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Questioning the Books: Enron Official Failed to Warn Participants Of 401(k)= Plan The Wall Street Journal, 02/06/2002 ENRON EXECUTIVES SAY THEY DEBATED FREEZE ON PENSION The New York Times, 02/06/2002 Rich Employee, Poor Employee; Senate Panel Looking at Pensions Shown Both S= ides of the Enron Coin The Washington Post, 02/06/2002 Execs say they tried to protect workers' money=20 Houston Chronicle, 02/06/2002 Enron CEO Felt 'Betrayed,' Panel Told; Head of Internal Probe Testifies on = the Hill The Washington Post, 02/06/2002 Enron Officials Sought Lawyer's Dismissal Over Negotiations With Outside Pa= rtnership The Wall Street Journal, 02/06/2002 The Financial Wizard Tied to Enron's Fall The New York Times, 02/06/2002 Enron CEO Felt 'Betrayed,' Panel Told; Head of Internal Probe Testifies on = the Hill The Washington Post, 02/06/2002 $270 Million Man Stays in the Background The Washington Post, 02/06/2002 Enron Execs Sold Stock as Losses Grew Probe: The $44-million sell-off came = amid concern that problems at partnerships could become public. The action = raises questions of possible insider trading. Los Angeles Times, 02/06/2002 2 Officials Are Expected To Leave the Company The New York Times, 02/06/2002 Investigators Buying Time For Inquiry The New York Times, 02/06/2002 Enron Team Says Lay Took Some Blame Hearings: Former chief admits lapse in = oversight, according to internal investigator questioned by lawmakers. Los Angeles Times, 02/06/2002 Astros want out of naming-rights deal=20 Houston Chronicle, 02/06/2002 For Houston Astros, a Sponsorship Turns Sour The Washington Post, 02/06/2002 Astros Cry Foul and Try for an Enron Pickoff Play The New York Times, 02/06/2002 Questioning the Books: Enron's Fall Spurs Desire to Revisit Laws The Wall Street Journal, 02/06/2002 Former chairman of Enron to face lawmakers next week=20 Houston Chronicle, 02/06/2002 Creditors' committee can quiz auditor - COURT RULING. Financial Times, 02/06/2002 Andersen chief urges change in accounting rules. Financial Times, 02/06/2002 Populist Pitch -- Without the Punch; Both Parties Claim Title, but Neither = Makes Full-Scale Attack on Moneyed Interests The Washington Post, 02/06/2002 Enron Is Grist for Business School Courses The New York Times, 02/06/2002 Lerach's Enron Gambit The Wall Street Journal, 02/06/2002 Questioning the Books: Panel, in Enron's Wake, to Review Lawsuit Curbs The Wall Street Journal, 02/06/2002 Enron equity fears fuel 'flight from risk'. Financial Times, 02/06/2002 Barbie Loves Math The New York Times, 02/06/2002 ___________________________________________________________________________= _ Questioning the Books: Enron Official Failed to Warn Participants Of 401(k)= Plan By Kathy Chen and Theo Francis Staff Reporters of The Wall Street Journal 02/06/2002 The Wall Street Journal C1 (Copyright © 2002, Dow Jones & Company, Inc.) WASHINGTON -- A top Enron Corp. human-resources executive who also served a= s a trustee of the company's 401(k) plan said she became aware of serious a= llegations about the company's financial practices in August, but did nothi= ng to protect retirement-plan members.=20 Speaking at a Senate government affairs committee hearing, Cindy Olson said= Enron Vice President Sherron Watkins approached her for advice before send= ing her now well-publicized e-mail to former Enron Chairman Kenneth Lay in = August voicing concerns about the company's accounting practices. Ms. Olson= said Ms. Watkins also sought out Jeffrey McMahon, currently Enron's chief = operating officer, who was then its treasurer, for guidance at the time. Enron's retirement plans, decimated by the collapse of the Houston energy c= oncern, will come under further scrutiny in Congress this week. Today, Labo= r Secretary Elaine Chao testifies before the House Education and Workforce = Committee about whether retirement-plan rules should change in the wake of = Enron's collapse; tomorrow the Senate Committee on Health, Education, Labor= and Pensions will hear from former Enron workers.=20 In yesterday's hearing, Ms. Olson said she didn't share Ms. Watkins's alleg= ations with the other 401(k) plan trustees because she didn't feel it was h= er responsibility to repeat "hearsay." In addition, she said, Ms. Watkins h= ad come to her in confidence. After Ms. Watkins took her concerns to Mr. La= y and he ordered an investigation, "I felt it was all in good hands," Ms. O= lson said.=20 Eli Gottesdiener, a Washington-based lawyer representing Enron workers, cou= ntered those arguments. "She had information that affected the lives of 10,= 000 people and did nothing," he said, adding, "It's so clear that she breac= hed her duty." He said Ms. Olson should have convened an emergency meeting = of the trustees to inform them of Ms. Watkins's allegations so that they co= uld launch their own investigation. The trustees immediately could have sto= pped offering Enron stock as an investment option, and stopped using Enron = stock as a matching contribution in the retirement plan.=20 Ms. Olson testified that the plan trustees felt that they didn't have the a= bility to change the plan design without approval from the board of directo= rs.=20 Ms. Olson herself sold much of her own Enron holdings, most before she knew= of Ms. Watkins's concerns, but some afterward. Responding to sharp questio= ning from lawmakers, including Sen. Joseph Lieberman, a Connecticut Democra= t who heads the Senate's Government Affairs Committee, Ms. Olson acknowledg= ed she sold 83,000 Enron shares for $6.5 million, the bulk from December 20= 00 to March 2001. She said she decided to sell the shares after having a fa= lling out with former Enron President Jeffrey Skilling over their different= management styles. Thinking about leaving the company, she said, she went = to a financial adviser who advised her to diversify her portfolio; at his s= uggestion, she said, she put the proceeds from selling her Enron shares int= o government bonds.=20 A few days before Enron filed for bankruptcy-court protection on Dec. 2, Ms= . Olson said she sold an additional 3,000 Enron shares that were in her emp= loyee stock ownership plan, for $2 each. She said she didn't have knowledge= of the bankruptcy, but suspected the possibility.=20 During the hearing, Mr. Lieberman said he would issue subpoenas to gather m= ore information about the alleged payment of $105 million in bonuses to man= agement around the time Enron filed for Chapter 11, and the company's alleg= ed failure to pay workers severance pay, beyond a one-time $4,500 payment.= =20 As Enron shares plunged last fall, the company also considered postponing a= planned "blackout" during which time employees wouldn't be able to change = their investments or sell Enron stock, said Ms. Olson and Enron benefits ma= nager Mikie Rath. Ms. Olson said she finally decided against a delay after = consulting with other Enron executives and an outside lawyer several days b= efore the scheduled blackout that began on Oct. 26 last year and lasted for= about 10 trading days. She said the lawyer had advised Enron to go ahead w= ith the blackout, on the grounds that it wouldn't be able to notify in time= all employees -- specifically about 11,000 retirees and other workers base= d outside of the Houston headquarters -- about a potential postponement.=20 Executives from Northern Trust Retirement Consulting LLC and Hewitt Associa= tes LLC, the companies that managed Enron's 401(k) plans, confirmed that th= ey were contacted about the possibility of delaying the blackout period.=20 Ms. Olson said Enron hired counsel in early November to seek legal advice o= n whether it "made sense" to advise employees on selling their Enron stockh= oldings.=20 This week's hearings are intended to generate more information for lawmaker= s who will decide whether retirement plans ought to be more carefully regul= ated. House Energy and Commerce Chairman W.J. "Billy" Tauzin (R., La.) says= a top priority this year will be legislation aimed at protecting workers s= uch as those at Enron. "Clearly, we need pension reform," Mr. Tauzin, the l= eading congressional investigator into Enron, said in an interview.