Kenneth Lay Resigns as Enron Chairman Probe: Creditors panel urges the move so new managers can oversee reorganization.
Los Angeles Times, 01/24/2002

Enron Chief Quits Under Pressure And Calls Inquiries a Distraction
The New York Times, 01/24/2002

Enron's Lay Resigns as Chairman, CEO --- Panel Appointed by Court Had Requested Change; Interim Chief Is Sought
The Wall Street Journal, 01/24/2002

Lay quits top post at Enron 
Creditors asked for resignation 
Houston Chronicle, 01/24/2002

Enron Chief Quits As Hearings Open; Lay Scheduled to Appear on Hill Feb. 4
The Washington Post, 01/24/2002

Loss booked as unit profit, memo claims 
Houston Chronicle, 01/24/2002

Accounting for Enron: Congress Probes Shredding by Andersen --- Executives Are Subpoenaed To Testify Before Panel In House in Enron Case
The Wall Street Journal, 01/24/2002

ENRON'S COLLAPSE: THE OVERVIEW
WIDE EFFORT SEEN IN SHREDDING DATA ON ENRON'S AUDITS
The New York Times, 01/24/2002

THE NATION THE ENRON INQUIRY Andersen Memo Cites Objections
Los Angeles Times, 01/24/2002

Enron Audit Fee Raises Some Brows
Los Angeles Times, 01/23/2002

ENRON'S COLLAPSE: GAUGING THE ASSETS
Plaintiffs Ask: Just How Deep Are the Pockets At Andersen?
The New York Times, 01/24/2002

ENRON'S COLLAPSE: THE OFFICE
Morale and Occupancy Are Low At the Headquarters in Houston
The New York Times, 01/24/2002

ENRON'S COLLAPSE: THE CRITICS
Sharpton, in Houston, Calls Attention to the Workers
The New York Times, 01/24/2002

Sharpton urges aid for investors 
Houston Chronicle, 01/23/2002

Taking Stock of Enron
The Wall Street Journal, 01/24/2002

ENRON'S COLLAPSE: RETURNS UNDER SCRUTINY
Senate Finance Panel Wants Tax Information From Enron
The New York Times, 01/24/2002

ENRON'S COLLAPSE: POLITICAL MEMO
In Personal Anecdote, Some See New Distance Where Others See New Strategy
The New York Times, 01/24/2002

ENRON'S COLLAPSE: FADING NEST EGGS
Labor Dept. Reviews Ban On Stock Sale
The New York Times, 01/24/2002

Labor probes 401(k) lockdown 
Houston Chronicle, 01/23/2002

Beware the 401(k) Gamble: Enron workers aren't the only ones rolling the dice with retirement savings. But efforts to limit investment in employer stock meet bitter resistance.
Los Angeles Times, 01/24/2002

How to Predict The Next Fiasco In Accounting And Bail Early
The Wall Street Journal, 01/24/2002

Bush Official Cites Losses On Sales of Enron Stock; Army Secretary Had Been A Company Executive
The Washington Post, 01/24/2002

Accounting for Enron: Bush's Plan to Name Accounting Veterans To SEC Raises Some Eyebrows in Congress
The Wall Street Journal, 01/24/2002

Accounting for Enron: Insurance Companies Cut Sales Of Once-Plentiful Surety Bonds
The Wall Street Journal, 01/24/2002

Accounting for Enron: Pension Funds, Not Lawyers, Drive Holder Suits
The Wall Street Journal, 01/24/2002

Sales to Ex-Enron Customers Help Dynegy Profit Rise 36%
Los Angeles Times, 01/24/2002

Accounting for Enron: Dynegy's Fourth-Quarter Net Fell 27%, Weighed Down by Costs Related to Enron
The Wall Street Journal, 01/24/2002

Congress Fought Changes to Accounting Rules Over Past Decade
The Wall Street Journal, 01/24/2002

Damn the delete key
U.S. News & World Report, 01/28/2002

Man on the Hot Seat
U.S. News & World Report, 01/28/2002

Leaving well enough alone
U.S. News & World Report, 01/28/2002

Congress's Enron Challenge
The Washington Post, 01/24/2002

All Enron Cards on the Table
The Washington Post, 01/24/2002

A Gift To the Democrats
The Washington Post, 01/24/2002

A Crash Course In Lobbying
The Washington Post, 01/24/2002

Letters to the Editor
The Enron Mess: Outrage, and Then?
The New York Times, 01/24/2002

Enron's Shell Game Shouldn't Taint Markets
Los Angeles Times, 01/24/2002

Oblivious to a Strong Smell
Los Angeles Times, 01/24/2002
LOU DOBBS MONEYLINE; CNNfn
CNNfn: Moneyline News Hour, 01/23/2002

Poor Kenny Boy 
WorkingForChange.com, 01/23/2002

______________________________________________________________________

Financial Desk
THE ENRON INQUIRY
Kenneth Lay Resigns as Enron Chairman Probe: Creditors panel urges the move so new managers can oversee reorganization.
NANCY RIVERA BROOKS; DAVID STREITFELD; LEE ROMNEY
TIMES STAFF WRITERS

01/24/2002
Los Angeles Times
Home Edition
A-1
Copyright 2002 / The Times Mirror Company

HOUSTON -- Kenneth L. Lay was ousted Wednesday from Enron Corp., the Houston company that he spent 15 years building into the world's largest energy trader only to watch it crumble amid allegations of financial trickery. 
Enron announced it is beginning a search for a turnaround specialist to save what is left of what was once the nation's seventh-largest company, but which now holds the dubious distinction of having filed the largest-ever bankruptcy petition.
Lay said his decision to resign as chairman and chief executive was reached in cooperation with Enron's board and the 15-member creditors' committee selected as part of Enron's bankruptcy proceedings. Enron filed for bankruptcy protection Dec. 2, listing more than $50 billion in assets and more than $31 billion in debts. 
The bank-dominated creditors' committee had been pushing for Lay's resignation so that new managers could oversee Enron's attempt to reorganize and repay the money it owes, sources familiar with the situation said. The decision was reached Wednesday morning during a board meeting with Enron's far-flung directors checking in by telephone. 
"The creditors just want a green-eyeshade guy who gets their money back for them," one source said. 
Lay will remain a director of the company. 
"I want to see Enron survive, and for that to happen we need someone at the helm who can focus 100% of his efforts on reorganizing the company and preserving value for our creditors and hard-working employees," Lay said in a statement. "Unfortunately, with the multiple inquiries and investigations that currently require much of my time, it is becoming increasingly difficult to concentrate fully on what is most important to Enron's stakeholders." 
Lay, 59, has been named in more than 50 lawsuits, and his company's disintegration is being investigated by several congressional committees, the Justice Department and the Securities and Exchange Commission. 
That Lay was tossed out comes as less of a surprise than the leisurely time it took to do it, Enron watchers said. 
Lay held on as a series of damaging financial disclosures about murky off-balance-sheet partnerships and overstated earnings hammered Enron's stock price, wiping out billions of dollars of investor holdings and the retirement savings of Enron employees. 
Lay survived a failed last-ditch merger attempt with cross-town rival Dynegy Inc., which fled claiming that it hadn't realized the depths of Enron's troubles. He lasted as Enron's debt plunged to junk status and lenders turned their backs, causing an all but fatal cash crunch that pushed Enron into bankruptcy. 
But the heat rose in the last few weeks with revelations that Lay and other Enron executives contacted Bush administration officials late last year seeking help for the flailing company, that Lay was touting the stock to employees and urging them to buy shortly before Enron announced its worst quarter in corporate history, that Lay was warned in August by a company vice president of a possible corporate implosion if details of the off-balance-sheet transactions became known and that documents were shredded by Enron employees and those of its auditor, Andersen. 
"For whatever value remains in Enron to be realized, Lay's resignation was necessary," said Edward Muller, an investor in energy ventures and former president of Irvine-based Edison Mission Energy. It was necessary because "Lay's presence, with an obvious personal interest, stood in the way of decisions being made to realize value for creditors and move the organization forward." 
Prudential Securities analyst Carol Coale said the decision comes too late and is likely to play poorly on Wall Street. 
"When Wall Street was calling for Ken Lay's head, it was early in the game," said Coale, who is based in Houston and has followed Enron closely. "Wall Street thought that would be the responsible thing for the board to do. But at this point, it makes him look guilty." 
"I don't think the market's going to react favorably to that," she said, noting that the company's stock took a steep plunge when CEO Jeffrey Skilling resigned abruptly in August. Enron, which little more than a year ago traded at nearly $90 a share on the New York Stock Exchange, closed Wednesday at 34 cents in over-the-counter trading, down 9.5 cents. Lay's resignation was announced after markets closed. 
The reaction from Enron employees, current and former, was bitter. 
"It was bound to happen," said Maritta Mullet, a former 10-year employee who lost nearly half a million dollars in would-be retirement benefits. "I'm surprised he's been able to face up to all these people and stay in there so long. 
"I feel terribly betrayed by him," added Mullet, who said Lay was "blushing over with how good everything looked" in a September online chat with employees. 
That enthusiasm cost her and others dearly. 
Rumors had swirled in recent days that a new management team was about to be named, perhaps to be led by Jeffrey McMahon, Enron executive vice president and chief financial officer. McMahon was named to those posts in late October, replacing Andrew Fastow, who helped engineer the off-balance-sheet partnerships that greased Enron's slide into bankruptcy. 
McMahon was treasurer in 2000 and reportedly objected to the conflicts of interest caused by Fastow's twin roles as Enron chief financial officer and manager of two of the partnerships. McMahon then moved to a small Enron subsidiary but was brought back in a futile attempt to calm investors. 
With Lay's departure, McMahon would be the only remaining member of Enron's three-person office of the chairman. The third member, Enron President Lawrence Greg Whalley, is leaving Enron to run the trading operation that Enron is selling to UBS Warberg in a noncash profit-sharing deal. 
Enron officials have touted the pending sale of the company's trading operation to UBS as the beginning of a new future. The deal was blessed by the U.S. Bankruptcy Court on Friday, and UBS has already extended job offers to 640 Enron employees. 
Still, if Enron management believes the company can move forward more smoothly and reorganize without Lay, Mullet and others are doubtful. 
"I didn't think the company could survive with him staying. But I don't think the company can survive either way," she said. "I don't see what's left." 
"It's about time," said one former Enron vice president who spent four years at the company. "I think he's entirely culpable. He knew what was going on. He was responsible. He was captain of the ship." 
The former vice president, who asked not to be named, said the board of directors has been passive and should have acted sooner. 
"I was wondering when they were going to get around to it. I've been shocked that the [Bankruptcy] Court allowed the same management to stay in place. It seems like the shredded documents were the last straw." 
One current Enron finance executive said, "Good. Now they can start cleaning house. He's a great guy, but he fell asleep at the wheel a bit. There has to be someone taking some responsibility here, and he's chairman." 
Enron spokesman Mark Palmer said he did not know what kind of retirement package Lay was being given, but noted that any agreement would have to be approved by the Bankruptcy Court. 
Lay earned hundreds of millions of dollars at Enron, primarily through lucrative stock options in recent years. 
In 2000, Lay exercised options worth $123.4 million, according to Enron filings with the Securities and Exchange Commission. His base salary that year was $1.3 million, and he was given a $7-million bonus. 
At the end of 2000, Lay held 5.1 million options worth $257.5 million, and an additional 1.5 million options worth more than $100 million that were scheduled to vest in coming years, according to the SEC documents. 
However, the plunge in Enron's stock price probably renders any unexercised options worthless. 
Lay received a $3.6-million bonus in January 2001. The company has not released figures relating to his 2001 salary and option grants. 
* 
Contributing to this story were Times staff writers David Streitfeld and Lee Romney in Houston and Walter Hamilton and James Flanigan in Los Angeles.

PHOTO: Attorney William Lerach represents Amalgamated Bank and other clients that say they lost millions in Enron investments.; ; PHOTOGRAPHER: Reuters; PHOTO: Rusty Hardin, attorney for Andersen, speaks to reporters in Houston after a court hearing related to shredding of Enron documents.; ; PHOTOGRAPHER: Reuters 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Business/Financial Desk; Section A
ENRON'S COLLAPSE: THE CHAIRMAN
Enron Chief Quits Under Pressure And Calls Inquiries a Distraction
By JIM YARDLEY and JOHN SCHWARTZ

01/24/2002
The New York Times
Page 1, Column 6
c. 2002 New York Times Company

HOUSTON, Jan. 23 -- Kenneth L. Lay resigned this evening as chairman and chief executive of the Enron Corporation under pressure from outside creditors, nearly two months after his company filed for one of the largest bankruptcies in the history of American business. 
Mr. Lay, 59, suggested in a statement that he had decided to resign ''in cooperation'' with the court-appointed creditors committee that is overseeing the bankruptcy proceedings. He said the various federal inquiries into Enron's collapse were too large a distraction as he tried to resuscitate the company he has led since 1986.
''I want to see Enron survive, and for that to happen we need someone at the helm who can focus 100 percent of his efforts on reorganizing the company and preserving value for our creditors and hard-working employees,'' he said in a statement released by the company. 
''Unfortunately,'' he added, ''with the multiple inquiries and investigations that currently require much of my time, it is becoming increasingly difficult to concentrate fully on what is most important to Enron's stakeholders.'' 
Mr. Lay will remain on Enron's board. The creditors committee is searching for a specialist in reorganizing companies to join Enron and serve as acting chief executive as soon as possible. 
Thomas A. Roberts, a lawyer for Enron in New York, said that Mr. Lay had been discussing the possibility of resigning since early December. Mr. Roberts said that a representative of the creditors committee had called him Tuesday night. ''The creditors committee really thinks Ken should think about stepping down as an officer and employee of the company,'' he said. 
Mr. Roberts then called Mr. Lay at his home about 10 p.m. Tuesday. ''I passed that along and said, 'We probably need to think about this.' We talked about it awhile, and he said he was going to get something to eat and talked with his wife,'' Mr. Roberts said. 
The two men talked again the next morning; Mr. Lay said that he would convene a conference call among the directors later that morning. Mr. Roberts was included in that call. 
During the call, Mr. Lay gave a synopsis. ''He said the time had come for him to resign as an officer of the company so that somebody could get in there and work on rebuilding it because his time was going to have to be dedicated to all of these investigations that were taking place,'' Mr. Roberts said. 
Mr. Roberts said that it was very important that Mr. Lay was staying on as a board member because ''he will continue to be available to advise the company.'' 
The resignation of Mr. Lay comes after a string of recent revelations that have raised questions about the conduct of Enron's top executives, including Mr. Lay himself. Disclosures by Congressional investigators have shown that Mr. Lay helped create and oversee some of the financial arrangements that helped lead to Enron's collapse. 
In August, he was warned in a private memorandum from a company vice president that Enron's accounting practices could bring down the company. 
Yet even as he was selling his own shares of Enron stock in September and October, he was reassuring employees that the company would rebound and encouraging them to buy. His lawyer has said Mr. Lay was selling not because of lack of confidence in Enron but because he faced margin calls as investments in his personal portfolio declined in value. 
Mr. Lay will now face scrutiny for his role in Enron's collapse from federal investigators and Congressional committees. On the day he resigned, the company that he had once helped develop into the nation's largest energy trader was instead a half-empty tower in which two floors were secured by federal agents. 
A White House spokeswoman, Jeanie Mamo, said, ''This doesn't change the president's focus, which is on the ongoing criminal investigation and on the policy reviews to protect people's pensions.'' 
Mr. Lay had been a popular leader as Enron grew the last 15 years into an energy giant that he transformed, Cinderella style, from an unglamorous gas pipeline company. He was considered by peers as a man of big ideas, a crusader for free markets and a risk taker in the Texas wildcatter tradition. But while he was busy befriending the nation's most powerful politicians, erecting one of the tallest buildings in Houston and pledging $100 million to put Enron's logo on the city's new ballpark, the little things were turning out to be Mr. Lay's big problems. 
One after another, disclosures spilled out of his company in recent months: off-balance-sheet partnerships had hidden billions in debt; years of Enron's reported profits had been exaggerated. The stock price, once at more than $90 a share, tumbled to less than a dollar. A flood of lawsuits resulted as retirement systems, shareholders, former employees and others said that Enron's failure to disclose its accounting flaws amounted to a violation. 
''He fell on his sword,'' said John Olson, an energy industry analyst here who was a lone skeptic about Enron when the company was flying high. ''It was probably the right thing to do. Given the climate of opinion in Houston, and where the company is in attempted recovery, this is probably in the best interests of everybody.'' 
Mr. Lay hoped at first that he could avoid filing for bankruptcy when he entered into merger talks with Dynegy, his Houston rival. But that deal fell apart, spawning more lawsuits and hard feelings, and leaving Enron with little choice but to file for Chapter 11 bankruptcy. On Dec. 3, the company laid off more than 4,000 workers and was vilified in the hometown where he was once thought to be a mayoral candidate. 
There is no question that Enron employees did benefit over the years when the stock price soared, as did Mr. Lay. He has collected more than $300 million since 1989, mostly through exercising stock options. 
In Texas, he was first known as a friend and supporter of former President George Bush. But when George W. Bush ran for president in 2000, Mr. Lay gained a national reputation as one of the ''pioneers,'' the top fund-raisers who gave more than $100,000 to Mr. Bush's presidential campaign. In all, Enron along with Mr. Lay have given more than $600,000 to Mr. Bush's political campaigns dating back to his first failed run for Congress in West Texas. 
Enron did not limit its contributions to Mr. Bush. The company has made donations to nearly two-thirds of the members of Congress and much of the Republican establishment in Texas.

Photo: Kenneth L. Lay, Enron's ex-chief. (F. Carter Smith/Corbis Sygma) 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Enron's Lay Resigns as Chairman, CEO --- Panel Appointed by Court Had Requested Change; Interim Chief Is Sought
By Mitchell Pacelle and Rebecca Smith
Staff Reporters of The Wall Street Journal

01/24/2002
The Wall Street Journal
A3
(Copyright (c) 2002, Dow Jones & Company, Inc.)

Kenneth L. Lay resigned as chairman and chief executive of Enron Corp., the company announced last night, less than 24 hours after the court-appointed creditors committee requested his removal. 
The beleaguered company and the creditors committee are now searching for a chief restructuring officer to also serve as interim chief executive, the company said. The company has launched a separate search for a new chairman.
The committee, which consists of 15 Enron creditors, had contacted the company's lawyers at about 9 p.m. Tuesday to request Mr. Lay's resignation and the appointment of a restructuring officer to take over running the company, according to Thomas Roberts of Weil Gotshal & Manges, counsel to Enron. Mr. Roberts said he relayed the request to Mr. Lay, who offered his resignation to Enron's board at a meeting late yesterday morning. Mr. Lay will remain on Enron's board. 
"I want to see Enron survive, and for that to happen we need someone at the helm who can focus 100%" on the reorganization, Mr. Lay said in a prepared statement. "Unfortunately, with the multiple inquiries and investigations that currently require much of my time, it is becoming increasingly difficult to concentrate fully on what is most important to Enron's stakeholders." 
In recent weeks, Mr. Lay worked tirelessly to find some way to end the crisis that drove into bankruptcy the company he built. Beginning in 1985, Mr. Lay took a second-tier gas-pipeline company, formed through the merger of Houston Natural Gas and InterNorth Inc., and forged it into the nation's biggest energy trader. Enron became a tireless proselytizer for deregulation and competitive markets, reflecting Mr. Lay's belief in open markets honed as a Ph.D. economist at the Federal Energy Regulatory Commission and a college economics professor. 
The company is already talking to a couple of people about the chief-executive position, and has drawn up a lengthier list of people to approach about the chairman position, according to someone familiar with the process. 
While a final decision about Mr. Lay's fate rested with Enron's board, the position of the creditors committee carries considerable weight in the bankruptcy process. Under bankruptcy law, after a company files for Chapter 11 bankruptcy-court protection, as Enron did Dec. 2, the fiduciary responsibility of its board expands from shareholders to include all creditors. 
Mr. Roberts said Mr. Lay had been considering resigning "off and on" since before Christmas. 
Mr. Lay had stepped down as chief executive in January 2001, only to return to the job after his successor, Jeffrey K. Skilling, abruptly resigned in August as the company's stock was falling. Mr. Lay also agreed to step down if Dynegy Inc. had completed its proposed acquisition of Enron, which unraveled as Enron's problems mounted in November. 
In the wake of damaging allegations about the destruction of Enron-related documents, and reports of Mr. Lay's sales of tens of millions of dollars of Enron stock in the past year as the company's condition deteriorated, there was a growing sense on the creditors committee that he wasn't the best man to run the company as it tries to maximize recoveries to creditors, according to people familiar with the committee's deliberations. 
Many creditors are worried that Enron's assets may be worth far less than they initially had hoped, meaning creditors are likely to receive far less than the billions of dollars they are owed. 
In response to criticism, Mr. Lay has indicated he wasn't fully aware of the details of the controversial partnerships whose disclosure led to major financial losses and, even worse, to a loss in investor confidence in Enron. But Mr. Lay was present at board meetings where some of the partnerships were approved and where a waiver of the company's conflict-of-interest policy was discussed to enable former Chief Financial Officer Andrew Fastow to run them. 
As the partnerships came under public scrutiny, Mr. Lay defended them in interviews, saying the transactions were fully vetted and approved by the board and had been done to benefit Enron. 
Given controversy swirling around Mr. Lay and other top Enron executives, it is hardly surprising that creditors would question his future. 
There is ample precedent for the forced departure of top executives of companies that have filed for bankruptcy. In November, Linda Wachner, longtime head of Warnaco Group Inc., was replaced as chief executive officer by a turnaround expert after she lost the support of creditors in bankruptcy proceedings. 
If a company's board doesn't accede to the wishes of the creditors committee, bankruptcy law gives creditors further leverage to force a company's hand. 
Creditors can file a motion asking the court to appoint a trustee to run the company, supplanting the top executive and the board. To gain such relief, creditors must prove gross mismanagement or fraud by current management.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Lay quits top post at Enron 
Creditors asked for resignation 
By LAURA GOLDBERG 
Copyright 2002 Houston Chronicle 
Jan. 24, 2002, 8:45AM
Ken Lay resigned Wednesday as chairman and chief executive officer of Enron at the request of the committee representing the company's creditors. 
"I want to see Enron survive, and for that to happen we need someone at the helm who can focus 100 percent of his efforts reorganizing the company and preserving value for our creditors and hard-working employees," Lay, 59, said in a statement released Wednesday night. "Unfortunately, with the multiple inquiries and investigations that currently require much of my time, it is becoming increasingly difficult to concentrate on what is most important to Enron's stakeholders." 
The committee representing creditors in Enron's bankruptcy told Lay Tuesday night he had become a distraction and must step aside because of the many allegations being leveled at the company, a source close to Enron said Wednesday night. 
Lay, who will stay on the board of directors, oversaw the company's growth from a staid pipeline business into an energy powerhouse that dealt in natural gas, electricity and other commodities. 
After a decline that began early this year, the company finally collapsed in October amid charges it had improperly inflated revenues and concealed debt by using questionable accounting techniques. Thousands of employees were put out of jobs and still more lost their retirement savings. 
Thomas A. Roberts, a corporate lawyer helping oversee Enron's reorganization, said Lay had been considering stepping down since before Christmas. 
Lay couldn't be reached for comment. 
He is scheduled to testify Feb. 4 before the Senate Commerce Committee. Enron spokesman Mark Palmer said he did not think Lay has changed plans to do so. 
Palmer said he was unsure whether Lay would be receiving any severance. 
The creditors committee apparently didn't object to Lay remaining on the board of directors, who Palmer said had asked Lay to stay on to help with the restructuring. Lawyers representing the creditors committee couldn't be reached Wednesday night. 
The board and creditors committee are in the process of selecting a "restructuring specialist" to serve as acting chief executive officer. The board, itself the target of lawsuits, will soon select a new chairman. 
Lay notified remaining Enron employees of his resignation in an e-mail sent Wednesday night. He told them he was proud of what Enron and its employees had accomplished over the years and praised them for the help they had given to other employees and their communities. 
In Washington, U.S. Rep. Ken Bentsen, D-Houston, said Lay's announcement was "no great surprise when you consider the fact that he had lorded over a company that collapsed as a result of what appears to be great mismanagement, if not fraud." 
"I don't think he had any other choice but to step aside," he said, adding that he doesn't expect Enron to be resurrected. 
"I've been highly skeptical of whether we would ever see Enron rise again," Bentsen said. "The chairman and CEO (Lay) ultimately has to take responsibility for that." 
House Majority Whip Tom DeLay, R-Sugar Land, said he is focused on finding out what happened at Enron. 
"It's been a very hard time for too many Houstonians," he said. "This doesn't change that fact, nor the fact that we still need answers." 
Arthur Andersen spokesman Patrick Dorton declined to comment on Lay's departure. Andersen was the accounting firm for Enron before the collapse. 
Houston Chronicle reporters Karen Masterson and Patty Reinert contributed to this report from Washington. 

