Enron To Tap Restructuring Expert To Replace Ex-CEO Lay
Dow Jones News Service, 01/24/2002

USA: White House - Lay resignation will not deter probe.
Reuters English News Service, 01/24/2002

Enron auditor ripped as hearings open 
MSNBC, 01/24/2002
Enron Executives Depart, Trader Seeks New Leaders
Bloomberg, 01/24/2002

UBS Moves To Start Up Former Enron US Energy Trade Ops
Dow Jones Energy Service, 01/24/2002

USA: Jesse Jackson to meet, pray with Enron's Lay.
Reuters English News Service, 01/24/2002

The Collected Letters of Enron's Employees: Michael Lewis
Bloomberg, 01/24/2002
Enron delinquent in state tax payments
Associated Press Newswires, 01/24/2002

Andersen employees paid overtime to shred Enron documents - internal memo
AFX News, 01/24/2002

USA: Judge grants early Andersen depositions in Enron suit.
Reuters English News Service, 01/24/2002

Arthur Andersen Ordered to Protect Enron Documents
Bloomberg, 01/24/2002

Andersen Workers Told to Work Overtime on Shredding, Rep. Says
Bloomberg, 01/24/2002

Wide Effort Seen in Shredding Data on Enron's Audits
Bloomberg, 01/24/2002
Enron's chief auditor refuses to testify
CNN, 01/24/2002
Enron Duncan Text
Associated Press Newswires, 01/24/2002

USA: Lawyers see settlement of massive Andersen suits.
Reuters English News Service, 01/24/2002

State Board Confirms Investigation into Arthur Andersen LLP/Enron Audit
PR Newswire, 01/24/2002

Fed's Greenspan Comments on `Egregious' Accounting at Enron
Bloomberg, 01/24/2002

Greenspan Says Enron 'Abrogated' Good Will Of US Public
Dow Jones Capital Markets Report, 01/24/2002

USA: Derivatives at root of Enron collapse, expert says.
Reuters English News Service, 01/24/2002

Campaign Finance Bill to Get a Vote, Thanks to Enron 
Bloomberg, 01/24/2002

SEC Chairman Pitt's Plan `Needs More Teeth,' Levitt Says
Bloomberg, 01/24/2002

Enron Asks Ct For Quick OK Of India Unit Sale To BG Grp
Dow Jones, 01/24/2002

SEC Considers Post-Enron Changes To Financial Reports
Dow Jones News Service, 01/24/2002

Eyeless in Houston
The Real Values Crisis Behind the Enron Collapse
ABC News, 01/24/2002

More Enrons to come?
CNN Wolf Blitzer Reports, 01/24/2002

Media Advisory: Enron Legal Documents Available at FindLaw
PR Newswire, 01/24/2002




Enron To Tap Restructuring Expert To Replace Ex-CEO Lay
By Christina Cheddar

01/24/2002
Dow Jones News Service
(Copyright (c) 2002, Dow Jones & Company, Inc.)

Of DOW JONES NEWSWIRES 

NEW YORK -(Dow Jones)- Who Enron Corp. (ENRNQ) taps to replace Kenneth Lay as the company's chief executive will provide clues about the future shape of the bankrupt company.
Lay resigned late Wednesday amid pressure from the company's creditors committee. Enron, once the nation's largest energy trading company, now is preparing a search for a chief restructuring officer to serve as an interim chief executive. 
In an e-mail to employees, Lay said, the restructuring specialist would join Enron's remaining management team to direct the company's ongoing operations. 
The decision was applauded by Enron's creditors committee, which is using its clout to exert its will over how the company reorganizes in order to protect its interests. 
"The creditors committee is pleased with Ken Lay's and the Enron board's decision regarding Ken Lay's departure," said Luc Despins, a partner at Milbank Tweed, the firm representing Enron's creditors committee. 
"The creditors committee views this as a step in the right direction to maximize value for all creditors. The committee is encouraged that Enron is proceeding with the retention of a chief restructuring officer," he said. 
Despins declined to comment on what qualities the creditors committee would be looking for in a candidate, or how long the process might take. 
Sources familiar with turnaround efforts and executive recruitment said the process will be swift, and a decision could be made in few days. 
These people say Enron's next step will be to form a search committee made up of members of the creditors committee and the board. Next, the committee would work with a recruitment firm to identify candidates and make a selection and offer to the candidate. He or she would need to be approved by the bankruptcy court, one of the sources said. 
Enron spokesman Vance Meyer said he couldn't immediately comment on the details of the selection process. However, he said, Enron was in "an active search." 
There is a small pool of turnaround experts that come to mind, one executive recruiter said. The list includes individuals such as Robert S. Miller, currently chairman and chief executive of Bethlehem Steel Corp. (BS). 
Miller, who is best known for negotiating the 1980 loan bailout of Chrysler Corp, wasn't immediately available to comment. However, through a Bethlehem Steel spokeswoman, he said he remains committed to helping restructure the Bethlehem, Pa., steel company. 
"I made a personal commitment in September 2001 to the board of directors and to the employees of Bethlehem Steel Corp. to work with the firm until it was on stable ground," Miller said. 
Beyond executives who specifically deal in restructuring, there are those like financier Carl Icahn, who are famed for their ability to dismantle a company and eke out the value of its assets. 
Although it isn't necessary that the individual come from the energy industry, knowledge of the sector is helpful. 
Whoever is chosen, the person's reputation and background will say a lot about the strategy Enron's board and its creditors committee plan to take in the restructuring, said John Challenger, chief executive of Challenger Gray and Christmas, a Chicago-based outplacement firm.
As for Lay, he will remain on Enron's board. 

