New Enron Chief Likes Challenges; Cooper Known as Blunt, Creative Strategist
The Washington Post, 01/30/2002

Accounting for Enron: Enron Selects Cooper of Zolfo Cooper For Post of Acting CEO, Succeeding Lay
The Wall Street Journal, 01/30/2002

ENRON'S MANY STRANDS: THE TURNAROUND EFFORT
Enron Names an Interim Chief to Oversee Its Bankruptcy
The New York Times, 01/30/2002

Video: Angry employee demanded to know if Lay on crack
Reuters, 01/30/2002

ENRON'S MANY STRANDS: THE TV INTERVIEW
Did NBC Let Lay's Wife Get Around Hard Issues?
The New York Times, 01/30/2002

Ill. Regulators Vote To Remove Enron Energy-Sale Rights
Dow Jones Energy Service, 01/30/2002

House Panel Seen Asking Enron Board Members To Testify
Dow Jones Energy Service, 01/30/2002

Enron failed to disclose full lobbying expenses 
Associated Press, 01/30/2002

ENRON'S MANY STRANDS: THE DOCUMENTS
Enron Says Shredding of Records Was Not Stopped Until Recently
The New York Times, 01/30/2002

Prosecutors, FBI Pore Over Enron's Books; Responsibility for Company's Demise Is Shrouded by Mystery Partners, Offshore Entities
The Washington Post, 01/30/2002

Enron Puts Stock in Turnaround Specialist RELATED STORY More scrutiny: Regulators are probing whether Enron inflated California power prices. A12
Los Angeles Times, 01/30/2002

ENRON'S MANY STRANDS: THE ACCOUNTING
Fuzzy Rules Of Accounting And Enron
The New York Times, 01/30/2002

Andersen's Reputation in Shreds. The accounting firm was once considered the industry's conscience. But the Enron scandal has revealed the dark side of the profession.
Los Angeles Times, 01/30/2002

Accounting for Enron: U.S. Probes Enron's Effect on Power Prices
The Wall Street Journal, 01/30/2002

U.S. to Probe Enron Tie to Energy Prices; Senators From West Voice Concern About Alleged Manipulation
The Washington Post, 01/30/2002

Accounting for Enron: Davis Polk Is Barred From Enron Work For J.P. Morgan Chase
The Wall Street Journal, 01/30/2002

Burden of Doubt: Stocks Take a Beating As Accounting Worries Spread Beyond Enron --- Investors Ignore Good News About Economy; Banks Are a Focus of Selling --- `A Big Haircut' for Some
The Wall Street Journal, 01/30/2002

At Energy Firm, A Post-Enron Double-Check
The Washington Post, 01/30/2002

Ex-Enron workers feel jilted by Bush 
Houston Chronicle, 01/30/2002

Sempra buys metals business from Enron
Associated Press Newswires, 01/30/2002

DENMARK: Enron Wind "too risky" for German rival Nordex.
Reuters English News Service, 01/30/2002

. . . And the Enron Pundits
The Washington Post, 01/30/2002

Greedy Liars? The Enron Scandal; TheBIGStory An Occasional Look at Stories Everyone Is Talking About
The Washington Post, 01/30/2002

Open Cheney's Enron Baggage to Scrutiny
Los Angeles Times, 01/30/2002

Attorney general's opinion is sought
Media has asked to see suicide note 
Houston Chronicle, 01/30/2002

ENRON'S MANY STRANDS: AN EXECUTIVE'S DEATH
Hometown Remembers Man Who Wore Success Quietly
The New York Times, 01/30/2002

_______________________________________________________________________________________

Financial
New Enron Chief Likes Challenges; Cooper Known as Blunt, Creative Strategist
Albert B. Crenshaw
Washington Post Staff Writer

01/30/2002
The Washington Post
FINAL
E01
Copyright 2002, The Washington Post Co. All Rights Reserved

Corporate turnaround expert Stephen F. Cooper likes to rate restructuring jobs on a scale of 1 to 10, with 10 being the most difficult. 
"I would rather work on a 10 than a 4," he told the Toronto Globe and Mail two years ago as he took over at Burlington, Ont.-based Laidlaw Inc. -- parent of the Greyhound bus line -- shortly before it entered bankruptcy.
Now he may have has his "10" -- at bankrupt Enron Corp., where Cooper was named interim chief executive yesterday. He replaces company founder Kenneth L. Lay, who resigned last week under pressure from creditors. 
Cooper said his group will start immediately. 
"Our focus is on the future of Enron," he said in a statement released by Enron. "With more than 19,000 employees worldwide, Enron has real businesses with real value. We will work closely with the board of directors, management and the creditors committee to develop a reorganization plan to maximize value for the company's stakeholders." 
Whether Enron will survive in any form is highly uncertain, however. The company has at least $40 billion in debt, with the full extent of its liabilities from hundreds of partnerships and related companies as yet unknown. In addition, most of its known assets are heavily mortgaged, and some of its viable operations have already been sold off. 
Enron's cornerstone energy-trading operation was sold earlier this month to UBS Warburg, a Swiss bank, and Enron announced yesterday that its president and chief operating officer, Lawrence G. Whalley, had resigned to go with UBS Warburg. Earlier, Enron ceded control of its largest pipeline to its Houston-based rival, Dynegy Inc. And yesterday, Enron agreed to sell its London-based metals-trading unit for $145 million to Sempra Energy. 
It is possible all of Enron's remaining assets will also have to be sold to pay creditors, and some experts said Cooper's main challenge may be hammering out an agreement among creditors on how to divide up the proceeds. 
As managing principal of Zolfo Cooper LLC, a New York and Los Angeles-based firm specializing in the reorganization of corporations in bankruptcy or other difficult circumstances, Cooper has worked with such troubled companies as Macy's parent Federated Department Stores Inc., appliance maker Sunbeam Corp. and construction firm Morrison Knudsen. 
The firm "has terrific cachet in the workout community," said Stephen H. Case of the Washington office of Dave, Polk & Wardwell. "They are very much in demand and highly respected." 
Cooper is known as blunt-spoken, pulling no punches about what a company ought to do to survive, and creative in coming up with strategies to achieve those goals. 
And as an executive who tries to rescue companies in extremis, he has won some and lost some. 
One of his biggest victories was at Federated, which filed for Chapter 11 protection in 1990 and emerged two years later. Federated owns Bloomingdale's and other department-store chains as well as Macy's. 
Federated, once owned by Canadian developer Robert Campeau, was a basically solid business that was overwhelmed by junk-bond debt from the 1980s takeover binge. Cooper was able to cobble together a large retail firm from the wreckage and have it in the black by late 1992. 
At the other end of the scale, Bradlees, a chain of discount department stores operating in the Northeast, turned out not to be viable and was liquidated, with unsecured creditors receiving 22 cents on the dollar. 
Cooper is a graduate of Occidental College and holds an MBA from the Wharton School of the University of Pennsylvania. He was not available for comment yesterday.

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

Accounting for Enron: Enron Selects Cooper of Zolfo Cooper For Post of Acting CEO, Succeeding Lay
By Rebecca Smith
Staff Reporter of The Wall Street Journal

01/30/2002
The Wall Street Journal
A4
(Copyright (c) 2002, Dow Jones & Company, Inc.)

Enron Corp. said it named Stephen Cooper, a principal at New York restructuring firm Zolfo Cooper, as acting chief executive officer, succeeding Kenneth Lay, who resigned from the embattled energy concern last week. 
In his new role, Mr. Cooper, 55 years old, faces the daunting challenge of shepherding Enron through the biggest bankruptcy case in U.S. history. The appointment had been expected. Enron still employs some 19,000 people, although the company has been mired in Chapter 11 bankruptcy-court proceedings since last month, which shields it from creditors as it attempts to reorganize.
Meantime, Enron's board is continuing to search for a chairman, a position also held by Mr. Lay. Those close to the matter say that Enron is seeking someone with a high public stature. The idea is for this person to be something of an ambassador to Congress, which now has nearly a dozen committees investigating Enron's business practices. 
Mr. Cooper, who declined an interview request yesterday, is expected to run Enron on a day-to-day basis and help it navigate the bankruptcy process. It is expected that he will leave the post if the company emerges from bankruptcy proceedings. Previously, Enron noted, he has worked on the bankruptcy proceedings of Laidlaw Inc., Morrison Knudsen Corp., Sunbeam Corp., Federated Department Stores Inc., as well as many other big-name Chapter 11 cases. 
Those who know Mr. Cooper describe him as an energetic deal maker who is good at getting to the crux of issues. In a room filled with suit-and-tie-clad bankruptcy attorneys, Mr. Cooper often stands out for his casual dress. When discussions get contentious, he is known to defuse the tension with humor then redirects discussions back in the direction of solutions. 
"He's a very interesting person, and I can't say that about a lot of the people you deal with when you're in bankruptcy," said Peter Widdrington, chairman of Laidlaw, the big Toronto-based transportation company that operates school buses in the U.S. and Canada and owns Greyhound bus lines. Laidlaw filed for bankruptcy protection last summer, and Mr. Cooper has been advising it on how to emerge from court proceedings. 
Mr. Widdrington said Mr. Cooper has indicated that he will continue to work 20 hours a week for Laidlaw, as specified in his contract. "I'm not unconcerned about the fact he's now working with Enron," said Mr. Widdrington, but he added that others at Mr. Cooper's firm are capable of "stepping in." 
Some observers wonder whether Mr. Cooper will, for all his talents, be able to lead Enron out of bankruptcy; they speculate that the company could well be liquidated in the end. In all, Enron's bankrupt entities have liabilities exceeding $30 billion. 
Mr. Cooper will work most closely with Jeff McMahon, Enron's chief financial officer, who yesterday was named president and chief operating officer, and with Ray Bowen, formerly treasurer, who will step into Mr. McMahon's finance job. 
Greg Whalley, named president of Enron last summer by Mr. Lay, has resigned to take a senior level job at UBS AG's UBS Warburg, which this month bought Enron's energy-trading business. 
Separately, Texas Deputy Attorney General Jeff Boyd filed a motion in the U.S. Bankruptcy Court of the Southern District of New York -- where Enron's case is being heard -- asking the court to appoint an additional creditors committee to represent the interests of former and retired Enron employees. 
"While the major financial creditors of Enron have a right to adequate representation in the bankruptcy case, so do the thousands of former and retired Enron employees who are the least able, on an individual basis, to participate meaningfully in this case," Mr. Boyd said in a statement. 
Meanwhile, Sempra Energy Trading, a unit of San Diego-based Sempra Energy, said it will pay $145 million for Enron's London-based metals trading business, formerly Metallgesellschaft Ltd. The transaction, subject to final audit, is expected to be completed by Feb. 4. Don Felsinger, head of Sempra's unregulated operations, said the Enron unit has been profitable "since its inception . . . and we expect this track record of success to continue." 
--- 
Joann S. Lublin contributed to this article.

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

Business/Financial Desk; Section C
ENRON'S MANY STRANDS: THE TURNAROUND EFFORT
Enron Names an Interim Chief to Oversee Its Bankruptcy
By SHAILA K. DEWAN With JENNIFER 8. LEE

01/30/2002
The New York Times
Page 7, Column 1
c. 2002 New York Times Company

HOUSTON, Jan. 29 -- Enron today named Stephen F. Cooper, a specialist in revamping troubled companies, to lead it through the largest bankruptcy in the nation's history. 
Mr. Cooper, who will serve as Enron's interim chief executive, fills the top position vacated by Kenneth L. Lay, who resigned last Wednesday as chief executive and chairman under pressure from the company's creditors.
Enron is still searching for a chairman, who will serve as the political face of the company in Washington, where it is being investigated by Congress, the Securities and Exchange Commission and the Department of Justice. 
Mr. Cooper, 55, has been involved in prominent bankruptcies, including those of Federated Department Stores and Trans World Airlines. But sorting out Enron's tangled and opaque finances will be the biggest challenge of his career, bankruptcy experts said. 
Enron also named Jeffrey McMahon president and chief operating officer. He succeeds Lawrence G. Whalley, who resigned to take a position with UBS Warburg, which bought the energy trading business that was once the centerpiece of Enron's success. 
Mr. McMahon, who was named in a letter by a former employee, Sherron S. Watkins, as one executive who complained about the company's conflicts of interest, became chief financial officer after the forced resignation in October of Andrew S. Fastow, who managed some of the partnerships that helped bring the company to ruin. Raymond M. Bowen Jr., formerly the treasurer, was appointed executive vice president and chief financial officer. 
Mr. Cooper, a managing partner at Zolfo Cooper, a boutique advisory firm for companies in trouble, was the leading candidate to replace Mr. Lay. In selecting candidates for the Enron board to interview, the creditors committee decided to focus on specialists in corporate turnarounds, rather than chief executives with marquee names. 
''Our focus is on the future of Enron,'' Mr. Cooper said in a statement. ''Enron has real businesses with real value. We will work closely with the board of directors, management and the creditors committee to develop a reorganization plan to maximize value for the company's stakeholders.'' 
Mr. Cooper is known for his ability to balance the interests of warring factions. 
''He's a person who can get in there and see where the bodies are buried and see what things are needed to calm the waters,'' said Sandra E. Mayerson, a bankruptcy lawyer at Holland & Knight who represents several of Enron's smaller creditors. 
Still, some creditors not represented on the committee reacted with only a cautious optimism, praising the naming of an outsider to run the company but noting that the terms of Mr. Cooper's contract, which calls for him to be paid an hourly wage with a bonus if he meets certain goals, have not yet been made public. 
''We're going to keep an open mind as to Mr. Cooper and his team,'' said David Bennett, a lawyer who represents a group of oil and gas companies owed about $100 million. ''To have someone with restructuring experience is a good thing.'' 
While a few creditors have asked for a court-appointed trustee to oversee the reorganization, some said that the choice of an outsider might satisfy them. ''He's going to bring credibility to the situation,'' Ms. Mayerson said. ''I think if you hadn't gotten him involved in management, there would have been movement for an examiner or a trustee. He can serve that function as well as the C.E.O. function. So you are getting two functions for the price of one.'' 
A lawyer for the Wiser Oil Company, another creditor that has asked for a trustee, declined to comment. 
Some bankruptcy experts have questioned Mr. Cooper's lack of experience as a chief executive. But Mr. Cooper's defenders point out that what is needed in Enron's case is someone intimately familiar with bankruptcy, not someone who can lead or innovate in the context of a healthy company. 
''He's a person who knows the ins and outs of restructuring and a person who knows the ins and outs of forensic accounting,'' said Deborah Hicks Midanek, a principal for Glass & Associates, a Zolfo competitor. 
Mr. Cooper began work today, sending Enron employees a voice mail message praising the work force and expressing confidence that the company would eventually emerge from bankruptcy in some form. But many outside experts maintain that Enron may have little choice but to sell its viable businesses and eventually shut down. 
Mr. Cooper has largely avoided the spotlight, even as he has advised or managed well-known companies in crisis. 
He grew up in Indiana and received his M.B.A. from the Wharton School in 1970. At the accounting firm of Touche Ross, now a part of Deloitte & Touche, he and Frank Zolfo, now retired, founded the reorganization advisory group and were early advocates for bankruptcy as an area of specialty. 
In the early 1990's, Mr. Cooper served as an adviser to Federated, the owner of Bloomingdale's and Macy's, as it worked through its bankruptcy. In part because of the aggressive timelines Mr. Cooper set, the Federated bankruptcy proceeding took only two years instead of the five years that some analysts had predicted. 
He also served as an adviser in two of T.W.A.'s bankruptcies. 
Even as he takes the Enron job, Mr. Cooper continues to serve as vice chairman and chief restructuring officer of the Canadian conglomerate Laidlaw Inc., the largest North American ground transportation company, whose holdings include Greyhound Lines. Though he was called in to help the debt-burdened company stave off bankruptcy in 2000, Laidlaw filed for protection from creditors in June 2001. 
''When we did eventually file for bankruptcy, we did it in a very orderly basis, and that had a lot to do with his efforts,'' said Peter Widdrington, the chairman of Laidlaw. Mr. Cooper cleared a major obstacle by negotiating a recent $55.4 million settlement, announced two weeks ago, in a class- action lawsuit against Laidlaw. 
On a scale of one to 10, Mr. Cooper told a Canadian newspaper, he rated Laidlaw a 4 for complexity. ''I would rather work on a 10 than a 4,'' he said. 
Enron, then, is his wish come true. 
Stephen F. Cooper 
BORN: Oct. 23, 1946, Gary, Ind. 
EDUCATION: B.S. in economics, Occidental College, 1968; M.B.A., Wharton School of Business, 1970. 
CAREER HIGHLIGHTS: 1970-1985 -- Helped found reorganziation advisory group at Touche Ross & Co., which later became part of Deloitte & Touche. 1985 -- Joined advisory firm Zolfo, which was renamed Zolfo Cooper. 1990-1992 -- Advised Federated Department Stores on reorganization. 1995-1996 -- Adviser to Morrison Knudsen during its reorganization. 2000-current -- Vice chairman and chief restructuring officer of Laidlaw, an Ontario-based conglomerate. The company filed for bankruptcy protection in June 2001. 2001-current -- Advised Washington Group International, a company formed when Morrison Knudsen acquired Raytheon Engineers and Constructors, on reorganization. 
FAMILY: Nancie, wife, with two daughters. 
HOBBIES: Golf, tennis, skiing, biking, gardening.