=20 However, retirement-plan experts say any significant change will be an uphi= ll battle, as employer groups, Republicans, and the Bush administration opp= ose an overhaul -- in particular, any limits on company stock in retirement= plans.=20 Somewhat less controversial are proposals, by Democrats and more recently b= y President Bush and Rob Portman (R., Ohio) and Ben Cardin (D., Md.), that = would provide employees greater ability to diversify out of stock contribut= ed by their employer. Many employers now lock workers into such shares unti= l age 50 or later.=20 On this issue, there may be more opportunity for compromise, since so far, = all proposals still leave employers with the freedom to lock employees into= company stock for long periods. Mr. Bush's proposal has the weakest divers= ification provisions, as it exempts many defined contribution savings plans= from proposed diversification rules, particularly ESOPs, which hundreds of= large employers use. Consequently, employers could continue to lock worker= s into company stock in many plans until age 55 and later.=20 ---=20 Greg Hitt contributed to this article. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business/Financial Desk; Section A ENRON'S MANY STRANDS: THE OVERVIEW ENRON EXECUTIVES SAY THEY DEBATED FREEZE ON PENSION By STEVEN GREENHOUSE and STEPHEN LABATON 02/06/2002 The New York Times Page 1, Column 1 c. 2002 New York Times Company WASHINGTON, Feb. 5 -- Enron executives acknowledged today that before they = temporarily prevented employees from selling company stock in their retirem= ent accounts last fall, the executives had sharply debated delaying the mor= atorium because employees could suffer heavy losses from a plunging stock p= rice.=20 ''We were concerned in the benefits department about the deterioration of t= he stock price,'' Mikie Rath, a benefits manager at Enron, said in testimon= y before the Senate Governmental Affairs Committee. But after the debate on= the eve of the moratorium, they imposed the so-called blackout period to g= ive themselves time to replace the administrators of the retirement plan. Enron executives said they decided it would be too hard to notify the parti= cipants in the company's 401(k) plan immediately. They also said they feare= d they would open themselves to lawsuits by plan participants who were noti= fied about the delay later than others for reasons like mail delays.=20 The disclosures on the pension plan came as other Congressional committees = took up Enron matters.=20 House and Senate lawmakers issued subpoenas to compel the testimony of Enro= n's former chief executive, Kenneth L. Lay, while Congressional and state o= fficials broadened their investigations into why state pension funds and st= ate agencies invested and did business with Enron as it spiraled downward l= ast year.=20 The Senate Commerce Committee voted unanimously to issue the subpoena to re= quire Mr. Lay's appearance next Tuesday. A similar subpoena was issued by R= epresentative Michael G. Oxley, the Ohio Republican who is chairman of the = House Financial Services Committee.=20 A spokeswoman for Mr. Lay, who had been scheduled to testify on Monday but = bowed out, said his lawyers would work out details for his appearance, alth= ough lawmakers said they expected that he would invoke his Fifth Amendment = right against self-incrimination.=20 While Mr. Lay may not answer any questions, members of a House subcommittee= on oversight and investigation focused on him today, trying to glean, by p= roxy, what he might say.=20 Under questioning, William C. Powers, chairman of the special investigative= committee of Enron's board that wrote a harshly critical report, said that= in his four-hour interview with Mr. Lay, the former chairman understood th= at off-the-books partnerships were set up to hide losses. ''But,'' Mr. Powe= rs said, ''he didn't understand or appreciate that there was anything wrong= with that. That's his story. The accountants signed off, and he was O.K. w= ith that.''=20 President Bush brushed aside a demand by Senator Ernest F. Hollings, the So= uth Carolina Democrat who heads the Commerce Committee, that a special coun= sel should be appointed to supervise the criminal investigation of Enron. M= r. Hollings cited Enron's ties to administration officials, including the a= ttorney general.=20 Mr. Bush told reporters as he toured a research laboratory in Pittsburgh: '= 'This is a business problem, and my Justice Department is going to investig= ate. If there's wrongdoing, we'll hold them accountable for mistreatment of= employees and shareholders.''=20 Lawyers representing the employees have accused Enron of stock fraud for im= posing the moratorium and for not disclosing the company's financial condit= ion, resulting, the lawyers say, in losses of more than $1.2 billion for th= e 15,000 participants in Enron's retirement plan. During the moratorium, em= ployees could not sell stock in the retirement plan, but senior executives = faced no restrictions in selling their stock.=20 The testimony prompted a new round of criticism of Enron's senior officials= for looking out for their own interests while turning their backs on their= employees.=20 ''Management knew full well that their employees' 401(k)'s were overloaded = with shares of Enron,'' said Senator Joseph I. Lieberman, the Connecticut D= emocrat who is chairman of the governmental affairs committee. ''Shouldn't = that have prompted them to postpone the lockdown when the company was reeli= ng?''=20 In response to the collapse of Enron, an administration task force is prepa= ring recommendations to revise securities and corporate laws. Administratio= n officials said that they were debating proposals to make it more likely t= hat corporate executives and boards face personal liability for violating t= he law.=20 Officials in Connecticut, one of several states considering whether to susp= end or revoke the license of Arthur Andersen, Enron's accounting firm, said= they had subpoenaed Andersen records.=20 Richard Blumenthal, the attorney general in Connecticut, said he was examin= ing a state agency's decision last year to pay Enron $220 million for an en= ergy contract that might never be fulfilled.=20 At a House committee hearing, Joseph F. Berardino, Andersen's chief executi= ve, repeated earlier statements that important information about Enron's fi= nances had been withheld from his firm.=20 Democrats and Republicans repeatedly complained that Mr. Berardino was evad= ing the committee's questions about Andersen's involvement in Enron's colla= pse.=20 ''Maybe it's better to be dumb than culpable, but we want some answers,'' s= aid Representative Gary L. Ackerman, Democrat of New York. ''Your not knowi= ng what was going on, if that's the case, is basically saying that you have= squandered the integrity of your company.''=20 Mr. Berardino said Andersen would establish new offices of audit quality an= d ethics and compliance.=20 Before approving the subpoena of Mr. Lay, members of the Senate Commerce Co= mmittee said that they had begun investigating losses that state pension fu= nds sustained from the decline in Enron stock.=20 Senator Bill Nelson, Democrat of Florida, said it was suspicious that an in= vestment manager for the Florida retirement system bought millions of dolla= rs in shares last fall, at prices ranging from $22.82 to $9.02, even after = Enron had announced that it was being investigated by the Securities and Ex= change Commission.=20 A few days before Enron filed for bankruptcy, the fund sold more than seven= million shares at 28 cents each.=20 The investment management firm that bought the Enron stock for Florida's re= tirement funds is Alliance Capital. Frank Savage, a recently retired senior= executive at Alliance, sits on Enron's board.