In his email to employees Wednesday, Lay cited the distractions caused by "multiple inquiries and investigations" as one factor contributing to his decision to resign. 

Both Lay and Earl Silbert, a Washington, D.C.-based attorney representing Lay, weren't available for comment. 

Lay's departure follows other recent exits. Vice Chairman  Mark Frevert left at the end of December, and Greg Whalley, Enron's president and chief operating officer, will join Swiss bank UBS AG (UBS), which acquired Enron's trading operations on Jan. 18. 

Both Frevert and Whalley were part of Enron's office of the chairman. The lone remaining member of office of the chairman is Chief Financial Officer Jeffrey McMahon, who was named chief financial officer after Andrew Fastow was forced to resign. 

Questions regarding an off-balance sheet financing vehicle run by Fastow sparked the initial inquiry into Enron's finances by the Securities and Exchange commission. 

Enron's Myer said he wasn't immediately sure whether others would be promoted to the office of chairman. 

Other departures include that of Mike McConnell, who was president of Enron Global Markets. 

According to Meyer, some of the resignations reflect Enron's restructuring efforts. 

Since filing for bankruptcy protection in early December, some of Enron's assets have been sold off or have  suffered. 

-By Christina Cheddar, Dow Jones Newswires; 201-938-5166; christina.cheddar@dowjones.com


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

USA: White House - Lay resignation will not deter probe.

01/24/2002
Reuters English News Service
(C) Reuters Limited 2002.

WASHINGTON, Jan 24 (Reuters) - The resignation of Enron Corp chairman Kenneth Lay will not deter the administration from seeking answers to the energy trading firm's spectacular collapse, a White House spokesman said on Thursday. 
Asked about Wednesday's resignation of Lay, a friend and major political supporter of President George W. Bush, White House spokesman Ari Fleischer said, "Nothing changes the determination of this administration to help protect people's pensions."
"I know that no matter what happens to one individual there, even if that individual is a friend of the president's or is a supporter of the president's, nothing is going to stop the president and this administration from pursuing justice," he said. 
Enron is facing multiple congressional and federal investigations over its collapse, which threw thousands of employees out of work and devastated investors, including employees whose pension plans were heavily invested in Enron stock.

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

Enron auditor ripped as hearings open 
Congressional probes of energy firm's collapse begin

Surrounded by counsel, David Duncan invoked the Fifth Amendment Thursday in order not to testify before a Congressional panel investigating actions surrounding Enron's collapse.

MSNBC STAFF AND WIRE REPORTS

WASHINGTON, Jan. 24 -  The chairman of a House panel investigating Enron's collapse asserted Thursday that the shredding of records by Enron accountant Arthur Andersen clearly 'compounded the catastrophic business failure' of the energy giant. Top Andersen executives responded to the criticism by telling the panel that David Duncan, its lead partner for auditing Enron's books, was largely responsible for the most of the destruction of documents sought by government investigators.