Photos: Enron has appointed Stephen F. Cooper, left, as interim chief executive, Jeffrey McMahon as president and chief operating officer, and Raymond M. Bowen Jr., right, as chief financial officer. 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Video: Angry employee demanded to know if Lay on crack 
Reuters News Services 
Jan. 30, 2002, 8:26AM
WASHINGTON - A video of an Enron staff meeting, held as the former energy giant began to unravel, showed former chief Kenneth Lay under fire from employees, one of whom demanded to know if he was on crack. 
"I would like to know if you are on crack. If so that would explain a lot, if not you may want to start because it's going to be a long time before we trust you again," was one written comment Lay read out at the meeting, held Oct. 23. 
"I think that's probably not a very happy employee, and that's understandable," Lay said in response. 
Enron, once the world's largest energy trader and a Wall Street darling, made the largest bankruptcy filing in U.S. history on Dec. 2. Damning allegations of insider trading and financial misdeeds evaporated investor confidence, threw thousands out of work and wiped out workers' retirement savings. 
The staff meeting, aired today on NBC's Today show, happened just days after Enron reported its first quarterly loss in over four years after taking charges of $1 billion on poorly performing businesses. 
In the video, Lay, who last week quit as Enron's chairman and chief executive officer, apologized to his workers and promised to get back money they lost when the company's share price plummeted. 
"Let me say right up front, I am absolutely heartbroken about what's happened both over the last few months and more importantly the last several days," he told glum-faced employees. 
"Many of you, who were a lot wealthier six to nine months ago, are now concerned about college education for your kids, maybe the mortgage on your house, maybe your retirement and for that I am incredibly sorry. But we're going to get it back." 
Earlier this week Lay's wife Linda said her family lost its fortune when Enron, the once-proud linchpin of the Houston economy and national energy market, collapsed. 
"There's nothing left. Everything we had mostly was in the one stock... Other than the home we live in, everything else is for sale.. We are fighting for liquidity," she said. 
But NBC said they had found at least 10 homes or lots, owned by the couple, that were not listed for sale and were worth about $10 million. 
The network said Lay was entitled to a severance package of $25 million. And as of Jan. 1, the former-Enron chief owned more than $5 million in two companies -- with 340,724 shares in the No. 2 Houston computer-maker Compaq and 20,220 in drugmaker Eli Lilly. 

USA: Video shows Enron employee asked if Lay was on crack.

01/30/2002
Reuters English News Service
(C) Reuters Limited 2002.

WASHINGTON, Jan 30 (Reuters) - A video broadcast on Wednesday of an Enron staff meeting, held as the former energy giant began to unravel, showed its former chief Kenneth Lay under fire from employees, one of whom demanded to know if he was on crack. 
"I would like to know if you are on crack. If so that would explain a lot, if not you may want to start because it's going to be a long time before we trust you again," was one written comment Lay read out at the meeting, held on Oct. 23.
"I think that's probably not a very happy employee and that's understandable," Lay said in response. 
Enron, once the world's largest energy trader and a Wall Street darling, made the largest bankruptcy filing in U.S. history on Dec. 2. Damning allegations of insider trading and financial misdeeds evaporated investor confidence, threw thousands out of work and wiped out workers' retirement savings. 
The staff meeting, aired on Wednesday on NBC's "Today" show, happened just days after Enron reported its first quarterly loss in over four years after taking charges of $1 billion on poorly performing businesses. 
In the video Lay, who last week quit as Enron's chairman and chief executive officer, apologized to his workers and promised to get back money they lost when the company's share price plummeted. 
"Let me say right up front, I am absolutely heartbroken about what's happened both over the last few months and more importantly the last several days," he told glum-faced employees. 
"Many of you, who were a lot wealthier six to nine months ago, are now concerned about college education for your kids, maybe the mortgage on your house, maybe your retirement and for that I am incredibly sorry. But we're going to get it back." 
Earlier this week Lay's wife Linda said her family lost its fortune when Enron, the once-proud linchpin of the Houston economy and national energy market, collapsed. 
"There's nothing left. Everything we had mostly was in the one stock... Other than the home we live in, everything else is for sale.. We are fighting for liquidity," she said. 
But NBC said they had found at least 10 homes or lots, owned by the couple, that were not listed for sale and were worth about $10 million. 
The network said Lay was entitled to a severance package of $25 million. And as of Jan. 1, the former-Enron chief owned more than $5 million in two companies - with 340,724 shares in the No. 2 personal computer company Compaq and 20,220 in drugmaker Eli Lilly.

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

Business/Financial Desk; Section C
ENRON'S MANY STRANDS: THE TV INTERVIEW
Did NBC Let Lay's Wife Get Around Hard Issues?
By FELICITY BARRINGER

01/30/2002
The New York Times
Page 7, Column 6
c. 2002 New York Times Company

Lisa Myers, the NBC Capitol Hill correspondent long known as tough-minded, left much of her aggressive edge at the door on Saturday when she did an exclusive interview with the wife of Kenneth L. Lay, the former chief executive of Enron. 
As a result, Linda Lay felt comfortable enough to say that she and her husband, who took home about $200 million worth of cash and stock the last four years, ''are fighting for liquidity.''
''We don't want to go bankrupt,'' she added. ''Other than the home we live in, everything else is for sale.'' 
So should Ms. Myers earn praise from her colleagues for eliciting such a newsworthy -- and, to former Enron employees, infuriating -- statement? Or did she shirk her duty by failing to grill Mrs. Lay on the details of where all the money went, accepting the answer: ''There's nothing left. Everything we had mostly was in Enron stock.'' 
For 10 minutes on Monday on the NBC News program ''Today'' and for another 6 minutes yesterday, Mrs. Lay, the couple's children, Mr. Lay's former wife and his pastor were given a platform to praise the integrity of the man who Ms. Myers said in a separate report ''led Enron to great heights and to ruin.'' 
Ms. Myers, while challenging Mrs. Lay in general terms on issues like Mr. Lay's responsibility for Enron's collapse, gave the Lay family plenty of room to make the case for him, free of prosecutory inquiry. 
This led some journalists and media critics to ask whether the network and one of its sharp-edged correspondents had become soft. 
Ken Auletta, who covers media companies for The New Yorker, said: ''Lisa Myers has proven over the years that she knows how to ask tough questions and be in-your-face aggressive. With this she proved she has another pitch, to draw people out.'' 
He added: ''That's commendable. But there's another pitch, a combination of solicitous and tough questions. We didn't see that third pitch'' in the interview, he said. 
But Richard Wald, a former ABC News executive who is now a professor at the Columbia University Graduate School of Journalism, said aggression was often counterproductive. ''What you wanted was a sense of what this woman was like,'' Mr. Wald said. ''I had the feeling she shot herself in the foot.'' 
One core question raised by critics was how much leeway an interviewer should give when the only person who can be enticed before the camera's eye is a surrogate -- a wife, a friend, a child -- for the newsmaker the journalist really wants to interview. ''She's not a main character in the drama,'' Mr. Wald said, ''she's a peripheral character now putting herself forward.'' 
Don Hewitt, executive producer of the CBS News program ''60 Minutes,'' had not seen the interview, but said: ''When you invite somebody in and you make it apparent that you want to discuss the business at hand, there are no ground rules. If she knows that much about what he made and what they lost and what they don't have, she's qualified to answer all the rest of the questions.'' 
Ms. Myers said: ''I dealt with her on the broad strokes of every significant issue of potential misconduct that had been raised about her husband. But you cannot go into all the minutiae.'' 
A second question, Ms. Myers and Mr. Wald say, is the extent to which relentless critical scrutiny can and should be balanced with sympathetic coverage. 
In another report this month, Ms. Myers captured the tone and substance of much of her Enron coverage. In it, she described an optimistic Mr. Lay saying in October that ''we had a good strong quarter.'' Ms. Myers followed by saying: ''Six weeks later, Enron laid off 4,000 employees and declared bankruptcy, costing thousands of workers their life savings. Tonight, Enron had no comment on why it didn't level with the public last fall.'' 
Ms. Myers said yesterday that she and the network should be judged by ''the totality of the coverage.'' 
Last night, a Myers report on the defense of Mr. Lay's family included critical commentary by business experts. Another NBC reporter, Jim Avila, also reported on the Lay's $10 million in real estate holdings and $5 million in stock and interviewed an Enron employee who was incredulous about Mrs. Lay's claim that her family was nearly broke. 
As for the amount of time given to the defense of Mr. Lay, she said, ''We wanted to let the family make all the points they wanted to make -- they have a right to be heard from -- the amount of time they've gotten for their point of view has been dwarfed by the hours and hours of critical coverage.''

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

Ill. Regulators Vote To Remove Enron Energy-Sale Rights
Of DOW JONES NEWSWIRES

01/30/2002
Dow Jones Energy Service
(Copyright (c) 2002, Dow Jones & Company, Inc.)

By Jon Kamp
CHICAGO (Dow Jones)--The Illinois Commerce Commission approved an order Tuesday to strip an Enron Corp. (ENRNQ) unit of its right to sell electricity to retail customers in the state. 
Illinois law requires retail electric providers such as Enron Energy Services to be backed by a company with at least an investment-grade credit rating. Major ratings firms dropped Enron to below that level last November, and while EES has maintained hundreds of customers around the U.S. despite joining its parent in bankruptcy court, it is missing needed criteria to operate in Illinois, the ICC said. 
"As a result of Enron's ratings downgrades, EES can no longer rely on the Enron guarantee to demonstrate that it is in compliance" with state law, the ICC said in its order. 
Enron's certificate won't be immediately revoked. Instead, Tuesday's order starts a process in which an administrative law judge will review the issue, and will give Enron an undermined amount of time to show why it should retain its certificate, ICC spokesman Beth Bosch said. 
The commission said in its order that EES was notified Nov. 30 that it had 30 days to demonstrate it had financial resources to meet the state's criteria. But EES hasn't provided any documentation since then, the order said. 
An EES representative didn't return repeated calls seeking comment. 
ICC Commissioner Ruth Kretschmer said EES has already informally suggested it will voluntarily give up its right to serve retail customers in Illinois. 
"My understanding is that they have offered to relinquish the certificate," Kretschmer said in an interview. 
But Kretschmer still expects there will be a review process to determine exactly how Tuesday's order impacts EES' ability to do business in Illinois. While the company had dozens of Chicago-area customers before its parent's collapse, including the city of Chicago and PepsiCo Inc. (PEP) unit Quaker Oats Co., the ICC said EES wasn't actually supplying electricity for any of its Illinois customers. 
Instead, EES was acting as a billing agent and manager, helping mostly large commercial and industrial customers manage their energy use and restructure deals with local utilities, such as Exelon Corp.'s (EXC) Commonwealth Edison Co. Kretschmer said it is unclear whether EES needs the retail electricity provider to serve in such a capacity. 
"We probably won't have an answer until we go through the (review) process," Kretschmer said. 
While EES may not have directly served customers with power, some energy management deals were a foothold to later energy provider service. In its eight-year contract signed with the city of Chicago last summer, for example, Enron was to provide management services for the first few years and then actual electricity for the remainder of the deal. 
The city of Chicago canceled its Enron deal in early December. Quaker Oats, the University of Chicago and the Archdiocese of Chicago have also backed out of their EES contracts in the wake of Enron's financial troubles. 
EES was a large player in Illinois' young, deregulated retail electric marketplace, but Kretschmer said she doesn't see its withdrawal hindering the growth of competition. 
"There are a number of other big players that can pick up what Enron lost," she said. "I don't think it will have a negative impact here." 
-By Jon Kamp, Dow Jones Newswires; 312-750-4129; jon.kamp@dowjones.com

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

House Panel Seen Asking Enron Board Members To Testify
By Jason Leopold

01/30/2002
Dow Jones Energy Service
(Copyright (c) 2002, Dow Jones & Company, Inc.)

Of DOW JONES NEWSWIRES 

(This article was originally published Tuesday.)
LOS ANGELES (Dow Jones)--Members of Enron Corp.'s (ENRNQ) board of directors are expected to be asked next week to testify before the House Energy and Commerce Committee, a lawyer representing the board said Tuesday. 
The board members will appear before the committee whether or not they are subpoenaed and will answer all questions, attorney Neil Eggleston said. 
"I expect something will happen in the next day or so regarding their appearance," Eggleston said. "We were notified already, but we should know for sure by next week." 
Peter Sheffield, a spokesman for the committee, said Tuesday that he expects committee Chairman Billy Tauzin, R-La., to issue subpoenas next week to compel members of Enron's board to testify, possibly by mid-February. 
Enron's former Chairman and Chief Executive Ken Lay, who resigned last week but remains on the board, is scheduled to testify before the House committee on Monday. Enron's board is named in a number of civil and class action lawsuits associated with the company's collapse. Its audit committee reviewed some of the off-balance sheet partnerships now at the center of federal
investigations, and the full board voted twice to suspend Enron's code of ethics to allow former Chief Financial Officer Andrew Fastow to run partnerships even as he served as an officer for Enron.