=20 Mr. Nelson said that if Mr. Lay had agreed to testify, he would be asked, '= 'Were they told to buy the stock to prop it up?''=20 John Meyers, a spokesman at Alliance Capital, said that the investments wer= e reasonable at the time and that Mr. Savage ''had no involvement in the bu= ying, holding or selling of Enron'' stock.=20 At the Senate governmental affairs hearing, Cindy Olson, Enron's executive = vice president for human resources, said there had been a debate on the day= before the trading moratorium about whether the company should postpone th= e blackout, which was needed for a change in plan administrators.=20 But executives said they decided against delaying after concluding that it = would be too hard to notify the participants in Enron's 401(k) plan immedia= tely. The executives said they feared that if they delayed this blackout pe= riod, they would open themselves to lawsuits by participants who were notif= ied later than others for reasons like mail delays.=20 Though the company says the blackout began Oct. 26, it sent out conflicting= bulletins. The confusion led many employees to think that the blackout beg= an Oct. 19, when Enron stock traded at $26.05. By the time employees were a= ble to sell shares on Nov. 13, the shares had plunged, closing at $9.98 tha= t day.=20 Deborah G. Perrotta, a former senior administrative assistant, told the com= mittee that the blackout hurt. ''A delay would have saved a lot of people,'= ' she said.=20 Several senators said it was unconscionable for Mr. Lay and other Enron off= icials to tell employees that the stock price would continue to rise while = some officials were raising tough questions about the stability of the comp= any's finances.=20 Ms. Olson, who served as a trustee of Enron's retirement plan, testified th= at in August, Sherron S. Watkins, an Enron vice president, had told her of = concerns she had about whether Enron executives had engaged in some chicane= ry that undermined the company's finances. Ms. Watkins raised many of those= questions in a letter last summer to Mr. Lay.=20 Saying she was not convinced that Ms. Watkins's assertions were accurate, M= s. Olson said that she, as a plan fiduciary, did not deem it necessary to i= nform plan participants of the questions about Enron. Photo: Joseph F. Berardino, chief executive of Arthur Andersen, the former = Enron auditor, testifying yesterday before a House committee. Both Democrat= s and Republicans complained that he evaded the panel's questions. (Paul Ho= sefros/The New York Times)(pg. C8) Chart: ''Buying as the Ship Went Down'' = On the advice of Alliance Capital Management, one of its investment manager= s, the Florida state pension fund bought Enron stock even as the company's = troubles became known. A former Alliance executive, Frank Savage, is also a= member of Enron's board. Enron's daily closing stock price PURCHASES OF EN= RON STOCK SINCE OCT. 17 DATE: OCT. 22 NUMBER OF SHARES: 311,200 SHARE PRICE= : $22.82 PRICE PAID (MILLIONS): $7.1 DATE: OCT. 24 NUMBER OF SHARES: 302,50= 0 SHARE PRICE: 16.30 PRICE PAID (MILLIONS): 4.9 DATE: OCT. 25 NUMBER OF SHA= RES: 124,600 SHARE PRICE: 15.47 PRICE PAID (MILLIONS): 1.9 DATE: OCT. 29 NU= MBER OF SHARES: 373,900 SHARE PRICE: 14.51 PRICE PAID (MILLIONS): 5.4 DATE:= OCT. 30 NUMBER OF SHARES: 317,800 SHARE PRICE: 12.23 PRICE PAID (MILLIONS)= : 3.9 DATE: NOV. 13 NUMBER OF SHARES: 581,900 SHARE PRICE: 9.37 PRICE PAID = (MILLIONS): 5.5 DATE: NOV. 14 NUMBER OF SHARES: 478,600 SHARE PRICE: 9.84 P= RICE PAID (MILLIONS): 4.7 DATE: NOV. 16 NUMBER OF SHARES: 209,500 SHARE PRI= CE: 9.02 PRICE PAID (MILLIONS): 1.9 OCT. 17 -- Enron reduces shareholder eq= uity by $1.2 billion to account for transactions involving certain partners= hips. OCT. 22 -- Enron discloses that the Securities and Exchange Commissio= n has opened an inquiry into the partnerships. NOV. 8 -- Enron says it over= stated profits for the previous five years by $586 million. NOV. 30 -- Pens= ion fund sells its entire Enron holdings, 7.6 million shares, at 28 cents a= share. DEC. 2 -- Enron files for bankruptcy protection. (Sources: Dow Jone= s Interactive [stock price]; Office of Senator Bill Nelson) (pg. C8)=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Financial Rich Employee, Poor Employee; Senate Panel Looking at Pensions Shown Both S= ides of the Enron Coin Albert B. Crenshaw Washington Post Staff Writer 02/06/2002 The Washington Post FINAL E01 Copyright 2002, The Washington Post Co. All Rights Reserved Two Enron employees told a Senate committee yesterday what happened to them= before and immediately after the collapse of the giant Texas energy-tradin= g company.=20 Their stories were very different. Deborah G. Perrotta, an administrative assistant, broke down in tears as sh= e described losing her job, $40,000 in retirement savings and all but a fra= ction of her severance pay.=20 The other, Cindy Olson, executive vice president of Enron's human resources= department and one of the people in charge of the company's ill-fated 401(= k) plan, still works for Enron. She matter-of-factly described how a year a= go, when Enron stock was near its peak, she cashed in options on 83,000 sha= res, netting about $3 million.=20 Their testimony again highlighted the devastation that can befall employees= who tie their jobs and their retirement security to a single company. But = it also showed how much difference professional advice and investment insti= ncts can make for workers in a situation like Enron's, and how workers caug= ht up in a company's collapse can be affected very differently.=20 Perrotta and Olson testified before the Senate Governmental Affairs Committ= ee, which is trying to determine what changes might be needed in federal pe= nsion and employment laws to improve worker protections should their employ= er fail.=20 The hearing highlighted several issues that are common in 401(k) and other = retirement savings plans known as defined-contribution plans, which, unlike= old-fashioned defined-benefit pensions, place the market risk and reward o= n employees.=20 * Fiduciary responsibility. Who is responsible for sharing information with= employees and retirees, and how and when?=20 Former Enron Chairman Kenneth L. Lay encouraged workers to keep their retir= ement money in company stock. Perrotta recalled that in August she was awar= ded a block of shares, and an accompanying e-mail from Lay said that "one o= f my highest priorities is to restore investor confidence in Enron. This sh= ould result in a significantly higher stock price. I hope this grant lets y= ou know how valued you are to Enron."=20 Olson, however, had a higher position at the company and access to more inf= ormation than Perrotta. Indeed, Olson actually spoke with whistle-blower Sh= erron Watkins before Watkins sent her anonymous letter to Lay, in which she= said she worried that the company's accounting practices could lead to a m= ajor scandal. Olson said Watkins was fearful that she was overlooking somet= hing or that there was some other reason her conclusions might be incorrect= . Olson took no action to inform other employees about the concerns, howeve= r. "She went to speak to Mr. Lay, and Mr. Lay kicked off an investigation,"= Olson said. ". . . I felt like it was in good hands."=20 * How tough it is to separate loyalty from investment decisions.=20 Enron's restrictions on employees selling stock they received as matching c= ontributions to their 401(k) plans have been well chronicled. But, by some = accounts, 89 percent of the Enron stock in the plan was there because worke= rs invested in it voluntarily.=20 Olson, however, had been granted options that did not have the same restric= tions against selling as the Enron stock matches in the 401(k) plan. Olson = said she cashed in her options only because she had a run-in with then-chie= f executive Jeffrey Skilling that motivated her to seek professional invest= ment advice. The adviser told her she was too emotionally involved with the= stock, and she agreed to sell.