ca= ught in the widening probe of Enron's collapse. They are raising questions = about conflicts of interest, and they fear the report will deflect blame fr= om Enron's board onto former Enron executives or Arthur Andersen LLP, its f= ormer auditor.=20 In an interview yesterday, William Powers Jr. -- the University of Texas la= w school dean who joined Enron's board in October and heads a committee of = outside directors that is conducting the investigation -- declined to comme= nt on the report. "We will file the report when it's ready and then we will= comment on it," he said. Mr. Powers is scheduled to testify at a congressi= onal hearing into the Enron collapse Tuesday.=20 Mr. Powers, chairman of the special committee, had ties to Enron executives= and its law firm, Vinson & Elkins, and helped raise millions of dollars fr= om them for the University of Texas, the defense lawyers and other said. Mr= . Powers serves on the university Capital Campaign Committee, and Enron has= given $3 million to the university, and more than $250,000 to the law scho= ol, since Mr. Powers became dean in 1998. In addition, Vinson & Elkins endo= wed a chair at the law school.=20 Critics of the expected report also point out that other Enron directors on= the special committee approved the transactions that they are now reviewin= g. The Wall Street Journal reported Jan. 2 that the board explicitly approv= ed the structure of the partnerships now under scrutiny.=20 The company announced the formation of the special committee in the fall, j= ust as the Securities and Exchange Commission initiated an investigation in= to partnerships used by Enron to move debt off its books.=20 The special committee's other two members are Raymond Troubh, a New York fi= nancial consultant named to Enron's board in late November; and Herbert S. = Winokur, a director since 1985 and chairman and CEO of Capricorn Holdings I= nc., a private investment company. Mr. Winokur also was chairman of the boa= rd's finance committee, which recommended that the board suspend the compan= y's ethics code so former company treasurer, Andrew Fastow, could run a par= tnership.=20 The committee retained William McLucas, a former SEC enforcement chief who = left after 22 years to join the Washington, D.C., law firm of Wilmer, Cutle= r & Pickering, to advise the committee. Mr. McLucas, 51, was known as a no-= nonsense securities cop in the eight years he served as the SEC's top law-e= nforcement officer.=20 Enron has said its dealings with the Fastow partnerships were legal and pro= perly disclosed to investors. According to Enron filings with the SEC, the = company did deals involving billions of dollars of assets and Enron stock w= ith entities related to the Fastow partnerships. Internal partnership docum= ents indicate that Mr. Fastow and possibly others made millions of dollars = from the partnerships.=20 The committee is expected to present the report to Enron's full board of di= rectors, then to the official committee of unsecured creditors in Enron's b= ankruptcy-court proceeding, according to someone familiar with the process.= It will then be filed publicly in federal bankruptcy court in New York.=20 Asked when Enron planned to file the report with the court, Martin Bienenst= ock of Weil, Gotshal & Manges LLP, Enron's lead bankruptcy lawyer, said, "W= e hope next week." Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Executive Privilege Enron's Top Dogs Still Flying Luxury Jets By Brian Ross <http://abcnews.go.com/sections/2020/2020/ross_brian_bio.htm= l< =20 Jan. 31 - Enron executives and lawyers appear to be going bankrupt in style= , traveling to bankruptcy court hearings in New York in the company's two r= emaining private jets.=20 An Enron spokesperson has confirmed a total of eight corporate jet trips to= New York and Washington since the bankruptcy, saying the flights were more= efficient than commercial travel.=20 A round-trip commercial flight, Houston to New York, could be as little as = $365 in coach. According to aviation executives, the same trip on an Enron = jet would cost tens of thousands of dollars.=20 The Enron executives seen leaving the airport Wednesday used the corporate = jet to attend the funeral of J. Clifford Baxter, a former Enron executive w= ho committed suicide on Jan. 25. Enron says that is the only nonbusiness tr= ip since the bankruptcy.=20 "Of course I have sympathy for the Baxter family, but for them to use the c= orporate jets to fly the total corporate entity to any function at this poi= nt again seems arrogant," said Rod Jordan, a former employee and chairman o= f the Severed Enron Employees Coalition.=20 Former Employees Outraged=20 Laid-off Enron employees, who stood in line today for $1,000 checks from a = group collecting donations and returned political contributions, were outra= ged to hear the luxury jets were still in the air.=20 "This is atrocious," said former Enron employee Cindy Cicchetti. "What's wr= ong with coach? That's what I fly."=20 The luxury private jets were part of the Enron culture created by its forme= r chairman and CEO, Kenneth Lay.