Eggleston said last week Enron's board of directors didn't learn until October that an Enron executive had serious concerns accounting improprieties could bring down the company, although word of those concerns had spread throughout the company by early September. 
The executive, Sherron Watkins, raised her concerns with Lay in August. Those concerns were shared with the board after being reviewed at Lay's request by Vinson & Elkins, Enron's outside law firm, Eggleston said last week. 
According to Eggleston, Robert Jaedicke, the chairman of the board's audit committee, became aware of Watkins' concerns a few days before the committee met on Oct. 8. Vinson & Elkins advised others on the committee at the meeting, and the rest of the board was informed a couple of days before the firm released its report. 
The firm submitted its findings in a report dated Oct. 15, concluding that the company's handling of its off-balance-sheet partnerships was proper but could be portrayed in a way that could be damaging to Enron. 
Enron has declined to challenge Eggleston's account. 
Some members of Enron's board - including audit committee members Ronnie Chan, chairman of the Hang Lung Group in Hong Kong; John Wakeham, chairman of the Press Complaints Commission in the U.K.; and Paulo V. Ferraz Pereira, executive vice president of Group Bozano in Brazil - reside outside the U.S. 
Eggleston said he didn't know if those board members would travel to the U.S. to testify. 
-By Jason Leopold, Dow Jones Newswires; 323-658-3874; jason.leopold@dowjones.com

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

Enron failed to disclose full lobbying expenses 
Associated Press 
Jan. 30, 2002, 6:53AM
WASHINGTON - Enron Corp. apparently failed to disclose many of its lobbying expenses to Congress last year as the energy trader headed toward financial disaster. 
Enron acknowledged the problem Tuesday night after a private group that tracks money in politics compared Enron's lobbying filing to Congress in August with congressional filings by outside lobbying firms. The lobbying firms say they were paid more than $1.6 million by Enron for the first six months of 2001. Enron reported spending $825,000. 
Enron spokeswoman Karen Denne said the company's spending figure submitted to Congress last Aug. 15 is meant to cover lobbying by the company's own staff and work by outside lobbying firms. 
"We are reviewing those fees and will respond in writing to the secretary of the Senate," Denne said. 
Among the lobbyists doing work for Enron were Republican strategist Ed Gillespie; ex-Sen. J. Bennett Johnston, a Louisiana Democratic; and current Republican Party chief Marc Racicot; and two ex-aides to House Majority Whip Tom DeLay. Racicot still collects a salary from his firm but said when he took the GOP post he would no longer lobby for Enron. In the face of mounting criticism, Racicot has since given up his other lobbying clients as well. 
The discrepancy in Enron's lobbying expenses was discovered by the Washington-based Center for Responsive Politics. Its executive director, Larry Noble, said "it is particularly critical at this time for the public to have the full picture of Enron's lobbying activities." 
Also on Tuesday, Enron's political action committee said it donated at least $26,000 to congressional campaigns in November, the month before the company filed for bankruptcy protection. Recipients included several lawmakers on the committees now investigating Enron's collapse. At least two, Rep. Mary Bono, R-Calif., and Rep. Greg Walden, R-Ore., plan to give their donations to charity. 
The Enron PAC donated at least $120,188 to federal candidates and fund-raising committees last year, the report shows. 
In another development, the issue of document-shredding re-emerged at Enron, with the company saying it hired private companies to destroy documents. Robert Bennett, an attorney representing the company, said the discarded documents were not sensitive financial records, and any suggestion of any impropriety was "a bunch of nonsense." 
Enron hired two companies, one of them named Shredco, to destroy a huge volume of material, ABC News reported Tuesday night. 
"There was a contract with a company when Enron consolidated down from two buildings to one building," Bennett said. "There was a lot of information including payroll records, resumes, Social Security numbers. These trucks came in in the light of day." 
"Even if they're shredding old newspapers, they need to contact the Justice Department" to get permission to do so and allay suspicions, said Rep. Jim Greenwood, R-Pa., who chairs the House Energy and Commerce oversight and investigations subcommittee looking into Enron. 
FBI agents have been investigating allegations of massive shredding of documents at Enron's Houston headquarters. The company's auditor, Arthur Andersen LLP, has acknowledged destroying Enron-related documents and e-mails that were sought by federal and congressional investigators. 

Business/Financial Desk; Section A
ENRON'S MANY STRANDS: THE DOCUMENTS
Enron Says Shredding of Records Was Not Stopped Until Recently
By BARNABY J. FEDER and MICHAEL BRICK

01/30/2002
The New York Times
Page 1, Column 1
c. 2002 New York Times Company

Enron acknowledged yesterday that it had contracted until mid-January with commercial shredding companies to destroy company records. 
The disclosure outraged a congressman whose subcommittee is investigating document destruction at Enron and its accounting firm, Arthur Andersen, though Enron insisted that the records being destroyed were unrelated to the continuing investigations of the company's collapse.
F.B.I. agents were in the company's Houston headquarters as recently as Monday, government officials said. They have been working there to preserve potential evidence since last week, when an employee came forward to say documents were being shredded earlier in the month. 
In Washington, House Republican leaders backed President Bush and Vice President Dick Cheney in their refusal to tell Congress about contacts between Enron and the administration's energy task force. But several Republican senators called on the White House to disclose the information. [Page C1.] 
Mark Palmer, an Enron spokesman, said the commercial shredding was a routine matter. The materials destroyed by a private company, Shredco, included items like payroll runs, old personnel records, performance reviews, medical records and other items that he called ''sensitive employee documents.'' 
Representative James Greenwood, the Pennsylvania Republican who is chairman of the investigative subcommittee of the House Energy and Commerce Committee, said last night that he was dismayed that even routine shredding had continued for so long at Enron. 
''It is stunning to me that this company, which is being investigated by the Congress, by the Justice Department, by the S.E.C., would get anywhere near a shredder without at least seeking the permission of the Justice Department and others, so that everyone is clear on what it is that they were shredding,'' Mr. Greenwood said. ''Otherwise they are either incredibly arrogant and out of control, or somebody's incredibly stupid.'' 
As for Andersen, the Energy and Commerce Committee sent the firm a letter demanding details of its internal investigation of document shredding, as well as information about any consulting work it did on a score of Enron's complex partnership deals. 
And computer experts said in interviews that the majority -- perhaps nearly all -- of the destroyed Andersen and Enron materials could be recovered by electronic means. 
Brian Sierra, a Justice Department spokesman, declined yesterday to comment on whether agents had secured computer hard drives and other electronic media at Enron. Asked if the F.B.I. had succeeded in preventing any further destruction of potential evidence at the company, he said, ''We certainly hope so.'' 
Mr. Palmer said that all shredding at Enron had ceased as of Jan. 14, after the first reports of document destruction at Andersen. 
''A lot of things are stacking up that under normal circumstances we would destroy and employees would want us to destroy,'' he said. 
Last week, when Maureen Castaneda, a former Enron executive, disclosed that the company was continuing to shred documents in its accounting department, the company insisted that it had issued several directives stating that ''all relevant documents should be preserved in light of pending litigation.'' 
But those directives, issued as e-mail messages beginning on Oct. 25, began by specifying only certain materials related to investigations that had come to light. At the end of October, the company issued a broader message telling employees to preserve just about all documents. 
On Jan. 14, another directive was issued by Enron's general counsel, James Derrick Jr., to ''remind all employees, that, as earlier instructed, in view of the pending and threatened legal proceedings involving the company, no company records, either in electronic or paper form, should be destroyed.'' 
One Enron employee who insisted on not being identified said that on Friday the company had gathered up the shredders on each floor of its headquarters and put them into sealed-off areas, but that the machines had not been removed from the building. 
At Andersen, the focus was on electronic records. The firm has hired ASR Data Acquisition and Analysis, a small computer forensics firm, to recover computer records that may have been deleted or overwritten. 
Because nearly all paper documents these days are created on computers, investigators say that recovering the electronic materials is likely to be far more important to sorting out what happened than gathering and reassembling shredded paper documents. 
ASR, based in Cedar Park, Tex., declined to describe in any detail its work for Andersen and for Davis, Polk & Wardwell, the law firm that Andersen has hired to investigate its dealings with Enron. 
Andrew S. Rosen, president of ASR, said the extent of his inquiry was ''still emerging.'' He added that while it was generally easy to recover deleted data, figuring out who deleted it and when -- crucial information for Congressional and criminal investigators -- is much harder. 
''This is like an onion,'' Mr. Rosen said. ''The first layers come off easily, but it gets harder and makes you cry as you go deeper.'' 
Andersen itself is anxious to complete the investigation because the firm's senior management believes that the inquiry will show that potentially illegal activities were confined to a handful of individuals. The firm is struggling to retain customers amid growing concerns that its reputation has been irreparably damaged. 
Andersen, based in Chicago, has promised to issue a complete report on its Enron dealings in a few days. The Energy and Commerce Committee, in its letter yesterday, asked Andersen to disclose by tomorrow who was being interviewed as part of the investigation, anyone identified as taking part in the destruction of records and the details of Andersen's engagement of Davis, Polk. 
The continuing pressures come at a crucial time for Andersen as it tries to head off client defections. 
The Wall Street Journal reported yesterday that Delta Air Lines would give other firms the opportunity this spring to bid for the auditing job now performed by Andersen. Peggy Estes, a Delta spokeswoman, described the process as a normal one for the company. 
Other big Andersen clients, like Utilicorp United of Kansas City, Mo., and International Paper of Stamford, Conn., said they were conducting similar reviews.

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

A Section
Prosecutors, FBI Pore Over Enron's Books; Responsibility for Company's Demise Is Shrouded by Mystery Partners, Offshore Entities
Susan Schmidt
Washington Post Staff Writer

01/30/2002
The Washington Post
FINAL
A06
Copyright 2002, The Washington Post Co. All Rights Reserved

Enron's ex-chairman Kenneth Lay says he was in the dark; his subordinates say he knew of their deals. The company insists accountants approved its off-the-books partnerships, but Arthur Andersen says key facts were withheld. Creditors are demanding payment; the board of directors is eyeing the staggering stock profits made by former executives. 
The finger-pointing has started in earnest now that more than 60 prosecutors and FBI agents swarm over Enron's books, trying to untangle a web of mystery partners and offshore entities that swapped and hedged the Houston-based company's debt.
There is still a vast amount unknown -- and no proof so far of criminal intent by Enron officials -- as the Justice Department ramps up its investigation of the energy giant's collapse. At this early stage, legal experts and lawyers close to the probe say, it may not even be clear who the chief investigative targets should be. 
Prosecutors are casting about for the right witnesses to guide them through the complexity, a decision that could prove crucial to their success. They are likely to offer deals with some people in exchange for information and testimony. Of central interest is Lay's role at the company, and that of former executives Andrew Fastow and Jeffrey Skilling, principal architects of the hundreds of partnerships. 
"You have to decide who you want to scapegoat -- who you want to build your case toward," said Donald Langevoort, a securities law professor Georgetown University. The choice goes beyond strictly legal questions, he said, for it helps establish a public face for the inquiry. 
"Would you rather this be a Kenneth Lay story or the story of a highly ambitious second in command?" Langevoort said. "Who you portray as the bad guy is a political decision." 
Prosecutors have focused their early attention on the shredding of Enron records at the Arthur Andersen auditing firm, though it's not clear that will lead them to the principal figures at Enron. Bringing an obstruction-of-justice case against Andersen may be a relatively quick call, lawyers close to the probe said, if it's found that documents were destroyed after officials knew they could be sought in legal proceedings. 
Investigators have collected numerous Andersen e-mails and memos dealing with the retention or destruction of documents. The lead Andersen auditor on the Enron account, who was fired by the company for allegedly orchestrating the shredding, has already spent seven hours with the Justice Department's Enron task force telling prosecutors about the role he says higher-ups played in the document destruction. 
Any underlying fraud and securities cases against Enron and Andersen will be much more difficult to sort out. Securities law experts closely tracking the Enron saga said possible wrongdoing may include insider trading, material misrepresentations to the Securities and Exchange Commission or to the public in press releases, as well as mail and wire fraud. 
"Serious questions have been posed, but whether anyone is criminally liable for anything is not known yet," said Joel Seligman, dean of Washington University School of Law. Whether charges are brought, he said, likely rests on information not yet pieced together. 
"Why did people destroy so many documents?" Seligman said. "What was potentially so unnerving in those documents for Enron and Arthur Andersen? I'd really like to know the answer to that question." 
Investigators are poring over reams of company records and trying to reconstruct what was shredded, both at Enron and Arthur Andersen. Help from insiders would be vital to speed the investigation along and illuminate what can't be readily gleaned from company records. 
Forty FBI accountants have been dispatched to Houston to examine Enron's books. But former Enron executives and lawyers close to the case say there is only so much the paper trail will reveal. Heading the investigation is fraud division chief Joshua Hochberg, with coordination of prosecutors across the country by Leslie Caldwell, former chief of the securities fraud unit in the U.S. attorney's office in San Francisco. 
The most pressing unknown at this point may be who the real players are in the more than 1,000 Enron-related private partnerships and investment groups, many of which were kept off the company books. Those entities hid company debt and pumped up the company's stock, which Enron executives cashed out for hundreds of millions of dollars. 
It may take an insider to reveal those names, because they are not on company records. Even Enron's lawyers say they don't have them. Similarly, it may require an inside source to help prosecutors decide if there is a tax evasion case to be made from the partnerships located in the Cayman Islands. 
The prospect of an obstruction case against Arthur Andersen seems to have shaken at least one important potential witness loose already. David B. Duncan, Andersen's lead auditor on the Enron account, has met with the Justice Department Enron task force twice. His lawyers said he is cooperating, but he has not so far entered into any deal with prosecutors. 
Duncan is in a position to know what went on at both companies and about the partnerships themselves. Enron executives came up with the partnership concepts and the accountants "tweaked" the financial setups, said one source familiar with the accountant's work. 
The early phase of the investigation may turn on how far up the chain the document destruction investigation goes at Andersen. Duncan has told congressional investigators he believed he was following direction from company lawyer Nancy Temple. 
In October, with shareholders filing lawsuits against Enron and the SEC preparing an inquiry, Temple sent Duncan's group an e-mail reminding him of the Andersen document retention policy. It called for the retention of some documents and the destruction of others. A week later, Temple e-mailed the policy to two high-level Chicago partners who were reviewing the Enron audit and the way the partnerships had been reviewed. 
Yesterday, the House Energy and Commerce Committee demanded information from Andersen about Enron document destruction, which the company has acknowledged went beyond the Houston office. Committee investigators also are interested in the role of Andersen's outside lawyers, the New York-based law firm of Davis, Polk and Wardwell. 
The firm was hired Oct. 9. It has declined to comment on what advice it gave Andersen and Temple about preserving documents. Temple testified before Congress that the firm advised her to send out an e-mail on Nov. 10 -- three weeks after the SEC began probing Enron -- saying it was time to start preserving documents. 
Davis, Polk and Wardwell is conducting Andersen's internal investigation of the document destruction, prompting questions among committee staffers about the objectivity of the investigation.