=20 Olson said she held on to another 3,000 shares in her retirement account un= til two days before the company went into bankruptcy.=20 The panel is looking at proposals to limit the percentage of company stock = permitted in a 401(k) account. But employer groups argue that retirement pl= ans are often designed to align the interests of workers and companies, and= they are urging Congress to be careful not to discourage companies from of= fering retirement plans or matching worker contributions to plans.=20 * Investment advice. Most companies are reluctant to provide it for fear of= exposing themselves to liability if the advice doesn't work out.=20 Pending legislation would permit them to provide advice or to pay for it fr= om third parties.=20 The potential benefits for employees seem clear in retrospect. Olson went t= o an adviser while Perrotta did not. "When it started to fall apart, we jus= t sat there -- watched it," Perrotta said.=20 But critics say that the issue is more complex than it seems and that any l= egislation should be careful to eliminate conflicts of interest among advis= ers and employers.=20 * "Lockdowns" of 401(k) plans. These freezes on account activity occur when= a company changes plan administrators, and can last up to several months. = Enron changed administrators last fall and employee accounts were frozen fo= r several weeks. The exact duration is in dispute.=20 * Severance in bankruptcy. Laid-off workers are generally limited to paymen= ts of about $4,500. Severance owed beyond that is usually treated as a gene= ral unsecured debt, though some courts have been more lenient.=20 It has become routine, however, for companies entering bankruptcy to pay la= rge "retention bonuses" to keep certain workers while the newly unemployed = get little. Enron paid out $55 million in such bonuses.=20 Enron benefits manager Mikie Rath, who testified with Olson, drew snickers = in the crowded hearing room when she said she had gotten a retention bonus = but could not remember exactly how much it was. Pressed, she said it was "a= bout" $20,000.=20 Enron workers who were laid off would have been entitled to about $150 mill= ion total, and Olson said "we thought we could give employees the full seve= rance" but "at the 11th hour we found we could only give $4,500." Company l= awyers said the limit was set by law, she said. http://www.washingtonpost.com=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Execs say they tried to protect workers' money=20 By PATTY REINERT=20 Copyright 2002 Houston Chronicle Washington Bureau=20 Feb. 5, 2002, 9:17PM WASHINGTON -- Two Enron executives told a Senate panel Tuesday that they sc= rambled to protect employees' retirement savings and severance pay as soon = as they realized the company was collapsing last year.=20 "We did the best we could with a difficult situation," said Cindy Olson, ex= ecutive vice president for human resources for the Houston energy trader.= =20 Olson and Enron benefits manager Mikie Rath told members of the Senate Gove= rnmental Affairs Committee that they had considered, then rejected, putting= off a planned change in the company's investment administrator last fall w= hen they realized the transition would take place as Enron's stock was fall= ing. Employees were prevented from selling the stock in their 401(k) retire= ment accounts during the transition.=20 Later, as the company was headed for bankruptcy, Olson said she had several= conversations with then-Chairman Ken Lay to try to salvage employees' seve= rance pay. She quickly concluded, she said, that employees would get only a= nominal payment of $4,500 each if Enron declared bankruptcy. The realizati= on was devastating, she said.=20 Several former Enron workers, who are suing Olson and other top executives,= criticized the executives' testimony.=20 Debbie Perrotta, a laid-off senior administrative assistant who had worked = at Enron for five years, testified Tuesday that 4,500 Houston Enron employe= es lost their jobs, their retirement savings and an estimated $150 million = in severance and vacation pay after the company filed for bankruptcy on Dec= . 2.=20 But two days before that filing, Perrotta said, "Enron cut $105 million in = retention bonuses for a small number of executives."=20 Sen. Joseph Lieberman, D-Conn., who heads the Senate committee, said he wou= ld subpoena records on the retention bonuses.=20 Perrotta broke down and cried several times as she told of losing $40,000 i= n retirement money and struggling to pay for her family's health care and h= er daughter's wedding. She said she and other laid-off employees now must w= ait in line behind Enron's creditors in bankruptcy court to recover whateve= r they can.=20 "It may be the law," she said, "but it's wrong."=20 Lieberman asked Olson to explain why she failed to warn employees to sell t= heir Enron stock as the price was sliding.=20 "We didn't have a crystal ball," Olson said. "We didn't know where the stoc= k was going to go."=20 She added that federal law limits what investment advice employers can give= their employees. Besides, she said, the company's top executives put their= faith in Lay and hoped he could save the company.=20 But Lieberman pointed out that something must have motivated Olson to sell = $6.5 million of her own Enron stock months earlier.=20 Olson -- who served on Enron's executive committee from 1999 until she and = then-Chief Executive Officer Jeff Skilling had a falling out and he removed= her in early 2001 -- said she sold most of her company stock in late 2000 = and early 2001.=20 Olson said she was thinking of leaving Enron after Skilling demoted her fro= m the executive committee and took away some of her human resources duties.= She said she and Skilling "did not see eye to eye" about how employees sho= uld be treated.=20 Olson said she and her husband hired their own financial adviser, who urged= her to diversify her stock portfolio so she would not be so reliant on her= company's stock.=20 Olson also testified that Sherron Watkins, a former Enron executive, had co= me to her last summer, asking Olson's advice on whether she should approach= Lay with concerns about accounting problems she believed threatened to bri= ng down the company.=20 Olson said Watkins was unsure whether a memo she had written to Lay on Aug.= 15 was technically or legally accurate. Olson said she encouraged Watkins = to talk to Lay.=20 Even after her conversation with Watkins, however, Olson said she did not w= arn her colleagues. Her talk with Watkins had been confidential, she said, = and she trusted Lay to act if Watkins' fears were on target.=20 Both Olson and Rath told lawmakers that they had considered halting the tra= nsition to a new retirement fund administrator last fall, but concluded tha= t it would take longer to stop the process than to go through with it.=20 In the midst of last fall's anthrax scares and the resulting delays in mail= service, they said, it would have been impossible to notify the 11,000 ret= irees invested in Enron's retirement plan if the company had decided to cha= nge the schedule for the transition. Notifying current Enron employees via = e-mail would have treated current and former Enron employees differently an= d that would have been unfair, they said.=20 Instead, they decided to speed up the transition process and were able to s= have one week off of the lockdown period so that employees would have acces= s to their accounts sooner, they said.=20 At the time, Rath testified, she was still hoping the stock price would go = back up.=20 In the hallway outside the hearing later, several laid-off workers criticiz= ed the two executives' testimony.=20 "She cashed out six and a half million dollars in her own Enron stock," Gwe= n Gray said of Olson. "She knew (the company was failing)."