A Section
Enron Chief Quits As Hearings Open; Lay Scheduled to Appear on Hill Feb. 4
Dan Morgan and Peter Behr
Washington Post Staff Writers

01/24/2002
The Washington Post
FINAL
A01
Copyright 2002, The Washington Post Co. All Rights Reserved

Kenneth L. Lay resigned yesterday as chairman and chief executive of Enron Corp., caught between unrelenting pressures from the energy company's creditors and a circle of federal and congressional investigators pursuing the reasons for Enron's collapse late last year. 
Lay, 59, who founded the Houston company in 1986 and presided over its surging growth as an energy trader in the late 1990s, submitted his resignation around noon in a conference phone call with the company's board of directors. He will remain on the board.
His resignation, on the eve of two congressional hearings, had been sought by a committee of major creditors who hold veto power over Enron's Chapter 11 bankruptcy reorganization. "You work for the creditors. The creditors wanted someone else," said one Enron official. 
Lay's departure came a day after FBI agents moved into Enron's headquarters tower to investigate charges of widespread shredding of corporate documents after government investigations of Enron had begun. Agents said they found a trash can containing shredded material and sealed off the area. Document destruction at Enron and its outside auditing firm, Arthur Andersen, will be a key focus of today's Capitol Hill hearings. 
Yesterday, people familiar with an investigation into shredding of Enron-related documents at Andersen's Houston office said scores of employees were involved. Ken Johnson, spokesman for the House Energy and Commerce Committee, said it was "many" people, not just a few. Others familiar with the situation say all those involved were on Enron's audit team in the Houston office, or were technical employees directed by the Enron team. 
A friend and major political backer of President Bush, Lay formed Enron by combining two natural gas pipeline companies and transformed it into a powerful supplier of gas and electricity. In the 1990s it created a vast, complex energy and commodity trading operation marked by increasingly elaborate outside partnership structures that are a central focus of the Enron investigations. 
Lay is scheduled to make the first appearance by a senior Enron executive before congressional panels investigating his company's demise at a Senate hearing Feb. 4. He also is a lead defendant in lawsuits by Enron shareholders and former employees. Their lawyers charge that Lay and other company executives enriched themselves through sales of Enron stock while misleading investors and employees about the company's rapidly deteriorating financial condition last year. 
"I want to see Enron survive, and for that to happen, we need someone at the helm who can focus 100 percent of his efforts on reorganizing the company and preserving value for our creditors and hardworking employees," Lay said in a statement. 
After filing the largest bankruptcy petition in U.S. history Dec. 2, Enron is trying to sell assets, settle its debts and survive as an energy producer and distributor. Although the company laid off about 4,500 employees from its headquarters staff, it has about 19,000 employees worldwide at energy, pipeline and water supply installations, the company said. 
"It was becoming increasingly difficult for Ken to concentrate fully on what is most important to Enron's stakeholder" -- the bankruptcy reorganization, said Enron spokesman Mark Palmer. 
"Ken had considered the possibility that he might want or need to step down back before Christmas," said Enron's chief outside corporate lawyer, Thomas A. Roberts of Weil, Gotshal & Manges. A representative of Enron's creditors committee called Roberts on Tuesday to say that Lay should consider resigning and after Roberts and Lay discussed it, Lay resigned. 
Today's hearings are being conducted by the Senate Governmental Affairs Committee, which is looking into financial and regulatory issues surrounding Enron's collapse, and the oversight subcommittee of the House Energy and Commerce Committee, which is looking into alleged document destruction by Arthur Andersen. 
A White House spokeswoman, Jeanie Mamo, said the resignation does not change the president's focus. "It is on the criminal investigation, which will continue, and on the policy reviews to protect people's pensions," she said. 
Governmental Affairs Committee Chairman Joseph I. Lieberman -- a pro-business Democrat from Connecticut with an eye on his party's 2004 presidential nomination -- has summoned former Securities and Exchange Commission chairman Arthur Levitt Jr. and other witnesses to testify about financial and regulatory issues. 
Rep. W.J. "Billy" Tauzin, (R-La.) chairman of the House Energy and Commerce Committee, said yesterday he had moved the investigatory hearing ahead of one planned by the full committee to examine Enron's financial activities and relationships because it was urgent "to get to the bottom of this." 
"We cannot do our work if people are going to destroy documents," he said. 
Andersen recently admitted that the company's audit team last October destroyed thousands of documents and e-mails resulting from its audit of Enron after learning that the SEC was looking into Enron's accounting practices. 
Rep. James C. Greenwood (R-Pa.), who chairs the subcommittee on oversight and investigations, said Andersen agreed late yesterday to provide a senior partner to answer questions about policies and procedures regarding documents. Andersen attorney Nancy Temple and Michael Odum, who was on the Andersen team at Enron, will appear under subpoena. 
Greenwood said they would be questioned about when they became aware that Enron or Andersen might face litigation or an SEC probe, and how this affected their handling of relevant documents. 
David B. Duncan, who led Andersen's audit of Enron, has also been ordered to appear. His attorneys have told the committee he probably will refuse to testify by invoking his right against self-incrimination. Duncan previously spoke to committee investigators, but not under oath. 
Lieberman has labeled the Enron story a "corporate scandal," and indicated he wants to use the hearings to explore the role of the SEC, the Department of Energy and other oversight agencies. 
Under Lay, Enron was a leading political advocate for natural gas and electricity deregulation, courting allies in Washington and state capitals with intensive lobbying and generous contributions. Enron made $1.9 million in political contributions between 1999 and 2001, according to a campaign spending watchdog group, the majority of it to Republicans. Lay, other Enron executives and the company itself contributed more than $220,000 to Bush's presidential campaign. 
As Enron was unraveling last fall, Lay tried to win help from the Bush administration, contacting Commerce Secretary Donald L. Evans and Treasury Secretary Paul H. O'Neill in October. The Cabinet officials said they turned down Lay's requests for assistance in holding off a pending downgrade of Enron's credit rating -- a critical issue for the heavily indebted company. 
Lieberman has avoided direct criticism of the White House's ties to Lay and other Enron figures, saying he has seen no indication of illegal activity. That caution, say political observers, reflects many Democrats' concerns about the risks of appearing overly partisan, especially if congressional inquiries turn up no evidence of White House wrongdoing. 
The central question Lay faces now is what he knew about Enron's deteriorating financial condition last year. Lay and other top executives professed that the company's future was bright at a time when its foreign energy projects were losing money and a crucial Internet networking venture was failing. 
In August, Enron Vice President Sherron Watkins warned Lay directly that the company faced a threat of accounting scandals because of its use of outside partnerships and investment entities to conceal debts and exaggerate revenue, she said. Enron asked another outside law firm, Vinson & Elkins, to investigate the charges, but said nothing about Watkins's warning. 
Two months later, Enron revealed the first of a worsening series of accounting violations and errors, the Securities and Exchange Commission launched an inquiry, and the company's final collapse began. 
Thousands of Enron shareholders have lost retirement savings in Enron stock and Lay has become a focus of their anger. 
"I believe he cares very much for the jobs that have been lost and the pain that's been done," Roberts said. "It's been extraordinarily difficult. He's held up very well." 
Like dozens of others in Congress serving on committees involved in the investigation, Lieberman has received political donations from accounting companies, including Andersen's political action committee. The New Democrat Network, a campaign group he co-founded to support the election of centrist Democrats, also has received $14,500 from the Andersen PAC and $15,000 from Enron's PAC since 1997, according to PoliticalMoneyLine, an independent monitoring group. 
As a Republican loyalist, Tauzin is expected to keep attention focused on the corporate misdeeds of Enron and Andersen, and away from Enron's ties to the GOP. He has made clear he will not join Rep. Henry A. Waxman (D-Calif.) in using the investigations to highlight the ties between President Bush, some of his top aides and Enron. 
Waxman "is carrying on a very partisan fight and trying to make this into a political deal," said Tauzin. "It isn't." 
Over the years, campaign groups controlled by Tauzin have received large sums from the accounting industry, including Andersen. But those who have followed Tauzin's career say that won't necessarily affect how he proceeds. 
Born in the tiny southern Louisiana town of Chackbay, he grew up in a populist political culture that often viewed big corporations with as much suspicion as big government. He was elected to Congress in 1980 as a Democrat, and switched to the GOP in 1995. 
On the powerful Energy and Commerce Committee, Tauzin developed close connections to the telecommunications, energy and accounting industries. In the mid-1990s, for example, he worked for securities litigation reform that limited lawsuits against accounting firms. In 2000, he battled against a proposal by the SEC's Levitt for far-reaching reforms of the accounting industry that would have prevented firms from maintaining lucrative consulting contracts with companies they audit. Andersen had such contracts with Enron. 
But the same year, Tauzin led an aggressive investigation of the role of Ford Motor Co. and Firestone in accidents involving Ford Explorer vehicles. That resulted in legislation strengthening tire safety rules. 
"Friend or foe, our committee is going to go after anyone who has done something wrong," said Tauzin. "I'm not interested in the political friendships. We're going to treat everyone the same." 
Tauzin's investigators were the first to arrive at Enron headquarters in Houston to gather documents. Among the items they found was the Watkins letter warning Lay of accounting problems. 
Tauzin said yesterday he would keep an open mind on whether it might be necessary to institute some of the changes in the accounting industry that Levitt proposed -- and he opposed -- in 2000. 
"If the regulatory balance is wrong today, then we need to rebalance it," he said. 
Sens. Christopher J. Dodd (D-Conn.) and Jon S. Corzine (D-N.J.), both members of the Banking Committee, said yesterday that they are drafting legislation that would prevent accounting firms from offering both audit and consulting services to the same client. Sen. Barbara Boxer (D-Calif.) has said she will introduce similar legislation. 
Staff writers Susan Schmidt, John Lancaster and Kathleen Day contributed to this report.

http://www.washingtonpost.com 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Loss booked as unit profit, memo claims 
By MARY FLOOD and TOM FOWLER 
Copyright 2002 Houston Chronicle 
Jan. 24, 2002, 12:41AM
Enron reported a profit at its energy-services business last year by moving the unit's huge losses onto the books of another corporate division, a former Enron employee says. 
The allegations of questionable Enron accounting were made Aug. 28 by former Enron Energy Services employee Margaret Ceconi in a five-page memo to Chairman Ken Lay and the board of directors slightly more than three weeks after she and others in her department were laid off. 
Her allegations echo those made just a few days before by Sherron Smith Watkins, Enron's director of corporate development, in a memo to Lay. But while Watkins criticized the accounting treatment of several peripheral off-the-books entities, Ceconi's e-mail zeroed in on a part of the company that had been ballyhooed as an important growth engine. 
Ceconi, 41, now working at a Houston consulting firm, said she had been lured to Enron early in the year after spending four years at GE Capital in Dallas, where she was senior vice president, by promises of $800,000 to $1 million in salary. 
That, she said in her memo, was simply a "fraudulent" way to attract her and others to Enron, and symptomatic of the widespread corporate dishonesty displayed in its accounting and other business practices. 
"Lying was rewarded in the culture at Enron," she said. "Fraud is fraud. But there was a kind of blind loyalty there." 
At Enron Energy Services, or EES, actual losses of at least $500 million were moved to another sector of Enron to make EES appear profitable, the memo says. 
Ceconi said the losses were hidden in Enron Wholesale Services, the company's highly profitable and well-established trading arm. 
Mark Palmer, spokesman for Enron, would not discuss specifics in the memo, which he said was "obviously from a disgruntled employee." 
Of the EES losses, he said, "these are serious allegations. They are the kind of allegations that should be made to government officials if she believes that." 
"Enron touted EES as deserving a premium value on Wall Street," said Carol Coale, an analyst with Prudential Securities Research. She and other analysts said that hidden EES losses not only would have been seen as a material disclosure by investors before Enron declared bankruptcy, they could still be relevant. 
"If it comes out that earnings are compromised with funky accounting at EES that could affect the (bankruptcy) reorganization plan as it is right now." Coale said some EES contracts are still seen as viable assets. 
Ceconi, who has a degree in accounting, said she had asked the Securities and Exchange Commission questions about the practices while still at the company and, after being laid off, informed the agency of actual problems. 
SEC spokeswoman Christi Harlin in Washington, D.C., said the agency cannot comment on whether it received a complaint or what was done. 
Ceconi's e-mail is replete with the personal criticism of mid- and upper-level managers that might be expected from a disgruntled employee. 
But her attorney, Demetrios Anaipakos, said she wrote it not out of anger but out of a sense of obligation to company management and federal regulators. 
"She had a good faith concern that Enron may have been violating various SEC rules and regulations and well as various accounting standards," Anaipakos said. 
The e-mail is less specific about the accounting practices than Watkins' memo, which also mentioned concern about "valuation issues" at EES, one of three surviving divisions at Enron. 
Ceconi's says, "EES has knowingly misrepresented EES' earnings. This is common knowledge among all the EES employees, and is actually joked about. But it should be taken seriously." 
Ceconi, who was vice president at a Houston bank before going to Dallas, said in the memo that it was to "everyone's amazement" that EES, despite its huge losses, reported a profit in the second quarter of 2001. 
A fellow employee at EES, asking not to be identified, confirmed Wednesday that the people who worked there could not understand how EES could report a profit, and that there were constant rumors that losses were being hidden. 
Ceconi's e-mail began, "One can only surmise that the removal of (Chief Executive) Jeff Skilling was an action taken by the board to correct the wrongdoings of the various management teams at Enron. However, based on my experience at this company, I'm sure the board has only scratched the surface of the impending problems that plague Enron at the moment. ... " 
Noting problems in various Enron interests around the world, she said, "Obviously the board has (its) hands full at the moment, ... Some would say the house of cards (is) falling. You are potentially facing shareholder lawsuits, employee lawsuits ... heat from the analysts and the newspapers." 
EES was formed to help companies manage and reduce their energy costs. By securing fixed prices through long-term contracts, EES helped customers maintain predictable supplies at stable costs. It also provided energy audits and helped companies improve their energy efficiency. 
It made a breakthrough in 1997, when the Archdiocese of Chicago agreed to let EES manage its energy needs by buying natural gas to heat 1,000 schools, churches and other facilities. 
The division didn't begin to report profits until late in 2000, but then revenues steadily improved. In the first quarter of 2001, it reported profits of $40 million. In the second quarter, $60 million in profit was reported earned on more than $7 billion in contracts. 
Ceconi said those profits were surprising given that many contracts had to be renegotiated to Enron's disadvantage. Many of the assumptions made by Enron when structuring the deals did not pan out, she said, causing losses for Enron on the first day of the contracts. 
In its bankruptcy filing, EES lists $2.5 billion in assets, mainly its contracts with companies and organizations, and $2.1 billion in debts. The two largest unsecured creditors are Enron subsidiaries -- Risk Management & Trading Corp., which is owed more than $126 million; and Enron North America, owed $107 million. 
Bala Dharan, accounting professor at Rice University, said it is possible Ceconi could be right and the losses were moved, legally, into another entity. 
"But," he added, "if investors were misled as they tried to make a section of the business look profitable when it wasn't, that could cause great concern." 

Accounting for Enron: Congress Probes Shredding by Andersen --- Executives Are Subpoenaed To Testify Before Panel In House in Enron Case
By Wall Street Journal staff reporters Tom Hamburger and Jeanne Cummings in Washington and Rebecca Smith in Los Angeles

01/24/2002
The Wall Street Journal
A8
(Copyright (c) 2002, Dow Jones & Company, Inc.)

WASHINGTON -- Enron Corp.'s chief auditor at Arthur Andersen LLP warned the energy-trading giant against putting "misleading" information in a news release about third-quarter earnings last October, according to a memo that the auditor wrote for his files. 
But David Duncan's concerns were ignored, according to the memo, one of two on the subject obtained by investigators for the House Energy and Commerce Committee, which opens hearings on Enron and Andersen today.
The first memo of Mr. Duncan, who has since been fired, is dated the day before Enron's earnings announcement on Oct. 16. He writes that Enron's representation "could potentially be misunderstood by investors." 
Specifically, he warned that Enron's claim of $1.01 billion of "nonrecurring" charges falsely allowed the company to tell investors that it was "on track" to meet strong earnings growth in 2002. 
In an e-mail response to concerns raised by Mr. Duncan, a Chicago lawyer for Andersen, Nancy Temple, appeared to ignore the crux of his misgivings about Enron's actions and, instead, suggested he make changes to his memo. Among other things, she recommended that he delete her name from the memo since it "increases the chances that I might be a witness, which I prefer to avoid." 
Both the auditor and lawyer will appear today before a House Energy and Commerce subcommittee. The hearing was initially set to discuss document destruction at Andersen, but aides to committee Chairman Billy Tauzin, a Louisiana Republican, said they expect that the newly obtained memos about the Enron news release between Mr. Duncan and Ms. Temple will spark unanticipated questions. 
The lawmaker who called the hearing, Oversight and Investigations Subcommittee Chairman James Greenwood (R., Pa.), said 80 Andersen employees were instructed to destroy documents related to the auditor's work for Enron. He said he planned to ask Ms. Temple whether she was aware of document destruction while visiting Houston in late October, a time that shredding was going on. 
Meanwhile, Army Secretary Thomas E. White, a former Enron executive, disclosed that he had spoken with former Enron colleagues on 30 occasions in the past seven months. He said he met with Enron President Lawrence "Greg" Whalley on Oct. 4, weeks before the company began seeking government help to ward off bankruptcy. All of the contacts were "personal in nature" and involved conversations about "the general financial condition of Enron," he said, but no one asked him to intercede on the corporation's behalf. 
Three Andersen executives have been subpoenaed to testify about the matter today before the Oversight and Investigations Subcommittee, one of several congressional panels looking into the collapse of the Houston energy-trading concern. 
Mr. Duncan will refuse to answer questions, citing his Fifth Amendment rights against potential self-incrimination, his lawyer said. The subcommittee plans to ask Mr. Duncan a single question as a formality and then excuse him, said one person familiar with the negotiations with House officials. 
Once Mr. Duncan is dispatched, the star witness is likely to be Ms. Temple. Mr. Duncan has cited an Oct. 12 e-mail reminder from her of the firm's document-disposal-and-retention policy in explaining his actions. Rep. Greenwood said she will be questioned about that e-mail as well as reports that she visited the Houston branch of Andersen in late October, after a Securities and Exchange Commission investigation of Enron had been announced. 
Andersen Chief Executive Officer Joseph Berardino managed to avoid the embarrassing spectacle of being subpoenaed to testify against his will, thanks to some late-night negotiations between his representatives and the House Energy and Commerce Committee staff. Mr. Berardino's representatives agreed that he would testify in the near future and to send the company's managing director of professional standards, Dorsey Baskin Jr., in his stead at the hearing today. 
The Senate Government Affairs Committee also opens its hearings on Enron today with a much broader inquiry into systemic explanations for Enron's failure. Former SEC Commissioner Arthur Levitt is expected to discuss his unsuccessful efforts to ban accounting firms from auditing companies with which they have consulting contracts. Andersen had lucrative consulting contracts with Enron while auditing the company's books, a common practice in the industry, and Enron's accounting practices are at the center of investigations into its collapse. 
The disclosures from Army Secretary White came in a letter responding to questions from Democratic Rep. Henry A. Waxman of California, a chief administration antagonist on Enron issues. 
"Since joining the administration, no one has asked that I intercede with anyone, in any way, for the benefit of Enron Corp. Further, I have not done so," Mr. White wrote to Mr. Waxman. He said his contacts with former colleagues were congratulatory in nature in June, after he took his new post, and became sympathetic later as Enron's situation deteriorated in the fall. 
Mr. White said he had two discussions about Enron's collapse with Defense Secretary Donald Rumsfeld in early November and with Secretary of State Colin Powell on Dec. 12. Both of those conversations were focused primarily on the concern of Mr. Rumsfeld and Mr. Powell about "my personal well-being. My response in both cases was that I had suffered significant personal losses, but that I would persevere," Mr. White said. 
Mr. White offered limited details of his own significant financial losses in Enron's collapse. Though he didn't say exactly how much he lost, Mr. White said he was still in the process of divesting when Enron went into its downward spiral. Stock that was selling for $50 a share when Mr. White began selling in June was valued at $12.85 on Oct. 30, the date of his last sale, of 86,709 shares. Mr. White also said the company has stopped paying him his retirement benefits. 
The army secretary reports one conversation with Kenneth Lay, on Sept. 10, that Mr. White said he initiated in order to wish Mr. Lay well in his new post as Enron's Chief Executive Officer. Mr. Lay resigned from his posts last night. 
--- 
Journal Link: Listen as House and Senate committees open hearings on the demise of Enron Corp., in the Online Journal at WSJ.com/JournalLinks, by arrangement with Hearings.com.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

National Desk; Section A
ENRON'S COLLAPSE: THE OVERVIEW
WIDE EFFORT SEEN IN SHREDDING DATA ON ENRON'S AUDITS
By RICHARD A. OPPEL Jr.