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

Business; Business Desk
Enron Puts Stock in Turnaround Specialist RELATED STORY More scrutiny: Regulators are probing whether Enron inflated California power prices. A12
JEFF LEEDS and LEE ROMNEY
TIMES STAFF WRITERS

01/30/2002
Los Angeles Times
Home Edition
C-1
Copyright 2002 / The Times Mirror Company

HOUSTON -- Eight weeks after going broke, Enron Corp. selected management consultant Stephen Cooper as interim chief executive to steer the fallen energy giant through Bankruptcy Court, a battery of shareholder lawsuits and a criminal probe. 
Board members tapped Cooper, a principal of New York-based turnaround firm Zolfo Cooper, less than a week after the resignation of Chairman and Chief Executive Kenneth L. Lay. The board has not named a new chairman.
Cooper, 55, said Tuesday that "Enron has real businesses with real value." But whether he can restructure the firm and handle the complex legal issues to allow it to keep operating remained an open question, analysts said. 
Enron already has sold a majority stake in its commodities trading business, which generated about 90% of the $100 billion in revenue it reported for 2000. The company also has handed control of its largest pipeline to Houston-based rival Dynegy Inc., and expects to sell its Portland General Electric division for an estimated $3 billion to Northwest Natural Gas Co. Enron's remaining assets, including smaller pipelines and utilities outside the U.S., accounted for just a fraction of its revenue. 
But Cooper, in a voicemail disseminated to Enron's employees, offered an optimistic take on the company's current divisions. 
"The physical assets look to me to be of an enormous advantage here," Cooper said. "The regulated assets--the pipelines and generating plants-- provide reliable, steady cash flow and returns. And they provide a very sound, fundamental base to restructure around." 
Many experts, however, expressed doubt Cooper will be able to do anything more than sell off Enron in pieces. 
"I find it hard to envision a workable entity coming out of bankruptcy here," said Andre Meade, a utilities analyst for Commerzbank Securities. "The only business that really makes sense is a smaller version of what Enron was in the first place--a small gas-pipeline company, but the demands of the industry over the last couple of years have basically eliminated all small-pipeline companies." 
Enron is still seeking a chairman, who must deal with the firm's interests in Washington, where it is under attack on Capitol Hill. 
Steven Panagos, a partner at Zolfo Cooper, said the firm believes Enron has enough cash to continue operations and emerge from bankruptcy. ''It has a good customer base, it has a good supplier base and most importantly it has plenty of liquidity,'' he said. 
Cooper's biggest asset, analysts said, is whatever goodwill he can generate from the creditors' committee. Cooper comes to the company as an outsider--an attribute sought by committee members who pushed for Lay's exit. 
Cooper began studying company reorganizations while working as an accountant at Touche Ross, now known as Deloitte & Touche. In 1986, he joined a former colleague, Frank Zolfo, to form Zolfo Cooper. Cooper, a graduate of Occidental College in Los Angeles and the University of Pennsylvania's Wharton School, declined interview requests Tuesday. 
As part of the management shuffling announced Tuesday, Enron President and Chief Operating Officer Lawrence G. Whalley resigned to take a post at UBS Warburg, the Swiss bank that acquired Enron's trading division this month. Enron also elevated Chief Financial Officer Jeff McMahon to succeed Whalley and named treasurer Ray Bowen as CFO. 
Shannon Burchett, president of Dallas-based energy firm specialist Risk Limited Corp., noted that the promoted executives have not been implicated in the scandal, but "if I were a creditor, what I'd like to see is a whole new cast." 
When Cooper was hired to help rescue troubled Canadian transportation firm Laidlaw Inc. in mid-2000, he clearly identified the problem areas, Laidlaw Chairman Peter Widdrington said. 
"He can get deadlines established which initially look unrealistic, but the more he sells the deadline to all involved, the more realistic they become," he said. 
Some analysts noted that Cooper, a veteran of the bankruptcies of Federated Department Stores and other firms, has little experience in the energy field. 
But Widdrington, who has discussed the Enron debacle with Cooper, said, "Steve himself is not awed by the task. He thinks essentially the operational aspects of the company are still in decent shape." 
Cooper plans to continue as Laidlaw's vice chairman and chief restructuring officer. 
Cooper's firm also has been consulting for Polaroid Corp. since last summer and assisted the firm as it prepared to file for Chapter 11 bankruptcy protection in October. Polaroid spokesman Skip Colcord said the company could not comment on Zolfo Cooper's performance because Polaroid has not yet emerged from bankruptcy. 
UCLA bankruptcy law professor Lynn LoPucki said Enron probably can emerge from Chapter 11, but it probably will do so as a shadow of its former self. "There will be a lot of pieces of things that survive from Enron, but they aren't in any real sense Enron," he said. "One might carry the Enron name, one might be the same legal entity, but they won't be anything like the pre-bankruptcy Enron." 
Michael J. Miller, a former Enron employee and a member of the organization that sued Enron officials Monday for severance and other losses, said he remains hopeful that Cooper can squeeze cash flow from Enron's shell. 
"Certainly we'll wish this guy well on his endeavors, but we're also going to be watching what's going on," Miller said. "We have very high stakes." 
* 
Leeds reported from Houston and Romney from Los Angeles.

PHOTO: Stephen Cooper, 65, has an undergraduate degree from Occidental College in Los Angeles.; ; PHOTOGRAPHER: Associated Press 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Business/Financial Desk; Section C
ENRON'S MANY STRANDS: THE ACCOUNTING
Fuzzy Rules Of Accounting And Enron
By FLOYD NORRIS and KURT EICHENWALD

01/30/2002
The New York Times
Page 1, Column 5
c. 2002 New York Times Company

Enron collapsed after reporting strong profits for years, a fact that might be seen as proof that the profits were illusory. 
But even some accountants who are extremely critical of Enron's accounting now say that accounting rules -- including one that was influenced by Enron when it was being written -- give at least a veneer of acceptability to some of the most widely questioned Enron accounting practices.
''It's conceivable that they complied with the rules,'' said Douglas Carmichael, a professor of accountancy at Baruch College. ''Absent a smoking-gun e-mail or something similar, it is an issue of trying to attack the reasonableness of the assumptions they made.'' 
The Enron case highlights a weakness in the system that exists to encourage companies to fairly describe their financial health: when accounting rules are written very specifically, clever accountants find ways to get around them. When, as in this case, they are written far more generally, proper accounting can be overly reliant on the good faith of companies and auditors in applying the rules. 
As a result, the evidence that the Justice Department and the Securities and Exchange Commission would need to bring fraud charges would be documents showing that accountants made estimates they knew to be unreasonable. To find such evidence, investigators would review internal memorandums and e-mail messages. But some of those appear to have been destroyed by employees of Enron and its former auditor, Arthur Andersen. 
The rule in question concerned trading in the energy business. When Enron's energy services division agreed to supply power to a company at a fixed price, it made optimistic projections that energy prices would fall enough in the future to guarantee Enron a healthy profit. It was then able to report that profit as soon as it signed the contract -- long before it was clear whether its optimistic assumptions would prove to be accurate. 
''It looked like a license to print money,'' said Glenn Dickson, a former manager in the energy services unit. 
The decision that energy trading could be accounted for in the way that Enron used was made by the Emerging Issues Task Force, a group under the oversight of the Financial Accounting Standards Board, the principal accounting rule maker in this country. It did so in 1999, after meeting with Enron, which was viewed as the leading company in energy trading. 
Timothy S. Lucas, the director of research at the F.A.S.B. and the nonvoting chairman of the task force, said Enron's role was to provide information, not to serve as a consultant. He said that, as he recalled, Enron had already begun using accounting similar to the accounting the task force wound up endorsing. 
In retrospect, Mr. Lucas said, the task force may have erred by not requiring more disclosures about the accounting used, particularly in long-term transactions. 
''There are suggestions for good information that we could add to the disclosure that we simply did not think of,'' he said, adding that such disclosures would now be considered. 
The accounting rule in question required Enron to ''mark to market'' the value of its energy trades. Where there was an active market, as with stocks or publicly traded bonds, that is relatively easy to do and difficult to manipulate. But where there is no such market, companies were allowed by the rules to use their own models to estimate fair value, and to treat that as the market value. 
The mark-to-market technique was used to report profits in some Enron businesses. When its energy services unit signed a power-supply contract with a company, it would structure the deal to bring it under those accounting rules. It would then project electricity and natural gas prices for the full term of the deal, which could last as long as 10 years, according to former Enron officials. 
Many of the contracts covered companies in states that had not yet deregulated their power markets. In those cases, Enron forecast when the states would deregulate those markets and then projected what prices would be under the currently nonexistent deregulated market. 
Then, based on its projections, Enron would calculate its total profit over the life of the contract. After discounting that figure to account for the risk its customer would default and the fact that it would not receive most payments for years, Enron would book the profit immediately. 
Mr. Lucas said it had not occurred to him that anyone would use models to try to forecast energy prices for 10 years, and then use those models to report profits, but that the rule had not placed a limit on such trades. He noted that any trade that required assumptions for such a long time would appear to be very risky. 
A former Enron official has told associates that Arthur Andersen, Enron's auditor, took a number of issues related to Enron's accounting to the task force. That official said Andersen accountants viewed the company's structuring of financial instruments to be on the cutting edge. 
Andersen has a seat on the task force, as do each of the four other large accounting firms. The other members among the 13 on the task force are 4 representatives of smaller accounting firms and 4 executives from large companies. One industry seat is now vacant, after an executive from General Electric left. The others are held by officials of J. P. Morgan, Exxon Mobil and Dow Chemical. 
The task force does not disclose who suggests topics, so it is not possible to be certain which Enron issues were considered. But it appears that one such issue came in 2000, when the task force addressed the question of what should be done about what appeared to be the application of widely varying approaches by energy traders to determine how much contracts were worth. The task force refused to specify how valuations should be made, leaving companies free to use methods they deemed best. 
It is not possible to know how much, if at all, Enron would have been restrained from its aggressive accounting had the task force chosen to enact more detailed rules. But Mr. Carmichael, the Baruch professor, said that an enforcement case would be easier to make had the regulators ''set some kind of parameters on the ability to use an internal model.'' 
Absent such clarifying rules, he said, ''you would expect an auditor to come in and challenge the assumptions made.'' He said the investigation ''is likely to delve into whether the assumptions were reasonable and to what extent did Arthur Andersen challenge the reasonableness of the assumptions.'' Internal Andersen memorandums could be crucial to making a case against the auditor. 
Edward W. Trott, who in 1998 was a member of the task force representing KPMG, a large accounting firm, and who since 1999 has been a member of the F.A.S.B., said in an interview that he believed that the right decisions were made on how to account for energy trading. 
But, he added, ''if you're telling me that somebody who wants to game the system can do it, you probably have a lot of evidence to support that.'' 
The accounting for energy services is not the only area in which Enron engaged in accounting that used rules in surprising ways. 
In one transaction involving a joint venture with Blockbuster, Enron reported large profits even though the venture never attracted more than a few customers. 
''They were extremely clever,'' said Paul Brown, the chairman of the accounting department at New York University. 
In the Enron-Blockbuster deal, the two companies set up a pilot project, streaming videos to a few dozen apartments in Portland, Ore., from servers set up in the basement of the building. With that tiny beginning, Enron opened up a partnership, called Braveheart, which raised more than $115 million from a bank in exchange for a promise of most of the earnings from the Blockbuster deal for years. 
Enron asserted that there was a market in broadband, and that its transaction amounted to one involving the transfer of financial assets. That meant it could report the transaction on a mark-to-market basis, similar to the way it accounted for the energy trades. It applied its undisclosed model to calculate how much revenue it could report from the transaction, and reported more than $110 million. Former executives say accountants at Arthur Andersen approved the accounting. 
''Nobody in the division could comprehend how they got Andersen to sign off on that,'' one former senior executive in the broadband division said. ''It just didn't make any sense. When we heard what they did, everybody's mouths just hung open. We weren't doing business on any scale even close to those numbers.'' 
The Wall Street Journal has reported that the bank that put up the money had a guarantee from Enron that it would not lose money. From the bank's point of view, that may have made the transaction look like a loan, but Enron says the accounting came under an F.A.S.B. rule covering the securitization of assets. Under that rule, accountants say, Enron could still treat the transaction as a sale, while reducing the profit to reflect the value of its guarantee. 
An Enron spokesman said the company believed that it had complied with applicable accounting rules. ''I'm sure all of these past transactions will be investigated by lots of people,'' he said. ''Why don't we just wait and see what the appropriate authorities decide?'' 
An auditor at one large firm not involved in the Enron case said it was common for auditors to face creative ways to use accounting rules. ''These issues can become very complex and very fact-specific,'' he said. ''You have a lot of sharp pencils on Wall Street cooking up transactions to achieve a specific result. Oftentimes, they understand the accounting rules as well as or better than we do.'' 
Or, as Mr. Brown, the N.Y.U. professor, put it: ''It's the old adage of a F.A.S.B. rule. It takes four years to write it, and it takes four minutes for an astute investment banker to get around it.''

Chart: ''A Complicated Partnership With Debilitating Results'' Investigators are examining some of the deals that improved Enron's balance sheet but were not part of its financial statements. Here is one in which Enron used a partnership to increase its short-term earnings. 1. Enron signed a multiyear deal with Blockbuster to provide videos over Enron's broadband network. Enron hoped to make millions of dollars off the deal. 2. Enron created a partnership called Braveheart whose purpose was to get someone to advance Enron the money it expected to make on the deal with Blockbuster. To capitalize Braveheart, a small amount of money came from outside investors and Enron lent the partnership some stock. 3. An outside investment bank gave Braveheart $115 million in return for a promise that most of the earnings from the Blockbuster deal would go directly to the bank. If the earnings were not enough for the bank to recoup its investment, Enron promised that it would repay the bank. 4. Enron recorded $110 million of the money invested in Braveheart as profit. Enron did not count all $115 million because, under an accounting rule, it had to estimate the value of its guarantee to pay back the bank and reduce its revenue by that amount. PROBLEM: Blockbuster backed out of the contract, leaving Enron responsible for repaying the bank. (pg. C6) 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Financial Desk
THE NATION COLUMN ONE Andersen's Reputation in Shreds The accounting firm was once considered the industry's conscience. But the Enron scandal has revealed the dark side of the profession.
RALPH FRAMMOLINO; JEFF LEEDS
TIMES STAFF WRITERS

01/30/2002
Los Angeles Times
Home Edition
A-1
Copyright 2002 / The Times Mirror Company