=20 Gray, who also worked in Enron's human resources department before she was = laid off, said she was disturbed by Rath's remark that she couldn't remembe= r the amount of her own retention bonus.=20 When Rath's former colleagues in the audience laughed at her statement, sen= ators pressured Rath. She said the bonus was "in excess of $20,000." (Olson= testified that she had received nothing to stay with the company.)=20 A Section Enron CEO Felt 'Betrayed,' Panel Told; Head of Internal Probe Testifies on = the Hill Jackie Spinner and David S. Hilzenrath Washington Post Staff Writers 02/06/2002 The Washington Post FINAL A01 Copyright 2002, The Washington Post Co. All Rights Reserved Former Enron Corp. chairman Kenneth L. Lay told investigators for the Enron= board that he should have paid more attention to his company's bookkeeping= but felt "betrayed" by others at the company who kept information from him= , the board's lead investigator testified yesterday.=20 Lay, in four hours of interviews with the special board committee investiga= ting the company's collapse, indicated that he knew the company was using E= nron stock to protect investors in its off-the-books partnerships, said Wil= liam C. Powers Jr., chairman of the committee, which issued its report Satu= rday. That unusual strategy helped Enron hide large debts and losses.=20 "When we interviewed Mr. Lay . . . he didn't understand or appreciate there= was anything wrong with it," Powers, dean of the University of Texas Law S= chool, told the House Government Reform subcommittee on oversight and inves= tigations. Lay's story was that "the accountants had signed off on it," Pow= ers said. "It was a credible device."=20 Powers also disclosed that the Enron board's investigative committee spent = "a couple of hours" interviewing former Enron vice chairman J. Clifford Bax= ter, who was found dead on Jan. 25 of a self-inflicted gunshot wound. Power= s said Baxter gave no hint that he was "a person . . . in danger."=20 House members asked Powers for notes or recordings from that interview. Pow= ers said he could not turn the records over without permission from the com= pany, but he said he would support their release. Enron attorney Robert Ben= nett later said the company "certainly will provide the materials requested= ."=20 Committees in the Senate and House yesterday subpoenaed Lay to appear on Ca= pitol Hill on Feb. 12 and 14. Lay, who withdrew from a scheduled appearance= Monday, is expected to invoke his constitutional right against self-incrim= ination and refuse to testify, but the subpoenas mean he will have to do so= in person in the full glare of publicity.=20 Meanwhile, members of a Financial Services subcommittee unleashed their wra= th on Arthur Andersen chief executive Joseph F. Berardino, blasting the big= accounting firm's audits of Enron and voicing exasperation when Berardino = said he didn't know the answers to many of their questions about Andersen's= conduct.=20 "Maybe it's better to be dumb than culpable, but we want some answers," sai= d Rep. Gary L. Ackerman (D-N.Y.).=20 "I mean, your ship is going to go down and you're going to be lashed to the= mast unless you start talking to us about what happened."=20 Berardino, who headed Andersen's audit practice before becoming its chief e= xecutive about a year ago, said Andersen was still trying to gather the fac= ts.=20 "I don't know, with authority, what we knew and when we knew it," he told t= he Financial Services subcommittee on capital markets, one of several congr= essional panels investigating Enron's collapse.=20 Separately, a spokesman for Andersen said yesterday that its auditors went = to Enron's board earlier than was previously known with concerns about poss= ible illegal activity.=20 The first approach was in August, after the emergence of a letter from exec= utive Sherron Watkins to Lay warning of widespread accounting irregularitie= s, spokesman Charlie Leonard said.=20 Federal law requires auditors to alert the SEC when they suspect illegality= and the board or management does not address it. In this case, Andersen pe= rsonnel went to the board but not to the SEC because they were assured the = board was investigating the matter, Leonard said.=20 Andersen previously said it had alerted the board to possible illegal activ= ities last fall as Enron unraveled.=20 As lawmakers search for ways to prevent future Enrons, Rep. Richard H. Bake= r (R-La.), chairman of the House subcommittee, floated what would be a fund= amental change in the auditing business -- having stock exchanges hire the = auditors. Currently, auditors are hired by the companies they are responsib= le for auditing -- an arrangement that some lawmakers say deters them from = challenging dubious corporate accounting.=20 In other developments yesterday, President Bush rejected a call by Sen. Ern= est F. Hollings (D-S.C.) for a special prosecutor to investigate Enron, say= ing his Justice Department could do the job. Enron was a major contributor = to the Bush presidential campaign and has ties to a number of administratio= n officials.=20 The House Energy and Commerce Committee yesterday subpoenaed former Enron c= hief financial officer Andrew S. Fastow to appear at a hearing tomorrow. Fa= stow's attorneys originally told the committee he would appear voluntarily,= but they later informed the committee he had "a change of heart," committe= e spokesman Ken Johnson said. Fastow, who organized some of Enron's largest= partnerships and earned at least $30 million from running them, intends to= assert his Fifth Amendment right against self-incrimination, Johnson said,= but he will be required to do that in front of the committee.=20 Fastow has hired criminal lawyer John Keker of San Francisco, who prosecute= d Oliver L. North in the Iran-contra affair, to represent him in the Justic= e Department's criminal investigation.=20 Andersen's chief executive yesterday made his second voluntary appearance b= efore the capital markets subcommittee, and lawmakers praised him for testi= fying. But that was one of the few things they gave him credit for during a= bout four hours of stern questioning and speechifying. It was a much more s= keptical reception than Berardino received from the same lawmakers in Decem= ber, when he faced few if any probing questions. That appearance, however, = took place before Andersen acknowledged that it had destroyed numerous docu= ments pertaining to its work at Enron, and before the Powers report said it= "did not fulfill its professional responsibilities" in its Enron work.=20 Berardino said auditing is "a hard job" and Andersen personnel "are trained= to do the right thing."=20 "But we are human beings, and we may not get it right every time. I'm not a= pologizing for that," he said.=20 Rep. Max Sandlin (D-Tex.) asked Berardino to consider "the people whose liv= es . . . you helped destroy," a reference to Enron employees who lost their= jobs and the bulk of their retirement savings when Enron collapsed. Rep. M= ichael E. Capuano (D-Mass.) said Andersen "blew it so badly."=20 The report commissioned by Enron directors accused Andersen of failing in i= ts responsibilities and helping Enron create a web of transactions designed= to hide debts and losses. In the process, the report said, Andersen accoun= tants "had to surmount numerous obstacles presented by pertinent accounting= rules."=20 For example, the report said Andersen advised Enron each step of the way ab= out transactions with a group of off-the-books partnerships known as the Ra= ptors, which "had little economic substance."=20 The Raptor transactions accounted for about $1.1 billion of the $1.5 billio= n of pretax income Enron reported during the five quarters that preceded En= ron's December bankruptcy filing.=20 Berardino said Andersen approved deals involving the partnerships but didn'= t come up with the ideas for them. The accounting firm was reacting to plan= s developed by Enron personnel, investment bankers and others, he said.