01/24/2002
The New York Times
Page 1, Column 5
c. 2002 New York Times Company

WASHINGTON, Jan. 23 -- Scores of people who worked at Arthur Andersen's Houston office were involved in the destruction of documents related to the Enron Corporation, the chairman of one of the Congressional subcommittees that will begin hearings Thursday on Enron's collapse said today. 
The chairman, Representative James C. Greenwood, Republican of Pennsylvania, head of the House Energy and Commerce oversight subcommittee, said investigators for the subcommittee had determined that document shredding was widespread and that up to 80 people had received orders to destroy papers. He said it called into question Andersen's attempts to blame rogue employees for the episode.
The hearings on Thursday will be Congress's first public exploration into the Enron collapse, the largest corporate Chapter 11 bankruptcy filing in American history. 
Tonight, Enron's chairman and chief executive, Kenneth L. Lay, announced his resignation, saying the many investigations into the company's collapse would require too much of his attention. 
Last week, Andersen, one of the Big Five accounting firms, fired the lead partner on the Enron account, David B. Duncan, saying he orchestrated widespread document destruction shortly after learning of a government investigation into Enron's finances. 
But Mr. Greenwood expressed skepticism about that account. ''Do you believe that 80 Andersen employees were directed by Mr. Duncan to violate an express provision of policy by Andersen in the face of yet another investigation, and none of them picked up the phone and called their superiors and said, 'This doesn't seem right'?'' he asked. ''The question we need to get to is, Were there instructions from above.'' 
Other people close to the investigation said they doubted that the number of Andersen employees was as high as Mr. Greenwood's estimate, but they said it was a much larger group than the company had suggested. Mr. Duncan is expected to appear under subpoena at the energy and commerce subcommittee hearing, but he plans to invoke his Fifth Amendment right against self-incrimination, his lawyer said today. Mr. Duncan, will ''rely on his Constitutional right not to testify'' unless he is given immunity, his lawyer, Robert Giuffra, told the committee in a letter today. 
Also today, Congressional investigators made public a memo Mr. Duncan wrote last October saying he expressed concerns about the way in which Enron was about to disclose huge losses from controversial dealings that investigators believed played a significant role in the company's collapse. The disclosure, he said, was misleading to investors and possibly illegal. 
On Oct. 16, Enron disclosed that it lost $618 million during the third quarter and that it would have to reduce its net worth by $1.2 billion, partly because of dealings with investment partnerships that had been headed by Andrew S. Fastow, who was then the company's chief financial officer. At the time, the company said the losses were the result of one-time losses, leaving the impression that the company could weather the bad quarterly results. 
But two days earlier, Mr. Duncan warned the company's chief accounting officer, Rick Causey, that the way the company planned to disclose the information might be ''misconstrued or misunderstood by investors,'' according to a memo Mr. Duncan wrote to his files on Oct. 15 that was made available to Congressional investigators. However, the press release Enron issued the next day was ''essentially the original presentation,'' Mr. Duncan wrote. 
Mr. Duncan said in his memo that he had warned Mr. Causey that the Securities and Exchange Commission initiates enforcement actions against companies that issue financial information that is ''materially misleading.'' He said the company should rewrite its earnings report and bring in lawyers to assure that its statements were not false. 
One week later, officials in Andersen's Houston office began to shred Enron-related documents on a massive scale, even though Enron had just disclosed that the Securities and Exchange Commission had begun an investigation into its finances. Andersen fired Mr. Duncan last week, saying he had ordered the destruction of the Enron papers. 
An Andersen spokesman, Charlie Leonard, characterized Mr. Duncan's memo as routine and said it reflected internal debates about accounting issues that occur between auditors and corporate executives. He added: ''It looks like that with the exception of some inappropriate phrasing, Mr. Duncan was doing what he was supposed to.'' 
Tonight, an Andersen official repeated the firm's assertion that Mr. Duncan's actions, aided by other partners in the Houston office who were demoted or placed on leave last week, had not been sanctioned. 
''The one glaring fact here is that David Duncan, with full knowledge of an S.E.C. investigation, initiated a massive document destruction campaign,'' official said. 
The hearings that begin on Thursday, which will eventually involve 10 different committees, could lead to changes in pension, tax, securities and accounting laws, though many experts are skeptical how far lawmakers will go. Past efforts to tighten laws in these areas, particularly auditing standards, have been beaten back by industry lobbying. 
The fall of Enron has touched off a scramble in the capital to assign blame and avoid the taint of the company's prodigious political donations. 
Some Democrats in Congress see the Enron case as a windfall that could dent President Bush's lofty public approval ratings. But many Democrats are also vulnerable because the company spread its largess so widely and the accounting and regulatory practices that led to Enron's collapse took place under Democratic and Republican administrations. 
In the House, the Energy and Commerce subcommittee will cross-examine three senior Arthur Andersen officials about why the firm destroyed Enron documents after learning about an S.E.C. investigation into the company's finances. 
Also, the Senate Governmental Affairs Committee will examine whether government policies failed and what new legislation is needed. The first witness will be Arthur Levitt, the former S.E.C. chairman whose efforts to tighten auditing standards two years ago were derailed by opposition from Congress. 
Separately, Representative John Conyers Jr. of Michigan, the ranking Democrat on the House Judiciary Committee, formally asked the Justice Department to appoint a special counsel to investigate Enron, arguing the case ''represents one of the largest corporate frauds in the nation's history'' and citing the large campaign donations Enron has provided to President Bush over the years and the large number of senior administration officials who worked for or invested in the company. 
A Justice Department official said that he had not seen Mr. Conyers's letter and that officials were still proceeding with their criminal investigation. 
Also today, the Senate Finance Committee asked Enron to turn over tax returns for the past 16 years, in a letter sent by the committee chairman, Max Baucus, Democrat of Montana, and the ranking Republican, Charles E. Grassley of Iowa. Their request follows the disclosure in The New York Times last week that Enron used almost 900 subsidiaries in tax-haven countries and other techniques to pay no income taxes in four of the last five years. 
In an interview, Mr. Greenwood said Mr. Duncan had sought immunity for his testimony but had been rebuffed. Justice Department officials are worried that grants of immunity made by Congress might hamper their criminal investigation of Enron and Andersen. 
Investigators had asked Andersen's chief executive, Joseph F. Berardino, to appear, but Mr. Berardino said he would be willing to attend on a later date. Instead, Dorsey Baskin, a senior technical expert at Andersen, will testify. Two other Andersen officials -- Michael C. Odom, a partner in Houston, and Nancy Temple, an in-house lawyer in Chicago -- are scheduled to testify. 
While the House subcommittee hearing will focus on Andersen's document destruction, attention will turn later to the reasons for Enron's flawed accounting. In Mr. Duncan's memo, the auditor says Andersen had expressed serious reservations about Enron's accounting, particularly the company's description of large losses as ''nonrecurring,'' or one-time, charges. 
Andersen had advised Enron that its use of the term ''could potentially be misunderstood by investors,'' Mr. Duncan's memo states. ''We pointed out that such items are, more often than not, included in normal operating earnings in'' financial statements that are put together using generally accepted accounting practices. 
The next day -- the same day Enron disclosed the earnings press release that Mr. Duncan objected to -- Ms. Temple, who had been involved in discussing the matter with Mr. Duncan, sent an e-mail message to Mr. Duncan and others at the firm suggesting that language be deleted from the memo ''that might suggest we have concluded the release is misleading.'' 
A copy of the message showed that Ms. Temple appeared to be worried about potential litigation on Enron's finances and she sought to remove her name from the list of people who received the document: ''If my name is mentioned it increases the chances that I might be a witness, which I prefer to avoid.'' 
Ms. Temple's lawyer did not return a telephone call for comment. Mr. Leonard, the Andersen spokesman, said Ms. Temple was simply worried about waiving attorney-client privilege. Her reference to not concluding that the press release is misleading reflects her understanding that auditors ''don't have a right or responsibility to pass judgment on press releases,'' only formal financial statements, he added. 
Mr. Duncan, 42, has told investigators that he was only destroying documents in keeping with an Oct. 12 e-mail message from Ms. Temple that emphasized that they follow a policy requiring some documents be destroyed. Mr. Duncan has told investigators he stopped shredding after Ms. Temple ordered it halted Nov. 9. 
While Andersen officials have sought to blame Mr. Duncan and other employees in Houston office for the destruction of the documents, investigators are skeptical and want to probe why the firm waited more than two weeks after Enron disclosed the S.E.C. investigation to order the shredding stopped. 
Mr. Greenwood said that in interviews with committee investigators, Mr. Duncan stated that on at least two occasions before Oct. 12, Ms. Temple asked him, ''How are you on compliance with the document-retention on Enron?'' 
''Did she really mean that,'' Mr. Greenwood asked, ''or did she mean, 'How are you doing on getting rid of the documents?'''

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Financial Desk
THE NATION THE ENRON INQUIRY Andersen Memo Cites Objections
EDMUND SANDERS; RICHARD SIMON
TIMES STAFF WRITERS

01/24/2002
Los Angeles Times
Home Edition
A-17
Copyright 2002 / The Times Mirror Company

WASHINGTON -- A fired executive with Enron Corp.'s accounting firm, Andersen, warned the energy trading company that some of its public statements might mislead investors, a memo obtained Wednesday shows. 
As Enron was preparing to make the first public disclosure of its financial problems, David B. Duncan, the Andersen partner who oversaw the Enron account, advised Enron that language in its news release "could be misconstrued or misunderstood by investors," according to an Oct. 15 memo written by Duncan.
Duncan is expected to be called to testify today at the first congressional hearing to examine why Andersen destroyed thousands of documents related to the Enron account. Andersen, claiming Duncan acted against orders in shredding documents, fired him last week. 
Duncan has contended that Andersen executives in Chicago were aware of Enron's problems and that he was singled out as a scapegoat. 
On Oct. 16, Enron reported a $1.2-billion charge against shareholder equity. In his memo a day earlier, which he prepared for his files and copied to Andersen attorney Nancy Temple, Duncan said he raised objections to Enron's characterization of some of the charges as "non-recurring" in a company news release. He noted that the Securities and Exchange Commission had been cracking down on companies that improperly used the term. 
Temple wrote back and suggested that Duncan delete her name from the memo due to a concern that the reference to Andersen's legal department might be viewed as a waiver of attorney-client privilege. 
"If my name is mentioned, it increases the chances that I might be a witness, which I prefer to avoid," Temple wrote on Oct. 16, according to a copy of her e-mail. 
Duncan, who was fired by Andersen for allegedly orchestrating the destruction, has pointed to an "unusual" Oct. 12 e-mail from Temple, reminding employees to abide by the company's policy for deleting old files. 
Sources close to the Enron investigation say the new memos show that Andersen was concerned in mid-October about its own legal liability in the Enron scandal, including the possibility that Temple might later be called as a witness. 
But the company did not advise its workers to preserve Enron documents until Nov. 9, after it was subpoenaed by government investigators. 
An Andersen spokesman called the memos standard and appropriate. He said Temple didn't want a reference to her conversations with Duncan because they were covered by attorney-client privilege. 
An attorney for Duncan declined to comment on the memo. 
But in a contentious opening salvo to the government's burgeoning inquiry, Duncan plans to refuse to testify today before the House Energy and Commerce Committee. 
The public standoff between Duncan, who wanted immunity in exchange for his testimony today, and the committee, which refused his request for a temporary postponement of his appearance, are the first examples of what Washington experts predict could be several months of finger-pointing and legal maneuvering. 
"He's flying from Houston to Washington to assert the 5th [Amendment] and leave," said Duncan's attorney, Robert J. Giuffra Jr. 
In a letter to the committee Wednesday, Giuffra expressed frustration that the committee would not allow Duncan to postpone his testimony in order to review two boxes of Andersen documents that were not provided to him until Tuesday. 
He also noted that it was unusual to require a potential witness to appear before a congressional committee and be sworn in, merely to invoke his constitutional right to refuse to testify. Duncan had offered to provide the committee with a sworn statement invoking the 5th Amendment in lieu of appearing at the televised hearing. 
"Most of the time, these things are worked out," said Jack Blum, a Washington attorney and former Senate investigator. "But if the effect you want is drama, you bring them in to take the 5th." 
Committee spokesman Ken Johnson noted that Duncan spent 4 1/2 hours talking to committee investigators behind closed doors. 
"All we're asking is that he provide the same information to the committee under oath." 
The committee also planned to subpoena Andersen Chief Executive Joseph F. Berardino but reportedly has agreed to allow an Andersen partner, Dorsey Baskin, to come in Berardino's place. 
The Senate Governmental Affairs Committee, which Sen. Joseph I. Lieberman (D-Conn.) chairs, is also holding hearings today, focusing primarily on issues related to the SEC, pensions, investor confidence, derivatives trading and the energy market. Former SEC Chairman Arthur Levitt is the primary witness. 
* 
Times staff writers Eric Lichtblau, Janet Hook and Nick Anderson in Washington contributed to this report.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Financial Desk
Enron Audit Fee Raises Some Brows
JERRY HIRSCH
TIMES STAFF WRITER

01/23/2002
Los Angeles Times
Home Edition
A-1
Copyright 2002 / The Times Mirror Company

The fee Enron Corp. paid the Andersen accounting firm to audit its books was one of the richest in corporate America, a fee that reflects the complexity, and possibly the risk, inherent in the job. 
Enron paid Andersen $25 million for the year 2000 audit, a figure higher than all but one of the companies in the Dow Jones industrials that reported their audit fees. The average charge among the blue chips was just $9 million, according to a review of such fees by The Times.
It also was large compared with the fees other energy companies paid their accountants, even Andersen. In a review of fees listed in Securities and Exchange Commission filings, The Times found that audit contracts averaged $3 million at nine large energy companies, including Andersen clients Mirant Corp., UtiliCorp United Inc., Dynegy Inc. and Calpine Corp. 
Andersen's fee was a red flag to some experts and critics who say it could have clouded the company's judgment as it examined Enron's tangled financial structure. The high fee no doubt reflected the difficulty of the audit, but it also may have hinted that Enron's finances contained unknown risks. Indeed, Andersen executives debated internally whether the audit and other fees would be perceived as a breach of the firm's independence. 
An Andersen spokesman defended the fee, saying it reflected the size and complexity of Enron. 
"This was a very sophisticated business," Andersen spokesman David Tabolt said. "The fee is set by the scope of the audit and the kind of people that have to be brought in to do the work. There are a whole lot of factors that go into it." 
Tabolt said the audit fee was in line with those of Enron's peers--the top 10 companies in the Fortune 500. But even by that standard, the fee was large. 
The nine other companies at the top of that list paid an average of $14.5 million for their audits. Only Citigroup Inc., the nation's largest financial services company, paid more than Enron: $26.1 million. 
Even if Enron were looked at as a financial services company, the fee it paid was unusual. The Times examined the fees of seven large financial services companies--including Citigroup, American International Group, Goldman Sachs Group Inc. and Bank of America Corp.--and found that the average audit charge was $15.5 million. 
Several accounting professors and industry insiders said the high fees could be an indicator of the complicated nature of the Enron audit or the perceived risk of the account. 
"The relationship between a client and its auditors is a complicated thing because auditors get paid by the client but are supposed to be independent," said Rick Antle, an accounting professor at the Yale School of Management. 
"If you tell your client 'no' too many times, you don't have a client. But if you go along with everything they suggest, you could end up in jail," said Antle, who added that there is insufficient information yet to determine whether the high fees Andersen collected influenced its judgment. 
However, critics of the accounting industry say the fees Enron paid Andersen--including an additional $27 million for consulting work--and the scandal arising from the audit highlight problems that include the independence of auditors and how the business is marketed and sold. 
They argue that the fee clouded the minds of auditors, who were loath to endanger Andersen's contract by forcing Enron to adhere to stricter financial standards. 
The audit--and its failure to more fully disclose internal conflicts of interest of Enron executives, billions of dollars in hidden debt and hundreds of millions of dollars in losses--is now the subject of multiple federal investigations. 
Even top Andersen executives debated the propriety of the fees it was collecting from Enron--which, including the consulting work, reached $1 million a week. 
In a meeting almost a year ago, a group of the firm's top partners on the Enron engagement and at Andersen headquarters in Chicago discussed "whether there would be a perceived independence issue solely considering our level of fees," according to a Feb. 6 internal e-mail summarizing the meeting. 
The partners estimated that the combined take on the Enron audit and consulting contracts could reach $100 million annually. Ultimately the partners decided that they were not troubled by such a figure "as long as the nature of the services was not an issue." 
The amount a firm charges for accounting services can be a warning sign for audit problems, said Mark Cheffers, who operates the AccountingMalpractice.com Web site. 
Certainly, the Enron fee was large enough to have the potential to color the judgment of the firm's staff, Cheffers said. 
But there is equal danger at the other end of the scale, where low audit fees are designed to gain an accounting firm entry to a large company so it can sell a host of profitable consulting and other services, Cheffers said. 
Companies only last year began disclosing what they paid auditors, and there is not enough information yet to interpret what differences in fees mean, said Lawrence Revsine, a Northwestern University accounting professor. 
"We can't say that when there is a $25-million audit versus a $15-million audit, something rotten is afoot here, but we will be able to as more information about audit fees comes out now and it is studied," he said. 
Revsine said researchers will look at how differences in a company's number of locations, employees, complexity of transactions and other factors can affect an audit. 
Audits are intended to provide independent verification that a company is giving investors an accurate picture of its finances and that it is following consistent and generally accepted accounting rules and standards. 
Enron's downfall, caused in part by the accounting treatment of a series of partnerships and ventures affiliated with the Houston energy trader, has thrown thousands of employees out of work and has cost the company's pensioners and investors billions of dollars in stock value losses. 
Yet it would be a mistake to assume that all audited financial statements go through the same type of scrubbing and are comparable, said Ira Solomon, who heads the accounting department at the University of Illinois. 
For example, two identical companies with the same level of sales and cost structures could have different profit figures based upon the way they construct their financial statements. The cost of inventory can be calculated by two methods that yield different results in the short term. Each approach is an accepted practice, and each produces a different profit figure, Solomon said. 
J. Terry Strange, vice chairman, assurance and advisory services, for accounting firm KPMG, which audits Citigroup, said it makes sense that financial services companies pay higher audit fees than other companies. 
"The size of the fee is directly related to the size, and more importantly, the complexity of the enterprise being audited," Strange said. "Financial services companies are, generally speaking, the most complicated businesses. The reason they are complicated is that they are in the financial risk business. 
"So risk enters into [calculating an audit fee]--the nature of risk that the enterprise takes and the amount of work that must be done to become comfortable that the auditor understands and agrees with the accounting and believes that the enterprise has controls in place to manage the risk they are taking," he said. 
By those standards, it would make sense that Enron would be an expensive audit. The company in many ways operated as a financial services business, developing new trading mechanisms and markets for everything from energy to telecommunications services--in the process inventing transactions that were new to the business world. 
With that came high risks. 
"Clearly this was a very high-risk client. They were doing things in an industry that had never been done before," said Randolph Beatty, dean of USC's Leventhal School of Accounting. 
But Andersen spokesman Tabolt said the company does not build a "risk premium" into its audit fees. 
Each of the five largest accounting firms conducts the audits of 2,000 to 3,000 publicly traded companies in the United States, according to the Public Accounting Report, an industry newsletter. They so dominate the business that the No. 6 firm in the country, BDO Seidman, has only 325 SEC-reporting clients. 
Although companies occasionally change auditors for such reasons as fees or arguments or service issues, most companies stay with the same auditor for years, occasionally putting their contracts out to bid. 
Certain firms specialize in industries. Andersen, which audits only two of the 30 companies that make up the Dow Jones industrial average, has a large energy business practice. PricewaterhouseCoopers specializes in large companies and audits 14 of the Dow 30. 
Times staff writer Ralph Frammolino in Chicago contributed to this report.

PHOTO: Andersen attorney Rusty Hardin addresses reporters outside a Houston courthouse. Congressional investigators will call on senior executives of the accounting firm for their testimony this week.; ; PHOTOGRAPHER: Reuters 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Business/Financial Desk; Section C
ENRON'S COLLAPSE: GAUGING THE ASSETS
Plaintiffs Ask: Just How Deep Are the Pockets At Andersen?
By JONATHAN D. GLATER

01/24/2002
The New York Times
Page 1, Column 2
c. 2002 New York Times Company

The growing stack of lawsuits against Arthur Andersen, which audited Enron's financial statements, raises the question of just how much could the firm really afford to pay out. 
In the latest suit, filed yesterday in Federal District Court in Houston, Enron employees argue that the accounting firm helped hide Enron's true financial condition and contributed to losses of more than $1.3 billion from their retirement funds.
Federal and Congressional investigators, along with legions of plaintiffs' lawyers, are engaged in a fierce and competitive search for evidence of wrongdoing at the accounting firm in its dealings with Enron, the Houston energy trader now in bankruptcy court. Andersen, after all, could conceivably satisfy at least some of Enron's creditors. 
It is not easy to determine how much Andersen is worth or how much it could pay to satisfy the various lawsuits if it loses or chooses to settle. But claims of more than $1 billion, as identified in yesterday's suit, could come dangerously close to wiping out the firm, said independent analysts who track the industry. 
In public statements about the impact of Enron's collapse Joseph F. Berardino, Andersen's chief executive, has emphasized that the firm's clients are standing by it and that its employees are trying to focus on the firm's work. ''We are meeting with our clients every day,'' Mr. Berardino said on ''Meet the Press'' on Sunday. ''Our clients know what we really stand for, and our clients are standing by us because we do great work.'' 
Like the other Big Five accounting firms, Andersen is a private partnership and does not have to disclose much information about its financial condition. 
''They like to be under the radar screen,'' said Arthur W. Bowman, editor of Bowman's Accounting Report. 
Some general information has been amassed by accounting industry analysts and lawyers who have been involved in litigation against the Big Five firms. 
Andersen's first line of defense is its insurance. While that amount is a closely guarded secret -- plaintiffs' lawyers would dearly love to know how much coverage an accounting firm has so that they could settle lawsuits for the full amount of the policy -- some of the firm's peers described, in general terms, what that insurance looks like. 
Big accounting firms generally have an outside insurance policy of $100 million to $300 million. That policy would come with a sizable deductible, too -- probably $50 million to $100 million. Above that, some firms self-insure, for example by setting up ''captive'' offshore subsidiaries that sell insurance back to the parent firm. (Setting up such a company offshore confers certain benefits on the subsidiary, like a smaller required capital investment by the parent.) 
Until June 1998, the Big Five firms pooled insurance funds, so that a big insurance payout by one firm could affect another. That system is no longer in effect and would not be invoked in any Enron-related lawsuits because they have all been filed well after 1998, said executives at a big firm. 
Next would come the firm's capital, a figure very difficult to determine. Partnership capital is the result of payments made by the a ners. Consulting partners may be compensated differently from auditing partners, as are different partners in different cities. But when an auditor is first promoted to partner, he must pay a portion of his compensation into the firm, essentially buying a stake in the company. That first payment could amount to nearly all of his compensation, probably $150,000 to $250,000 a year. In later years, those partners would probably plow a smaller portion of their compensation back into the firm to cover operating expenses. 
The firm's capital base, consisting of assets, like furniture, computers and offices, and cash, might total $1.5 billion to $2 billion, said accountants familiar with the Big Five, but plaintiffs' lawyers said that liquidating the firm would be difficult. The firm could also draw on lines of credit from lenders for some unknown amount, while it rebuilt capital. Some analysts said, however, that partners were more likely to choose to disband than to try to rebuild a depleted capital base with loans or their own money. 
The firm could raise money by selling off business lines, said Melvyn I. Weiss, whose law firm, Milberg Weiss Hynes Bershad & Lerach, is one of several that have filed suits against Enron executives and Andersen. ''Maybe they can sell the firm, or pieces of it,'' he said. 
Because Andersen is a limited liability partnership, it is unlikely that any plaintiff could collect from a partner's personal assets, unless that partner was directly involved in wrongdoing that led to the firm's liability. For example, partners intimately involved in the Enron account could conceivably be found personally liable in a shareholder lawsuit, lawyers said. 
''It's unclear where the chain of liability would end,'' said David J. McCabe, a lawyer at Willkie Farr & Gallagher in New York. ''But clearly the partner who was responsible for supervision'' would be at risk, he said. 
Of course, Andersen's ability to survive depends on how it fares in lawsuits as well as how its business does. It is too early to tell whether clients are jumping to some of the firm's rivals, though some other big firms say that they have picked up a smattering of Andersen clients. 
The other risk to the firm is a loss of personnel as the Enron scandal drags on. While many headhunters said they had not yet seen a flurry of resumes, Dean McMann, chief executive of the Ransford Group, which advises accounting firms, said he had received more than 1,000 e-mail messages and phone calls from Andersen employees curious about the job market for them. 
''The only reason you want to know what's happening in the market is you want to be in the market,'' Mr. McMann said. ''It's not a very good market right now.''