CHICAGO -- Think straight, talk straight. 
That motto was coined by Arthur Edward Andersen, a Northwestern University accounting professor who made standing up for what's right the bedrock principle of the company he founded 88 years ago.
What John Wayne was to westerns, Andersen was to accounting--demanding absolute honesty and probity from employees and clients alike. Andersen's fastidiousness even extended to an employee dress code, which for years required all auditors to wear fedoras on appointments, no matter the weather. 
Andersen's company grew into the world's fifth-largest accounting firm, with more than 100,000 corporate clients, $9 billion a year in revenue and 85,000 employees around the world. More than that, it helped set ethical standards for the entire profession. 
"Arthur Andersen wouldn't put up with anything that wasn't complete, 100% integrity," said George R. Catlett, 84, a retired Andersen partner from Evanston, Ill. "If anybody did anything otherwise, he'd fire them. And if clients wanted him to do something he didn't agree with, he'd either try to change them or quit." 
Today the Chicago-based firm, known simply as Andersen, is an emblem of accounting misdeeds, the focus of congressional investigations and the butt of presidential jokes. 
Andersen vouched for financial statements that overstated Enron Corp.'s earnings by $586 million over nearly five years. It has admitted shredding documents even after the Securities and Exchange Commission began examining Enron's collapse, the largest corporate bankruptcy in U.S. history. 
The scandal threatens the survival of Andersen. And because of the company's prominence, the disclosures are reverberating widely, shaking investors' confidence in the profits and losses reported by corporate America. Members of Congress and federal regulators are examining the accounting industry's practices and standards. 
"The conscience of the industry, essentially, appeared to sell out," said Bill Cummings, an accounting professor at Northern Illinois University and a past president of the American Accounting Assn.'s Midwest region. "I think it's pure and simple. It's greed and the allure of the big-money clients." 
Andersen's role in the Enron collapse has revealed the "dark side" of a profession whose independence has been compromised by the chase for multimillion-dollar fees, Cummings said. 
Like many accounting firms these days, Andersen wore two hats at Enron. It was the company's independent auditor, responsible for ensuring that its financial statements were accurate. It was also a financial consultant, helping Enron executives devise ways of running the business more profitably and reducing its tax bill. 
Andersen auditors and consultants occupied a floor of their own in the energy company's gleaming Houston headquarters. They carried Enron-issued electronic ID cards, mingled at office picnics--and even wore Enron golf shirts. 
Investigators are looking at Andersen's alleged role in setting up complex transactions that inflated Enron's earnings by keeping massive debts off the company's books. Andersen has claimed that its accountants were misled by Enron. 
Arthur Andersen himself wouldn't have gotten so cozy with a client, to judge from accounts of his career. The son of Norwegian immigrants, Andersen is described as crotchety, opinionated and stubborn. 
Company lore has it that he lost the prized E.I. du Pont account in the 1930s over an interpretation of operating income. Du Pont executives insisted on using a more liberal definition that would lump in the value of the company's large investment in General Motors. Andersen's auditors said no, and Andersen backed them up. Du Pont found another auditor. 
The episode sealed the reputation of Andersen and his firm. The company still guards that legacy jealously, said Andersen spokesman Dave Tabolt. "It's an issue that people are concerned about every day," he said. 
Even now, Andersen employees can be fired for fudging a meal on an expense form or lying about their college grade-point averages, say former partners. 
Before accepting a client, Andersen performs background checks on its top executives. Andersen auditors are told to summarily "leave the field"--walk away from the job--if they meet unreasonable resistance. 
The firm also has shaped reforms within the accounting profession. 
Firm Insisted on Tight Central Controls 
Auditors perform a vital role in the nation's financial system by certifying the accuracy of profits, losses, debts and other financial data reported by companies. They are hired by a company's shareholders and its board of directors to ensure that financial statements meet federal disclosure standards. 
During the 1950s and 1960s, Leonard Spacek, Andersen's successor, openly criticized the profession for tolerating what he considered a sloppy patchwork of accounting standards that left the investing public no way to compare the financial performance of different companies. 
Spacek's evangelism led to the creation of the Accounting Principles Board, an industry group that established uniform financial accounting and reporting standards. In 1973, the board was replaced by the Financial Accounting Standards Board, an independent body recognized by the SEC. 
"They wanted what they considered to be substandard accounting principles . . . to be improved," said Stephen Zeff, an accounting professor and historian at Rice University. "The accounting establishment back East . . . didn't want the cage rattled. Arthur Andersen rattled the cage." 
The firm also has set itself apart over the years by cultivating a corporate cohesiveness that borders on clannishness, say experts and former employees. 
The firm has always insisted on tight central controls and uniformity. Before computers, Andersen partners around the world worked off a cross-indexed central filing system that listed every client, audit and supporting memos. 
At the firm's campus in rural St. Charles, Ill., about 40 miles west of Chicago, uniformity is stressed to new recruits during an intensive two-week training course. 
"They always talked about the one-firm philosophy. . . . No matter where you are, there was one firm, one philosophy," said Vadim Fridman, 31, a former Andersen auditor who is now chief financial officer for St. Maartens Spirits, a distributor of premium liqueurs in Santa Barbara. 
Over the years, the practice of accounting changed in ways that Andersen's original credo didn't anticipate. 
Accounting firms now offer lucrative consulting services. Their clients include complex businesses with dozens of different divisions. And when companies go bad, shareholders often target the auditors as well as the management. 
Worries over shareholder lawsuits rippled throughout the firm and shaped how audits were conducted during the 1990s, former employees say. 
Auditors use two files to keep records of their work. One is for working papers that offer supporting documentation for the auditor's findings about a company's finances. The other file is for personal notes, memos and other documents. At the end of an audit, papers in the second file are destroyed while those in the first are preserved. 
"The emphasis when I was at Andersen was to take more and more out of the work file. They wanted fewer and fewer source documents to be in the source file, across the board with any client," said a former employee in Houston, who left the firm about a year ago. "The less of that you keep in the file, the less likely there is of someone coming back in and finding a smoking gun." 
Equally troublesome, say regulators and critics, was Andersen's habit, common in the industry, of encouraging its auditors to seek employment with the companies they were auditing. This gave Andersen a network of allies in big corporations and with it leverage to preserve its auditing and consulting contracts and prospect for new ones. 
Andersen alumni hold top positions in industries where Andersen has a large share of the auditing business. Andersen is the dominant accounting company for Texas energy companies. Former Andersen executives hold top corporate slots at such companies as Dynegy, Petroleum Geoservices and Comstock Resources. All buy auditing services from Andersen, whose contracts are reviewed annually. 
"We call it practice development," said one Andersen alumnus. "The biggest reason to do it is, if there's other [non-audit] work to be done, you want to be the first one they call." 
Case in point: Vadim Fridman. He worked in Andersen's Woodland Hills office, auditing mid-size businesses. When he left the company, he wasn't forgotten. "They've always maintained contact," he said. 
Two jobs later, an Andersen executive called him and asked whether he had any interest in becoming chief financial officer of St. Maartens Spirits, the Santa Barbara company. 
"They did some [consulting] work for the company and came up with the fact they needed a CFO and got me the interview," said Fridman, who ended up getting the job. If St. Maartens ever needs the services of a major accounting firm, he added, "obviously I'd lean toward Andersen. I know how they work." 
Over the years, Enron hired away dozens of current and former Andersen employees--including Sherron S. Watkins, the Enron vice president who eventually warned of the company's collapse. In 1993, Enron shifted 40 employees to Andersen's payroll when it hired the firm, already its outside auditor, to take over internal auditing as well. 
Outside auditors examine transaction records to verify the accuracy of a company's financial statements. Internal auditors monitor the effectiveness of the company's internal financial controls. 
The arrangement meant that Andersen would be essentially policing its own work, said one former Andersen energy expert. 
In the case of another Andersen client, Waste Management Inc., the SEC cited such interlocking ties when it levied a $7-million fine against Andersen last year, the largest ever imposed by the agency on an accounting firm. 
In that case, Andersen issued "materially false or misleading audits" that overstated Waste Management's net income between 1993 and 1997 by more than $1 billion, the SEC said. The agency also fined four Andersen partners and barred them for varying periods from working on audits of publicly traded companies. 
"Arthur Andersen and its partners failed to stand up to company management and thereby betrayed their ultimate allegiance to Waste Management's shareholders and the investing public," said Richard Walker, the SEC's chief of enforcement. 
The agency disclosed that every chief financial officer and chief accounting officer at Waste Management from 1971 until 1997 was a former Andersen auditor. Altogether, 14 former Andersen employees worked for Waste Management during the 1990s in key financial and accounting positions. Andersen and Waste Management paid $220 million to settle several lawsuits over accounting practices. 
The case was one of the latest in a string of lawsuits and sanctions against Andersen or its partners for alleged shoddy or misleading work. In April, the SEC sued an Andersen partner for allegedly covering up a massive management fraud at appliance maker Sunbeam Inc. Andersen agreed to pay $110 million to settle a related shareholder lawsuit. 
In 1999, the accounting giant paid $90 million to investors and $2.5 million to Connecticut authorities to settle allegations that it knowingly approved overly optimistic projections for real estate ventures launched by Colonial Realty, a commercial real estate company. 
Those settlements have come as Andersen has fought tighter restrictions on the accounting industry. 
Last year, Andersen led the lobbying campaign that ultimately defeated a proposed SEC rule to force accounting firms to separate their business consulting practice from auditing. Former SEC Chairman Arthur Levitt and others argued that the twin functions posed a temptation for firms to coddle high-paying clients or bury their accounting sins. 
At Enron, Andersen collected $52 million for its auditing and consulting services for 2000. 
The firm that once defied du Pont is accused of wilting in the face of a dubious client that paid it a million dollars a week in fees. "Nobody's going to walk away from that," said Cummings, the Northern Illinois University professor. 
Andersen Chief Executive Joseph Berardino rose to the defense of his firm this week, saying the Enron debacle does not represent the true character of the company and its 85,000 employees. 
"They want you to know that this is not their Andersen," he said. 
Berardino conceded the company was losing business. One recent defector is Keystone Automotive Industries, a Pomona-based distributor of auto parts. In November, the firm's board voted to hire Andersen after using Ernst & Young as its auditor for 20 years. The board dropped Andersen when the Enron revelations began to roll. 
"We just felt that there was so much noise surrounding this situation that maybe for us the best thing to do was not be second-guessed" by stockholders, said John Palumbo, Keystone's chief financial officer. 
Among the clients sticking by Andersen for now is Houston-based Swift Energy, an oil and gas exploration firm. Yet Bruce Vincent, Swift's executive vice president, said he could understand why others might desert the company. 
"The risk to Andersen is almost like that of a bank," said Vincent. "If you have a loss of credibility, you have a run on the bank. If you have enough clients that start switching, they're out of business."

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

Accounting for Enron: U.S. Probes Enron's Effect on Power Prices
By Jeanne Cummings
Staff Reporter of The Wall Street Journal

01/30/2002
The Wall Street Journal
A4
(Copyright (c) 2002, Dow Jones & Company, Inc.)

WASHINGTON -- Federal energy regulators are looking into whether Enron Corp. improperly boosted the electricity prices that Californians and other consumers in the Pacific Northwest will be paying for years under long-term energy contracts, as a private study suggests. 
Several senators from western states cited the report at a Senate hearing on the impact of Enron's collapse on the energy sector, and Federal Energy Regulatory Commission Chairman Patrick Wood said he would open an inquiry into the matter.
Overall, Mr. Wood said he has concluded that the U.S. energy markets absorbed the Enron Dec. 2 bankruptcy filing without major disruption or price spikes, and the debacle shouldn't "sound the death knell for competition." Still, the FERC chairman and five other experts said the situation exposed a need for greater transaction disclosure, particularly in the area of online energy trading, Enron's core business. 
Because Enron's trading wasn't subject to government oversight, the evidence of price manipulation presented against Enron at the hearing was anecdotal. 
Robert McCullough, a Portland, Ore., energy consultant with clients affected by last year's energy crisis in the West, conducted research to determine Enron's market dominance in one pricing area -- the area along the California-Oregon border -- by studying data voluntarily made public by other companies in the same business. His conclusion was that Enron accounted for more than a 30% share of the business. 
On Dec. 3, the day after Enron filed for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code, the forward markets -- hedge trading on future energy prices -- on the West Coast fell 30%, Mr. McCullough testified. After ruling out other possible causes for the price drop -- a decline in hydroelectric supply or a spike in fossil-fuel prices -- "the clear implication is that Enron may have been using its market dominance to set forward prices," he said. With Enron out of the market, prices fell. 
Enron denies any manipulation. "There is political grandstanding going on right now, and it's been going on against Enron for more than a year," company spokeswoman Karen Denne said. "There are a number of factors that drive prices, seasonal, weather or demand factors. There have been a number of investigations into price manipulation and collusion, and none of them found Enron to engage in any of those practices." 
Indeed, Lawrence Makovich, an analyst at Cambridge Energy Research Associates in Massachusetts, told the committee that forward prices dropped markedly throughout the country earlier in the year and the decline identified in the study could have been part of that pattern. 
Sen. Dianne Feinstein (D., Calif.) questioned whether Enron's trading could have contributed to California's struggle last year to recover from an energy shortage that led to rolling blackouts, sharply higher prices charged to consumers and big political problems for Democratic Gov. Gray Davis. 
Mr. Davis is running for re-election this year; he faces a tough Republican field and an electorate that gives more credit to its own conservation in ending the state's energy crisis than to the governor's actions. 
As part of his recovery plan, Mr. Davis signed several expensive, long-term energy contracts. Though none of those agreements was with Enron, officials hope to prove that Enron's dealings in the marketplace improperly boosted the overall market price. Such a finding could pave the way for California and other entities to attempt to break their contracts and renegotiate lower prices for consumers. 
Mr. Wood said he has concluded Enron didn't contribute to California's short-term energy crisis last year. But, he said the allegation about manipulation of the futures market "is an interesting question." In his review, he said he would try to determine how big the forward-market is and to what degree Enron dominated it. 
He suggested to Ms. Feinstein that California file a formal complaint with his agency, which would trigger a formal, 60-day investigation. Ms. Feinstein said she would see that it is filed. 
Mr. Wood also endorsed lawmakers' suggestions that Internet energy trading should be subjected to rules for disclosure. 
Much of Enron's business -- buying and selling of over-the-counter energy derivatives -- was exempted from regulation by the Commodity Futures Trading Commission. Mr. McCullough and other witnesses said online traders should face the same disclosure requirements as traditional trading entities, such as the New York Mercantile Exchange. 
"We need to find out if there is only one person in the [trading] pit," Mr. McCullough said. "If there is, we know to proceed with caution."