AS EXPECTED, Duncan refused to testify at the House hearing, invoking his right under the Fifth Amendment of the Constitution. 
       Rep. Jim Greenwood, R-Pa., said that the decision by Duncan not to testify "will hamper the important work of this committee in our search for the truth that what transpired at Andersen during the critical period we are examining." 
       The hearing came a day after Enron Chairman Kenneth Lay, who has close ties to President Bush, resigned his post. 
       As the House panel pursued the document destruction at Andersen, the Senate Governmental Affairs Committees planned to question former regulators and other experts on whether the government failed to exercise proper oversight of Enron. 
       The Securities and Exchange Commission started looking into Enron's accounting in mid-October, after the company reported a third-quarter loss of more than $600 million. The agency's inquiry eventually included demands for financial documents from Enron and Andersen. 
       Enron's slide into the biggest bankruptcy in U.S. history on Dec. 2 left thousands of employees without jobs and their retirement savings all but gone because the funds had been tied largely to now-nearly worthless Enron stock. Other investors and creditors also have lost hundreds of millions of dollars.
       At least 11 congressional committees plan hearings on the collapse of what once was the nation's seventh-largest corporation. 
       While reports emerged this week of document shredding at Enron's Houston headquarters as well, the focus of the House subcommittee, for the time being, is on the destruction of Enron-related papers at Anderson at a time last fall when the energy giant was descending toward bankruptcy.
       Last week, Andersen fired Duncan because of his role in Enron-related document destruction in October and November, just as Enron's problems were publicly emerging and the SEC began a formal investigation. 
       But Duncan has claimed to investigators that he was following company guidance on document destruction laid out in an Oct. 12 e-mail from Andersen corporate attorney Nancy Temple at the firm's Chicago headquarters.
       Temple and Dorsey Baskins Jr., managing director of Andersen's professional standards group, were expected to be quizzed by the House panel as to why the memo was written and on the firm's normal paper shredding policies. The company claims the Temple memo was routine and aimed only to combat the "pack-rat" mentality of many accountants. 
       Duncan's interpretation of the Oct. 12 memo reflected a sinister view, one supported by another Andersen manager, Michael C. Odom, who also has told investigators he viewed the memo as unusual. He also has been subpoenaed to testify.
       And a new Andersen document, obtained from committee sources Wednesday, also suggests the Temple directive was more than routine. In the Oct. 24 memo from a manager, employees were told the document shredding was so important that it should be pursued even "on an overtime basis, if necessary for the remainder of this week or for however long it takes." 
       Investigators also may question Temple about a warning by Duncan last October that Enron's explanation for huge third-quarter losses might be misleading investors. Duncan expressed his concerns to Enron officials on Oct. 15, a day before the losses were announced with no change, according to several memos made available by the House subcommittee.
       But if lawmakers had hoped to hear from Duncan, they have been disappointed.
       Robert Giuffra Jr., one of Duncan's attorneys, informed the subcommittee 
       Wednesday that the Duncan has not had time to prepare, has not had access to critical documents and will testify only if given immunity - as is his right under the Fifth Amendment.
       "Mr. Duncan seeks the full disclosure of the truth" and will continue to cooperate with the congressional investigations as well as those by the Justice Department and the SEC, Giuffra wrote.
       Kenneth Johnson, a spokesman for the full committee, said the panel did not want to impede a criminal investigation at the Justice Department, so it rejected the immunity request as well as a request by Duncan that he not be required to appear.
       
ANDERSEN OFFICIALS DECRY SHREDDING

       Meanwhile, Andersen partner C.E. Andrews and Andersen managing director Dorsey Baskin, in written testimony to the House subcommittee, said the destruction by Duncan was wrong and that the auditing firm has taken steps in response.
       "Our investigation indicated that he directed the purposeful destruction of a very substantial volume of documents - and in doing so, he gave every appearance of destroying these materials in anticipation of a government request for documents," the two said.
       Duncan has said through his lawyers he did not do anything wrong but was simply following instructions from Temple and is cooperating with government investigators.
       "The case of Mr. Duncan was clear enough to allow us to draw conclusions about his responsibility at an early stage of the inquiry. That is not true of other Andersen personnel who were involved with the destruction of documents," the two Andersen executives told the House subcommittee on oversight and investigations.
       "Our investigation into the destruction of documents by Andersen personnel is far from complete," they said.
       
The Associated Press and Reuters contributed to this report.


Enron Executives Depart, Trader Seeks New Leaders
2002-01-24 16:00 (New York)

     Houston, Jan. 24 (Bloomberg) -- Enron Corp. executives are leaving the company as it struggles to survive the largest U.S. bankruptcy case, while creditors began exerting power to salvage the remains of the fallen energy trading giant.
     A day after Chairman and Chief Executive Kenneth Lay resigned amid pressure from the creditors, the company stepped up the search for new management to rescue it from oblivion.
     Officials at three New York-based consulting firms that specialize in turning around failing businesses are the front runners to replace Lay, people close to the company said. They areAlvarez & Marsal, Glass & Associates Inc. and Zolfo Cooper LLC, the people said.
     ``My guess is Enron will get sold off in pieces and the creditors will be left to fight over the bones,'' said Al Koch, chief operating officer of turnaround consulting firm Jay Alix & Associates.
     Creditors are concerned Enron may be worth less than they thought, analysts say. That means they're likely to get a fraction of the more than $40 billion they're owed.
     With Lay's departure, Enron plans to choose a turnaround specialist to run the company until a permanent replacement is found, Enron spokesman Mark Palmer said. For now, Chief Financial Officer Jeff McMahon and Stan Horton, chairman and chief executive of Enron Global Services, are in charge, Palmer said.