Photos: Sonia Garcia, who lost her job at Enron, seeks work during the rush hour in Houston. At Enron's headquarters, debris from some of the shredded documents bears dates and the word ''Raptor,'' the name of one of the off-balance-sheet partnerships. (Photographs by James Estrin/The New York Times) Chart: ''Arthur Andersen at a Glance'' The company was founded in 1913 by Arthur Andersen, a university professor, in Chicago. OFFICES: 390 in 84 countries EMPLOYEES: More than 85,000 (About 4,700 partners) TOP FIVE CLIENTS: Merck, Enron, Texaco, UtiliCorp United, Freddie Mac TOP EXECUTIVES: Chief executive: Joseph F. Berardino Managing partners: Thomas L. Elliott III, Kay G. Priestly, Philip A. Randall, Xavier de Sarrau 2001 REVENUE BY AREA (in billions) North America -- $4.5 Asia Pacific -- $1.2 Central Europe, Middle East, India and Africa -- $0.4 Western Europe -- $2.9 Latin America -- $0.4 PROBLEMS THE FIRM FACES Litigation is coming quicker than expected from Enron shareholders and creditors. Corporate clients may decide against retaining Andersen as their auditor. The Connecticut attorney general has suggested that Andersen be barred from practicing in the state. Graph tracks revenue since 1994. (Source: Company reports)(pg. C8) 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Business/Financial Desk; Section C
ENRON'S COLLAPSE: THE OFFICE
Morale and Occupancy Are Low At the Headquarters in Houston
By DAVID BARBOZA

01/24/2002
The New York Times
Page 1, Column 4
c. 2002 New York Times Company

HOUSTON, Jan. 23 -- Inside the glass-sheathed 50-story Enron headquarters here, the televisions that once carried news and financial channels in the elevators have been turned off. ''ETV is under construction,'' the monitors now read. 
''They don't want to make people more nervous than they are already,'' explained one former executive who has visited the building since he was laid off in December after the company filed for bankruptcy protection. ''It's very, very grim.''
This is the new face of the Enron Corporation, once the world's biggest energy trader but now a skeleton of its old self. Not long ago, 7,000 people worked for the company in downtown Houston. Now only about 4,000 of the faithful are left. Entire units have been decimated; whole floors are practically deserted. 
For weeks after the filing, Keith Couch had the 27th floor virtually to himself. People would stop by and notice the lone figure tapping away at a keyboard. They would laugh, giggle and point at the rows of empty desks that suggested a neutron bomb had been set off. 
''It's been dead here for a while,'' said Mr. Couch, 34, who works in the information technology group at Enron and has since moved to a more populated floor. ''It's not like being in a funeral, but it's quiet -- real quiet,'' he said. ''The place I used to work isn't here anymore.'' 
These days, Enron is being carved up; its accounting is being scrutinized by litigants, and its corridors are even being prowled by F.B.I. agents, photographing documents and hoping to prevent important information from reaching the shredding machines. 
Two days after a former employee gave lawyers a box full of shredded financial documents, the kind of papers the company warned people not to destroy, both Enron and the F.B.I have stepped up security. The 19th and 20th floors, which once housed the accounting offices and even some employees from Arthur Andersen working on internal auditing, are now under guard. Stairway access was sealed on Tuesday. 
This is the humbled face of the new Enron, beleaguered, embattled and under siege. Legions of class-action lawyers are in town meeting at the Four Seasons Hotel, drafting new strategies on how to pull valuable financial documents out of the building. And government investigators of all types are also here, combing through the financial ruins of a company that rose to No. 7 on the Fortune 500 list, albeit because of revenue that some now say was inflated. 
The media hordes come and go, often straddling all corners around 1400 Smith Street, where a giant ''E,'' tipped on its side as a corporate emblem, sends a dual message about a company that once defied gravity and now reluctantly succumbs to it. 
''People are nervous about being there,'' said a former executive who has kept in touch with friends and colleagues inside the building. ''They still feel guilty about being there.'' 
This was once the home of the old- economy company that went new economy -- a dot-com energy company that acted like a Wall Street trading house and boldly told competitors they were ''dinosaurs'' and Enron was going to eat their lunch. 
Today, Enron cannot afford the new $200 million 40-story corporate tower under construction across the street. It was supposed to relieve the congestion in the main headquarters tower . Now, the company is moving employees over from 3 Allen Center, a nearby tower where it has long housed other workers. 
''It definitely feels empty,'' said one worker who asked not to be named. ''You feel a lot of things are missing. And morale is kind of low.'' 
Enron recently sold off its profitable energy and power trading group to UBS in exchange for promises of about a third of the pretax profits. Soon Enron will also lose the natural gas pipeline that Dynegy is to get after the failed merger between the companies. 
Away from its headquarters, many companies acquired by Enron along the way are trying to conduct business as usual. But it isn't easy. Portland General Electric, a utility that serves northern Oregon, has not been forced to lay off any of its 2,700 employees. But with the Enron stock price in the basement, so are many employees' retirement hopes. 
''I've been climbing poles and doing line work since 1966,'' said Roy Rinard, 54, whose 401(k) plan once was worth as much as $472,000. ''Now I'm sitting here with basically $12,000 to show for it.'' 
Mr. Rinard said the uncertainty hanging over the utility's future made it hard to focus on work. ''Everyone is concerned about the direction we're going, whether we're going to be broken apart and separated or remain an intact utility,'' he said. 
The broadband unit, which was supposed to offer high-speed telecommunications services, came unglued even before Enron's Chapter 11 filing. Nine months ago, it employed about 1,000 people. Now, there is virtually no one in the unit. The trading floor for another unit, Enron Global Markets, is idle -- a room of computers but no heads. 
The average passer-by might not notice anything unusual from outside the Enron headquarters, but inside the building seems less cramped. This afternoon, a little coffee shop on the ground floor, which used to be crowded at 4 p.m. with chattering and deal-making employees, had just two patrons. 
''The elevators used to be so crowded,'' said Jeff Snyder, 24, a former employee who has gone back into the building recently. ''Now you get one and you ride by yourself.'' 
One can see a pleasant but more stoic look on the faces of Enron people. 
Many remember that just months ago there was an energy about the place. There was the fast pace, the giddiness of riding with a company whose stock went to the moon in 1999 and 2000. 
A giant banner hanging in the Enron lobby had proclaimed, ''From the World's Leading Energy Company to the World's Leading Company!'' After Sept. 11, it was replaced by an American flag; and that was probably a good thing because by now it would serve only as a daily reminder of how grossly overconfident the company once was. 
Down in the lobby, where security guards carefully keep unwelcome visitors at bay, an electrified ''E'' inside the lobby still twirls, and the ticker showing Enron's stock price is still aglow. But today, the price of Enron's stock, which has been delisted from the New York Stock Exchange, scrolled across at 34 cents a share, down 9 cents. 
The new Enron is filled with people moving into what is now its lone building to fill the gaps. On many floors, there is no receptionist and there are empty cubicles. 
Of course, Enron still has three major natural gas pipelines, it still owns Portland General Electric (though it is being sold), and it still has Enron Wind and Enron Energy Services, which delivers energy to commercial and industrial companies. 
But the legal department was chopped, and so were human resources, accounting, tax and corporate services. And fewer people are on hand to field news media calls. 
''We just moved; we got smaller,'' said Mark Palmer, an Enron spokesman. ''We had 27; now we have 7.'' 
More than 100 Arthur Andersen people have departed, some before and some after Enron said this month that it would fire the company as its auditor. 
To lighten up the place, Elicia de la Cruz had a baby shower in the payroll department today. Coming out of the building this afternoon, her friend Pauline Sanchez said the shower had brought some smiles. 
''It was a nice change,'' she said. 
Still, life goes on. The credit union is open, and so is a small supermarket where workers can get fresh deli meats. The health club was closed for a while but is now open again, though the $10 monthly membership fee has been increased to $25. 
Representatives of the news media are eager to get into 1400 Smith Street. Some chase Enron employees to their cars. Not long ago, a photographer paid an Enron employee to smuggle in a camera to photograph the place. Security seized the camera. 
The people who are photographing, though, are agents from the F.B.I., who today were on the 19th and 20th floors. ''It's kind of weird,'' one Enron employee said. ''They say we're exhibit No. 102.'' 
The company used to give regular video updates on the building under construction next door, even with skits by the ''building guy.'' 
''The joke was,'' one employee said, ''that the building guy would be replaced by the bankruptcy guy.''

Photo: The 19th and 20th floors, which once housed Enron's accounting offices and even some employees from Arthur Andersen, are now under guard. (James Estrin/The New York Times)(pg. C6) 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Business/Financial Desk; Section C
ENRON'S COLLAPSE: THE CRITICS
Sharpton, in Houston, Calls Attention to the Workers
By MICHAEL BRICK

01/24/2002
The New York Times
Page 6, Column 1
c. 2002 New York Times Company

HOUSTON, Jan. 23 -- The Rev. Al Sharpton pulled up to RJ's Rib Joint this afternoon to meet with local ministers, a state representative, an N.A.A.C.P. official and a victim of the Enron collapse. 
Local television cameramen were waiting under the veranda. The three palm trees looked a little out of place.
''I'm here because I'm very concerned about the employees and the investors,'' Mr. Sharpton said. ''As the investigation goes forward, somebody needs to step forward and call on the government to bail out the victims.'' 
Then the cameras turned on Mary Behn, the Enron victim. The local ministers shepherded her inside to a private dining room to prepare for a full-blown news conference. Just about everyone but Mr. Sharpton tried the ribs. Mr. Sharpton stuck to the chicken. A couple dining in the main room did not initially recognize him as he passed by, they said, because he had lost so much weight. 
The Enron debacle has made Houston the center of a certain kind of temporal universe, and Mr. Sharpton has recognized an unusual opportunity for his brand of social criticism. 
So has the Rev. Jesse L. Jackson, who said in a telephone interview that he would arrive in Houston Thursday night and conduct several meetings with fired workers under the auspices of his Operation PUSH organization. 
Mr. Jackson said he would remain here through Friday, in hopes of meeting with Kenneth L. Lay, Enron's chief executive. ''I think one thing that Ken Lay and President Bush should agree on is that these workers need to be made whole,'' he said. 
There has been talk of the two ministers jostling for pre-eminence on issues of social justice; all that Mr. Jackson's local representative, William-Paul Michael, would say on that score about Mr. Sharpton's visit was, ''it's interesting that he is here just before reverend's here.'' 
So Mr. Sharpton has a one-day head start on Mr. Jackson. 
After lunch, Mr. Sharpton escorted Ms. Behn before the cameras to tell her story. She worked at Enron for 15 years. She is a single parent with a child in college. Her stock is worthless and she has no income. 
''We want to be able to start our lives over again,'' she said. ''We thank Mr. Sharpton for allowing himself to be present to help.'' 
And Mr. Sharpton had one last point to make. 
''The laryngitis that the leading Democrats have had on this issue to me is frightening,'' he said. Democrats and Republicans alike plan numerous hearings into Enron's collapse, with one scheduled Thursday in each house of Congress. 
Mr. Sharpton and local ministers plan to bring other former Enron employees and stockholders to a meeting next week and then to Washington, but for now they have just Ms. Behn. Mr. Sharpton said that because everyone was focused on the investigation, the workers' troubles were being overlooked. Many of these workers do at least have savings and job prospects. 
Still, said Michael P. Williams, the pastor of the Joy Tabernacle here and one of the ministers who met with Mr. Sharpton, ''people define themselves by what they do -- when you stop being that, after 15 years, after 20 years, that's a big blow.'' 
Back in the private meeting room, as everyone was finishing sides of potato salad (Mr. Sharpton opted for the baked potato), the Rev. James W. E. Dixon said that former Enron workers in his church were asking for advice about their careers and their assets. 
Mr. Sharpton said the workers deserved remuneration because regulation failed. And he sees his own opportunity here, too. 
''As I explore running for president,'' he said, ''it is interesting that none of the other candidates have been here.'' 
Told that Mr. Jackson will be here Thursday, he said: ''Maybe. But he isn't running for president.''

Photo: The Rev. Al Sharpton was in Houston yesterday to discuss Enron. From left, Al Edwards, assemblyman; Mr. Sharpton; Mary Behn; the Rev. Samuel Gilbert; the Rev. James Dixon; and the Rev. Michael P. Williams. (James Estrin/The New York Times) 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Sharpton urges aid for investors 
By S.K. BARDWELL 
Copyright 2002 Houston Chronicle 
Jan. 23, 2002, 11:55PM
The government failed to protect investors from the downfall of Enron and therefore should find money to help those who lost their savings in the corporation's collapse, the Rev. Al Sharpton said Wednesday. 
"Somebody must stand up" for those people, Sharpton said at a news conference on the steps outside Enron. "There must be a commitment by the government to bail them out." 
If the government can afford to bail out airlines and other struggling corporations, he said, "they can certainly find money for victims who would not have been victimized if the government had protected them." 
The Rev. James Dixon, president of the Texas chapter of the National Action Network, and Larry Green, district director for U.S. Rep. Sheila Jackson Lee, D-Houston, also attended. 
Sharpton, president of the National Action Network, said he came to Houston after talking with Dixon about the effect of Enron's collapse. 
"The ripple effect in the community is huge," said Dixon, of Houston's Community of Faith Baptist Church. He noted scores of families in his and other churches who have suffered critical financial wounds in the wake of Enron's collapse. 
Green said Jackson Lee was in Washington Wednesday, introducing legislation to ensure a disaster like Enron's collapse will never happen again. 
Sharpton and Dixon have scheduled a town hall meeting for 7 p.m. Wednesday at Community of Faith Baptist Church, 1024 Pinemont. 

REVIEW & OUTLOOK (Editorial)
Taking Stock of Enron

01/24/2002
The Wall Street Journal
A18
(Copyright (c) 2002, Dow Jones & Company, Inc.)

The first two of at least eight Congressional hearings on Enron kick off today, an embarrassment of political riches. We're as curious as anybody to learn what was going on behind Enron's accounting kimono, but in the meantime we've been taking a peek ourselves at other parts of the company's anatomy. 
In particular, we've looked into the alleged problems with Enron's pension plan, the source of much hot populist rage. What we've learned is that, at least in this part of the Enron debacle, the reality isn't nearly as awful as some of the headlines. Consider some of the facts:
-- Enron's pension plans followed standard practices of most big, publicly traded firms. Enron offered several arrangements -- from employee stock-option plans to defined benefits -- but the one that has everybody outraged is its 401(k). 
Enron's employees could set aside up to 15% of their pretax salary in a 401(k), up to the IRS limit of $10,500 last year; they could put the cash into one of 20 different investment vehicles, including mutual funds and a brokerage account. Workers controlled this money in their own self-directed accounts and were free to switch among investments or even cash out (with a tax penalty). 
Enron had about 24,000 workers world-wide before bankruptcy and about half of them participated in the 401(k). So we're talking about 11,000 employees and a plan with about $1 billion in total assets, of which from $500 million to $600 million was invested in Enron stock. 
-- Enron also matched up to half of these worker contributions, up to 6% of base pay. But it matched in Enron stock, and employees were required to hold this matched stock until age 50. That limitation has come in for criticism, but keep in mind the stock was free. Some politicians want to stop companies from matching in stock, but the danger is that they then won't match at all. 
This arrangement is also fairly typical of big plans. About half match with company stock and half with cash. General Electric's plan offers a cash match, for instance, but about three-quarters of its workers use that money to buy company stock. 
-- Contrary to the headlines, Enron employees were not forced to watch helplessly as the value of their stock cratered, trapped by a malicious "lockdown." 
A lockdown, more properly a "transaction suspension period," occurs when companies change record keepers. Transactions are barred for a time so the new record keeper can verify account accuracy and make a reconciliation. Lockdowns can last anywhere from a few days to two months, depending on the size of the plan, its complexity and the sophistication of the record keepers. Last year, 24,000 private investment plans changed record keepers. 
Most important, Enron notified employees of the coming lockdown several times -- first by mail and then by four separate e-mails. Enron shares were still trading in the $30 range at this time, when workers had ample opportunity to sell. The lockdown itself started Oct. 26 and ended Nov. 13, so workers were locked out for only 11 stock-trading days. And during that time Enron's stock fell from $15.40 to $9.30, a rather small decline for a stock that had already lost almost 70% of its value during 2001. 
-- 401(k) plans do not promote dangerously undiversified portfolios. Diversification is an important financial tool, permitting investors to reduce risk without reducing expected returns. In long-term financial planning, it makes excellent sense to hold a portfolio that is diversified across a range of assets. 
But diversification is also a highly individual thing. Strategies depend mostly on age; a person nearing retirement should hold fewer risky assets than one starting a career. But after adjusting for age, all assets should be considered together. For example, a person who is heavily invested in real estate might want to achieve balance by a single-minded approach in other vehicles, like ginning up her 401(k) for equities. 
That doesn't mean holding 100% of equities in company stock is a great idea. But then again if the rest of an investor's equity portion is well-diversified, such a concentration isn't crazy. In hindsight, a 100% concentration in Microsoft made a lot of sense and lot of millionaires. A 100% concentration in Enron also made sense for a while; from January 1998 to January 2001, Enron's shares increased fivefold. 
-- Enron's 401(k) experience does not indicate that the plan is fiendishly flawed and government must step in to correct it. If workers knew Enron's true condition, they would no doubt have declined to invest in company stock in their self-directed accounts. The problem is that they didn't know the true condition of Enron, but then neither did the credit rating agencies, various federal overseers, stock analysts, auditors and (possibly) even much of its senior management. This was a failure in truth-telling and truth-ferreting out and it was system wide. 
All of which means that while the Enron pension story is tragic, it's more about specific corporate blunders and wrongdoing than it is about flaws in pension law or in 401(k)s. It's certainly no excuse for Congress to lobotomize a private pension system that has given millions of Americans a comfortable retirement.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Business/Financial Desk; Section C
ENRON'S COLLAPSE: RETURNS UNDER SCRUTINY
Senate Finance Panel Wants Tax Information From Enron
By DAVID CAY JOHNSTON

01/24/2002
The New York Times
Page 7, Column 1
c. 2002 New York Times Company

The Senate Finance Committee yesterday asked Enron to disclose its corporate income tax returns. 
In a letter to the chief financial officer of Enron, Senator Max Baucus, Democrat of Montana, who is chairman of the committee, and Senator Charles E. Grassley of Iowa, the ranking Republican, said ''it is critical that the public and the Congress have a more informed understanding of the activities and transactions related to Enron's tax returns and pension programs.''
The New York Times reported last week that Enron paid no taxes on its profits in four of the last five years and was eligible for $382 million of refunds. Enron created 881 partnerships in the Cayman Islands and other tax havens, most of which also have strict bank secrecy laws, actions the Finance Committee plans to examine in hearings that may begin as soon as March. 
Vance Mayer, an Enron spokesman, had no comment. 
Several leading tax lawyers said they saw no benefit to Enron in making its tax returns public. 
Mortimer Caplin, the Kennedy administration's tax commissioner, said, ''I would try to resist them as much as I could if I was representing Enron.'' 
Six other Washington tax lawyers, some of whom represent Enron or its creditors, agreed. ''Disclosure would just lead to more questions, and that won't help Enron,'' said one of the lawyers, who insisted on anonymity. 
Federal law allows the Senate Finance Committee, the House Ways and Means Committee and the Joint Committee on Taxation to inspect any tax return, but requires that they do so in closed session. The committees are not allowed to disclose what they glean from tax returns, and for that reason, some committee tax experts refuse to inspect actual returns. Disclosure of information on the returns is a felony. 
The letter from the two senators took note of their committee's authority to inspect the returns in closed session. They said their request was a courtesy ''to allow Enron an opportunity to provide the public a better understanding of the events at Enron.'' 
Mr. Baucus, in an interview, said that he hoped Enron would decide ''to work on a solid constructive basis with the committee.'' 
''This is not a witch hunt,'' Senator Baucus said. ''I want to get the facts and work with the company if they want to work with us.'' 
He said that if a closed-door review of the income tax returns showed that Enron had complied with all tax laws, he would then focus on changing those laws so that corporations could not eliminate income taxes through the use of partnerships in tax havens.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Business/Financial Desk; Section C
ENRON'S COLLAPSE: POLITICAL MEMO
In Personal Anecdote, Some See New Distance Where Others See New Strategy
By RICHARD L. BERKE

01/24/2002
The New York Times
Page 6, Column 1
c. 2002 New York Times Company

WASHINGTON, Jan. 23 -- To listen to President Bush, it was almost as if an epiphany involving his mother-in-law drove him to turn on the Enron Corporation, his most generous political benefactor. In assailing Enron on a trip Tuesday to Belle, W.Va., Mr. Bush said, ''My own mother-in-law'' lost all of her investment when the company's stock collapsed. 
But people close to Mr. Bush said his mother-in-law, Jenna Welch, served as a convenient device for him to distance himself from the Enron debacle and to appear more empathetic to its investors and employees than to the wealthy business executives who escaped the Enron collapse with flush bank accounts.
White House officials insisted that there was no change of emphasis -- or heart -- and noted that Mr. Bush's newly disparaging comments about Enron, and his mother-in-law's experience, came in response to reporters' questions. 
''This was definitely not a predetermined strategy shift of any sort,'' said Dan Bartlett, Mr. Bush's communications director. ''It's the same thing he's been saying in private meetings and conversations with staff for the past month.'' 
Yet other advisers to Mr. Bush said the president had recently discussed with Karen P. Hughes, his counselor, and a tight circle of aides, that he needed to move more aggressively -- and in a much more public way -- to distance the White House from Enron and its chief executive, Kenneth L. Lay. 
They said Mr. Bush was in part responding to many of his friends in Texas where, in the words of one adviser, ''This has really put a gash in the fabric of the community.'' More pragmatically, they said polling for the Republican Party has shown that Mr. Bush's relationship to energy companies is one of his biggest vulnerabilities. 
In addition, they said, the White House did not want to end up too much on the defensive, as often happened when controversies swirled around President Bill Clinton. Already, Congressional Republicans appeared to be moving ahead of Mr. Bush by announcing that they were returning their Enron donations -- while the president was still expressing remorse over the collapse. 
''It changed the terms of the debate to Bush's family being a victim,'' Scott Reed, a Republican strategist, said of Mr. Bush's remarks, ''and for the first time it gives the Republicans the high ground on the Enron mess. I was with a lot of Democrats at lunch today, and they saw it as a turning point.'' 
An outside adviser to Mr. Bush said, ''They don't want Bush to appear to be aloof and focused only on the big financial problems of Enron.'' 
Other Republicans were more skeptical, suggesting that Mr. Bush's hasty retreat from his friendship with Mr. Lay -- and his fresh outrage over Enron -- was transparent. 
A longtime Bush adviser said: ''He doesn't necessarily turn on people but he cuts them off. This is cut and run.'' He added, ''It was a little gratuitous invoking his mother-in-law.'' 
Yet by mentioning his mother-in-law, Mr. Bartlett said, the president underscores that he is sympathetic to the personal and financial havoc brought on by Enron's collapse. 
''It shows that he does understand that the typical investor and the everyday employees of Enron were really hurt by this,'' he said. 
Specifically, Mr. Bush told reporters on Tuesday: ''What I'm outraged about is that shareholders and employees didn't know all the facts about Enron. My own mother-in-law bought stock last summer, and it's not worth anything now. If she had known all the facts, I don't know what her decision would have been made, but she didn't know all the facts. And a lot of shareholders didn't know all the facts.'' 
Still, it can be treacherous for presidents, or would-be presidents, to try to personalize problems of ordinary Americans to their own lives. Al Gore's citing of the price of his mother-in-law's arthritis medicine backfired. (He said she paid nearly three times as much for it as the same medicine used by his ailing dog, Shiloh.) And the audience burst into laughter at a presidential debate when President Jimmy Carter said he chatted about nuclear weaponry with his daughter, Amy. 
''This is very dangerous for the president,'' said Stanley Greenberg, a Democratic pollster. ''I don't know that the president can attack Enron and be plausible or authentic. It will not take away the close relationships between Enron and Arthur Andersen and the administration. It will look like hypocrisy.'' 
Asserting that Mr. Bush did not suddenly bring up the anecdote about his mother-in-law, Mr. Bartlett said he first heard the president mention it at a private meeting of the White House economic team on Jan. 10. He also said that had the response been orchestrated, there would have been no need for Ms. Hughes to call him at the White House from West Virginia to seek more details about Ms. Welch's $8,000 Enron investment. 
''When Karen called me from the road, she said, 'Can you get the details on the Enron stock?' '' Mr. Bartlett said. ''We didn't have the details. It's not something we had all in the can. We had to call the accountant.'' (In fact, after gleaning new details, White House officials ended up correcting Mr. Bush on the timing of his mother-in-law's investment.) 
Beyond the political imperatives, White House advisers said Mr. Bush has been affected by the concerns expressed by many of his closest friends in the energy business. 
''He's hearing from all kinds of people in Texas on this thing,'' said a close friend of Mr. Bush. ''You can't be in the Houston community without seeing the devastation, and those stories are getting out.'' 
Some advisers to Mr. Bush said he did not act sooner to denounce Enron because he and his aides were inundated with questions about ties between the administration and Enron officials. 
To reinforce Mr. Bush's determination to side with the stockholders and Enron employees, Mr. Reed said the president's mother-in-law should join investors who are suing Enron. 
''The logical next step for the White House is to have the mother-in-law join this class-action suit,'' Mr. Reed said. ''That's the way to cement this baby.''