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

A Section
U.S. to Probe Enron Tie to Energy Prices; Senators From West Voice Concern About Alleged Manipulation
Kathleen Day and Susan Schmidt
Washington Post Staff Writers

01/30/2002
The Washington Post
FINAL
A06
Copyright 2002, The Washington Post Co. All Rights Reserved

The nation's top energy regulator promised yesterday to investigate whether Enron Corp. manipulated long-term energy prices in western states until the day it declared bankruptcy last month. 
Pat Wood III, chairman of the Federal Energy Regulatory Commission, made the pledge during a congressional hearing in which several senators voiced concern about Enron's dominance of electronic trading of financial instruments tied to energy. Such trading is unregulated.
This would be the second time FERC has looked at Enron's role in setting western energy prices. During the year-long California energy crisis that ended last summer, the agency found no evidence that energy companies, including Enron, had manipulated the short-term market for electricity, although it found serious flaws in the market structure. 
"There are issues about whether Enron was manipulating the West Coast energy markets," said Sen. Ron Wyden (D-Ore.). "It's important not just to ratepayers on the West Coast, but it goes to the issue of the confidence Americans need to have in the energy market. We need to lift the veil of secrecy about how energy is bought and sold in this country." 
The hearing by the Senate Energy and Natural Resources Committee was meant to explore the impact that Enron's collapse in December had on energy markets. 
Robert McCullough, an energy consultant whose clients include utilities in the Northwest, testified that the price of unregulated financial energy contracts on the West Coast dropped 30 percent on Dec. 3, the day after Enron filed for bankruptcy. This suggests, he said, that "Enron may have been using its market dominance" to set long-term energy prices. 
Wood, a former Texas utility commissioner backed by longtime Enron chairman Kenneth L. Lay for the federal job, told lawmakers that Enron's demise didn't damage the nation's energy-trading industry or disrupt the supply of energy. 
Enron, meanwhile, named Stephen F. Cooper, a corporate turnaround expert, as its interim chief executive, replacing Lay, who resigned last week. 
In other Enron-related news: 
* A House subcommittee leading the investigation of document shredding by Enron's outside auditor, Arthur Andersen LLP, announced it will turn its focus to Enron at hearings next week. Merrill Lynch & Co. confirmed that some of its senior executives invested in one of the controversial Enron partnerships involved in the company's unraveling last fall. 
* More than 400 past and present Enron workers asked the bankruptcy judge to appoint an official panel to give them greater say in the case, saying one worker representative on the 15-member creditors' committee was inadequate. 
* Enron said its investigation of papers shredded at the company's Houston headquarters after it received subpoenas from federal investigators had turned up no evidence that any relevant materials were destroyed. "Based on our investigation so far, we are unaware of any improper shredding of documents," Enron attorney Robert Bennett said last night. The FBI is continuing to interview everyone at Enron headquarters who had a role in shredding documents. An Enron spokesman confirmed that the company continued shredding documents until recently but maintained that they were payroll and other personnel records unrelated to the investigation. 
* Police in Sugar Land, Tex., said they could not disclose the contents of the suicide note written by J. Clifford Baxter, a former senior Enron executive, without the permission of the Texas attorney general. 
At the Senate hearing, Sen. Dianne Feinstein (D-Calif.) and others said the danger that Enron posed occurred before it collapsed, from its success in lobbying state and federal regulators against disclosure of energy prices and supplies. 
That secrecy has allowed companies to dominate markets and "price-gouge" consumers, Feinstein said. Enron's large role in trading financial energy contracts coupled with the company's control over "50 percent to 70 percent" of natural gas going into California gave the company the tools it needed to set prices unfairly, she said. 
In December 2000, Congress exempted such "derivatives" contracts -- which are used to hedge against price swings but also to speculate on price changes -- from regulation by the Commodity Futures Trading Commission. Sen. Jeff Bingaman (D-N.M.), chairman of the committee, said the Enron fiasco shows the need for greater public disclosure about energy derivatives and how they are traded. 
James E. Newsome, chairman of the Commodity Futures Trading Commission, said that if Congress decides that energy derivatives need more oversight, his commission should provide that oversight. 
In announcing new hearings next Tuesday and Wednesday, the House Commerce subcommittee on oversight and investigations sent out a new round of letters requesting documents. Among them was one to Enron seeking copies of a report a New York law firm prepared last summer on problems with partnerships then headed by Enron's chief financial officer, Andrew Fastow. Fastow sold those interests last July 31. 
The Internet magazine Salon reported last week that Jordan Mintz, an Enron attorney, had asked the Fried Frank Harris Shriver & Jacobson law firm for an opinion on the partnerships. Enron sources confirmed that an opinion was prepared but would not provide details of its contents. 
A Merrill Lynch spokesman said, in response to a report by Bloomberg News, that executives at the brokerage firm invested in the LJM2 partnership, one of the private entities run by Fastow. 
"The investment partnership was reviewed and deemed appropriate by parties on all sides of the transaction," the spokesman said. "Consistent with common industry practice, it was offered to qualified external as well as internal investors, and this is not a conflict of interest." 
The partnership was one of many that helped Enron keep debt off its books -- debt that investors, including those following the Merrill Lynch analysts' recommendations on Enron, were not aware of. The spokesman said the Merrill Lynch investors in the partnership didn't tell the analysts about their investment. 
Meanwhile, the Federal Election Commission said it was unclear what would become of the $430,000 remaining in Enron's political action committee coffers at the end of 2001. The PAC made donations last fall to several members of Congress who are now investigating the company. "We have never had to address anything like this before," said Kelly Huff, a spokeswoman for the election panel.

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

Accounting for Enron: Davis Polk Is Barred From Enron Work For J.P. Morgan Chase
Dow Jones Newswires

01/30/2002
The Wall Street Journal
A4
(Copyright (c) 2002, Dow Jones & Company, Inc.)

NEW YORK -- J.P. Morgan Chase & Co. needs to find a new lawyer in its high-profile legal battle to force insurers to honor $1.1 billion in Enron Corp. surety bonds. 
A federal judge on Monday disqualified Davis Polk & Wardwell because the New York law firm also represents Chubb Corp., the parent company of Federal Insurance Co., an insurer named as a defendant in the suit. U.S. District Judge Jed S. Rakoff wrote in a nine-page opinion that Davis Polk has "entangled itself in conflicts of interest" by advising Chubb and J.P. Morgan at the same time.
On Dec. 11, Davis Polk helped Chubb file papers with the Securities and Exchange Commission that outline Chubb's obligations on $220 million worth of Federal Insurance surety bonds related to Enron affiliates, the judge noted. On the same day, Davis Polk, acting for J.P. Morgan Chase, filed the lawsuit in New York state court against Federal Insurance and eight other major insurance companies over the surety bonds. 
"It is doubtful that Chubb would have approved such wording [on the SEC filings] if it had known that Davis Polk would simultaneously bring suit on these bonds against Federal," the judge wrote. 
A Davis Polk spokesman said: "We are obviously disappointed by the court's decision. We believed that we had good grounds to proceed on behalf of J.P. Morgan Chase bank under the applicable ethical standards, but we will of course abide by the decision of the court." Judge Rakoff ordered all proceedings in the case on hold for two weeks to allow J.P. Morgan time to obtain new counsel or appeal the decision. J.P. Morgan Chase declined to comment.

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


Burden of Doubt: Stocks Take a Beating As Accounting Worries Spread Beyond Enron --- Investors Ignore Good News About Economy; Banks Are a Focus of Selling --- `A Big Haircut' for Some
By E.S. Browning and Jonathan Weil
Staff Reporters of The Wall Street Journal

01/30/2002
The Wall Street Journal
A1
(Copyright (c) 2002, Dow Jones & Company, Inc.)

It's not the economy anymore, stupid. It's the accounting. 
Yesterday was the day that the smoldering corporate accounting scandal, which started with Enron Corp. and quickly spread to Arthur Andersen LLP, reached a wide group of U.S. companies and seriously singed their stock prices. Accounting problems surfaced in sectors ranging from banking to oil, prompting fears of new mini-Enrons and spurring a sell-off of shares at the slightest whiff of such trouble.
As a result, despite broadly upbeat economic news, the stock market took a tumble, with shares falling to their lowest levels in three months. 
Signs of toughening stances by auditors and regulators emerged, raising questions as to how many more corporate managements will be forced to restate their earnings and abandon cozy accounting treatments that easily passed muster a few months ago. 
Stocks in the banking industry, for instance, fell sharply following word that PNC Financial Services Group, a Pittsburgh-based banking group, was restating its 2001 results. Analysts immediately fretted that many other banks could be hit. In addition, pipeline company Williams Cos. delayed an earnings report to examine the impact of commitments to a former unit, and conglomerate Tyco International Ltd. suffered on news that it had made a $20 million payment to an outside director and to a charity he controls. After the markets closed, Houston energy producer Anadarko Petroleum Corp. announced it made a billion-dollar mistake in the way it calculated the value of its domestic oil and gas properties for the quarter ended Sept. 30, citing faulty tax assumptions. 
The upshot: Tyco was down almost 20% for the day, PNC fell more than 9%, and Williams fell more than 22%. Together, the three lost $21 billion in market value in one day. 
On a day in which the big-picture economic news was good -- and other corporate earnings were, in fact, up -- the Dow Jones Industrial Average nevertheless fell 2.51%, or 247.51 points, to 9618.24, its lowest level since Oct. 29. Trading volume was the highest it has been since the week the markets reopened after the September terrorist attacks. 
Behind the frantic trading is a watershed development in American business: The fundamentals of the accounting profession have been called into question. Where two decades ago, accountants were still held in high esteem, now they rank in public opinion polls below politicians and even journalists. An opinion letter from a Big Five accounting firm, once viewed as a trusted seal of approval, now may not carry the imprimatur of authority. 
Some of the sell-off could be an overreaction. The U.S. continues to have one of the world's most rigorous accounting systems, and most companies clearly function within the rules. 
But just as investors ultimately turned away from overhyped tech stocks during the Internet bust, in the wake of Enron they clearly have no stomach for any hint of accounting irregularities. 
"The market has little or no tolerance for any of the unknowns associated with . . . accounting right now," said Matthew Johnson, head of U.S. stock trading at New York brokerage firm Lehman Brothers. "It is just bar-the-doors." 
Amid a growing sense that bull-market excess made companies push accounting rules to the limit in the late 1990s, regulators, accounting firms and rating agencies have become more sensitive than ever -- raising the specter of more bombshells. The Securities and Exchange Commission, for instance, last week reminded public companies of the need to clearly disclose financial transactions, including off-balance-sheet financings, in their forthcoming annual reports. Moody's Investors Service Inc., the big credit-rating agency, has demanded that more than 4,000 bond issuers provide new information on off-balance-sheet arrangements that could involve financial risks. And auditing firms are taking a tougher stance with clients. 
In the case of PNC, the bank said it planned to restate its numbers in the wake of an accounting probe by the Federal Reserve and the SEC. 
"What is underlying this whole thing is a huge discrepancy concerning what really constitutes earnings," said Henry Herrmann, chief investment officer at mutual-fund group Waddell & Reed in Overland Park, Kan. "The market is giving a big haircut to companies whose earnings numbers raise questions in investors' minds." 
Several of those companies said the attention is unfair. "Clearly we are in an environment where people are intensely skeptical of Corporate America," said Dennis Kozlowski, Tyco's chairman and chief executive, who said his company's payment to the director was "appropriate" and had been fully disclosed in Tyco's proxy statement. "Obviously, we believe the reaction in our stock price was unjustified." 
Williams executives have in the past said their accounting practices are more open than Enron's. A spokesman said yesterday the company has "the financial capability" to make good on its commitments to its former unit. 
Investors also suspect that organizations assigned to make the rules, like the Financial Accounting Standards Board, often act more like protectors of the industry they watch. That, in part, is why Enron, like so many other companies, was allowed to exploit lax rules for "special-purpose entities" that allowed it to keep tens of billions of dollars of debt off its balance sheet. Losses related to this debt contributed to Enron's abrupt downfall. 
The consequences of those suspicions could be huge, both for the stock market and the accounting profession. Politicians and investors, for instance, are openly questioning whether the accounting industry should be allowed to continue regulating itself. 
The recession that began last year is helping drive accounting issues out of the woodwork. Analysts say it is a lot easier for companies to hide poor performance through aggressive accounting during good times -- when stocks are rising and the economy is booming -- than it is when the market is in the tank and the economy is slowing down. 
When bear markets hit, companies like Tyco, which had relied on high-priced stock acquisitions to fuel their growth, no longer have the currency to keep buying other companies. And while investors and analysts often are willing to let things slide during good times, they want real answers and information when stocks are going down and wiping out their portfolios. 
Enron has added an unsettling new dimension. As complex and opaque as its financial statements were, what many investors are starting to recognize is that they don't understand the financial statements of many other companies in which they have big stakes. Neither, they fear, do the rating agencies ranking the quality of their debt or the Wall Street analysts and brokers who are recommending the stocks. 
Restatements have been on the rise for more than a decade, and the SEC now has more accounting-fraud cases on its hands than ever before. According to a study last year by the research arm of Financial Executives International, a trade group in Morristown, N.J., there were 464 financial restatements by companies from 1998 through 2000 -- more than in the previous 10 years combined. 
Enron, however, was the financial markets' equivalent of the perfect storm -- a debacle so huge on so many different levels that it demanded the nation's attention. What's more, it exposed the degree to which hundreds of other companies' accounting practices are similar in certain ways to Enron's. 
The large accounting firms, such as Andersen, say the problem lies not with their conduct and priorities but with weaknesses in generally accepted accounting principles themselves. Likewise, they say, if only they could be delegated the job of fixing the system, then it could be fixed. 
Until investors conclude it is fixed, though, the market may have to brace for more days like yesterday. 
In addition to the declines in the Dow Jones industrials, the broad Standard & Poor's 500-stock index dropped 2.86%, or 32.42 points. The Nasdaq Composite Index, dominated by technology stocks, fell 2.62%, or 50.92 points, to 1892.99, leaving it down 3% for the year. 
In a sign of how much times have changed, the normally staid banking group fell far harder yesterday than technology stocks, which ordinarily are the market's most volatile group. A widely watched index of the nation's major bank stocks compiled by the Philadelphia Stock Exchange, for example, fell more than 5% on the day, while the exchange's index of the nation's main computer-chip stocks, which has been one of the market's most volatile groups in recent weeks, fell only 2.4%. 
The worry wasn't just that accounting issues could cause more high-profile bankruptcies, although that certainly was on some people's minds. It was also that accounting issues could hold down earnings growth by forcing companies to use more-conservative accounting practices. 
Recalling that Enron investors suffered if they held onto the energy-trading company's stock until they understood how bad the accounting problem was, shareholders in other companies tarred by accounting questions tended to sell first and ask questions later. 
Money flowed out of stocks and toward the relative safety of Treasury bonds, pushing government securities' prices up sharply. The government bonds rose despite stronger economic news, which normally would push bonds down because it would spur expectations that the Federal Reserve has finished cutting interest rates. The 10-year Treasury note rose 26/32, or $8.125 for each $1,000 invested. Its yield, which moves inversely to price, fell to 4.97%. 
The renewed preoccupation with accounting problems shifted investors' attention away from the two-day Federal Reserve meeting on monetary policy that is to wind up this afternoon. After cutting its interest-rate targets 11 consecutive times in an effort to stimulate the economy, the Fed is widely expected to leave rates unchanged, the first time it has done that in more than a year. The Fed is expected to announce its decision and issue comments on the economy at about 2:15 p.m. EST today. 
But now, investors said, they want to see the economy actually respond, in the form of improving corporate performance. 
"The concern is that these accounting issues are going to cause the economy to go into a double-dip" recession, in which the recovery stalls and the economy sinks a second time, Lehman's Mr. Johnson said. "There is a concern that there is more truth serum that has to be taken by companies." 
In addition, some investors still caution that the economic recovery is weaker than many investors think. 
"There has been a modest bounce in economic activity," Greg Jensen of Westport, Conn., money-management firm Bridgewater Associates said in a report to clients, but "at this point, all we have done is return to Sept. 10 levels. Prior to Sept. 11, we described the economy as `post-bubble and vulnerable,' and it still is." 
What would spook both the stock and bond markets would be any hint from the Fed that it sees a risk of inflation, which would require it to raise its target interest rates. 
As concerns have spread in recent weeks about an Enron effect on the broader market, some policy makers have started to fret. 
"This runs the risk of truly undermining business and consumer confidence," New Jersey Democratic Sen. Jon Corzine said at a Senate Budget Committee hearing last week. The senator, a former co-chairman of Goldman Sachs & Co., wondered aloud "about whether the concerns and the issues that have been revealed here are not more broadly applicable in the economy," and could then "lead to a rise in the cost of capital, lead to serious concerns about foreigners wanting to continue to invest in America in the way that they have supported us with regard to our foreign trade balance." 
Fed Chairman Alan Greenspan dismissed those worries at the same hearing, however. Still, Mr. Greenspan suggested that the fallout could transform the way investors and companies interact. 
"The reaction, I think, is going to create a really major rethinking in a lot of people about whether there is a spin game going on with respect to information coming out of business into the investment community," the Fed chairman said. "I think we're going to find there's going to be a good deal less of that and that the old issue of competing for reputation is going to re-emerge," he added. "And I think you're going to find at some point that there are going to be people out there who are going to say that `our accounts you can rely on.' And that probably will increase their price-earnings ratios."