=20 "Suffice it to say that we were very much involved, as the company was, set= ting up these transactions, giving our advice on whether they would pass th= e rules," Berardino said. That was part of Andersen's job as auditor, he sa= id.=20 "The point I would like to emphasize is, at the end of the day, these are t= he company's financial statements," Berardino told the committee. "We canno= t make a company report any more than what the rules require," he said.=20 Berardino called for a major overhaul of accounting and auditing, saying th= at simply tinkering with the system would fail to prevent further financial= debacles. He said stronger discipline is needed because today "punishment = is not sufficiently certain to promote confidence in the profession."=20 The Andersen chief said auditors should rate the quality of a company's acc= ounting instead of just issuing a pass or fail grade, as they now do. He to= ld lawmakers that Andersen will no longer serve as both internal and outsid= e auditor for the same company -- as it did at Enron -- and will stop consu= lting to audit clients on the design and implementation of their financial = information systems.=20 Berardino said such activities accounted for "very, very little" of the $52= million Andersen received from Enron in 2000.=20 Some lawmakers called on Berardino to stop consulting to audit clients alto= gether.=20 Meanwhile, Deloitte Touche Tohmatsu, the global parent of accounting firm D= eloitte & Touche, said it will announce today that it intends to split off = its $3.5 billion management-consulting business, following a similar announ= cement last week by fellow Big Five accounting firm PricewaterhouseCoopers.= =20 Staff writer Susan Schmidt contributed to this report. http://www.washingtonpost.com=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron Officials Sought Lawyer's Dismissal Over Negotiations With Outside Pa= rtnership By Tom Hamburger and John Emshwiller Staff Reporters of The Wall Street Journal 02/06/2002 The Wall Street Journal A3 (Copyright © 2002, Dow Jones & Company, Inc.) WASHINGTON -- Enron Corp. executives tried to get one of the company's in-h= ouse lawyers fired in 2000 after their boss expressed unhappiness with the = way the lawyer was negotiating with a partnership in which the boss had an = interest, congressional investigators said.=20 The disclosure underlined the conflicts of interest that apparently existed= with outside partnerships set up and run by some Enron executives. For Enr= on, which is now in bankruptcy proceedings, the partnerships allowed the Ho= uston energy-trading company to enhance its profits and to move debt off it= s books. But the partnerships also were used by some senior Enron executive= s to enrich themselves, according to an internal company report released th= is weekend. The investigators' statements came as several congressional committees push= ed forward with probes into Enron's collapse. A House and Senate panel each= voted to issue subpoenas to force appearances by Kenneth Lay, Enron's form= er chairman and chief executive. Meanwhile, the head of Arthur Andersen, En= ron's former auditor, was aggressively questioned before a House panel and = outlined additional steps the accounting firm is taking to restore its repu= tation.=20 At issue in the case involving the Enron lawyer was one of the outside part= nerships known as LJM2. Enron attorney Joel Ephros was negotiating with att= orneys for LJM2 from the law firm of Kirkland & Ellis in 2000, when he rece= ived an expletive-laced angry voice mail about his handling of the negotiat= ion from Enron's Chief Financial Officer, Andrew Fastow, according to an ac= count given to congressional investigators. Mr. Fastow at the time ran and = had an ownership interest in LJM2, which eventually earned him substantial = profits.=20 Later, in the fall of 2000, two of Mr. Fastow's subordinates, Ben Glisan Jr= . and Michael Kopper, approached Mr. Ephros's boss to accuse the lawyer of = being unresponsive and incompetent and to urge his dismissal. The boss, Jor= dan Mintz, general counsel of Enron Global Finance, had just started his ne= w job and said he wasn't prepared to make any personnel moves, so he declin= ed. Informed of the decision, Mr. Fastow didn't object. Mr. Mintz later dec= ided to keep Mr. Ephros on staff and praised his performance.=20 The attempt to fire Mr. Ephros will be aired at a hearing tomorrow before t= he House Energy and Commerce Committee's oversight panel, Billy Tauzin, cha= irman of the full committee, said in an interview. The Louisiana Republican= offered the episode as an example of what he called a corrupt culture with= in Enron as it sought to inflate revenue and conceal losses using entities = such as LJM2.=20 "They literally became sham operations," said Mr. Tauzin, who is leading th= e most aggressive probe of nearly a dozen now being conducted on Capitol Hi= ll into Enron. "One purpose was to fool investors into believing that debt = had moved, that risk had moved. And the other purpose was to create phony i= ncome. This is an old game. This is nothing new. This is insider theft."=20 Mr. Mintz will be a chief witness at tomorrow's hearing and is expected to = detail his recollections about the effort made to muzzle Mr. Ephros. A spok= esman for Mr. Fastow declined to comment. A lawyer for Mr. Glisan didn't re= turn a call for comment. Mr. Ephros and Mr. Kopper couldn't be reached. Mr.= Tauzin said he expects Messrs. Fastow and Kopper to invoke their Fifth Ame= ndment rights against possible self-incrimination to avoid testifying at to= morrow's hearing.=20 The Ephros episode is an example of a problem addressed cryptically in the = internal report by a special committee of Enron's board that was released l= ast weekend. Mr. Fastow "was in a position to exert great pressure and infl= uence. . . . We have been told of instances in which he used that pressure = to try to obtain better terms for LJM," the report said. "Simply put, there= was little of the separation and independence required to enable Enron emp= loyees to negotiate effectively against LJM2."=20 Mr. Tauzin said that tomorrow's hearing will also feature details of what h= e called "literally a sweetheart deal" involving another partnership. Accor= ding to Mr. Tauzin and his investigators, one of the partnership deals was = cut by two Enron employees who were engaged to be married, one representing= Enron and one representing LJM2.=20 Congressional investigators said that the agreement netted huge profits for= the couple, Trushar Patel, an Enron attorney, and his fiancee, Anne C. Yae= ger, who worked with Mr. Fastow and later left Enron. Ms. Yaeger signed a $= 30 million agreement on behalf of LJM2, listing herself as an "authorized p= erson," documents shows. Her husband signed representing Enron.=20 Committee spokesman Ken Johnson said investigators have learned Ms. Yaeger = entered into the transaction by initially providing just $10 as a down paym= ent, later kicking in an additional $2,913. "We believe she walked away fro= m the deal with a profit of half a million dollars," Mr. Johnson said. "Tha= t's not a bad return for a $10 initial investment."=20 Messages left at the home of the couple weren't returned.=20 In other action, the Senate Commerce Committee and the House Financial Serv= ices Committee approved subpoenas for Mr. Lay to appear before their panels= on Feb. 12 and 14, respectively. Mr. Lay had agreed to appear at hearings = this week, but backed out in response to scathing criticism from Capitol Hi= ll prompted by revelations in the Enron board's internal report. Though he = will be forced to appear, he can refuse to testify by invoking the Fifth Am= endment, and several senators and House members predicted he would do so. K= elly Kimberly, Mr. Lay's spokeswoman, said he and his lawyers haven't yet d= ecided whether he will testify.