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Business/Financial Desk; Section C
ENRON'S COLLAPSE: FADING NEST EGGS
Labor Dept. Reviews Ban On Stock Sale
By JO THOMAS

01/24/2002
The New York Times
Page 6, Column 6
c. 2002 New York Times Company

HOUSTON, Jan. 23 -- The Labor Department is reviewing whether the Enron Corporation acted properly when it told its employees they could not sell Enron shares in their retirement accounts at a time when the shares' value was evaporating, agency officials said today. 
Specifically, investigators are reviewing the actions of everyone who was responsible for administering the company's 401(k) retirement savings program.
Enron employees who were laid off after the company filed for bankruptcy last month say in a class- action lawsuit that their rights were violated by a ''lockdown'' that prevented them from selling their shares after the company announced a third-quarter loss of $638 million, causing the stock to tumble. 
Ann L. Combs, the assistant secretary of labor in charge of the Pension and Welfare Benefits Administration, which oversees and enforces federal laws governing employee pensions and health plans, said that 20,795 Enron employees held $2.1 billion in the company's 401(k) plan at the end of the year 2000, 63 percent of which was in Enron stock. 
At that time, 7,600 people held another $1 billion worth of Enron stock as part of the employee stock ownership plan, Ms. Combs said, and 20,000 people were enrolled in a defined-benefit pension plan, with assets of $270 million that are federally guaranteed and not involved in the bankruptcy. Some employees could have belonged to more than one program. 
''This investigation will take time,'' Ms. Combs said today. ''It involves collecting tens of thousands of documents, interviewing people, and trying to make sure we've nailed down all the facts.'' 
The secretary of labor, Elaine L. Chao, said her agency had begun investigating Enron two weeks before it filed for bankruptcy protection on Dec. 2, and she vowed today to do what she could to protect workers ''who have seen their retirement savings evaporate.'' 
Speaking at a briefing in Washington, linked by telephone to reporters across the nation, Ms. Chao said she was working with Donald Evans, the commerce secretary, and Paul H. O'Neill, the secretary of the Treasury, to recommend to President Bush changes in the laws that are intended to protect worker benefits. 
Her agency is looking into the possibility of civil and criminal violations at Enron, she said. 
Enron maintains that it sent letters to all employees on Oct. 4 -- 12 days before the third-quarter loss was announced -- saying accounts would be frozen starting Oct. 29 while the administration of the plan was switched to a new company. Enron says the change was planned for months and lasted only 10 days, a period in which the stock fell $3.83. 
But e-mail messages released by Eli Gottesdiener, a lawyer in Washington who represents some employees, include a Sept. 27 message to all employees saying that the lockdown would begin on Oct. 19 and last about a month. Mr. Gottesdiener has said that the e-mail message misled employees so that they did not sell shares in a week in which the stock fell $10.65. Enron shares, which were above $90 in August 2000, are now worth less than 50 cents. 
Ms. Combs said such freezes ''are very common'' when plans change recordkeepers. But those responsible are required to protect the participants and beneficiaries, she said.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Labor probes 401(k) lockdown 
Officials look into blocked stock sales 
By DAVID IVANOVICH 
Copyright 2002 Houston Chronicle Washington Bureau 
Jan. 23, 2002, 10:04PM
WASHINGTON -- The Labor Department's probe into the Enron debacle has focused on a period when participants in the company's 401(k) retirement plan were barred from selling their Enron stock, Labor Secretary Elaine Chao said Wednesday. 
It is important, Chao said, that the government "protect Enron workers who have seen their retirement benefits evaporate." 
Employees, ex-employees and retirees were unable to sell some of their Enron shares for 10 days in late October and early November, at a time when the stock price was nosediving. 
The regulators' task will be to determine whether the company's decisions when handling the 401(k) plan were prudent and reasonable. 
Enron spokesman Vance Meyer declined to comment on the department's investigation, except to note that the company first notified the plan participants in early October, 3 1/2 weeks before the "blackout" period. 
Labor Department officials began looking into the company's collapse on Nov. 16, when regulators first became concerned Enron might be headed to bankruptcy. 
Labor officials would not say Wednesday when they expect to complete the probe, although Ann Combs, the assistant secretary for the Pension and Welfare Benefits Administration noted: "This investigation will take some time." 
Plan participants were blocked from selling their shares because Enron had hired a new administrator to handle the record-keeping for the retirement savings plan. 
The period -- also called a lockdown -- was supposed to facilitate a smooth transition when Chicago-based Northern Trust Co. turned over records to the new administrator, Lincolnshire, Ill.-based Hewitt Associates. 
"It was a transition that was in the works for months," Meyer said. 
Lockdowns are not uncommon when companies change plan administrators, Labor officials said Wednesday. 
On Oct. 4, 2001, Enron officials told employees the lockdown period would begin on Sunday, Oct. 28, and continue until Nov. 20. But with the stock price falling, Enron employees started pressing management to alter its plans. 
In an e-mail to employees on Oct. 25, the company's benefits department noted: "We have been working with Hewitt and Northern Trust since July. We understand your concerns and are committed to making this transition period as short as possible without jeopardizing the reconciliation of both the plan in total and your account in particular." 
Company officials were able to cut short the transition period, although many participants complained they received no notice that the blackout period had been abbreviated. 
Enron contributed stock amounting to 50 percent of the contributions each employee made to the plan, up to 6 percent of salary. Under the company's 401(k) rules, only those employees aged 50 and over could sell those matching shares. 
During the lockdown period, no Enron stock in the 401(k) plan could be sold, even stock employees had bought on their own. 
Some employees have complained they had their entire life savings invested in Enron stock and lost everything when the energy and trading giant tumbled into bankruptcy court. 
At the end of 2000, nearly 21,000 current and former Enron employees participated in the company's 401(k), the Labor Department said. About 63 percent of the $1.6 billion worth of assets in the plan at that time were invested in Enron stock, the vast majority of which were non-matching shares employees had purchased on their own. 
Enron also offered two other retirement plans, a more traditional, defined-benefits pension plan and an employee stock-ownership plan. 
At the end of 2000, about 20,000 current and former employees participated in the pension plan, with assets of about $270 million, none of it invested in Enron shares. 
About 7,650 were enrolled in the stock-ownership plan. At the end of 2000, their shares were worth about $1 billion. 
Federal regulations require that companies offering traditional, defined-benefit plans invest those funds in a diversified portfolio. No more than 10 percent of a plan's funds can be invested in a particular stock. 
Congress, however, specifically excluded 401(k) employee contribution plans from those rules. In the wake of the Enron debacle, lawmakers now are considering whether to force employees to diversify their 401(k) portfolios as well. 
Also on Tuesday, a group of Enron employees filed suit in federal court in Houston accusing a slate of Enron executives, as well as the accounting firm Arthur Andersen, Enron's outside auditor, of racketeering. 
By conspiring to hide Enron's true financial position, the suit alleges, the Enron executives and Andersen caused employees to lose their retirement funds. 
A group of four Enron employees first filed suit last fall. On Tuesday, another 96 employees added their names to that complaint and raised the racketeering allegations for the first time. 
The employees are hoping to have their case certified as a class action. 
Steve Berman, an attorney representing the employees, said the workers could not sue Enron itself, since the corporation has already sought protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code. 
Among those named in the suit are Enron Chairman Ken Lay, who resigned Wednesday, former CEO Jeffrey Skilling and former Chief Financial Officer Andrew Fastow. The suit also names David Duncan, Andersen's lead partner on the Enron account. 
Meyer declined to comment on the suit. A spokesman for Andersen declined immediate comment. 
A hearing in the case is scheduled for Feb. 25. 

Financial Desk
COLUMN ONE Beware the 401(k) Gamble Enron workers aren't the only ones rolling the dice with retirement savings. But efforts to limit investment in employer stock meet bitter resistance.
PETER G. GOSSELIN
TIMES STAFF WRITER

01/24/2002
Los Angeles Times
Home Edition
A-1
Copyright 2002 / The Times Mirror Company

WASHINGTON -- Until recently, the flood of millions of working people into the stock market, principally through their retirement accounts, was hailed as evidence that Americans at all economic levels can make it on their own. 
Then Enron Corp. collapsed, throwing thousands out of work and destroying the retirement nest eggs of thousands more. While investigators search for clues of foul play, Washington is rushing in with legislative fixes--including proposals to limit how much company stock can go into retirement accounts.
For many, it is too late. The collapse of Enron's retirement arrangements is only the latest in a series of similar financial fiascoes during the last decade. But hundreds of thousands, perhaps millions, of Americans continue to shoulder the same kinds of risk borne by Enron workers before their savings evaporated. 
"We're fooling ourselves if we think Enron is a scandal that doesn't have anything to do with the rest of us," said Norman P. Stein, a member of the Labor Department's employee retirement advisory council and a University of Alabama law professor. "What happened to Enron workers could happen to you." 
The reason is a sea change in how Americans make financial provisions for their old age. Working people have turned the stock market into their retirement system, and themselves, rather than their corporate employers, into retirement money managers. 
Individuals are now responsible for making the basic investment decisions for half the nation's non-Social Security retirement savings, rather than having those decisions made the old-fashioned way--by employers who promise benefits no matter what. 
That is up from a little more than one-third in the early 1990s. Individuals, together with big institutions, have pumped more than two-thirds of the nation's $10 trillion-plus in public and private retirement savings into stocks. 
So when the stock market takes off, as it did in the late 1990s, so does America's retirement system. And when it tumbles, as it has in the last two years, so do retirement savings. 
"We have a system that has succeeded in amassing a formidable pool of capital and providing retirement benefits to millions of people," said J. Mark Iwry, who as benefits tax counsel for the Treasury Department until last year was one of the most powerful regulators of the retirement system in Washington. 
"On the other hand, the self-direction of investments has shifted the risk of retirement investment from employers to employees, and many workers have ended up assuming imprudent amounts of it." 
They often have done so without even knowing what they did. 
Retirees Look Back at Costly Errors 
Bill Quinlin certainly didn't. 
The 65-year-old Robstown, Texas, resident retired from Enron several years ago, after nearly three decades as a gas pipeline operator, to care for his dying mother. He had nearly all his retirement savings, save a small pension and Social Security, in 25,000 shares of Enron stock. 
When the stock was at its height at better than $80 a share and Quinlin was a paper millionaire, a friend suggested he sell some of his holdings. 
But Quinlin said he could not bring himself to do it, largely because the place was being run by Kenneth L. Lay, Enron's longtime chairman, who resigned late Wednesday. 
Lay had saved a utility where Quinlin once worked. And the executive had come down every year or so while Quinlin was at the Corpus Christi pump station to take the men out for barbecue. 
"I thought that guy walked on water," Quinlin said recently of Lay. "Why, if he walked in here this minute, I'd probably sit right down and talk to him." Quinlin's shares have gone from being worth about $2 million to a couple of thousand. 
Roger Boyce said he didn't understand the risks he was shouldering either, even though he is sophisticated in financial matters. 
The 67-year-old Minneapolis-area resident retired from Enron in March 2000 after almost two decades as a benefits executive and another decade as a safety and security manager. 
Boyce said he was well aware that the world of retirement savings was changing when Enron stopped offering old-fashioned pensions in the late 1980s and replaced them with plans such as 401(k) accounts, to which it contributed fixed amounts of stock, but made no promise of what benefits employees could expect when they retired. 
"I knew I had to manage these accounts, and I was aware the best protection was diversification" out of Enron stock and into other stocks and mutual funds, he said. 
But Boyce ended up pumping about two-thirds of his retirement savings into Enron because of the company's rapidly rising stock. In any case, he reasoned, with the company in so many lines of business it represented a diversified investment all on its own. Even if one business line failed, another would take its place. 
"I know a normal person's question is: 'How stupid could you be?' " But it was difficult to resist, he said. 
Like Quinlin, Boyce saw his Enron stock tumble almost $2 million in value. He and his wife, Marilyn, have been forced to scrap the idea of setting up trusts for their six grandchildren. 
"It's very tough to swallow," he said. 
It used to be that employees relied for retirement income on pensions in which employers managed the funds, promised retirees a "defined benefit" and kept excess profits or losses to themselves. The shift to 401(k)s, IRAs and employee stock ownership plans--in which employee contributions are defined but benefits are left to market forces--is usually portrayed as part of a titanic struggle between an old, dying, paternalistic, industrial order and a new, freedom-filled, entrepreneurial economy. And, in part, it has been just that. 
"When we first tried to sell the idea of the 401(k) to Bethlehem Steel in 1981, they said, 'You don't understand; it's part of our culture to take care of our people,' " recounted Ted Benna, a Bellefonte, Pa., consultant who is widely considered the "father of the 401(k)." 
"That paternalistic attitude has been blown away" by new technology, globalization and Reaganite politics, he said. 
The only problem with the old-versus-new portrayal is that it overlooks two crucial facts. The first, as even Benna will concede, is that 401(k)s and similar accounts were not originally intended to replace traditional pensions and grew in a piecemeal fashion. The second is that it was government tax subsidies, as much as market forces and individual choice, that produced the new accounts. According to a variety of regulators and lawmakers, that gives Washington a big responsibility for making sure they are run well. 
"Society has a lot riding on people's retirement savings," said Sen. Barbara Boxer (D-Calif.), who co-sponsored legislation to restrict the proportion of company stock such as Enron's in retirement accounts. "We're paying for them with big tax breaks." 
Indeed, the tax break for pensions and retirement savings is the very biggest that Washington offers, topping such giants as the mortgage interest deduction and the employer tax exclusion for employee health insurance, and amounting to about $100 billion a year. 
"Uncle Sam is the largest single investor in the retirement system and has a legitimate interest in how it works," said Iwry, the former Treasury official. 
Only it didn't work in the case of Enron. And, according to critics, it could fail in the same way at some of the nation's other big companies. 
In the investment world and at the casino, putting most of your chips on one color--or most of your money in one stock--is a gamble. 
Before the fall, fully 60% of the money in Enron's 401(k) plan was in Enron stock. But that hardly qualified the company for the top slot when it comes to packing retirement plans with company stock. 
At consumer goods giant Procter & Gamble, the portion of P&G stock in the unusually generous retirement plans exceeds 90%, according to D.C. Plan Investing, a financial newsletter. At Coca-Cola and General Electric, it is about 80%. At McDonald's and Home Depot, it is just below 75%. 
"The single-largest source of excessive risk for employees in retirement plans is undue concentration in employer stock," Iwry said. 
Investment Industry Balks at Reform Efforts 
Most congressional proposals for what to do about the problem run along one of two lines: imposing limits on the amount of company stock allowed in plans or encouraging more investor education. Key critics, including 401(k) inventor Benna, say that neither will work. In the case of stock limits, even some of the authors concede the measure falls far short of what is needed. 
Boxer and Sen. Jon Corzine (D-N.J.) want to impose a 20% cap on company stock and reduce the tax break that companies would get when they contributed stock instead of cash. A similar House bill would reduce the cap to 10%. 
Both proposals have met with howls of protest from the investment industry, which argues that individuals should have the right to invest their money as they see fit. 
Boxer is well acquainted with the argument; many of the same objections were raised when the California Democrat tried to win similar restrictions after floor retailer ColorTile Inc. went bankrupt five years ago, wiping out employees' 401(k) savings. Her measure was eventually so watered down it made almost no difference. 
By contrast, the investment industry enthusiastically supports a bill by Rep. John A. Boehner (R-Ohio) that would encourage companies and 401(k) providers such as mutual fund groups to offer education and financial advice by limiting their liability if their advice turns out to be bad. 
Boehner acknowledged that his measure could pave the way for conflicts of interest such as mutual funds advising employees to buy the fund's products. But he said the danger could be limited by requiring that the conflicts be disclosed. He asserted that there were no parallels with Enron and others encouraging workers to invest in the companies' own stock. 
"The lesson of Enron is diversify, diversify, diversify," Boehner said. "What we've got to do is get that across to people by giving them broader knowledge and access to advice." Critics say the Boehner bill is an invitation for trouble. 
Old-fashioned "defined benefit" plans follow diversification rules that go beyond company stock and a requirement that retirement savings be converted to an annuity, or fixed annual payment, when people retire to ensure that they don't outlive their own finances and end up in poverty. 
To date, no lawmakers, even sharp critics, have publicly proposed giving the same kind of protections to 401(k)s and the "defined contribution" world. 
The reason is clear: Such restrictions would fly in the face of the individual choice that has made 401(k)s so popular. 
But there are signs that some people are beginning to move in that direction. 
Corzine, for example, said last week that the cap he and Boxer are proposing for company stock should be extended to all assets in 401(k) plans so that individuals could not put more than 20% of their retirement savings in any one investment. Benna is pushing a plan to give companies new protections against employee lawsuits over retirement accounts if firms agree to effectively direct employees' investment options to a few prearranged diversified portfolios. 
"Nobody likes to say it, but people who don't know the difference between stocks and bonds are being asked to pick particular ones," said Stein, the Alabama law professor. "People are being given too many decisions to make." 
During the late 1990s when the stock market was climbing 20% and 30% a year, such views would have been dismissed out of hand. But with stocks stumbling, the country under assault and polls showing Americans increasingly concerned about "personal security," some believe there is a chance for change.

PHOTO: Retired Enron manager Roger Boyce, with his wife, Marilyn, saw his company stock plummet almost $2 million in value.; ; PHOTOGRAPHER: JANET HOSTETTER / For The Times; GRAPHIC: Retirement Tables Turned / Los Angeles Times; 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Heard on the Street
How to Predict The Next Fiasco In Accounting And Bail Early
By Cassell Bryan-Low and Jeff D. Opdyke
Staff Reporters of The Wall Street Journal

01/24/2002
The Wall Street Journal
C1
(Copyright (c) 2002, Dow Jones & Company, Inc.)

So you're not a Wall Street analyst or professional short seller. Still, you do have some tools at hand for avoiding being caught in a stock that suffers an accounting blowup. 
While the highly publicized accounting problems at collapsed energy-trading firm Enron are just the latest in a series of corporate accounting scandals, there are numerous warning signs that skeptical investors use to protect their money, and some are straightforward enough for individual investors to follow.
"After Enron, investors realize they have to question every financial statement they get," says Murray Stahl, director of research at Horizon Research, a New York investment-research firm. If nothing else, the Enron debacle "will make the issue of accounting very important in the future." 
Short sellers -- bearish investors who try to profit from a stock's decline by selling borrowed shares in hopes of replacing them with shares bought later at a lower price -- see no shortage of occasions where their hard-nosed approach to financial analysis will come in handy. Thanks to factors such as stock incentives for executives and auditors collecting fees for consulting, "accounting now is worse that it ever has been," says Marc Cohodes, a partner at Rocker Partners, a New York hedge fund. 
Here are some red flags that such professional investors watch out for to guard against potential trouble down the road: 

Invoices Increasing, Sales Slipping: If a company's accounts receivables are growing faster than sales, that signals some concerns about the quality of the sales. Among other things, swelling accounts receivable could indicate "channel stuffing," or overselling to distributors to pad short-term financial results. 
Similarly, if inventories are growing faster than sales, that could signal a company isn't able to sell inventory as quickly as originally believed. Depending on the type of inventory, there might be the added risk of the inventory becoming obsolete, resulting in write-downs. 
In 1998, Sunbeam, a maker of household consumer products, restated earnings downward for six previous quarters. The company, which had seen a surge in accounts receivable, acknowledged that the original revenue had been prematurely booked, and it cited a variety of other accounting moves that were necessary to restate. Sunbeam had inflated sales of such things as barbecue grills by offering retailers low prices and easy cancellation terms, promising, say, to hold the grills in Sunbeam's warehouses for later delivery. 
Dubbed a "massive financial fraud" by the Securities and Exchange Commission, the company filed for bankruptcy reorganization in February 2001. 

Concentrate on Cash: The cash-flow statement tracks all the changes that affect a company's cash position, be it cash flowing in from debt and stock offerings, or cash flowing out in the form of dividends. It can also serve as an indicator of potential chicanery inside a company's accounting. 
A telltale sign of trouble is negative cash flow from operations while the company's so-called Ebitda (earnings before interest, taxes, depreciation and amortization) is positive. Short sellers note that in such a case, a company could be using accounting gimmickry to make its business look healthier than it really is. If operating cash flow is negative, in reality the company is consuming cash rather than generating it, as its Ebitda figure would suggest. 

Risky Returns: At the end of the day, what makes a stock move is its return on capital -- how much profit a company generates off the assets it employs, such as its cash, inventories and property, plants and equipment. 
Most financial statements break apart a company's operations to show investors which segments generated which portion of sales and profits. By isolating individual segment returns, says one short-selling analyst, investors can determine where earnings are coming from and whether they seem fishy. A few simple calculations can reveal a lot. 
Consider Mirant, an energy peer of Enron. As part of its balance sheet, the Atlanta company shows assets and liabilities "from risk management activities," both current and noncurrent. Subtract the liabilities from the assets, the analyst notes, and Mirant has $80 million of equity in that business. As part of the footnote attached to those balance-sheet items, Mirant noted that it generated essentially $221 million off those assets during the third quarter. 
That kind of stunning return, about 275%, is hard for any company to sustain, raising questions about the likelihood that such strong performance can be maintained indefinitely. The same analysis shows the other segments had far more humble returns. A Mirant financial expert wasn't available to comment. 

It's All Relative: Often, a company's financial statements will include a "related-party transactions" section, pointing to dealings with its own officers or related companies. Maybe the company has loaned money to its officers to buy company stock, or cash to an affiliate to buy products from the company. 
Either way, investors should be aware of the potential pitfalls. Some short sellers say these dealings can signal that a company thinks of corporate cash as belonging to management and not the shareholders, and thus is more freewheeling with it than a more conservative company is. Enron may be a case in point; its downward spiral into bankruptcy-court protection started as investors focused on nettlesome related-party transactions involving the then-chief financial officer. 

Recurring Nonrecurring Charges: Another red flag, according to Nathaniel Guild, a partner at Short Alert, a research firm in Charlotte, N.C., is the practice of repeatedly labeling restructuring and other charges as "nonrecurring," "one-time" or "unusual," when they aren't truly one-off expenses. Because most analysts ignore such charges in their earnings models, this can create a cloud of smoke that obscures the company's true earnings power. "You can write off anything, in any fashion," Mr. Guild maintains. "There is very little regulation in that area." 

Consult the Consulting Fees: The case of Enron also has focused the spotlight on the issue of auditor independence. Thanks to new rules introduced by the Securities and Exchange Commission, companies now are required to disclose how much they pay their auditors not just for auditing, but for nonauditing work as well. The question investors should ask themselves, says Rocker Partners' Mr. Cohodes, is how independent an auditing firm can be that is getting paid as much or more for consulting services as it is for auditing. "It is a huge conflict," he contends. In the Enron example, the company in 2000 paid Arthur Andersen $25 million in audit fees and $27 million for nonaudit work, including consulting. 
--- 

A Section
Bush Official Cites Losses On Sales of Enron Stock; Army Secretary Had Been A Company Executive
Ellen Nakashima
Washington Post Staff Writer

01/24/2002
The Washington Post
FINAL
A10
Copyright 2002, The Washington Post Co. All Rights Reserved

Army Secretary Thomas E. White, the highest-ranking Bush administration official to come from Enron Corp., has told colleagues in the administration that he suffered "significant personal losses" as he sold his Enron stock to comply with his government ethics agreement, according to a letter released yesterday. 
The Jan. 22 letter, which White wrote in response to a query by Rep. Henry A. Waxman (D-Calif.), was released by Waxman's office.
In the letter, White listed sales of 405,710 shares of stock between June 13 and Oct. 30 at prices ranging from $50 to $12.85 a share. Though the sales yielded $12.1 million, he said he told Secretary of State Colin L. Powell and Defense Secretary Donald H. Rumsfeld that he "had suffered significant personal losses, but . . . would persevere." 
Among administration officials, White had by far the largest holdings in Enron stock and stock options. The financial disclosure form he filed last spring revealed that he held $25 million to $50 million in stock and a similar amount in options at that time. Bush senior adviser Karl Rove and Charlotte Beers, undersecretary of state for public diplomacy, reported the next highest holdings: $100,000 to $250,000. The government requires disclosure only within broad ranges. 
White took office May 31. According to an agreement he signed and filed with the Office of Government Ethics, he pledged to divest himself of his Enron stock and options within 90 days. 
In an interview yesterday, he said that he had sought and received an extension, which expired Nov. 20, and that he has sold all his Enron stock. In his letter to Waxman, he said he had renounced his options. 
White spent 11 years as an Enron official, leaving last spring as vice chairman of Enron Energy Services. His salary, according to his disclosure form, was $5.5 million a year. He also reported that, at the time he filed his disclosure, he owned a condo in Aspen, Colo., worth $5 million to $25 million and a similarly valued condo in Naples, Fla. According to property records, he currently owns a waterfront penthouse in Georgetown that he bought for $5.5 million last June. 
When White left Enron, he received a $1 million severance payment and $13 million in payment for stock appreciation rights, also known as "phantom stock." 
"We appreciate Secretary White providing the information," said Waxman, ranking minority member of the House Government Reform Committee. "We intend to review it. 
In his letter, White also said that he had had "brief" conversations with Powell on Dec. 12 and with Rumsfeld on Nov. 10. Both men were concerned only with the impact Enron's bankruptcy would have on his "personal well-being," he said. 
White also said that he had had 29 phone conversations or meetings with Enron Chairman Kenneth L. Lay and other Enron officials beginning last June, but that at no time was he asked to intervene on behalf of the failing company. 
In an interview yesterday, White said that he thought Enron's collapse was a tragedy. "I worked there for 11 years, and I have a good many dear friends that were a part of the corporation that I got to know well," he said. "The economic damage done to them and their wives and their families is tragic. So that's where my principal concern is." 
Staff writer Bill Miller and researchers Madonna Lebling and Lynn Davis contributed to this report.

http://www.washingtonpost.com 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Accounting for Enron: Bush's Plan to Name Accounting Veterans To SEC Raises Some Eyebrows in Congress
By Scot J. Paltrow
Staff Reporter of The Wall Street Journal

01/24/2002
The Wall Street Journal
A8
(Copyright (c) 2002, Dow Jones & Company, Inc.)