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

Financial
At Energy Firm, A Post-Enron Double-Check
Christopher Stern
Washington Post Staff Writer

01/30/2002
The Washington Post
FINAL
E01
Copyright 2002, The Washington Post Co. All Rights Reserved

The shadow of Enron Corp.'s collapse spread yesterday to Williams Cos., an Oklahoma energy-trading firm that postponed its quarterly earnings announcement after questions were raised about $2.4 billion worth of potential liabilities related to a telecommunications investment. 
Executives at Tulsa-based Williams said they would need several weeks to fully evaluate issues related to loan guarantees the company had provided Williams Communications Group Inc. -- a former subsidiary that was spun off to the public last April.
The company was forced to take a closer look at its financial relationship to the telecommunications firm after credit-rating agencies raised concerns about potential liabilities previously reported only in footnotes. 
A company spokesman said the review is directly related to a new, more aggressive approach by ratings agencies in the wake of Enron's collapse. Enron had kept billions of dollars in liabilities off its balance sheet through partnerships and other financial arrangements. 
"People began doing a better, more fuller job examining all our liability," said Williams spokesman Jim Gipson. Gipson added that the additional scrutiny ultimately should have a positive impact on the industry and investors, as people better understand the financial condition of companies. 
News of Williams's postponed earnings announcement was not received well by investors yesterday. Shares of the company fell $5.36, or 22.2 percent, to $18.78. 
Gipson said Williams has consistently disclosed the $1.4 billion in guaranteed loans to the former subsidiary along with an additional $1 billion in guarantees related to leases for fiber-optic cable and the Williams Communications headquarters. But the company did not count the obligations as liabilities, something that credit-rating agencies have said they may now require. 
"Recent events have caused us to reevaluate those obligations," Williams chief executive Steven Malcolm said in a conference call yesterday. Among the events Malcolm cited was the broad downturn in the telecommunications industry, including Monday's announcement by Global Crossing Ltd., an international fiber-optics firm, that it had filed for bankruptcy because it was unable to continue paying interest on more than $12 billion in debt. 
Some analysts said Enron's collapse, which has already hurt several energy firms, may now reverberate through the weak telecommunications sector, where many companies are struggling under mountains of debt. 
"Rating agencies are more likely to downgrade a company or take a conservative view of the company than they did 12 months ago," said Drake Johnstone, an analyst with Davenport & Co. "A lot of these [telecommunications] companies are clinging to the edge, and it doesn't take a hell of a lot to push them into bankruptcy." 
Shares of Williams Communications, which traded as high as $57 in 1999, fell 29 cents yesterday, or almost 18 percent, to $1.34. 
Corporate credit firms threatened to strip the Williams energy company of its investment-grade rating unless it finds a way to resolve questions of liability related to its investment in Williams Communications, Gipson said. 
The company had already announced a plan on Dec. 19 to firm up its balance sheet by reducing its capital expenditures from $4 billion to $3 billion. It also said then that it may sell $250 million in core assets and an additional $1 billion in equity. The combined savings and increased revenue would be used to offset any liabilities related to the Williams Communications debt. 
Williams is among several energy companies that have invested in telecommunications in recent years. Enron spent more than $1 billion buying 18,000 miles of fiber-optic lines with a goal of creating a market among companies that would bid for rights to transmit data and voice traffic. 
But Enron was hardly the only company to invest in fiber-optic lines, and a glut of capacity quickly developed. It is that glut that eventually sank other companies, including Global Crossing, which invested billions on the bet that demand would outstrip supply for fiber-optic capacity. Instead, the opposite proved true, and tens of thousands of miles of fiber-optic lines now lie unused. 
Williams, founded in 1908 and publicly traded since 1957, hoped to take advantage of its old-economy business by installing fiber-optic cable along its gas pipeline rights of way. Eventually, the company completed a 33,000-mile network of its own, which is now a leading supplier of fiber-optic capacity to the media industry. Hundreds of television stations and film production companies use Williams's lines to send video footage around the nation and the world.

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

Ex-Enron workers feel jilted by Bush 
By JULIE MASON and ROMA KHANNA 
Copyright 2002 Houston Chronicle 
Jan. 30, 2002, 12:40AM
WASHINGTON -- Listening to President Bush talk about homeland security and the economy Tuesday night, Digna Showers felt something was missing. 
One of 30 former Enron Corp. employees who took an exhausting 25-hour bus ride from Houston to meet with lawmakers, Showers said she wished Bush had addressed the one issue they all came to talk about. 
"I voted for him; my whole family voted for him. We think he's doing a good job, but he is distancing himself from Enron right now," Showers said. "He is a Texan, and he was our governor. I had hoped he would have said more." 
While Bush did not directly mention Enron in his State of the Union speech, he called for more corporate accountability and reform to protect workers. 
Showers, an 18-year employee of Enron, estimates she lost $450,000 in her retirement account when she was laid off as an administrative assistant. 
Her family's sole breadwinner, with a disabled husband at home, Showers now can't pay for her husband's medicine. 
"I could just cry, but I am not a crybaby," Showers said. "This has just been devastating." 
Throughout a hall where the former Enron workers gathered to watch the speech, the group shared stories of numbing personal and financial devastation from the collapse of their one-time employer. 
A single father who worked as an engineer lost his daughter's college fund; a woman with a husband on dialysis lost her family's health benefits when she was laid off from the corporation. 
A common experience described by the former employees was going out on job interviews, only to be grilled about Enron and never offered a position. 
The former employees, organized for their trip by the Rev. Jesse Jackson and Houston Democratic Rep. Sheila Jackson Lee, also had sought an audience with Bush. 
Katherine Benedict, a former marketing executive at Enron, said the group was told no one at the White House would see them. 
"We are trying to be a voice for the people who are hurting," Benedict said. "All the stories you read are about the executives at Enron, but we are struggling and that's what we want to put out there." 
More than 100 people made the trip from Houston, including former employees, several spouses, local Houston Democrats and staff members from Jackson's organization. 
The ex-employees group, on a trip dubbed the "Journey for Justice" by Jackson, met Tuesday with seven key senators involved in the Enron investigation. 
Several were invited to return Monday to sit in the hearing room when former Enron Chairman Ken Lay testifies before the Senate Commerce, Science and Transportation Committee. 
They also have been asked to return and give testimony before some of the other committees probing the company's collapse. 
Today, the group is scheduled to meet with lawmakers on the House side, including members of the Texas delegation, and participate in a prayer vigil before the long ride back to Texas. 
The three-pronged agenda they developed for the Washington trip calls for financial assistance for needy former Enron employees, help with job referrals, and legislation to improve corporate accountability and protect employee savings programs. 
Jackson Lee arranged for Jackson and one Enron employee to be in the chamber to hear the address. 
All three said the president did not sufficiently address Enron's downfall and the plight of its former employees. 
"He did not offer relief or remedy," said Jackson. "He talked about full disclosure, and (Vice President Dick) Cheney, who has refused disclosure, was sitting right behind him." 
Debbie Perrotta of Kingwood was an Enron senior administrative assistant for five years before the bankruptcy left her unemployed and without insurance. 
"He just did not offer us enough," Perrotta said of Bush. "He outlined protections for the future, but this has been tough on us." 
The grueling trip from Houston started Monday afternoon and took longer than expected when the buses got off course. A planned stop in Atlanta was scratched, and the weary employees rolled into Washington about four hours later than scheduled. 
Back at the gathering of former Enron employees watching the speech on television, Dennis Vegas, a former vice president of communications at the company, said that if Houston had been hit by a natural disaster, rather than a corporate one, federal assistance would have been provided. 
"If President Bush can at least address that message, and the House and Senate take proactive measures, then we are moving in the right direction," Vegas said. 
After arriving in Washington, the former employees were taken to the headquarters of the AFL-CIO, just across Lafayette Park from the White House. 
There, the group -- red-eyed from exhaustion with another long day ahead -- ate a meal provided by the labor organization and watched Bush's speech on an oversized television screen. 

Sempra buys metals business from Enron

01/30/2002
Associated Press Newswires
Copyright 2002. The Associated Press. All Rights Reserved.

SAN DIEGO (AP) - Sempra Energy, the parent company of San Diego Gas and Electric Co., has agreed to purchase the metals-trading arm of Enron Corp. for $145 million. 
Sempra executives announced Tuesday that the company would acquired London-based Enron Metals Ltd., which has annual revenues of more than $50 million. The business trades industrial metals including aluminum, copper and tin.
Sempra officials believe the deal would provide better services for their customers. 
"There are natural synergies between the energy and metals-trading businesses," David Messer, president of Sempra Energy Trading, said in a prepared statement. 
"Some of the largest energy users are metals producers. We see tremendous opportunity to expand risk-management services for our current customer base, as well as attract new customers with our ability to structure cross-commodity deals." 
Enron purchased the metals company in July 2000 from Metallgesellschaft Ltd. Enron Metals Ltd. has about 60 employees and its president, Thomas McKeever, will continue in his role, Sempra officials said. 
The sale of the metals business will provide needed cash for Enron, which recently declared bankruptcy. Enron and its auditor, auditor, Arthur Andersen LLP, are under investigation for allegedly shredding massive amounts of documents. 
Sempra said the acquisition is subject to a final audit of the firm's assets but is expected to close by Feb. 4.

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

DENMARK: Enron Wind "too risky" for German rival Nordex.

01/30/2002
Reuters English News Service
(C) Reuters Limited 2002.

COPENHAGEN, Jan 30 (Reuters) - German wind turbine maker Nordex said on Wednesday it had withdrawn from the bidding for Enron Wind, the wind turbine subsidiary of collapsed Enron Corp , saying it was "too risky". 
An industry source said earlier this week that five companies were in the running for Enron Wind, valued at $300 million to $700 million. "We are not a part in the final bidding round for Enron Wind. We have withdrawn, because we found it too risky," Carsten Pedersen, member of Nordex AG's management board, told Reuters by telephone.
In December, Nordex expressed keen interest in acquiring the U.S.-based rival. Pedersen did not want to elaborate on why Nordex was no longer interested in Enron Wind. 
Unlike its parent, Enron Wind is making money and not included in Enron's December 2 bankruptcy filing. 
The world's largest wind turbine maker Danish Vestas Wind Systems , frequently named as a possible buyer of Enron Wind, on Tuesday declined to comment whether the company has submitted a bid for Enron Wind. 
In December, Vestas CEO Johannes Poulsen rejected the idea of Vestas buying the U.S. group. 
The industry source said it could take several weeks before a buyer of Enron Wind would be announced.

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

Editorial
. . . And the Enron Pundits
Howard Kurtz

01/30/2002
The Washington Post
FINAL
A23
Copyright 2002, The Washington Post Co. All Rights Reserved

The debate about campaign finance reform can be boiled down to one question: What exactly are corporations buying when they give millions of dollars to politicians? 
Now, there's some heated talk about journalistic finance reform -- that is, what are corporations buying when they lard their payrolls with prominent media folks? And should columnists and commentators be taking cash from companies such as Enron, about which they later find themselves delivering strong opinions?
The contretemps has exposed just how cozy the relationships are between some in the pundit class and the corporate world, in which $50,000 can change hands for what the average cubicle dweller would consider remarkably little work. 
The journalists involved have, with varying degrees of candor, disclosed their Enron ties while writing about the collapse of America's seventh-largest corporation. But they find themselves facing the sort of hostile questions usually reserved for committee chairman who do legislative favors for big-time donors. 
I've been critical of journalistic buckraking since the mid-1990s, when I wrote about a $30,000 speech that Sam Donaldson had given to an insurance group. The gilded trail of corporate honoraria quickly led to such luminaries as David Brinkley, Robert Novak, David Gergen, Cokie Roberts, Christopher Matthews, Larry King, Mark Shields, Fred Barnes, George Will and Michael Kinsley, who memorably said: "I didn't do it for years, but it became more socially acceptable." King likened it to "white-collar crime." Many refused to discuss it on grounds they weren't public officials. 
The issue began to fade as a number of news organizations, including ABC and NBC, banned the practice. (The Washington Post had long barred honoraria from corporations or trade groups that lobby Congress.) 
But now, for those who took Enron money, there's no place to hide, the burgeoning scandal having replaced the war as the Beltway's reigning obsession. And the journalists involved (with one exception) have whacked Kenneth Lay & Co. pretty hard. 
New York Times columnist Paul Krugman, who got $50,000 from an Enron advisory board before joining the Times, blamed the criticism on an "effort by conservatives to sling Enron muck toward their left." Unfortunately for this argument, most of the Enron journalists are free-marketeers on the right. 
Wall Street Journal columnist Peggy Noonan, who received $25,000 to $50,000 for speechwriting help, told me: "I don't regret having done the work -- it was honest work, honestly done, hard work too, reported on my taxes, not hidden in any way. . . . But my feeling is: I have to talk about my experience in order to talk about Enron, and I have to talk about Enron because I have strong feelings about what they did." 
Lawrence Kudlow of CNBC and National Review said that he should have disclosed earlier that he'd gotten $50,000 for consulting and research, but he also said that he's tougher on the energy company because he feels betrayed. 
Weekly Standard Editor Bill Kristol, who received $100,000 from the advisory board, sees nothing wrong with such work. His role was disclosed in a Standard piece by another Enron beneficiary, contributing editor Irwin Stelzer, who praised Lay and Enron for "leading the fight for competition." 
Other than Stelzer, who failed to disclose the arrangement in articles for the British press, the other writers can boast that their criticism of Enron demonstrates they can't be swayed by mere money. Of course, had Enron not suffered a spectacular meltdown, we likely would not have known about most of these financial ties -- and still don't know about other such moonlighting. 
The Enron pundits have put themselves in a weird box. If they recused themselves and wrote nothing, as some critics suggest, then the company would in effect have bought their silence. By writing on Enron, they risk the appearance of biting the hand that fed them just to flaunt their journalistic courage. 
Perhaps what rankles most is the notion that Enron was trying to do what it did with George W. Bush, John Ashcroft, Joe Lieberman, Lawrence Lindsey, Ralph Reed and about half of official Washington -- making an investment that could pay off later on. What, after all, did the commentators do for Enron? "This was an advisory panel that had no function that I was aware of," Krugman told his newspaper. Exactly. 
It's hard for journalists who work for big companies, write books and appear on television to avoid all conflicts these days. But many of these commentators wax indignant when politicians of all stripes appear to be doing the bidding of those who fill their campaign coffers. For media people to line up at the same corporate trough is just asking for trouble. 
The writer covers the media for The Post. He is the author of four books for three publishers and hosts a weekly program on CNN.