=20 In his second appearance before the House Financial Services panel, Anderse= n CEO Joseph Berardino outlined new steps the accounting firm will take to = restore confidence in its work, including creating offices for audit qualit= y, ethics and compliance. Mr. Berardino came under heavy criticism from pan= el members for Andersen's role in the Enron affair, including a document-de= struction effort undertaken by Houston-based employees, one of whom was sub= sequently fired. He said he was "embarrassed" by the shredding. On Andersen= 's role in reviewing questionable partnership transactions, which later led= to Enron's collapse, he reiterated his assertion that "information was wit= hheld" by Enron as Andersen was reviewing them.=20 The difficulty Mr. Berardino faces in restoring confidence in his company w= as made clear in Connecticut yesterday as the state's Board of Accountancy = escalated its investigation of the firm, issuing a subpoena for Enron-relat= ed documents. The state could revoke Andersen's license to practice in Conn= ecticut and levy a fine. State Attorney General Richard Blumenthal says his= staff is searching for common policies between Andersen's activities in Ho= uston and Hartford. He added that other state attorneys general have been i= n contact with him and could pursue similar actions.=20 ---=20 Judith Miller and Russell Gold contributed to this article. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business/Financial Desk; Section A ENRON'S MANY STRANDS: THE TRANSACTIONS The Financial Wizard Tied to Enron's Fall By DAVID BARBOZA and JOHN SCHWARTZ 02/06/2002 The New York Times Page 1, Column 2 c. 2002 New York Times Company HOUSTON, Feb. 5 -- Before the financial shell games; before Chewco, Raptor = and LJM; before the partnerships that earned him $30 million, Andrew S. Fas= tow had his first setback at the Enron Corporation.=20 The setback came in 1996, when Mr. Fastow, a rising young star in corporate= finance, was nearly fired for the poor job he did running a retail unit th= at aimed to put Enron into competition with local utilities around the coun= try. Mr. Fastow, whose surname rhymes with how, was simply out of his element am= ong the intricacies of the retail market, colleagues said and his spokesman= , Gordon Andrew, acknowledged. Yet while Enron was notorious for its cutthr= oat corporate culture, its succeed-or-leave ethic, Mr. Fastow had enough in= fluence to return to his old department, finance.=20 ''What the guy knew was numbers and finance,'' a longtime colleague said. '= 'He knew how to close a deal. No one did that better than Andy.''=20 Today, investigators think that Mr. Fastow's financial wizardry, his abilit= y to wrap the company's assets and debts into complicated off-balance-sheet= deals, was a central cause of Enron's undoing. What Mr. Fastow presented a= s an arrangement intended to benefit Enron, according to a report released = on Saturday by a special committee of the board, ''became, over time, a mea= ns of enriching himself personally, and facilitating manipulation of Enron'= s financial statements.''=20 No one yet knows how much of the blame for Enron's collapse should fall upo= n Mr. Fastow. On Thursday, Mr. Fastow, 40, a father of two who was Enron's = chief financial officer until he was forced to resign in October, is expect= ed to invoke his Fifth Amendment right rather than give potentially self-in= criminating answers to questions from members of Congress.=20 The crucial question is whether Mr. Fastow was the mastermind behind Enron'= s most suspect financing deals. Or was he, as Mr. Fastow has maintained thr= ough a spokesman, merely doing, with the board's knowledge, the bidding of = his superiors at Enron, the former chief executives, Kenneth L. Lay and Jef= frey K. Skilling?=20 Even before Mr. Fastow's appearance on Capitol Hill, Representative James C= . Greenwood, Republican of Pennsylvania, called him the ''Betty Crocker of = cooked books.'' And today, in one Congressional hearing, William C. Powers = Jr., an Enron director who led the committee that wrote the internal report= , said Mr. Fastow had been plagued by dual loyalties. ''Fastow couldn't min= d the store,'' Mr. Powers said, ''because he was involved in the transactio= ns.''=20 For now, Mr. Fastow is not telling his story. He declined to be interviewed= for this article, and he refused to cooperate with a special investigative= committee for Enron's board. He also invoked his right against self-incrim= ination at a meeting a few weeks ago with the Securities and Exchange Commi= ssion.=20 But the portrait that is emerging of Mr. Fastow, from interviews with forme= r colleagues and details from the Enron special report, is that of a brilli= ant, ambitious and hard-charging executive who, it appears, grew obsessed w= ith using complex financing techniques to supercharge Enron's earnings whil= e inflating his own paycheck.=20 Besides the $30 million he made in the LJM partnerships, Mr. Fastow earned = a hefty salary and stock options at Enron. In 1999 and 2000, he sold about = $23 million in Enron stock.=20 It was not as if he needed the money, his friends say; his wife, the former= Lea Weingarten, is the heiress to a Houston real estate fortune. But Mr. F= astow was adamant, friends say, in his belief that the amount of money a pe= rson made was the only meaningful measure of success in business.=20 Even after Mr. Fastow retreated into seclusion last fall, he continued buil= ding an 11,500-square-foot house in Houston's wealthy River Oaks neighborho= od. The Fastows also maintain an art collection, some of which has been dis= played at the Contemporary Arts Museum and at the Menil Collection, both in= Houston.=20 He also had a prominent role in Houston's Jewish community, taking charge o= f fund-raising for the city's new Holocaust museum.=20 ''The work was significantly greater than the reward,'' said Bobby Lapin, a= lawyer who has known Mr. Fastow for years. ''The person I know bears absol= utely no relation to the person who has been characterized, in some reports= , within the walls of Enron.''=20 But the focus on Capitol Hill is not on good deeds.=20 According to the internal report, Mr. Fastow and a group of other top execu= tives secretly invested in a series of partnerships that benefited from swa= pping assets with Enron. Mr. Fastow used some of those partnerships to conc= eal losses at Enron. He used others to inflate profits, by about $1 billion= in a 12-month period in 2000 and 2001. And in one instance, he invested $2= 5,000 in Southampton Place, a partnership that in a matter of two months ma= de $4.5 million from a deal with Enron, the special report said.=20 That transaction, and many others, were never disclosed to Enron's director= s, the report said. The $4.5 million would eventually reach Mr. Fastow thro= ugh a family foundation he had set up as a charity.=20 The collapse of Enron is a dramatic reversal of fortune for Mr. Fastow. Unt= il last August, when Mr. Skilling resigned as chief executive, Mr. Fastow w= as at his side constantly, a crucial player in winning Enron acclaim as one= of the world's most innovative companies.=20 He arrived at the company in 1990, at age 29, a handsome, talented and ambi= tious man who would eventually assume the job of chief financial officer in= 1998 at the age of 36.=20 A graduate of Tufts University and the Kellogg School of Management at Nort= hwestern, Mr. Fastow was helping to refashion a gas pipeline company into s= omething more akin to a Wall Street trading house.=20 Those who knew Mr. Fastow at Enron described a man with twin personalities.= They say he could be charming yet aggressive, quiet yet mercurial, and phi= lanthropic yet bent on accumulating the trappings of wealth.=20 ''He was very smart and very good at what he did,'' one former executive sa= id. ''He could be nice, but he could also be quite volatile and short-tempe= red. He didn't have a lot of patience with people who weren't as smart as h= im.''