President Bush's plan for a Securities and Exchange Commission dominated -- for the first time ever -- by commissioners with close ties to the accounting industry is raising concerns in Congress in the wake of Enron Corp.'s collapse. 
The accounting failures that helped precipitate the collapse have made reform of accounting-industry oversight the biggest issue immediately facing the SEC.
But if the president's previously announced plans are fully carried out, three of the five SEC commissioners will be individuals with close professional ties to Big 5 accounting firms. Yesterday, the president made a recess appointment of two commissioners, including Cynthia A. Glassman, a principal at Ernst & Young LLP. His nomination in December of Paul Atkins, a lawyer and partner at PricewaterhouseCoopers, to a seat on the commission is still pending in the Senate. SEC Chairman Harvey Pitt, who took office last year, until then was an attorney for all the Big 5 firms as well as the industry's main trade association, the American Institute of Public Accountants. 
Even without the eventual approval of Mr. Atkins, Mr. Pitt and Ms. Glassman together will make a majority for the time being, as there are two vacancies remaining on the commission. The only other sitting commissioner is Isaac Hunt, a holdover from the Clinton administration, who became Mr. Bush's second recess appointee yesterday. 
The recess appointment, made while Congress isn't in session, enabled the president to bypass the usual process of Senate approval. Ms. Glassman will be able to serve until the end of this year. The move drew swift condemnation from Democrats in the House and Senate, even though the White House sought to blunt criticism by pairing the move with the recess reappointment of Mr. Hunt, a Democrat. 
People close to the Senate Banking Committee say the Atkins nomination is increasingly likely to face close scrutiny and potential opposition because of his ties to the industry. 
A spokesman for Sen. Jon Corzine (D., N.J.), former co-Chief Executive of Goldman Sachs and a member of the Senate Banking, Housing and Urban Affairs Committee that will vote on the Atkins nomination, said the senator faulted the administration for bypassing the hearing process for Ms. Glassman's appointment. He said Sen. Corzine "has concerns about putting on the board this concentration of people who have the same background, especially since the chairman himself was a lawyer representing the accounting industry." 
The timing of the president's choices is putting the White House in an uncomfortable position as new disclosures have been made almost daily about audits of Enron by Arthur Andersen LLP and shortcomings in accounting regulation. Anne Womack, White House press secretary, said the president is going ahead with his choices and denied that he has any desire to pack the commission with industry partisans. 
Ms. Womack said [Ms.] Glassman "has an extensive background as an economist" and with the Federal Reserve Board, in addition to her five years most recently with Ernst & Young. Mr. Atkins "has experience with accounting firm but also has served on SEC before," she said, and Mr. Pitt, she continued, "brings a legal background. Put these things together and you represent all the relevant disciplines that come before and are affected by SEC." 
The White House said it made the recess appointments because the large number of vacancies on the commission made it imperative to get a commissioner in place at least temporarily. 
But several prominent experts on the SEC said the president's moves are surprising in view of the Enron developments. Alan R. Bromberg, professor of securities law at Southern Methodist University in Dallas said, "It's very questionable in my mind," adding "It looks me like life is going to be a lot easier for accountants with this commission." 
Ms. Glassman and Mr. Atkins weren't available for comment. An Ernst & Young spokesman said the firm played no role in suggesting Ms. Glassman's nomination to the White House, adding, "She's not going there to represent us in any way."

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Accounting for Enron: Insurance Companies Cut Sales Of Once-Plentiful Surety Bonds
By Christopher Oster
Staff Reporter of The Wall Street Journal

01/24/2002
The Wall Street Journal
A8
(Copyright (c) 2002, Dow Jones & Company, Inc.)

A combination of a weak economy, Enron Corp.'s problems and significant losses from the Sept. 11 terrorist strikes have led the insurance industry to sharply reduce sales of once-plentiful and cheap surety bonds. Rates on many of the bonds they still do sell have soared 50% to 1,000%, analysts said. 
Surety bonds are issued by insurers to companies that want to guarantee performance or payment in a business transaction, to assure the companies' business partners that the concerns will complete the transactions. Without that assurance, some business grinds to a halt.
The insurance industry's unwillingness to issue surety bonds is hitting hardest those businesses that themselves are being hit by the recession. A prime example is Kmart Corp., which cited its inability to secure such bonds at a reasonable price as a factor leading to its decision to file this week for bankruptcy-court protection. Kmart used surety bonds to guarantee the payment of claims under its workers' compensation insurance program, as well as other liabilities that the company self-insured against. 
But insurers are less willing to provide surety bonds to these companies for such purposes because of the heightened risk, in a sluggish economy, that the companies will need to draw on them. 
"When you go into a recession, companies are going to go into default," said Don Watson, managing director at Standard & Poor's insurance ratings group. Mr. Watson expects companies with deteriorating credit quality to have an increasingly hard time obtaining surety bonds, which many consider vital to continuing business. 
The property-casualty insurance industry is unwilling to extend itself because it is sitting atop claims from the Sept. 11 terrorist attacks that are expected to top $40 billion, or about one-fourth of the capital base of commercial property-casualty insurers. A company's capital base is particularly important in the surety-bond business because regulators require large amounts of capital to back such bonds. 
On top of this, the bankruptcy-court filing by energy-trading firm Enron late last year could lead to potentially large payouts on surety bonds that were in place to guarantee the supply of oil and natural gas by Enron to various parties. Several insurers have announced exposure to Enron losses, including Chubb Corp., which said it has $220 million of such exposure. 
In a recent report, insurance broker Willis Group Holdings Ltd. said insurance companies are "more likely to allocate capital to property-casualty lines of business that present the prospect for higher returns" than do surety bonds. The report notes that the availability of surety bonds for self-insurance and other types of financial guarantees "will be severely curtailed, if written in the market at all." In the past year alone, the number of surety reinsurers has dropped to 12 from 16. Several primary surety-bond writers have exited the business. 
Like nearly all lines of property-casualty insurance, surety-bond prices fell in the 1990s as insurers competed fiercely for premium dollars. Underwriting became lax because in some cases claims might not be paid for years and insurers assumed they could turn a profit by investing the premiums in the soaring stock market. 
"The business had gotten very cheap," said Mark Reagan, chief executive of the construction practice of broker Willis Group Holdings Ltd. Underwriting manuals suggest premiums of $20 per $1,000. But "companies were getting bonds for $1.25 for $1,000 of coverage." 
The most obvious impact will be on the construction industry. Contractors buy surety bonds to ensure the completion of their work. "It's going to further limit or inhibit commercial property development, which will be a further drag on the economy," said S&P's Mr. Watson.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Accounting for Enron: Pension Funds, Not Lawyers, Drive Holder Suits
By Richard B. Schmitt
Staff Reporter of The Wall Street Journal

01/24/2002
The Wall Street Journal
A8
(Copyright (c) 2002, Dow Jones & Company, Inc.)

Lawyers for Enron Corp. shareholders marched into a Houston court with great show this week with a box full of shredded documents carted out of Enron headquarters by an ex-employee. 
The disclosure made good theater, but it also reflects a little-noticed change in the world of shareholder litigation. Such suits were once driven by lawyers who raced to the courthouse to be first to file so they could control the case and collect the biggest fees. Now, the suits are being driven by pension funds, like the one administered by the Regents of the University of California that hopes to become the lead plaintiff in the Enron shareholder case.
As a condition of hiring their lawyers, the Regents required that Milberg Weiss Bershad Hynes & Lerach commit dozens of lawyers, investigators and forensic accountants, among others, to the case. "They demanded a level of attention that is unprecedented," said Darren Robbins, a Milberg Weiss partner in San Diego. 
The result: Milberg Weiss, a firm that was once widely criticized by business groups for doing little work on behalf of shareholders, has done 100 interviews with potential witnesses and hired dozens of professionals to pore over evidence it has collected -- all before a judge even decides whether the firm's client will be named lead plaintiff and it will get the job of lead lawyer. 
Ironically, all this has come about because of a 1995 law aimed at putting the likes of Milberg Weiss on a short leash. Previously, under class-action rules, practically any investor who lost money in a stock could be a plaintiff. The result was a system that some companies viewed as legalized extortion, where they settled even nuisance claims to avoid the costs of litigation. The law changed the game by boosting the needed proof in such cases and by giving investors with the largest losses first crack at controlling them. 
Now, the lawyers are having to be salesmen, courting new business, with glossy presentations at institutional-investor conferences and competing in beauty contests staged by the investors to pick lawyers. "They are in hot pursuit of these clients," said Richard Koppes, former general counsel of the California Public Employees' Retirement System and currently a lawyer in the Sacramento, Calif., office of Jones, Day, Reavis & Pogue. "It is a new market for them, and they recognize that." 
Shareholder litigation was new terrain for the California Regents, which despite managing $54 billion in pension assets, had never headed up a big securities-fraud action before. That changed when it lost nearly $145 million investing in Enron. 
The two sides hooked up after the university treasurer heard a presentation by Milberg Weiss partner William Lerach at an invitation-only investor conference. Officials invited Mr. Lerach to make a pitch for the Enron suit at a private meeting last month. Several other firms also made unsolicited bids for the work. "The university came to believe that Milberg Weiss had the resources and the will to make a substantial rather than a symbolic recovery," said Lloyd Lee, a lawyer for the university in Oakland. 
Some class-action specialists say the involvement of large investors will make it more difficult for defendants like officers and directors of Enron to resolve cases. "Plaintiffs' lawyers used to settle pretty quickly," said Tracy Nichols, a partner with Holland & Knight in Miami. "Now, they have an institutional client looking over their shoulders, saying, `How hard are you going to push for me?"'

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Business; Business Desk
Sales to Ex-Enron Customers Help Dynegy Profit Rise 36%
From Bloomberg News

01/24/2002
Los Angeles Times
Home Edition
C-3
Copyright 2002 / The Times Mirror Company

Dynegy Inc. said fourth-quarter profit rose 36%, partly boosted by electricity sales to former customers of insolvent Enron Corp. 
Profit from operations climbed to $144 million, or 41 cents a share, from net income of $106 million, or 32 cents, a year earlier. Revenue fell 13% to $8.74 billion.
Dynegy's power sales more than doubled last quarter from a year earlier, and costs from canceling its bid for rival Enron were less than expected, executives said. Dynegy's stock gained after earnings matched analyst estimates, rising $1.25, or 5.4%, to $24.55 on the New York Stock Exchange. Shares fell 26% last quarter and had dropped 54% in the last year. 
Dynegy's trading and marketing profit rose 58% last quarter from a year earlier, boosted by business from customers trying to lock in gas and electricity prices. North American gas sales rose 14%. 
Dynegy wrote off $51 million, or 14 cents a share, in the quarter for its trading business with Enron, which filed for bankruptcy last month. Other costs included $7 million, or 2 cents a share, to end its bid for Enron in November and $9 million, or 3 cents, for severance costs related to its Illinois electric utility. That made net income $77 million, or 21 cents a share. 
The company had said Enron costs might reach $125 million. Dynegy will pay a $65-million dividend over two years to Chevron Texaco Corp. for its participation in the Enron bid. 
ChevronTexaco owns 27% of Dynegy and provided $1.5 billion to Dynegy for its $23-billion bid.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Accounting for Enron: Dynegy's Fourth-Quarter Net Fell 27%, Weighed Down by Costs Related to Enron
Dow Jones Newswires

01/24/2002
The Wall Street Journal
A8
(Copyright (c) 2002, Dow Jones & Company, Inc.)

HOUSTON -- Dynegy Inc.'s fourth-quarter net income fell 27%, hurt by exposure of its energy trading operations to fallen rival Enron Corp., as well as acquisition-related costs including its aborted acquisition of Enron late last year. 
Dynegy posted net income of $77 million, or 21 cents a share, compared with $106 million, or 32 cents a share, a year earlier.
The results were depressed by a $78 million pretax charge stemming from energy trading deals with Enron, which filed for bankruptcy-court protection in December. In addition, Dynegy took a $10 million pretax charge for costs related to its canceled $9 billion acquisition of Enron. Restructuring at Dynegy's Illinois Power Co. unit resulted in a $15 million pretax charge, while merger-related costs from the February 2000 acquisition of Illinova Corp. also came to $15 million. A special dividend associated with stock issued to ChevronTexaco Corp. in November cost $3 million. 
Revenue dropped 13% to $8.74 billion from $10 billion. 
Still, Dynegy said the quarter benefited from strong earnings from its wholesale energy network segment, led by increases in North American gas volume and total power sold. The company noted, however, that its liquids and transmission and distribution segments were hurt by mild weather and the economy. 
After excluding nonrecurring items, Dynegy said its earnings amounted to 41 cents a share -- in line with analysts' expectations as reported by Thomson Financial/First Call. "The results illustrate how the company's diverse energy delivery network is capable of generating solid earnings even in the most turbulent market environment," said UBS Warburg analyst Jay Yannello. 
At 4 p.m. in New York Stock Exchange composite trading, Dynegy rose $1.25, or 5.4%, to $24.55. 
For the full year, net income rose 29% to $648 million, or $1.90 a share, up from $501 million, or $1.48 a share, a year earlier. Revenue rose 43% to $42.24 billion from $29.45 billion. 
Dynegy said it has begun a previously announced capital-restructuring plan by issuing $748 million of common stock to ChevronTexaco and by reducing its capital spending budget to $1.2 billion from $1.7 billion. The company reaffirmed its lowered 2002 earnings estimate of $2.26 a share and estimated first-quarter earnings of 41 cents a share. Dynegy trimmed its outlook for 2002 last week from $2.30 a share to reflect the stock issuance to ChevronTexaco.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Politics & Policy
Congress Fought Changes to Accounting Rules Over Past Decade
By Michael Schroeder and Greg Hitt
Staff Reporters of The Wall Street Journal

01/24/2002
The Wall Street Journal
A20
(Copyright (c) 2002, Dow Jones & Company, Inc.)

WASHINGTON -- As Congress opens a slew of hearings about Enron Corp.'s collapse, outraged lawmakers who are pointing fingers about bad accounting might well beware of fingers pointing right back. 
House and Senate interrogators are questioning how the energy-trading company's financial mess could escape auditors' detection. But they shoulder some of the blame: Congress, including some of Enron's most vocal critics there, routinely opposed significant new accounting rules over the past decade.
Lynn Turner, head of Colorado State University's Center for Quality Financial Reporting and a former chief accountant at the Securities and Exchange Commission, cites several attempts to improve accounting standards throughout the 1990s that Congress fought. One effort, in particular, would have strengthened the authority of the Financial Accounting Standards Board, an independent rule-making body. 
The standards board has come under blistering attacks each time from companies who press Congress not to require new accounting disclosures. "Pressures from some members of Congress have unfortunately led to compromises that I don't believe were always in the interest of investors," Mr. Turner says. 
Some prominent past critics of the standards board are playing a different tune. Beyond zeroing in on Enron's own longtime auditor, Arthur Andersen LLP, Congress intends to explore whether to toughen requirements for how companies are audited and what information must be disclosed to investors. 
Consider Rep. Richard Baker, the Louisiana Republican who chairs a House subcommittee on capital markets, securities and government-sponsored enterprises. At a hearing last month, Mr. Baker asked an SEC official whether "we need better disclosure or accounting standards that give investors the real picture?" And later, expressing dismay about Enron's misleading disclosures, he asked Andersen's chief executive, Joseph Berardino, if authorities need to impose penalties for improper disclosure "so severe that it ain't worth the risk?" 
Yet Mr. Baker was a strong opponent of a standards board proposal, that recently was approved, that requires companies to better disclose their use of derivatives; those are investments pegged to the underlying value of assets, such as commodities or currencies. The standard board's new rules seek to ensure that corporate financial statements accurately reflect those risks. 
Mr. Baker called hearings about the proposal after banking regulators and industry groups objected that the standards board hadn't adequately considered earnings volatility that the derivatives disclosure might cause for companies -- particularly banks, the biggest users of derivatives. 
When the standards board pressed ahead, Mr. Baker introduced a bill to allow public companies to object to proposed accounting principles in federal court. He described his proposal "as a legislative remedy to a flaw in the private sector process for developing financial accounting standards." 
Though the Baker bill was unsuccessful, the pressure from Congress led the standards board to issue new, less stringent disclosure standards, which have recently taken effect. "Rep. Baker plans to address existing accounting problems," Rep. Baker's spokesman, Michael DiResto, said yesterday. 
The SEC, which oversees the standards board, also has frequently been caught in a cross-fire from Congress, which it has complained makes it harder to impose needed regulations. The derivatives proposal, for instance, sparked a row about the independence of the standard board's standard-setting process -- and in particular about whether the SEC and former SEC Chairman Arthur Levitt improperly pushed the proposal forward. 
Sen. Phil Gramm, the lead Republican and former chairman of the Senate Banking Committee and a frequent critic of the standards board and the SEC, accused Mr. Levitt of telling business representatives not to testify before Congress on the derivatives issue. A Senate official later retracted his allegation. Mr. Gramm, a Texas Republican and the Senate's second-largest recipient of Enron political contributions, has said he will skip any Enron-related hearings; his wife was on Enron's auditing board. 
In a 1997 speech, Mr. Levitt said he found the attacks on the standards board's process and its proposals "alarming." He added, "Critics are focusing too much on lobbying the decision-making process and not enough on thoughtful, substantive input into that process." 
Sen. Joseph Lieberman, the Connecticut Democrat who chairs the Senate Governmental Affairs Committee, opens a hearing today into Enron's collapse. Among the questions he says he is probing: "Why did Enron's auditors allow the company to overstate its profits for four years by over a half a billion dollars, using what now appear to be very questionable accounting practices?" 
But Mr. Lieberman, the former Democratic vice-presidential nominee and a 2004 presidential prospect, is a longtime critic of the accounting board, and he has rallied opposition to its proposed rules more than once. Recently, he challenged one to overhaul the accounting for corporate mergers and acquisitions, an issue of importance to the high-tech industry. In the fall of 2000, amid the tight presidential race, Mr. Lieberman joined with a bipartisan group of 13 senators in a letter urging the standards board to postpone consideration of the changes until Congress reconvened in 2001. 
The letter, among other things, claimed the accounting changes "will make mergers and acquisitions very difficult for high-technology companies." In the House, California Reps. Christopher Cox, a Republican, and Calvin Dooley, a Democrat, introduced a bill for a one-year moratorium on the standards board proposal. 
The proposal called for new disclosures on mergers and acquisitions. Companies cried foul, complaining the change would reduce their earnings. Under pressure from Congress, the standards board backed off, but still required new accounting that gives investors more information about the true initial costs of acquisitions and how to track the investment over time. 
Lieberman spokesman Dan Gerstein said such activity by the senator stemmed from concern that government bureaucracy was out of touch with the real-world impact of its proposal. "They are not democratically elected or accountable," he says. "In extreme circumstances, it's incumbent on Congress to step in." 
Similarly in 1994, Sen. Lieberman was a leading figure in a bipartisan group of legislators who opposed a proposed change in accounting for stock options. The change would have required that a company's current earnings reflect the value of future stock options. Blocking the change was a big priority of the high-tech community in Silicon Valley, where growth-oriented firms had made a regular practice of conferring stock options on executives and employees in lieu of direct compensation. 
With the technology industry growing in clout along with its campaign donations for both political parties, the industry's concerns were well-received on Capitol Hill. The Senate voted 88-9 for a Lieberman resolution urging the accounting board to back off. It did. 
"This was not just Joe Lieberman and a couple other folks out on a lark," says Mr. Gerstein, the spokesman. The senator "felt a compelling need to intervene," he adds, given the potential impact of the proposal on an important sector of the economy. 
The accounting board has had its defenders in Congress, such as Michigan Democrats John Dingell in the House and Carl Levin in the Senate. Mr. Levin in 1994 resisted the congressional efforts to influence the accounting board rule on stock options, and argued that the Lieberman resolution "would put the Senate on the record as opposing honest accounting." 
Now Mr. Levin is paired with Mr. Lieberman at the Governmental Affairs Committee, working to probe Enron's collapse.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Money & Business; Digital Domain
Damn the delete key
Randall E. Stross

01/28/2002
U.S. News & World Report
26
c Copyright 2002 U.S. News & World Report. All rights reserved.

To: Kenneth Lay, chairman and CEO, Enron Corp. 
From: Lucifer Public Relations
Crazy busy, huh? Won't take but a sec. Ever hear of E-mail-management software produced by Omniva Policy Systems? It performs an amazing trick: With a single click, a company's E-mail disappears irreversibly. No matter where in the world it happens to be, even if it is sitting on disks in a vault at the Securities and Exchange Commission. Mission impossible? Naw, the E-mail files don't actually vaporize. It works this way: When an E-mail message is created, Omniva encrypts it before sending and retains the key, which can be set to expire automatically after a certain number of days. When a recipient opens a message, the E-mail software checks with Omniva to make sure that the key hasn't expired. When the message is "deleted," it is the key that is deleted, which renders the messages permanently unreadable. Here's how Omniva's Dave Marvit puts it: "We're empowering people to have conversations that go away." You think the folks at Arthur Andersen would be interested, too? 
Here's the beauty part: It's perfectly legal. Companies can delete all E-mail--without first archiving--as long as it's done as a matter of routine and before being the subject of a particular criminal or civil investigation. That's why attorneys who specialize in "risk management" tell their clients to purge all E-mail after 30 days. And why leave it to fallible individuals to clean house regularly? Omniva's software makes the cleaning automatic, eliminating "the devastating liability created by casual comments archived permanently." 
Whaddya think about an endorsement deal with Omniva? Their Web site features the woes of companies that didn't "manage" their E-mail. Bridgestone/Firestone found itself in a world of hurt, according to Omniva, because of those undeleted E-mail messages showing that the company was aware of the tire safety issues. The result--of the E-mail that surfaced, not the defects--was "a deluge of bad press and questioning by lawmakers." You're sayin', "Tell me about it!" 
If you find yourself in court, and some snotty federal prosecutor waves your own E-mail in your face, you've got lots of company, buddy. Remember when the richest guy on the planet was on the witness stand and had an E-mail printout shoved under his nose: "Did you write this, Mr. Gates, on or about Jan. 5, 1996?" He had to hem and haw and feign befuddlement, all because the King of All Software hadn't installed software in his own company that would have made those embarrassing conversations "go away." So don't beat yourself up too hard, Ken. Next time, you'll know the drill: Never delay, delete away! 
TO: Harvey Pitt, chairman, SEC 
FROM: John Q. Public, Enron shareholder 
I hate to take you away, even momentarily, from The Case, but I would like to pull one good thing out of this towering fiasco: elimination of the loophole that permits publicly traded corporations to routinely destroy the electronic files that document the conduct of their business. I'm not talking about the panicky throw-everything-overboard document purging at Arthur Andersen last October; I'm talking about the corporate policies that mandate regular cleaning out of E-mail boxes, every 30, 60, or 90 days, at millions of corporate offices. That E-mail may prove to be critically important months, perhaps years, later when investigations into malfeasance are initiated. The law should require that all internal communications be preserved permanently for later retrieval. 
When the SEC was founded in 1934, business was conducted on paper, which is cumbersome and expensive to handle, copy, and store. Given the technology of the day, it was natural that the SEC required that publicly traded companies submit mere summaries of financial performance, not the full corpus of memos and correspondence. But technology has advanced, business now takes place in an electronic medium, and most communication consists of text that takes up infinitesimal storage space. The cost of preserving millions of records is now negligible. Using tape backup, the cost of storing 400,000 E-mail messages is about $1. And using a concept called single-instance storage, the costs of archiving an entire firm's correspondence shrinks still more dramatically because only the original full-text copy and a list of the recipients are stored, not the 1,000 identical copies floating around the company. 
Existing commercial software can automatically preserve in a centralized archive all the mail purged from individual boxes, but companies need the SEC to make its preservation a matter of law, not choice. 
It may be too late for us Enron victims, but let's modernize our oversight of publicly traded companies so that future malefactors will have reason to pause, knowing that the documentary record of their actions cannot after the fact be erased.

Picture: No caption; Drawing: No caption (ILLUSTRATION BY PETER HOEY FOR USN&WR) 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Money & Business
Man on the Hot Seat
Christopher H. Schmitt; Megan Barnett; Julian E. Barnes; Kit R. Roane

01/28/2002
U.S. News & World Report
20
c Copyright 2002 U.S. News & World Report. All rights reserved.