Perceptions

     Deborah Hicks Midanek, a senior official at Glass & Associates, declined to comment on whether her firm might be named to lead Enron's reorganization.
     ``Stabilizing perceptions'' of Enron is of paramount importance, she said. ``Enron needs to restore confidence that the company is being handled in a responsible manner.''
     Bryan Marsal, co-head of Alvarez & Marsal, declined to comment. His partner, Tony Alvarez, is chief executive officer of apparel maker Warnaco Group Inc.
     Stephen Cooper of Zolfo Cooper didn't return phone calls seeking comment.
     Lay's resignation was intended to fend off appointment of a Chapter 11 trustee in the case, experts say. A Chapter 11 trustee would supplant Enron's top officials and its board of directors.
The trustee would likely name a new law firm to replace Weil, Gotshal & Manges as Enron's bankruptcy attorneys.
     A group of creditors led by Wiser Oil Co. and Nuevo Energy Co., former Enron trading partners, has asked U.S. Bankruptcy Judge Arthur J. Gonzalez in Manhattan to appoint a Chapter 11 trustee to run Enron's North American operations.

`Fed Up'

     ``Motions by creditors to appoint a trustee or administrator is a clear indication that they are fed up,'' said Nancy Rapoport, dean of the University of Houston Law Center. ``There's a lack of confidence in Lay.''
     Lay's attorney, Earl Silbert, and Luc Despins, an attorney for Enron's creditors' committee, didn't return phone calls.
     To oust management and have a trustee appointed, creditors must show management has been incompetent or committed fraud, said Patrick A. Murphy, a lawyer with San Francisco's Murphy Shenemen Julian & Rogers.
     Document shredding and suggestions the true state of the company's financial health was covered up might be adequate grounds to name a trustee, lawyers suing Enron said.
     ``If this were a smaller case, this would result in the instant appointment of a trustee,'' said David M. Bennett, a Dallas lawyer representing some Enron creditors.
     Enron's slide into insolvency has devastated its executive ranks. Of the 14 executives listed in the company's annual 10-K filing with the U.S. Securities and Exchange Commission in April, at least half, including former Chief Executive Officer Jeffrey Skilling and former Vice Chairman Clifford Baxter, are no longer with the company.

Departures

     Vice Chairman Mark Frevert said in interview that he left the company at the end of the year. Frevert said he ``really can't say'' whether he quit or was fired.
     Greg Whalley, president and chief operating officer, is set to join Swiss bank UBS AG, which acquired Enron's trading operation on Jan. 18, according to the sale documents.
     In early December, Enron paid $55 million to 500 employees to persuade them to stay at the company for 90 days. Three-fourths of the employees held positions below the rank of vice president at the time.
     McMahon became CFO in October, after the ouster of Andrew Fastow, who set up and ran many of the private partnerships that led to Enron's demise. McMahon, a certified public accountant, joined Enron in 1994 from MG Natural Gas Corp., where he was CFO.
     Phone calls to Enron seeking comment from McMahon and Whalley weren't returned.

Seeking Control

     With most of Enron's more desirable assets sold or withering, creditors have stepped up efforts to control what's left of the company.
     In court papers filed yesterday, the creditors' committee asked a bankruptcy judge for permission to investigate Enron's former auditor, Arthur Andersen LLP, to help it prepare possible legal action against the accounting firm.
     Enron fired Andersen last week after the firm admitted employees destroyed Enron-related documents.
     Lay's resignation comes amid a dozen government investigations and more than 50 civil lawsuits into Enron's collapse. The company filed bankruptcy Dec. 2 and fired more than 4,500 employees after it admitted overstating profit by $586 million since 1997.

UBS Moves To Start Up Former Enron US Energy Trade Ops
By Mark Golden and John Edmiston

01/24/2002
Dow Jones Energy Service
(Copyright (c) 2002, Dow Jones & Company, Inc.)