=20 Andrew Stuart Fastow was born in Washington but grew up in New Providence, = N.J., the son of a buyer for supermarkets and department stores. His career= started in Chicago in the 1980's, at Continental Bank, where he worked on = ''troubled loans,'' and more complicated deals, like leveraged buyouts.=20 At Enron, he started by trying to arrange financing for Mr. Skilling's inno= vative plan, the creation of a ''gas bank'' that would help struggling ener= gy companies by providing them with loans in exchange for their oil and gas= reserves, which Enron could hedge and trade against in its growing derivat= ives unit.=20 Enron later began supporting energy producers by creating partnerships that= allowed the company to keep the debt off the balance sheet. The first of t= hose partnerships was named Cactus.=20 By 1993, the partnerships Mr. Fastow helped set up were so successful that = Calpers, the California Public Employees' Retirement System, approached Enr= on about a joint venture. The partnership was called JEDI, or the Joint Ene= rgy Development Investments.=20 Later, there were hundreds of other partnerships, with names like Obi 1, Ch= ewco and Raptor.=20 In recent years, as Enron pushed to build power plants and to develop new m= arkets, the company needed huge amounts of capital, and partnerships were o= ne way to pay for the projects without having the debt accumulate on Enron'= s balance sheet.=20 In 1999, CFO magazine honored Mr. Fastow for creating an innovative financi= ng structure. In a rare interview, he told CFO that he would use off-balanc= e-sheet transactions to avoid weakening Enron's credit rating. And he would= do this while operating in the shadows.=20 ''This guy was never anything but low profile,'' said John E. Olson, an ene= rgy analyst at Sanders Morris Harris. ''He rarely, if ever, showed up at an= alyst meetings. He was a loan consolidator.''=20 By 1999, there were small fissures in Mr. Fastow's labyrinthine financing e= mpire. As early as 1997, Enron had difficulty finding a partner to buy out = Calpers's interest. So, apparently to skirt disclosure rules, Mr. Fastow pr= oposed listing his wife's family as outside investors. When he was rebuffed= , Michael Kopper, who worked under Mr. Fastow at Enron, was selected. Becau= se he was a lower-level employee, Enron would not have to disclose his inte= rest in S.E.C. filings. Mr. Kopper would eventually make at least $10 milli= on in profit from the venture.=20 Later, Mr. Fastow dealt with partnerships that involved at least four other= Enron employees.=20 Mr. Fastow, the board report said, often played dual roles as an Enron exec= utive and a partner of LJM. Once, he found himself at odds with Enron Broad= band Services. ''Fastow's involvement caused great distress for the E.B.S. = team,'' the special report said. ''They understood that their job was to ge= t the best deal possible for Enron but driving a hard bargain for Enron dre= w the ire of Enron's C.F.O.'=20 Others, who worked closely with Mr. Fastow, say he was not a rogue operator= . ''I think there's too much focus on Andy,'' one longtime colleague said. = Mr. Fastow, the colleague said, did not do anything on his own.=20 Other colleagues say it is quite possible Mr. Fastow took charge himself, t= hat he got wrapped up in a series of complex transactions that ultimately d= oomed him. And even when it was all falling apart, Mr. Fastow was reluctant= to acknowledge what was happening.=20 In October, after the company was forced to restate its earnings but before= he left, Mr. Fastow appeared at an employee meeting at the Hyatt Regency h= otel here. His remarks were brief and mysterious. ''The Enron Corporation's= balance sheet,'' one employee recalls him saying, ''has never been in bett= er health.'' Photos: Andrew S. Fastow, Enron's former chief financial officer, at his la= wyer's office last month in Houston. (James Estrin/The New York Times)(pg. = A1); Andrew S. Fastow is said to have been a hard-charging executive obsess= ed with using complex financial techniques to bolster profit. (F. Carter Sm= ith for The New York Times); After Andrew S. Fastow went into seclusion las= t fall, he continued work on his 11,500-square-foot new home in the River O= aks area of Houston. (James Estrin/The New York Times)(pg. C9)=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 A Section Enron CEO Felt 'Betrayed,' Panel Told; Head of Internal Probe Testifies on = the Hill Jackie Spinner and David S. Hilzenrath Washington Post Staff Writers 02/06/2002 The Washington Post FINAL A01 Copyright 2002, The Washington Post Co. All Rights Reserved Former Enron Corp. chairman Kenneth L. Lay told investigators for the Enron= board that he should have paid more attention to his company's bookkeeping= but felt "betrayed" by others at the company who kept information from him= , the board's lead investigator testified yesterday.=20 Lay, in four hours of interviews with the special board committee investiga= ting the company's collapse, indicated that he knew the company was using E= nron stock to protect investors in its off-the-books partnerships, said Wil= liam C. Powers Jr., chairman of the committee, which issued its report Satu= rday. That unusual strategy helped Enron hide large debts and losses.=20 "When we interviewed Mr. Lay . . . he didn't understand or appreciate there= was anything wrong with it," Powers, dean of the University of Texas Law S= chool, told the House Government Reform subcommittee on oversight and inves= tigations. Lay's story was that "the accountants had signed off on it," Pow= ers said. "It was a credible device."=20 Powers also disclosed that the Enron board's investigative committee spent = "a couple of hours" interviewing former Enron vice chairman J. Clifford Bax= ter, who was found dead on Jan. 25 of a self-inflicted gunshot wound. Power= s said Baxter gave no hint that he was "a person . . . in danger."=20 House members asked Powers for notes or recordings from that interview. Pow= ers said he could not turn the records over without permission from the com= pany, but he said he would support their release. Enron attorney Robert Ben= nett later said the company "certainly will provide the materials requested= ."=20 Committees in the Senate and House yesterday subpoenaed Lay to appear on Ca= pitol Hill on Feb. 12 and 14. Lay, who withdrew from a scheduled appearance= Monday, is expected to invoke his constitutional right against self-incrim= ination and refuse to testify, but the subpoenas mean he will have to do so= in person in the full glare of publicity.=20 Meanwhile, members of a Financial Services subcommittee unleashed their wra= th on Arthur Andersen chief executive Joseph F. Berardino, blasting the big= accounting firm's audits of Enron and voicing exasperation when Berardino = said he didn't know the answers to many of their questions about Andersen's= conduct.=20 "Maybe it's better to be dumb than culpable, but we want some answers," sai= d Rep. Gary L. Ackerman (D-N.Y.).=20 "I mean, your ship is going to go down and you're going to be lashed to the= mast unless you start talking to us about what happened."=20 Berardino, who headed Andersen's audit practice before becoming its chief e= xecutive about a year ago, said Andersen was still trying to gather the fac= ts.=20 "I don't know, with authority, what we knew and when we knew it," he told t= he Financial Services subcommittee on capital markets, one of several congr= essional panels investigating Enron's collapse.=20 Separately, a spokesman for Andersen said yesterday that its auditors went = to Enron's board earlier than was previously known with concerns about poss= ible illegal activity.=20 The first approach was in August, after the emergence of a letter from exec= utive Sherron Watkins to Lay warning of widespread accounting irregularitie= s, spokesman Charlie Leonard said.=20 Federal law requires auditors to alert the SEC when they suspect illegality= and the board or management does not ad
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