To an uncanny degree, Andy Fastow mirrors the growth of Enron Corp. As the Houston-based energy giant rocketed to fame as a supernova of the "new economy," Fastow, its chief financial wizard, soared upward with it, crafting the complex partnership deals that in a short 10 years turned a sleepy pipeline outfit into the seventh-largest corporation in America. Now, with Enron in flames, having erased$67 billion in the largest bankruptcy in history, Fastow, a onetime Master of the Universe, is the most wanted man in corporate finance, the target of untold lawsuits and unchecked rage. 
Like the junk bond and savings and loan debacles before it, the Enron collapse is fast becoming a signature scandal. Its impact is felt in thousands of layoffs, the implosion of retirement savings, and possible criminal charges for massive accounting and securities fraud. Last week's developments alone were the stuff of corporate fiction: An Enron executive warned Chairman Kenneth Lay months ago of her worries about the partnerships Enron used to keep hundreds of millions of dollars in debt off its books. Enron's auditing firm, Arthur Andersen, fired its lead auditor when it was learned that Andersen destroyed documents after an investigation had begun. Then Enron fired Andersen. The head of the Securities and Exchange Commission, until recently stroking the accounting industry, proposed a new oversight body. Business leaders speculated openly about whether Andersen would survive.
Through it all, the man everybody wanted to talk to was Fastow, a 40-year-old, trombone-playing M.B.A. who made at least $30 million from the Enron partnerships while small investors lost their shirts. Fastow, who remains relatively secluded in his expensive Houston home, has frustrated investigators by balking at an SEC subpoena and dancing a fandango with congressional investigators. The seclusion ritual appears to be of a piece with Fastow's years with Enron. In his spacious top-floor office, surrounded by original, expensive art, Fastow has maintained an extraordinarily low profile over the years, granting few interviews, a virtual unknown even to many Enron employees. 
Yet, while some Enron officials say Fastow chafed at Enron's corporate swagger, he was, in many ways, a product of it. Many at Enron thought the company and its executives could do no wrong, and, some colleagues believe, so did Fastow. It was in part because he was presumed a financial genius that the board approved his machinations without adequate questioning. "He was a master politician; the board loved him," says a former employee. Others who did challenge him landed on his enemies list, objects of his occasionally volatile temper. In the company's annual "rank and yank" performance reviews, in which the employees who scored lowest were fired, Fastow shone. But some former colleagues say he also used the reviews to reward allies and take revenge on those who crossed him. 
Hyperventilating. Fastow was hired at Enron to drum up oil and gas deals, but his bosses quickly realized his talent for packaging the financing for new deals and restructuring other deals already on the books. Despite his title, Fastow never really played the CFO role at Enron. Typically, chief financial officers are a company's main envoy to Wall Street, walking a fine line between husbanding the firm's finances and hand-holding big players like analysts and institutional shareholders so important to setting the stock price. But Fastow developed surprisingly little presence on the Street. "Ordinarily, the CFO is hyperventilating and pontificating at analyst conferences," says John Olson, an analyst for Sanders Morris Harris. "[Fastow's] role was sitting in the backroom coming up with those partnerships." 
The details of those partnerships, which played a pivotal role in Enron's undoing, are truly complex. But the bottom line is this: In their pure form, such partnerships are helpful in arranging financing or attracting investors for a particular project, and they can minimize taxes. In Enron's case, they became a vehicle for keeping huge amounts of corporate debt off the books Enron presented to the world. That was important because too much debt makes borrowing more expensive. For Enron, that would mean lower profits, and as a Wall Street darling, that would not do. 
The problems with the partnerships, according to attorneys now suing the company, are that in creating them, Enron would contribute company stock or other assets, which would essentially be used to secure big loans. It's not supposed to go both ways; the assets can't serve dual roles as reserves for the partnership and collateral for a loan. Critics also point to a conflict of interest. Fastow was part of the partnerships but also an executive of Enron. As the partnerships did business with the company, Fastow's loyalties were inherently torn. Moreover, Enron guaranteed profits for the entities. If the targets were missed, Enron would make up the difference, typically through issuance of new stock. That would put more stock in circulation, potentially depressing the price. 
Mutants. By the time Enron filed for bankruptcy, the company listed more than 3,500 partnerships, often with complex links to other entities or unknown parties. "They just mutated into something virtually unrecognizable," says Olson. "Investors didn't know if they were investing in widgets or in an Indonesian coffee plantation." As early as 1997, some executives were challenging Fastow, only to see their criticisms pushed aside. "I said, `I don't care if Arthur Andersen has passed off on this or if the board of directors has approved it. It does not pass the smell test,' " said one former Enron employee. "That was not a politically astute thing of me to say." At a company meeting last October, Vice President Jim Schwieger pressed Lay about the partnerships; Lay responded by ending the meeting. Later that day, Fastow approached Schwieger, shook his hand, and offered to sit down and answer any questions. The next day, Schwieger says, Fastow was gone. 
Enron itself seems to be positioning Fastow as the fall guy, suggesting that the partnerships were Fastow creations that he failed to explain thoroughly. But U.S. News has learned that Fastow, who is represented by high-profile attorney David Boies, is beginning to push a two-tiered defense. Although Fastow declined to comment, his allies argue that the partnerships were created with the support and backing of Enron. Thomas Bilek, a Houston attorney who represents investors, said that Enron employees say Fastow has documents establishing the involvement of other company executives in the financial house of cards. 
Fastow is also likely to contend that the problem with the partnerships lies not in their creation but in how they were accounted for. A source close to Fastow argues that his responsibilities were limited to acquiring capital from outside investors and that he had no authority over accounting for them. That responsibility, Fastow maintains, fell to Richard Causey, Enron's chief accounting officer. Yet several former employees said Fastow created the partnerships precisely so they could be accounted for off the books. A lawyer for Causey said his client did nothing wrong. 
"A sound plan." Fastow was hardly the rogue operator Enron paints him to be, other officials say. One former executive recalls that sign-offs from the legal department to the accounting department were required on the deals. "It wasn't just an automatic," the employee says. Others say Fastow made no secret of his activities. Michael Klein, a friend and independent oil and gas producer, says Fastow discussed partnerships with him. "He told me it was a sound business plan that was approved and encouraged by Enron," Klein recalls. Even Enron's law firm, given a limited mission to examine some of the transactions, reports that company executives blessed the deals at the center of the controversy, known as the LJM partnerships. Says one employee who worked in the finance group: "Andy never pulled the trigger on the final decision at LJM." That, the employee says, required former CEO Jeffrey Skilling's approval. 
Fastow created his new financial order in Houston after leaving the shadow of the old. The middle of three brothers, he spent his early childhood on Long Island before moving to New Providence, N.J., a middle-class suburb of New York. In high school, Fastow displayed a progressive flair while serving his senior year as student representative to the state board of education, proposing that teaching of contraception be made mandatory in public schools. 
Regular newspaper reading as a child helped develop his interest in finance. He went to Tufts University for a degree in Chinese and economics. There, he met his wife-to-be, Lea Weingarten, from a prominent Houston family. Graduate business school was at Northwestern University outside Chicago, where he concentrated on finance. Not long ago, Fastow was a proud son of each institution, someone to be mined for generous alumni donations. By last week, the schools were reluctant to provide any information on him. 
While attending business school at night, Fastow worked at Chicago-based Continental Bank Corp., one of the nation's biggest banking companies. At the bank, he found ways to morph existing assets into new sources of cash, skills he would put to use at Enron. 
The father of two young sons, he is a onetime pilot and a decent tennis player, coaches youth sports, and has been a patron of contemporary arts, even donating pieces for display at a trendy Houston gallery. Property records show he bought a 68-acre spread in Vermont in 1998, and he is now building an 11,500-square-foot home in one of Houston's finest neighborhoods. Fastow has also contributed to charity, forming his own private foundation. Unlike Lay, Fastow has been temperate politically, with only $3,200 in donations to President Bush and a Texas congressional candidate topping his list. 
Through his ordeal, Fastow has had devoted supporters. "This is a man of integrity and honesty," says Ned Rifkin, a friend who until recently was director of the Menil Collection, the museum to which Fastow lent his art. "I just pray this isn't damaging to their family." Rabbi Shaul Osadchey, who officiated at Fastow's wedding, calls Fastow a mensch, the Yiddish term for a man of good character and sound values. 
But many investors hurt by the company's collapse have been clamoring to make Fastow pay. "Fastow broke a trust," says Enron veteran Maritta Mullet, who says the company's collapse cost her $500,000. In a way, he already is paying. One of the charities Fastow has supported, a Houston center that helps the homeless, is now seeing former Enron employees apply for help with their rent.

Picture: PAPER TRAIL. Investigators from the House Energy and Commerce Committee review Enron documents provided by fired Arthur Andersen partner David Duncan. (CHARLIE ARCHAMBAULT FOR USN&WR); Pictures: REVERSAL OF FORTUNE. Fastow with his wife, Lea, in costume at Houston's Contemporary Arts Museum. Above, Fastow with attorney David Boies (MIKE SEGAR--REUTERS); Picture: PLAYERS. Clockwise from left: Richard Causey, Enron's chief accounting officer, at Enron headquarters; David Duncan; and Sherron Watkins, the Enron employee who warned Chairman Kenneth Lay months ago about accounting irregularities (LEFT: PAM FRANCIS; TOP RIGHT: CNN / AP) 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Nation & World; The National Interest
Leaving well enough alone
Michael Barone

01/28/2002
U.S. News & World Report
19
c Copyright 2002 U.S. News & World Report. All rights reserved.

Washington has been all atwitter about the possibility that the Enron collapse will cause a political scandal for the Bush administration. We are reminded over and over that Enron generated more political contributions for George W. Bush than any other company, and the subtext of many of the news stories is that the Bush administration must have done Enron some favors in return. But there is no evidence that it did. By trying to fit Enron into the familiar scandal template, the media are missing larger, more important lessons. 
There is no dispute that Enron officials contacted Treasury Secretary Paul O'Neill, Treasury Under Secretary Paul Fisher, and Commerce Secretary Donald Evans seeking help as Enron stock plunged. Former Clinton Treasury Secretary Robert Rubin, now a top executive of Citigroup, which loaned Enron $800 million, asked Fisher whether he should call the bond-rating companies to question their downgrade of Enron's credit.
The response in each case was the same: No. Nor did Enron get what it wanted in public policy. The biggest change Enron sought--limits on carbon emissions, so that it could make money running emissions-trading markets--was firmly opposed by the administration. Editorial writers are already busy clucking that the Enron case shows the need for campaign finance reform. It shows just the opposite: With this administration, at least, campaign contributions bought nothing--not even access: O'Neill, Fisher, and Evans would have taken the calls of top officials of the nation's No. 7 company even if it hadn't given hefty campaign contributions. 
Broken laws? Democrats with presidential ambitions like Connecticut Sen. Joseph Lieberman are still talking about digging for evidence showing that the administration did something for Enron. Other Democrats, including California Rep. Henry Waxman, complain that the Bush administration didn't do enough for Enron shareholders. A more sensible approach is being taken by a Michigan Democrat, Sen. Carl Levin. His investigation is focusing on whether Enron and its auditors broke the law and whether laws or accounting standards should be changed to protect investors and make markets work properly. 
The Bush administration's refusal to intervene on Enron's behalf, like its refusal to intervene massively in Argentina's economic crisis, is an example of how its policies differ from those of the Clinton administration. In 1995, Rubin put together a $52 billion loan guarantee package for Mexico, without support from Congress. In 1998, the Federal Reserve Bank of New York, supported by the Clinton Treasury Department, provided $3.6 billion to bail out Long-Term Capital Management, a hedge fund. Both bailouts seemed to work well: Mexico's economy and Long-Term Capital recovered. Creditors who might have gotten nothing did well. 
But such bailouts create what economists call moral hazard: If creditors believe they're going to be bailed out, they will extend credit profligately, which will lead to more bankruptcies and financial crises. The Mexico bailout may have contributed to the 1997 East Asian financial crisis, and the Long-Term Capital bailout may have contributed to the Enron bankruptcy. The Bush administration's actions--or inactions--on Enron and Argentina will reduce moral hazard and make lenders and investors think twice about where they put their money. 
Of course, the facts in Mexico and Argentina, Long-Term Capital and Enron are not precisely the same, and you can construct an intellectually defensible position for both administrations' actions. Even so, they seem to reflect a difference in temperament between the two parties. When a Democrat as intelligent as Henry Waxman suggests that the government somehow should have acted to protect the share price of a single company, one must suspect that his temperament, not his intellect, is speaking. 
For Democrats are temperamentally inclined to believe that government should act to help people who are hurting, while Republicans are more inclined to let markets take their course. The Clinton administration actively promoted foreign investments by U.S. companies, including Enron, after it contributed to Democrats. The Bush administration seems less inclined to do so. The media are chortling that the Enron collapse will hurt Bush by showing how cozy he is with big business. But an administration disinclined to intervene in the marketplace is likely to be less popular among beleaguered CEOs and less affected by campaign contributions than one that is always eager to help.

Picture: No caption; Pictures: Violence in Buenos Aires: no bailout for Argentina's economy (ARIAS / SIPA) 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Editorial
Congress's Enron Challenge

01/24/2002
The Washington Post
FINAL
A20
Copyright 2002, The Washington Post Co. All Rights Reserved

CONGRESS BEGINS grappling with Enron today. The Senate Governmental Affairs Committee will hear testimony from regulatory experts; a House subcommittee will hear about the shredding of documents by Arthur Andersen, Enron's auditor. It is hard to overstate the importance of these and other hearings that Congress will convene over the next few weeks. The scandal gets steadily murkier, with news of document destruction at Enron compounding the impression that some people at the company had no respect for legality. Moreover, the scandal spotlights a complex list of regulatory failures, ranging from weak oversight of auditors to inadequate pension safeguards to the complete lack of federal supervision for many of the derivative financial instruments traded by non-bank companies. 
The need for leadership from Congress is especially strong, because the expert agencies that might usually be out in front are dithering. Harvey Pitt, the chairman of the Securities and Exchange Commission, shows little inclination to strengthen oversight of auditors; indeed, his weak gesture on this issue last week has prompted all five members of the respected Public Oversight Board to resign in protest. The Commodity Futures Trading Commission, which ought to monitor the swaps and other "over-the-counter" derivatives traded by non-bank firms much as financial regulators currently inspect the books of banks, shows no inclination to press for this authority. Both commissions are plagued by vacancies as well as leaders who seem reluctant to act. Somebody needs to push them.
The Senate is starting off on the right foot by hearing from Arthur Levitt, the former chairman of the Securities and Exchange Commission, and Lynn Turner, the SEC's former chief accountant. Messrs Levitt and Turner are both rightly outraged by the lax state of audit regulation. Auditors who sign off on fraudulent financial statements are seldom punished properly for the serious damage that they cause to ordinary people's savings. And despite a string of audit failures, the profession has repeatedly fought off attempts by Mr. Levitt and other reformers to toughen oversight -- not least by donating generously to members of Congress, who in turn have opposed tough regulation. In the wake of Enron, this needs to change. The Senate should listen carefully to its first witnesses today and frame reform accordingly. 
Enron's failure poses one central question. If this company issued make-believe accounts, why should anyone believe that dozens of other companies aren't practicing the same deception? Unless Congress can close the regulatory loopholes that permitted Enron's fall, there will be more corporate implosions. Millions of innocent savers will get hurt. And the nation's vaunted capital markets will forfeit the public trust that allows them to function.

http://www.washingtonpost.com 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Editorial
All Enron Cards on the Table
Henry A. Waxman

01/24/2002
The Washington Post
FINAL
A21
Copyright 2002, The Washington Post Co. All Rights Reserved

Talk cards with any good poker player and the discussion will soon turn to "tells": the unintended signals other players give that reveal whether they hold good hands or bad. 
Last week, the Bush administration gave its clearest "tell" yet that it doesn't like its Enron hand. In response to my inquiries about contacts between administration officials and Enron executives, a senior White House official warned: "Waxman risks transforming himself into the Dan Burton of the Democrats."
This unusual jab wasn't meant as friendly career advice. Republican White Houses rarely throw gratuitous insults at senior Republican members of Congress like Mr. Burton, the chairman of the Government Reform Committee. To make sure the message wasn't lost, the White House press secretary later called my efforts a "partisan waste of taxpayer money." 
These blunt personal attacks signal a high level of White House anxiety: Its strategy is to discredit me and make other Democrats nervous about investigating Enron's influence on White House policies. 
What's especially odd is that these attacks are coming even though I've been careful not to make any accusations about the president, the vice president or any of their staff. Having seen the mistakes of Republican investigations into the Clinton administration at close range, I have no interest in repeating the pattern of accuse first and investigate later. A better way is to ask for relevant information before reaching conclusions. 
For the past two months my staff has been conducting a broad inquiry into Enron's collapse. We've been trying to learn how thousands of American families were robbed of their financial security. As a minority member of the House, I can't call hearings or issue subpoenas, but a Web tip line has been surprisingly helpful in identifying parts of the puzzle. 
What offends the White House are the questions I have been asking about Enron's contacts with administration officials. While the investigation into Enron shouldn't be driven by politics, no area -- including Enron's political activities -- should be off limits. 
The Bush administration wants to wall off its relationship with Enron from congressional inquiry. In essence, it argues that the president has a constitutional right to block investigation into the influence of special interests on White House policy. The administration has even rebuffed the efforts of the General Accounting Office to learn what actions Enron requested from the vice president's energy task force, forcing GAO to consider the unprecedented step of suing the White House. 
Some facts are coming to light nonetheless. Enron was the administration's biggest campaign contributor. The company's lobbyists met secretly and repeatedly with the vice president's energy task force. The final energy plan contained 17 provisions that Enron wanted. 
Last April, Enron CEO Ken Lay met with Vice President Dick Cheney, urging him to oppose price relief in the California energy crisis. The next day, the vice president called the Los Angeles Times and argued against price caps. Two months later, the vice president raised Enron's concerns about the Dabhol power plant with a senior official from India. 
Lay weighed in with the White House director of personnel about appointments to the Federal Energy Regulatory Commission. The president later nominated candidates apparently supported by Lay. Lay also called Office of Management and Budget Director Mitch Daniels to lobby for the repeal of the corporate minimum tax. The administration subsequently endorsed the House-passed stimulus bill, which repealed the tax and gave Enron a $254 million windfall. 
Because all the facts are not yet in, congressional Democrats have carefully refrained from alleging that the White House took specific actions because of Enron's lobbying. But the White House is wrong to hide behind this reasonable restraint as a justification for resisting congressional inquiries about Enron's extraordinary access. 
It's also appropriate to ask the administration questions about its reaction to Enron's collapse. Treasury Secretary Paul O'Neill and others made the right call in not bailing Enron out. But had Secretary O'Neill initiated an expedited investigation into the conduct of Enron executives, he could have discovered in October that they had cashed out $1 billion in stock and that Enron employees were in a 401(k) "lock-down." Even then, it might have been difficult for the administration to take steps to mitigate the harm to Enron employees and other victims, but no one even tried. 
It's time for the administration to draw a new hand. It should begin with complete disclosure of all the Cheney energy task force records. Just as important is a full accounting of all administration contacts with Enron representatives. Nothing else will resolve legitimate questions that deserve explanation -- or fulfill the new approach that George W. Bush promised to bring to Washington. 
The writer is a Democratic representative from California.

http://www.washingtonpost.com 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Editorial
A Gift To the Democrats
Mary McGrory

01/24/2002
The Washington Post
FINAL
A21
Copyright 2002, The Washington Post Co. All Rights Reserved

On the basis of "things are seldom what they seem," especially in matters relating to Enron, you should know that CEO Kenneth L. Lay is not from the Lone Star State. He may sound like the quintessential high-handed, high-flying Texan, given to overwhelming people and brooking no opposition. But the man who purchased everyone who might stand in his way was born and educated in Missouri and did not hit Houston until 1970, when he took a PhD in economics at the University of Houston. 
Texan Robert Strauss, who has known Lay casually for many years, says he "doesn't fit the caricature of the self-promoting tycoon" -- the kind who usually does what he did: "He's quiet and well-mannered, with an air of refinement about him. And I find it strange I should say this, because I am incensed at what he did."
Since he rocked the world's financial markets with the biggest bankruptcy in history, Lay has been in one of his many mansions. We can't expect to see him here until Feb. 4, when he appears before a Senate Commerce subcommittee chaired by Byron Dorgan. 
He made monkeys of his monitors all the way: the Washington regulators, the Wall Street analysts, the congressional watchdogs, the Manhattan investment bankers, and the auditors, Arthur Andersen, who served Enron in the dual capacity of consultants and accountants, and whose legerdemain relieved the company of the tedium of paying taxes. 
The high-finance scene today looks like a beach where there's been an oil spill and creatures stumble out of the water, their wings plastered to them by the slick. No one has a plausible explanation for why they were still telling the public to buy, buy, buy when Enron was sinking fast. Newspaper and television screens throb with accounts of the heartbroken who trusted Lay when he told them, in the face of other warnings, that all would be well. 
Even Houston, proud, polluted capital of the oil "bidness," is a little ashamed. The town wears the Enron brand. The whole U.S. attorney's office had to bow out of the fraud case of the century because all were involved with Enron in one way or another. The FBI has taken over the job of interrupting the shredding parties at the stricken headquarters. It wouldn't have known about them except for a woman named Maureen Castenada, a former employee. There are no good guys yet in Enron, only good women: Ms. Castenada and Sherron Watkins, who told Lay that "legal is not right." 
After a week of dodging queries about his former pal and benefactor -- Kenneth Lay was President Bush's number one contributor -- the president wheeled around and joined the forces of outrage, thankfully recording a victim in his own family, his mother-in-law. 
Republicans are nervous as they try to depict Enron as an isolated case of capitalism gone mad and the serene balance of the market place torn up by a rogue company. They are aware, though, that some of their cherished projects have been endangered: parts of the president's economic stimulus bill, which, according to the Congressional Research Service, would have awarded Enron $254 million in "corporate alternative minimum tax credits" -- a gift few members of Congress, even those blessed with the bipartisan benefactions of Kenneth L. Lay, would be inclined to give. 
As for the Democrats, they have been handed a backdrop for the congressional campaign that they hardly know what to do with. They have been given a peerless chance to show the truth of what they have always said about the Republicans -- that they favor government of the corporations, by the corporations and for the corporations. They have scheduled 10 congressional hearings, which is obviously too many. They might try to whittle the number down by excluding members who received Lay bounty, such as Sen. Joe Lieberman. They could blow it. 
Presidential strategist Karl Rove suggested at the Republican National Committee meeting that he understood the dimensions of the problem, by suggesting that GOP candidates could run on the coattails of the commander in chief. Democrats cried foul. House Democratic leader Dick Gephardt howled "shame," a strident response to what was really only politics -- Democrats didn't hesitate to run on Bill Clinton's golden economic record, did they? And if George W. Bush can't talk about the war for fear of offending Democrats, we've entered new realms of political correctness. 
For Democrats to wail that they have supported the war -- they have not dared to open their mouths without praise for the president's prowess -- sounds self-righteous and self-pitying. They could spend their time better by figuring out how to use the present the gods have handed them -- and what to ask Ken Lay when they finally see him.


http://www.washingtonpost.com 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Style
ART BUCHWALD edc
A Crash Course In Lobbying
Art Buchwald

01/24/2002
The Washington Post
FINAL
C02
Copyright 2002, The Washington Post Co. All Rights Reserved

If nothing else, Enron's difficulties have not only given us a lesson in Economics 101, but they also have told us how Washington operates. 
All the people in the Enron mess have played their roles -- from the executives in the company and their accounting firm to the lawyers who served them so well. But none of them could accomplish what they did without the Washington lobbyists. They are the ones who protect companies from a government that cannot be trusted.
Lobbyists are just like you and me, and they put on their golf shoes one foot at a time. 
You have to be qualified to be a lobbyist. Many, but not all, are recruited from Congress. They have decided they are fed up with politics and want to make some big money for a change, or have lost an election and are not fit to do anything else. 
Lobbyists are very friendly people. They call lawmakers and administration officials by their first names: "Ted," "Terry," "George." Theirs is the only profession, except for the FBI, that makes house calls. 
The job of the lobbyist is to stop a law that will hurt his clients and lobby for a bill that will make everyone rich. 
This is an example of how it works: The Hidden Valley Gas and Energy Co. has ex-senator Glad Handle on its payroll to lobby for the company in Washington. Glad Handle is a Republican, and he replaced ex-congressman Taylor Bluewhistle, a Democrat, who was fired after Al Gore lost the election. 
Glad moves among the Capitol, the White House and any agency that can affect Hidden Valley business. 
Let's say Congress wants to pass a law forbidding Hidden Valley to deliver natural gas and smoke cigarettes at the same time. 
What Congress doesn't know is that Hidden Valley owns a cigarette company as well as a gas company. Banning smoking near a gas plant will seriously hurt its tobacco business. 
Glad invites Sen. Carl Fiddle to the Burning Tree country club. Fiddle is in charge of the Smoking and Energy Committee. He is greeted warmly by Handle, who says, "Remember when we filibustered an equal rights bill together?" 
They play 18 holes, and then Glad asks Fiddle, "How's the election campaign going?" 
"We could use $100,000 in soft money to buy sweat shirts for our volunteers." 
Glad takes out his checkbook and says, "Why didn't you say that before?" 
Sen. Fiddle replies: "You're a lobbyist, so we hated to ask you for something. If we take your money, what can we do for you?" 
"Nothing much. If you want to hold up the Anti-Smoking Gas Bill in committee, that would be fun." 
"It's done." 
"What about getting the oil rights to West Point?" Glad asks. 
"I know the person at EPA you should ask for." 
Glad says, "Can I buy you a beer?" 
"You know, Glad, that's against Senate rules." 
(c)2002, Tribune Media Services

http://www.washingtonpost.com 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Editorial Desk; Section A
Letters to the Editor
The Enron Mess: Outrage, and Then?

01/24/2002
The New York Times
Page 26, Column 6
c. 2002 New York Times Company

To the Editor: 
Among the startling revelations in the Enron mess is that Enron paid no federal corporate income taxes for four of the last five years (front page, Jan. 17).
Congress should investigate to see if this is common among major corporations. If it is, it should be remedied by eliminating the loopholes that let it happen. 
MICHAEL J. ZIMMER 
Evanston, Ill., Jan. 21, 2002

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Editorial Desk; Section A
Letters to the Editor
The Enron Mess: Outrage, and Then?