=20 Not only did Lay use his $45 million jet for business, but he regularly use= d it for strictly personal trips for him and his family, at a cost of $334,= 000 in the year 2000 alone.=20 Months before the bankruptcy, Lay defended the personal trips. When asked w= hat kind of message it sends to the rest of the company, he responded, "Wel= l, I think it gives my senior people something to aspire to."=20 Enron says Lay's favorite jet has already been sold, and that the remaining= two jets are for sale.=20 --- Enron exec concedes he gave poor advice=20 Student fund loses most of investment=20 Associated Press=20 Feb. 1, 2002, 12:43AM RICHMOND, Va. -- A top Enron Corp. executive has admitted he gave poor advi= ce to students at his alma mater who lost nearly $12,000 in University of R= ichmond endowment money invested in Enron stock.=20 Jeffrey McMahon, who was promoted to president and chief operating officer = at Enron this week, said he hadn't foreseen the company's collapse. In an i= nterview with the university's newspaper, however, he acknowledged that he = had long been a critic of Enron's use of secretive partnerships, a practice= that contributed to the company's downfall.=20 McMahon, who graduated from the university in 1982, visited the school Sept= . 20 and Oct. 18, meeting with students and giving enthusiastic accounts of= his company's prospects even as its stock was slumping.=20 On Nov. 2, a student group that manages a small portion of the university's= endowment fund bought $12,771 worth of Enron stock. At the time, Enron cos= t $11.61 a share. In late November, Enron's stock crashed, and when the gro= up sold their investment shares were trading at 83 cents. They got back jus= t $913.=20 "The students said he was just so enthusiastic about the company," accounti= ng professor Joe Hoyle told the newspaper, The Collegian. "Why would a guy = who had a whole lot of knowledge of Enron's finances go to his alma mater a= nd be so enthusiastic ... when you can just keep your mouth shut?"=20 Student fund manager Devin Weisleder told the newspaper, "After listening t= o him for an hour, you want to go out and drop 10 grand to buy the stock."= =20 In his copyright interview with The Collegian, McMahon said he was unaware = the investment was made on his recommendation, but conceded, "In hindsight,= that probably wasn't good advice."=20 "The stock suffered a precipitous fall that no one could have expected," he= said. "I was running an operating division at the time, responsible for pa= per and steel. I had little knowledge of the financials of the company," he= was quoted as saying.=20 McMahon was mentioned in an internal memo, written in August by Sherron Smi= th Watkins and made public earlier this month, critical of Enron's secretiv= e partnerships.=20 "I expressed concerns about partnerships in 1999," McMahon told the newspap= er. "(Watkins) was referring (in her memo) to conversations I had internall= y relating to those concerns and possible conflicts of interest."=20 Enron filed for bankruptcy in December and laid off thousands of workers. T= he filing came after weeks of revelations that executives had concocted com= plicated partnerships that let Enron keep $500 million in debt off its book= s. Enron shares spiraled to less than a dollar from nearly $80 a year ago, = obliterating employees' retirement funds loaded with the stock.=20 Business; Business Desk Mighty J.P. Morgan in the Hot Seat Banking: Charges of collusion with Enron= and its recent hefty losses raise questions about firm's judgment. E. SCOTT RECKARD TIMES STAFF WRITER 02/01/2002 Los Angeles Times Home Edition C-1 Copyright 2002 / The Times Mirror Company In the rubble of recent financial collapses, one prestigious institution se= ems especially vulnerable: J.P. Morgan Chase & Co., the nation's second-lar= gest bank.=20 The New York company, a lead lender to Enron Corp., Kmart Corp. and telecom= munications firm Global Crossing Ltd., is at risk of losing billions in dea= lings with bankrupt firms, as well as losing heavily in Argentina's economi= c meltdown. J.P. Morgan also lost $1.1 billion last year on its stakes in businesses, i= ncluding many ailing technology companies, and is accused by insurers of he= lping Enron conceal vast losses. Morgan strongly disputes the charge, but t= he allegation, coupled with the hefty losses, raises questions about the ju= dgment of an institution that traces its roots back more than 200 years.=20 The bank's woes, accompanied by sizable losses on loans at many other finan= cial giants, also reveal chinks in a banking industry generally regarded as= a pillar for the nation's recovery from an economic slowdown and from Sept= . 11.=20 J.P. Morgan fares badly in comparison with big competitors such as Citigrou= p Inc., the largest U.S. banking concern, and Bank of America Inc., the thi= rd-largest. Despite their huge losses in Argentina, Enron and other corpora= te collapses, Citigroup earned $4 billion and BofA p
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