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

Style
Greedy Liars? The Enron Scandal; TheBIGStory An Occasional Look at Stories Everyone Is Talking About

01/30/2002
The Washington Post
FINAL
C16
Copyright 2002, The Washington Post Co. All Rights Reserved

Last year Enron was the seventh largest U.S. company. Today it's bankrupt. Thousands of Enron workers have lost their jobs. Some have even lost their life savings. And maybe it didn't have to happen. 
What went wrong? It's a story so complicated that investigators have just started unraveling the mystery. But lots of people think there's something pretty simple at the bottom of the Enron mess: lies and greed. John Kelly takes a look at the scandal.
The Birth of Enron 
Enron started life in Texas as a company that owned underground pipes and sold natural gas to power plants. Then Enron expanded into all sorts of other businesses. It sold natural gas, electricity, Internet connections and more. It bought other companies and grew larger and larger. 
Enron looked like a success, a company people wanted to work at and invest in. But then . . . 
Secrets & Lies 
Companies are allowed to keep some secrets -- the recipe for a best-selling soft drink, for example. But there are some secrets they can't keep, especially if they're a "publicly held" company. 
Publicly held means that the public can buy stock, or ownership, in the company. When the company does well and makes a profit, the value of the stock goes up. But when a company is badly run, the stock value goes down. By studying information provided by a company, people can decide which stocks they should buy and which ones they should sell. 
For years everyone thought Enron was one of the best companies in the United States. If you bought one piece -- or "share" -- of Enron stock in January 1998 it cost you about $20. By September 2000 that same share was worth nearly $90. 
Enron's secret, officials say, is that it wasn't a well-run company. It was losing money, not making money. And to hide that fact it created dozens of partnerships. These secretive side deals allowed Enron to hide its debt. The idea seemed to be to convince people that it wasn't Enron that was in trouble, it was these other groups. The problem: Those other groups were Enron. And Enron was like a shaky building about to collapse. 
Rich Bosses, Poor Employees 
As Enron's stock increased in value, the people who ran the company got richer and richer. They often were paid in stock, in addition to their salaries. Regular employees did well too -- at least on paper. They were allowed to buy Enron stock to save for retirement. In fact, it was encouraged: Last October, Kenneth Lay, the head of Enron, sent an e-mail to workers saying that the stock was a great deal and the company was going strong. 
But it wasn't going strong. And Enron's bosses seemed to know that. For years they'd been selling some of their stock. It was almost as if they knew the value was going to drop. And it did drop. Last fall, when Enron announced that it had earned $586 million less over the past four years than it had said at first, the stock value plummeted. It was a good time to sell Enron stock. 
At around that time, though, Enron employees weren't allowed to sell their stock. They were frantic as they watched their life savings drip away. But company bigwigs were allowed to sell their stock. 
Today stock once valued at about $90 a share is worth about 45 cents. 
Politicians' Problems 
Enron didn't only spend money buying pipelines and other companies. It also donated money to Republicans and Democrats to help those politicians pay for their election campaigns. This is legal, but a lot of people think it smells fishy. They worry that a senator or representative who got a lot of money from Enron might hesitate to do anything that would upset the huge company. 
Think about it this way: If someone gave you a $10,000 "gift," would you think they expected something in return? 
President Bush received money from Enron. So did Attorney General John Ashcroft while running for re-election to the U.S. Senate. (Ashcroft, now in charge of prosecuting companies that cheat the public, has said he won't be involved in the Enron investigation.) 
Because of these connections, and the fact that such a big company failed and so many workers lost their jobs and their money, people are wondering what the Enron investigation will reveal.


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

California; Editorial Pages Desk
Open Cheney's Enron Baggage to Scrutiny

01/30/2002
Los Angeles Times
Home Edition
B-12
Copyright 2002 / The Times Mirror Company

Re "Cheney Defends Refusal to Detail Energy Meetings," Jan. 28: 
Vice President Dick Cheney feels previous administrations have "traded away" authority and that the demand for more information regarding the White House/Enron dealings is a partisan "fishing expedition." Funny, this administration seems to have exactly the opposite view regarding the treatment of the general public in its so-called war on terrorism, curtailing our civil liberties and casting a wide net to catch "evildoers."
Regardless of what may or may not have happened in those energy meetings, there appears to be a stink bomb in the administration's Enron baggage, and we the public want to know: Did they pack it themselves? Were they asked to carry anything for anyone? Has it been in their possession at all times? 
Ged Kenslea 
West Hollywood 
* 
Cheney regarding Enron: "There is no evidence to indicate anybody did anything wrong in the administration." And, of course, he doesn't think that we can be trusted to make that determination after hearing all the details, so he won't give them to us. Oh, why didn't I invest in the paper-shredding industry instead of Enron? 
Bob Stroh 
Fillmore 
* 
Congressional hearings have been convened to investigate the Enron tragedy in what seems to be record-breaking time. When issues directly affect its members, Congress can move with uncharacteristic speed. The far more urgent concern of extending unemployment and health benefits for the growing jobless ranks, however, has been shunted aside for the umpteenth time. Could this be because the Enron debacle provides greater political finger-pointing opportunities than the survival struggle of those less fortunate? 
Jane Garcia 
Los Angeles 
* 
"Enron Vision Proved Costly to Firm, State" (Jan. 28) portrays Enron as the root of all electric-industry evil. It fails to portray what happened. Deregulation is working in other states. California's Legislature dropped the ball. AB 1890 was not a deregulation bill. It was called "industry restructuring" because the legislators would not let go and create a true market, as you allege Enron wanted. The joke of 1996 was that AB 1890 was "re-regulation." 
You imply that Enron was the most influential lobbyist. In fact, California utilities like Southern California Edison contributed large sums of money, personnel and influence during that period, not to create the "perfect market" but to create legislation that would allow them to recapture 100% of their stranded assets. Many lobbyists were heavily involved in that legislative process, trying to secure legislated benefits for other narrow constituents. For state Sen. Steve Peace (D-El Cajon) to now say, in effect, "Enron made me do it" leads me to believe that he is not the brightest bulb in the Legislature. 
David A. Rohy 
Commissioner, California 
Energy Commission, 1995-2000 
San Diego 
* 
The American public should say thank you to Enron. The dramatic implosion of Enron reveals a fatal flaw of privatization and deregulation. The California energy crisis is a good example of failed deregulation, where the state opened the energy system to manipulation and price gouging. It drained the state's resources from the three publicly traded utilities--as well as the state's surplus--to the bone. 
Hopefully, the Enron bankruptcy will slow down the bullet train of privatization and deregulation being pushed by the Republican Party. Imagine the suffering the public will face if the privatization of Social Security is successfully rammed through Congress on the coattails of the president's popularity. Enron's workers and retirees who are educated (attorneys, traders and various professionals) still lost their pensions. Average American workers don't stand a chance to protect their private Social Security accounts. 
Tereso Banuelos 
Rancho Cucamonga

PHOTO: Vice President Dick Cheney; ; PHOTOGRAPHER: Associated Press 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Attorney general's opinion is sought
Media has asked to see suicide note 
By ERIC HANSON 
Copyright 2002 Houston Chronicle 
Jan. 30, 2002, 12:04AM
SUGAR LAND -- The Police Department says it will get an attorney general's ruling -- a process that could take months -- before releasing the suicide note written by a former Enron executive whose body was found in his car Friday. 
More than 60 news organizations, including the Chronicle, have asked the Sugar Land police to release the note written by John Clifford Baxter under the Texas Public Information Act. 
"The Police Department has completed its review of the note for investigative and testing purposes and, at this stage, does not have any objections to the release of its contents," said Joe Morris, Sugar Land's city attorney. 
However, Morris said there are confidentiality and right-to-privacy issues and that the city wants a legal opinion from the Texas attorney general's office before releasing the note. 
Rob Wiley, a Houston lawyer familiar with public-information law, said such requests are decided on a case-by-case basis. 
"The general criteria seem to be, is there an overwhelming public interest, and whether that outweighs any privacy or investigative interest that might be present," Wiley said. 
Usually, he said, a suicide note is personal and releasing it serves no serious public interest. 
However, in some cases, usually involving the suicide of a public official or newsworthy person, the attorney general has ruled in favor of releasing suicide notes. 
Wiley added that the attorney general could rule that parts of the note are private and others public. 
When someone requests information from a Texas government agency, the agency has 10 business days to provide the information or seek an attorney general's opinion on whether it is public information. Sugar Land officials received the first requests for the Baxter note Friday afternoon. 
The attorney general then has 45 business days to make a ruling, although that period can be extended by 10 business days. 
Officials expect to send the request to Austin in a few days, said city spokesman Doug Adolph. 
Baxter, 43, a former vice chairman of Enron, was found shot to death in his Mercedes-Benz sedan, which was parked in the 5800 block of Palm Royale. A .38-caliber pistol was found in the car. His funeral is scheduled for today in his hometown, Amityville, N.Y. 
Although the Harris County medical examiner has ruled the death a suicide, Sugar Land police say their investigation is continuing. 
But that does not mean the Police Department disagrees with the ruling, Police Chief Earnest Taylor said Tuesday. 
"As is the case with most routine investigations, other forensic tests such as ballistic tests, fingerprinting and hair and fiber analysis must be performed," he said. "These and other tests are thoroughly and methodically evaluated before closing an investigation." 

Business/Financial Desk; Section C
ENRON'S MANY STRANDS: AN EXECUTIVE'S DEATH
Hometown Remembers Man Who Wore Success Quietly
By ELISSA GOOTMAN

01/30/2002
The New York Times
Page 7, Column 1
c. 2002 New York Times Company

AMITYVILLE, N.Y., Jan. 29 -- When J. Clifford Baxter returned to this quiet village in September for his 25th high school reunion, his success was no secret. He arrived with a chauffeur, and afterward, he treated a group of 20 or so classmates to drinks at Giacomo Jack's, a nearby restaurant. 
But those who grew up playing football and climbing trees with Mr. Baxter, 43, a former vice chairman of Enron, said they were shocked to learn that he committed suicide in Texas last week. Many of his friends said they had also not realized the extent of his success: that since leaving Amityville, a village on Long Island's South Shore, Mr. Baxter had climbed to a top post at one of the country's largest companies.
''He looked great; he was in shape; he looked young for his age,'' said Tim Schultz, a high school classmate. ''But I don't think many people, if any, really knew how far he had come.'' 
In Amityville, an insular place where children run back and forth among neat, modest homes and spend their summers in or near the waters of Great South Bay, Mr. Baxter, who is to be buried here on Wednesday, will be remembered not for his successful career but as a loyal son who did not brag about his accomplishments and who always came home. 
Almost everyone in Amityville seems to know the Baxter family: Mr. Baxter's father was a sergeant in the village police department, and his grandfather, a plumber, was a village trustee. People knew that Cliff, the youngest of six, was bubbly and smart. 
But until recently, few people here seem to have given much thought to Enron, let alone realized that Mr. Baxter was among its top executives. ''I never knew the name of the place,'' said Joe C. Slack, a village trustee and family friend. ''I never gave much thought to it.'' 
Mr. Slack knew other things. He was invited, for instance, to the 80th-birthday party that Mr. Baxter held for his mother at a nearby catering hall. There were mussels and shrimp, Swedish meatballs and gracious toasts, and Mr. Baxter surprised his mother with two gifts: a Lincoln Continental and a trip to Ireland, Mr. Slack said. 
''All of the sudden, bam,'' Mr. Slack said. ''You see this good-looking boy in the paper, and you say, 'Holy mackerel.' '' 
John Bochicchio, 43, a high school classmate, said he was struck at the reunion by Mr. Baxter's modesty, his generosity and his connection to his hometown. Mr. Baxter had mentioned he was interested in setting up a college fund for Amityville high school students and donating money ''to fix up some things in town,'' said Mr. Bochicchio, a bartender at Runyon's, a restaurant not far from the high school. 
''He was really nostalgic,'' Mr. Bochicchio said. ''As successful as he became, he never forgot his roots. He loved Amityville.'' 
Mr. Baxter spent his childhood swimming at Amityville Beach, climbing the apple tree in his backyard and playing baseball on an abandoned cornfield on Oak Street that is now filled with condominiums. ''The cornfield boys,'' he and his friends called themselves. 
Mr. Baxter started playing guitar before high school. Later, in business school, he humored his classmates with a pointed rendition of ''Money for Nothing,'' a hit by the group Dire Straits. 
His intelligence was evident inside the classroom, where he once confidently argued a point with a high school biology teacher until the teacher acknowledged that he had erred, and on the playing fields. 
''If the ball was out of bounds, he wouldn't just shout you down,'' said Jim Cheviot, 44, a classmate. ''It was an organized debate.'' 
Once, during a game of catch, Mr. Baxter initiated a conversation that Mr. Bochicchio found so surprising he remembers it now -- more than 30 years later. 
''He's telling me, 'Isn't it amazing about gravity? The earth is spinning, and we can be out here catching a ball,' '' Mr. Bochicchio recalled. ''I'm doing everything I can just to catch and throw it, and he's already into physics and Newton. Even then I knew this guy was different.'' 
But not too different. In his high school yearbook, a surprised-looking Mr. Baxter, wearing an apron, is pictured during shop class, but not as most likely to succeed. 
''He was so naturally smart,'' Mr. Bochicchio said. ''I'm not sure he pushed himself to the limit, it was so easy for him.'' 
As things became tougher, Mr. Baxter rose to the challenge. After leaving Amityville, he graduated from New York University cum laude, with a degree in finance. He joined the Air Force, where he met his wife, with whom he had two children, and became a captain. 
Then came Columbia Business School, where he graduated as a co-valedictorian but stood out for being kind and approachable. 
''He was just warm and engaging and not in any way elitist or condescending,'' said Virginia Weiler, a classmate who is now an adjunct professor or marketing at the University of Southern Indiana. ''He was so rare, too, especially in the late 80's. He had a sense of propriety about him, and he was a straight arrow, unlike the Ivan Boesky wannabes in our class.'' 
When Ms. Weiler learned about Mr. Baxter's death last Friday, she was horrified. Upon reflection, she came to the conclusion that he must have acted out of conscience. 
''He was very much a man of principle and very much a man of honor,'' she said. ''He was ethical and very much had that military bearing about him.'' 
Alumni officials at the Columbia Business School and N.Y.U. said Mr. Baxter was not actively involved in alumni affairs, making his appearances at high school reunions all the more poignant. 
''I would have been surprised if he didn't come'' to the recent reunion, Mr. Cheviot said. ''He never forgot where he came from.'' 
Early this week, Mr. Baxter's relatives received guests at the Powell Funeral Home on Broadway. Mr. Baxter's coffin was draped with an American flag, and next to a collection of bright flower arrangements stood a montage of his personal history: Mr. Baxter posing in a pale blue tuxedo, outfitted in a black graduation cap and gown, sheepishly holding a birthday cake decorated with a rainbow. 
Many here refuse to believe what the medical examiner's office ruled the day after Mr. Baxter's body was found inside his car in the Houston suburb where he lived, with a gunshot wound to the head: that he had committed suicide. 
''With all the goings-on, the shenanigans in that company, I find it difficult to believe that it was a suicide,'' said John Mischenko III, 50, who grew up down the street from Mr. Baxter and was friendly with one of his older brothers. ''It just doesn't seem logical to me.'' 
Some friends said that Mr. Baxter had appeared more serious and subdued than usual at the recent reunion but that he did not seem to be distressed. 
When Mr. Cheviot marveled at the news that Mr. Baxter had already retired, he did not boast, or wince. Instead, he explained he wanted to spend more time with his family. ''Jim,'' he had said, ''I've been very fortunate.''

Photo: J. Clifford Baxter was not pictured as the most likely to succeed in his Long Island high school yearbook. Mr. Baxter, who the authorities say committed suicide, was photographed during shop class. (Amityville Memorial High School Yearbook, 1976) 
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Sarah Palmer
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Enron Public Relations
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