01/24/2002
The New York Times
Page 26, Column 6
c. 2002 New York Times Company

To the Editor: 
It is sad that it has taken a scandal to propel campaign finance reform to the top of the House of Representatives' legislative agenda (''A New Rallying Cry for Reform,'' editorial, Jan. 22). The money that Enron gave over the years to politicians of both major parties is tainted.
A comprehensive debate on the House floor and then a vote to pass the Shays-Meehan bill will help show America and the world that democracy still prevails here. It is essential that we win the war at home against corruption in politics. 
PAUL L. WHITELEY SR. 
Louisville, Ky., Jan. 22, 2002

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Editorial Desk; Section A
Letters to the Editor
The Enron Mess: Outrage, and Then?

01/24/2002
The New York Times
Page 26, Column 6
c. 2002 New York Times Company

To the Editor: 
President Bush has tried to personalize the Enron situation by citing his mother-in-law's loss of $8,000 through the devaluation of Enron's stock (front page, Jan. 23).
While I feel sorry for Jenna Welch, Laura Bush's mother, she has a very rich family to help her through any trying times, while the Enron employees likely do not. The president may believe that he is empathizing with them, but really he is not. Mr. Bush is personalizing a situation that is truly devastating to others. 
MARY MACELVEEN 
Sound Beach, N.Y., Jan. 23, 2002

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Editorial Desk; Section A
Letters to the Editor
The Enron Mess: Outrage, and Then?

01/24/2002
The New York Times
Page 26, Column 6
c. 2002 New York Times Company

To the Editor: 
Re ''In Shift, Bush Assails Enron Over Handling of Collapse'' (front page, Jan. 23):
President Bush says he is ''outraged'' that Enron misled its employees and investors, including his mother-in-law, who, he said, lost more than $8,000 when its stock collapsed. 
Would it be appropriate for Mr. Bush to return the more than $700,000 in contributions that Enron bestowed on him since 1993? I think that it would. 
To me, it seems that such a return of money (already undertaken by some members of Congress) should be a no-brainer for a self-described ''compassionate conservative'' like President Bush. 
HUGH WELBORN 
Tappan, N.Y., Jan. 23, 2002

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

California; Editorial Pages Desk
Enron's Shell Game Shouldn't Taint Markets

01/24/2002
Los Angeles Times
Home Edition
B-16
Copyright 2002 / The Times Mirror Company

Re "Enron Got Its Money's Worth," Commentary, Jan. 22: So Robert Scheer believes that the way to develop an energy policy is without industry input. I thought that the Clinton administration tried that with health care. The results were spectacular, were they not? Any energy plan would be controversial, but if I were going in for brain surgery I wouldn't want my gardener to perform the operation. 
The Clinton administration, eight years in office, had ample opportunity to develop an energy plan, as imports skyrocketed, but refused because there was no political upside in so doing.
Making electricity a commodity was Enron's objective. Its officials failed miserably and perhaps criminally, but they were on the right track. Futures markets are the way to provide the lowest possible electricity prices. 
The market works for all but someone like Scheer. 
Jerry Andersen 
Pacific Palisades 
* 
Your Jan. 19 editorial ("Enron's Far-Reaching Web") conveyed the impression that (a) I was in some sense on the take from Enron and (b) I hid that involvement. Both impressions are totally false. 
In 1999 I briefly served on Enron's advisory board. I ended that connection when I agreed to write for the New York Times in the fall of 1999. 
I also disclosed that past relationship the very first time I mentioned Enron, in a column sharply criticizing the company's role in California's energy crisis, in January 2001. 
Enron paid members of its advisory board $50,000 for attendance and presentations at two meetings (one of mine was canceled at the last minute), each spanning two business days. This payment, as a daily rate, was if anything somewhat less than I was regularly receiving for presentations to other companies: At the time, as an expert on international financial crises, I was in high demand as a speaker. 
Your editorial quotes my remark that the board "had no function I was aware of." This was self-deprecating humor: I later wondered whether the board was of much direct value to the company. However, I devoted as much time and effort to my presentations as I would have for any other corporate event. 
Given how scrupulously I have followed the strict conflict-of-interest rules at the New York Times, and how tough I have been on Enron this past year, I am astonished that the Los Angeles Times would imply that I had any ethical lapses. 
Paul Krugman 
Columnist, New York Times 
* 
Re your editorial: Enron's strategy in achieving its energy objectives through public policy was quite simple. 
In effect, the company decided that if you can't buy one influential politician, then the next best strategy was to attempt to buy them all. The amusing part of this debacle was for how little money so many thought to be smart, intelligent politicians and public policy officials and others settled. 
Nevertheless, Enron was quite successful in achieving its energy goals. 
Chance Williams 
South Pasadena 
* 
So Bush's chief economic advisor was a paid consultant to Enron, Bush's energy policy was dictated by his old friend and paymaster, Enron Chairman Kenneth Lay, and Bush appointees to the Federal Energy Regulatory Commission were vetted by Enron. 
Bush brings Enron economics and Enron morality to the White House--God help America! 
Kevin Jones 
Los Angeles 
* 
The "shell game" existence of Enron makes me wonder: What if, instead of handing out millions to politicians and selling off inflated stock, Enron executives had actually used the money Enron took from investors to develop--heaven forbid--renewable energy plants? What if politicians couldn't be bought and actually used their positions to work for, as the Constitution provides, "the general welfare"? 
Lynda Unterthiner 
Rancho Mirage

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

California; Editorial Pages Desk
Oblivious to a Strong Smell

01/24/2002
Los Angeles Times
Home Edition
B-16
Copyright 2002 / The Times Mirror Company

Energy giant Enron's conduct has been so egregious that even President Bush, a personal friend of just- resigned company Chairman Kenneth L. Lay, has finally felt compelled to denounce the corporation's alleged defrauding of employees and outside investors. If politicians are starting to return donations from Enron to assure the electorate that Congress isn't bought and paid for, then drastic measures surely need to be taken to reassure investors as well. 
Unfortunately, Securities and Exchange Commission Chairman Harvey Pitt is taking exactly the opposite course. The giant Andersen accounting company is under intense scrutiny for its auditing in the Enron debacle. Instead of pushing for reform, however, Pitt is dismissing the need for it, claiming "there is nothing rotten with the accounting industry."
Pitt has called for creating an oversight board. The five-member board currently responsible for ethics oversight has resigned, and its head, Charles Bowsher, a former U.S. comptroller general, has denounced Pitt's proposals as too friendly to the industry that is supposed to be monitored. The new oversight board would apparently be largely controlled by the industry's American Institute of Certified Public Accountants. 
Pitt, as the head regulator of financial markets, has come up with some cozy proposals that are astonishing. But they are less so considering that Pitt, a lawyer, had as clients the five biggest U.S. accounting firms, including Andersen, as well as the American Institute of Certified Public Accountants. Unless he changes course, he will be unable to restore investor confidence that fair and open audits are taking place. 
Despite Pitt's claims, there is a lot that is rotten in the accounting industry. It appears that Andersen did not just wink at Enron's end run around the law; Andersen may have abetted it. Though Andersen is reported to have shredded paperwork, memos have surfaced showing that auditors were aware of Enron's enormous manipulation of its reported earnings, which were really losses, and did nothing to expose it. On the contrary, because auditors can also be consultants to the companies they are supposed to monitor, the incentive is for them not to blow the whistle. Andersen, for example, received $27 million from Enron for consulting work. 
Congress needs to pass a law that would create an oversight board that would have enough power to police the industry effectively. It also needs to make it illegal for auditors to work in any capacity for corporations other than auditing. That would help end the smell from the accounting industry that Pitt is pretending doesn't exist.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Business
LOU DOBBS MONEYLINE; CNNfn
Kathleen Hays, Tim O`Brien, Allan Chernoff, Kelly Wallace, Jonathan Karl, Christine Romans, Greg Clarkin, Jonathan Aiken, Jamie McIntyre, David Grange, Steve Young, Fred Katayama, Wolf Blitzer

01/23/2002
CNNfn: Moneyline News Hour
(c) Copyright Federal Document Clearing House. All Rights Reserved.
ANNOUNCER: Tonight on LOU DOBBS MONEYLINE: The latest on the Enron scandal. And accounting oversight board votes itself out of existence. We`ll hear from an accounting group on how that affects plans to clean up the industry`s image. Boeing (URL: http://www.boeing.com/) CEO Phil Condit tells us why he`s optimistic about his company`s future despite a 79 percent plunge in profits. A leading economist tells us why he feels the recession is over and why the recovery has begun. 
American Taliban John Walker returns home and the Pentagon stops sending detainees to Cuba. General David Grange joins us.
This is LOU DOBBS MONEYLINE for January 23. Sitting in for Lou Dobbs, Kathleen Hays. 
KATHLEEN HAYS, CNNfn ANCHOR, LOU DOBBS MONEYLINE: Good evening, here are the latest developments in the Enron scandal. Enron today postponed a meeting with employees because of what the company called a media frenzy. The SEC`s accounting oversight board, all five members, quit. And David Duncan, the fired Andersen auditor, wants immunity before he tells Congress what he knows about document shredding. Tim O`Brien is in Washington tonight with more. 
Tim, what can you tell us on the latest developments? 
TIM O`BRIEN, CNNfn CORRESPONDENT: Well, the developments are breaking out all over. Amid reports that Enron was continuing to destroy documents as late as last week, a federal judge in Houston conducted a hearing. As we speak, he is about to rule on to best protect those documents. 
Lawyers for investors and former employees are urging they be placed in custody of a court-appointed trustee. Again, we are expecting a ruling within minutes. Meanwhile, there were other developments on a number of other fronts today. 
(BEGIN VIDEOTAPE) 
(voice-over): Enron employees were supposed to get a briefing today about their future with the company, but it was canceled. CEO Kenneth Lay, explaining to employees in an e-mail, we don`t want to subject you to the media frenzy that would certainly surround such a meeting, so we have decided to postpone it. 
Employees were told the meetings would be rescheduled for another time. On the political front, questions linger about Enron`s possible influence on the president`s energy program. Senate Majority Leader Tom Daschle, joined the chorus of Democrats calling on Dick Cheney, who chaired the president`s energy task force, to explain his meetings with Enron executives. 
SEN. TOM DASCHLE (D-SD), MAJORITY LEADER: I think we all have to be very forthcoming here and I think it`s important in this case that the vice president, like everybody else, provide the information required. 
O`BRIEN: To date, there has been no evidence that anyone in the administration acted improperly in the Enron collapse. In fact, some of Enron`s most important beneficiaries have also lost money. Texas Senator Phil Gramm and his wife, Dr. Wendy Gramm, say they lost around $686,000 in the Enron demise. Enron had showered the senator, a champion of deregulation, with campaign contributions. And Dr. Gramm, an economist, serves on Enron`s board of directors. Her deferred compensation was lost when Enron declared bankruptcy. 
And finally, reverberations from last week`s recommendation by Harvey Pitt, the chairman of the Securities and Exchange Commission, for a new regulatory agency to oversee the accounting profession. 
(END VIDEOTAPE) 
That didn`t sit well with the public oversight board, a five-member commission that already oversees ethics and disciplinary issues. All five members have resigned, saying Pitt`s new agency would render their work irrelevant. Pitt has now written back, urging the members to reconsider, saying his proposals would in fact strengthen the oversight board, not weaken it -- Kathleen. 
HAYS: Tim, in regards to Harvey Pitt`s role in proposing a new kind of oversight board, is there any talk in Washington that maybe Mr. Pitt has been too close to some of the big players, the big 5 accounting firms are his clients, the AICPA, the association of accountants, one of his clients, what`s the talk down there on that? 
O`BRIEN: Well not only those, also he represented Arthur Andersen when he was in private practice before joining the Securities and Exchange Commission. Some Democrats say that`s a conflict of interest and he should recuse himself. Legally it really isn`t, because you can`t identify the views expressed by a lawyer on behalf of a client with the lawyer himself. 
Harvey Pitt is the first to say he has another client now, it is the United States America and there is no conflict. However, he has indicated that he will step back from the investigation. The SEC ordered the investigation, he`s in charge of the SEC but he is not going to participate in the probe. 
HAYS: OK, Tim, thanks for the report. 
Starting tomorrow, Congress gets down and dirty on the Enron scandal. Several committees begin their investigations into the biggest corporate collapse ever. Allan Chernoff reports on the battle for witnesses before a subcommittee of the House Energy and Commerce Committee. 
(BEGIN VIDEOTAPE) 
ALLAN CHERNOFF, CNNfn CORRESPONDENT (voice-over): A behind-the-scenes struggle between David Duncan, the fired Andersen Partner, who oversaw the Enron audit and the subcommittee on oversight and investigation. 
Subcommittee chair, James Greenwood: 
REP. JAMES GREENWOOD (R), PENNSYLVANIA: We subpoenaed him. He still doesn`t want to come. He wants immunity. We are not going to grant him immunity. He wants to take the 5th, and we are telling him to come in tomorrow. If you want to take the 5th Amendment that`s your constitution right, but do it at the hearing, and if you don`t do it we reserve the right to cite you for contempt of Congress. 
CHERNOFF: A source close to Duncan says he will appear and simply will invoke the 5th Amendment protection against self-incrimination. 
His attorney had argued to the subcommittee that "Mr. Duncan has not yet had access to all the documents necessary for him to prepare for a formal hearing." 
REP. BILLY TAUZIN (R), LOUISIANA: I think he needs to be there to explain why he was willing to give us 4.5 hours of testimony and wouldn`t go public with the same testimony. But, he has his rights, and we`ll respect his rights. 
CHERNOFF: According to Andersen it was Duncan who ordered employees at the Houston office to shred and delete Enron-related documents. Duncan has told congressional investigators he was only following company orders, in the form of a memo reminding the engagement team of our documentation and retention policy, written by Andersen attorney Nancy Temple. She will testify. 
Of particular interest to the subcommittee, an October 23 Andersen e-mail addressed to David Duncan and other executives discussing a conference call agenda which included the SEC, legal representation, and response to SEC. 
Andersen says Duncan had directed the document disposal at a meeting on October 23. Andersen`s chief executive, Joseph Berardino, who testified before Congress in December, fought off the subcommittee`s request. Instead, the Chicago headquarters is sending executive Dorsey Baskin, who oversees the firm`s policy on audit and work papers. 
(END VIDEOTAPE) 
A demoted Andersen executive Michael Odom also is scheduled to testify before the subcommittee. Now, on the Senate side, Senator Lieberman`s Governmental Affairs Committee will be looking into the question of what Washington might have done to protect investors and businesses from the Enron fallout -- Kathleen. 
HAYS: Thanks Allan. I`m sure you are going to be a very busy man tomorrow. 
***
With Congress back in session, economic stimulus, the recession and Enron are shaping up as the biggest items on the congressional agenda. Jonathan Karl joins us with more from Capitol Hill. Hi, Jon. 
JONATHAN KARL, CNN CORRESPONDENT: Hey, Kathleen. And Congress is picking up right where it left off last year, the question of economic stimulus, what they can do to get the economy going. 
Right now the Republicans as we speak are over in the Capitol building, meeting, on the Senate side, trying to think about how to respond to Senator Tom Daschle`s latest gamut. 
Daschle has put on the table a possible proposal on economic stimulus that boils down to this: He says Democrats would give up much of the spending that was in the Democratic stimulus plan last year, in exchange for the Republicans giving up many of the tax cuts they had in their proposal. 
What you are left with, basically, is this: Extend unemployment benefits, also rebate checks for low-income taxpayers who did not get tax rebate checks last year, and the third item would be some modest tax breaks to encourage companies to invest in new equipment. Making the case for that, Daschle came out today and used a new verb, perhaps a new addition to the English language. The verb is "to "Enron." He was criticizing the Republicans, talking about deficits, and then he used the verb "to Enron." 
This is what he had to say. 
(BEGIN VIDEO CLIP) 
DASCHLE: I don`t want to Enron the people of the United States. I don`t want to see them holding the bag at the end of the day just like Enron employees have held the bag. I don`t want to destroy their Social Security system. I don`t want to destroy their Medicare system. I don`t want to destroy their ultimate ability to look with confidence at their retirement. 
(END VIDEO CLIP) 
KARL: So, you see a sign that while the Democrats are saying they don`t want to politicize the upcoming Enron hearings, clearly Democrats see the potential to try to talk about Republican economics as a kind of Enronomics, which is another term we have heard used by Democrats up here on Capitol Hill. 
And also, Kathleen, at the top of the show, you heard Tim O`Brien talk about how Senator Phil Gramm`s wife, Wendy Gramm who is on the Enron board, lost some 600,000 in her 401(k) when the Enron stock went south. 
Well, another little bit of news on Senator Gramm. Senator Gramm tells CNN that he will recuse himself from all matters directly related to the investigation of Enron here in Congress. Gramm is saying that he will continue to talk about issues related to Enron, such as pension reform and changes in the rules that govern accounting companies. But he will recuse himself in anything directly related to the investigation of Enron given that his wife, Wendy Gramm, is on their board -- Kathleen. 
HAYS: Thanks for the report, John, and for the new verb "Enron." Jonathan Karl on Capitol Hill. 
Still to come tonight, we`ll tell you why your safe deposit box may not be as safe as you think it is, and why it may not be insured. 
The nation`s mayors are concerned with keeping our cities safe. We`ll tell you how homeland security chief Tom Ridge plans to help. 
And Boeing`s profits are down. The year ahead looks bleak. And yet the company`s CEO is optimistic. He`ll tell us why. 
ANNOUNCER: Next, Kathleen talks with Phil Condit, CEO of Boeing. 
(COMMERCIAL BREAK) 
HAYS: The accounting industry`s reputation has been devastated by the Enron scandal. The SEC has proposed a new panel to police the industry, that decision has been applauded by the American Institute of Certified Public Accountants. The group`s president and CEO, Barry Melancon, joins us now. Welcome. 
BARRY MELANCON, PRES. & CEO, CPAS: Hi, Kathleen. 
HAYS: I think it`s interesting that Charles Boucher who was head of the public oversight board that resigned in protest today, says there`s plenty of oversight. What has been lacking in overseeing the accounting industry is the power to discipline. The power to demand records. What do you think of his statement? 
MELANCON: Well, in actuality what Chairman Pitt is proposed is a process where discipline is addressed, Kathleen. And in fact moves from the oversight to public participation. And obviously public participation is a higher order of participation than public oversight, and so the activities that Chairman Pitt proposed is moving us to new area which a majority of non-auditors, people who are not in the profession would actually be involved in the decision-making process over discipline and quality control. 
HAYS: But in fact the public oversight board was not comprised of people in the accounting profession. And let me come back to that question, is there something that Mr. Pitt has proposed that is going to put teeth in this new oversight board? So again, you`d think it would be very important to be able to demand to see certain records and have the threat of some kind of punishment from this board hanging over auditors if they don`t do their job. 
MELANCON: Well, what Chairman Pitt has proposed is a process by which a disciplinary board -- or in monitoring quality control. If someone was found to be deficient in the quality they were doing, they would actually lose the rights to be able to audit public companies, that`s pretty significant teeth. HAYS: What about the basic conflict of interest, this --also this does not seem to be addressed by Mr. Pitt`s proposal, at least not so far. Many of the large accounting firms do audits of companies, they also have another part that has consulting contracts where they advise the very managers that the other part of the firm is auditing. Is that problem going to be addressed by Harvey Pitt`s proposal? 
MELANCON: Well, in actuality, former Chairman Arthur Levitt adopted a rule at the end of his term that addressed that issue very directly. It outlawed or made by rule the inability to do certain services, it`s severely limited other services and it created a total aspect of transparency and disclosure if services were performed outside of the audit. But I might add, that`s sort of an easy issue to address from the standpoint it sounds good. But even if we had an outright ban, which is a very complicated point, this is very complicated issue, Enron, and that outright ban itself would not prevent the reoccurrence of Enron. HAYS: But it might prevent a conflict of interest in these firms. This is an issue that most every kind of accounting professor seems to bring up when they`re asked about it. 
MELANCON: In actuality there are over 300,000 CPAs in this country, and I think if you talk to small business people, business managers, they turn to their CPA`s for things other than just audits. And it`s just part of the profession for over a hundred years. And it`s been a critical element in the profession being part of the fiber, if you will, of the success of the American economy. Doing things like taxes, doing things like general advisory on whether someone should lease or buy, financial services are all part of what CPAs, men and women throughout this country who are doing things every day, and yet those same men and women do a very good job of drawing the line and in fact are drawing the line today. HAYS: Thank you very much, Barry Melancon for joining us. 
MELANCON: Thank you. 
***
HAYS: Today, a federal judge in Houston held a hearing on whether to impound documents from Enron regarding the company`s collapse. The hearing followed allegations that documents were being shredded by Enron employees as recently as last week. 
Tim O`Brien has the latest on today`s hearing. Hi, Tim. 
O`BRIEN: Kind of a non-decision, Kathleen. Federal judge Melinda Harmon says she wants to let the lawyers work out the details of any solution. And the lawyers for the plaintiffs, representing investors and former employees, are said to be very close to agreement with the lawyers for Arthur Andersen. 
The plan now is to allow the plaintiff`s lawyers and their experts total access to all records which are being kept in four secure locations: Houston, San Francisco, Chicago and New York. Attorneys for Andersen have already promised, of course, no more documents would be shredded, no computer files deleted. 
The plaintiff`s lawyers will have all the ordinary rights of discovery if they don`t get what they want or have any suspicions documents are being withheld or destroyed. Their remedy would be to go back to court. 
***
And that is MONEYLINE for this Wednesday evening. Thanks so much for joining us. I`m Kathleen Hays in for Lou Dobbs. Good night from New York. WOLF BLITZER REPORTS begins right now. 
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 888-CNNFN-01 OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT WWW.FDCH.COM 
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED. 
Content and programming copyright 2002 Cable News Network, Inc. ALL RIGHTS RESERVED. Prepared by FDCH-eMedia (Federal Document Clearing House, Inc. -eMediaMillWorks, Inc.) No license is granted to the user of this material other than for research. User may not reproduce or redistribute the material except for user`s personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon Cable News Network, Inc.`s copyright or other proprietary rights or interests in the material; provided, however, that members of the news media may redistribute limited portions (less than 250 words) of this material without a specific license from CNN so long as they provide conspicuous attribution to CNN as the originator and copyright holder of such material. This is not a legal transcript for purposes of litigation.



Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	


Poor Kenny Boy 
Will Durst - WorkingForChange.com
01.23.02 - SAN FRANCISCO -- Poor Kenneth Lay. Just this time last year he was riding higher than bacteria on a gnat inside the ear of a giraffe with a hyperactive pituitary. And now the powers that be are starting to pile on like he was a secret member of the Taliban's high command and they discovered his black turban on a shelf in the closet behind the gay porn tapes. 
This is all because Enron reportedly put a few employees' retirement in a bit of jeopardy, and Kenny Boy, as our hero President is wont to call him, might have sold a couple of shares of Enron stock while the company was experiencing their minor financial setback. 
It turns out there is an extremely logical and reasonable explanation for this "suspicious" behavior. Mr. Lay was not trying to ditch his stockholders and employees, but merely trying to raise some quick cash. To put it in the simplest of terms, for the "layman": he used his millions of dollars in Enron stock to repay loans made to him by the company and then he would take out more loans to repay money he owed on his other investments. That's all. 
Of course Mr. Lay was concerned about Enron's health, that's why on September 26 he used an online chat to urge employees to buy Enron shares because the stock was "an incredible bargain" which it was. It's an even better bargain now. Huge bargain as a matter of fact. 
You know what, I think people are just jealous. And indignant. And pissed. And outraged. And bitter. And angry. Just because Enron didn't pay any income taxes four out of the last five years, although whose fault was that? The shred happy accounting firm of Arthur Anderson, that's who. And weren't they fired last week? Of course they were. By who? Enron. See, problem discovered, action taken. 
Of course, nobody cares what happens to Mr. Lay. Who's wringing their hands over the fact this persecuted American has had to stay liquid by selling most of the properties he owns and pays taxes on all over this great nation of ours? No one. We're talking 3 out of the 4 homes he owned in Aspen, Colorado. Now this beleaguered CEO only has one destination to stay while skiing. How is one supposed to entertain when the help is staying in the same 12 bedroom manse as the guests? 
The only consolation is though his name will be dragged through mud by a vengeful media, the man himself is destined to receive justice. It is very doubtful any of the ten Congressional investigating committees will be able to form a quorum for even considering an indictment. After all, 250 out of 535 members of Congress received campaign contributions from Enron and that doesn't include the Attorney General's office, which has recused itself. As a matter of fact, I'm pretty sure everyone in DC except for Monica Lewinsky has recused themselves from this investigation. Perhaps Mr. Lay will take some solace from the price an old Enron ethics manual being sold on Ebay right now for over $250 whose seller advertises it as being in mint condition. Hopefully Mr. Lay has a couple of cases of old manuals laying around the garage. I doubt if any of them were ever used. 
? 2002 WorkingForChange.com 


Sarah Palmer
Internal Communications Manager
Enron Public Relations
(713) 853-9843