Of DOW JONES NEWSWIRES 

NEW YORK -(Dow Jones)- UBS AG (UBS) unit UBS-Warburg took a step forward Thursday in its restart of the acquired North American energy trading unit of Enron Corp. (ENRNQ).
UBS Warburg management asked all Enron employees that had accepted employment offers or intended to do so to attend a hastily called orientation meeting in Houston at the posh Houstonian Hotel. About 700 employees attended thee meeting, where they were given basic information about UBS and dealt with routine employment matters, attendees outside the hotel said. 
The employees were told that they would hear more about UBS' vision for the trading unit next week. 
UBS declined to comment on the meeting. 
UBS has offered jobs to the vast majority of Enron's North American energy trading staff, and many of those workers have already signed employment contracts, Enron and UBS employees said. The unit is expected to start trading next month. 
"Our goal is to reestablish the business," UBS spokesman David Walker said. "The buildup will be measured and focused on customer needs." 
In a deal approved by the bankruptcy court last week, UBS will take ownership of Enron's North American energy trading operations. The transaction involves no cash, but Enron will collect a third of the unit's profits for 10 years. UBS can begin to buy out Enron's interest in Year 3 of the deal. 
Walker declined to comment on whether UBS expects its energy trading volume to approach Enron's former level, nor would he say what the size of the unit's capitalization will be. The company won't be afraid of taking some big risks, however. 
"The risk profile will be consistent with the risk profile of UBS Warburg," Walker said. 
Some traders for other companies have questioned whether the UBS/Enron group could be anywhere near as large as the old Enron. Without enormous capitalization, the unit won't be able to make huge directional calls on commodity prices or stand by those calls for awhile even when the market moves in the opposite direction, as Enron did. Without huge deal flow, some traders have said, UBS/Enron won't have the market information that helped Enron traders make the right directional calls most of the time. 
But employees of Enron and UBS disagreed Thursday. 
"They haven't given us specifics, and I'm sure it won't be like 'the Big E' - that was an extreme situation," one trader moving to UBS said. "But they recognize the need for a certain amount of latitude in order to make money in this business. Will there be a severe change to risk limits? I don't think so." 
A UBS employee agreed. 
"That's what we do for a living: We manage risk and sometimes make big bets, too," the employee said. "Don't think that we don't have any tolerance for that." 
UBS has no intention of buying any of Enron's current trading positions, which are in the process of being liquidated following Enron's bankruptcy filing Dec. 2. Nor does UBS have any intention of acquiring Enron's retail unit, Enron Energy Services, which worked closely with the wholesale traders. 
"We plan on building up our own portfolio," Walker said. 
-By Mark Golden, Dow Jones Newswires; 201-938-4604; mark.golden@dowjones.com 
(John Edmiston in Houston and Jason Leopold in Los Angeles contributed to this article.)

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


USA: Jesse Jackson to meet, pray with Enron's Lay.

01/24/2002
Reuters English News Service
(C) Reuters Limited 2002.

HOUSTON, Jan 24 (Reuters) - Civil rights activist Rev. Jesse Jackson and former Enron Corp. chief executive Ken Lay were set to talk on Thursday night in a meeting at Enron headquarters that was likely to include a prayer session, a Jackson spokesman said. 
The hastily arranged session will be part of a two-day Jackson visit to Houston to drum up support for thousands of laid-off Enron employees who lost their savings in the energy trader's financial collapse, spokesman Mike Levine said.
"(Jackson) wanted to meet one-on-one with Lay just to let him know he's not here to come after him. He's just here to raise support for the employees," Levine said. 
"I'm sure they'll do some praying," he said. 
The besieged Lay, who is the son of a Baptist preacher, resigned in disgrace as Enron's chairman and chief executive officer on Wednesday, saying he could not reorganize the bankrupt company and fight its mounting legal battles at the same time. 
He remains on Enron's board of directors, but is scheduled to testify before Congress next month and faces numerous civil lawsuits and a criminal investigation by the U.S. Justice Department. 
Enron was the nation's top energy trading company until Dec. 2 when a ruinous financial scandal forced it into Chapter 11 bankruptcy. 
Jackson's visit comes a day after fellow activist Al Sharpton appeared on the steps of Enron headquarters to urge federal help for Enron employees and investors. 
An Enron spokesman was not immediately available for comment.

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

The Collected Letters of Enron's Employees: Michael Lewis
2002-01-24 14:33 (New York)

     (Commentary. Michael Lewis, whose books include ``Next: The Future Just Happened'' and ``Liar's Poker,'' is a columnist for Bloomberg News. The opinions expressed are his own.)

     Berkeley, California, Jan. 24 (Bloomberg) -- One of the high points of my day is reading the mail I receive from current and former Enron Corp. employees.
     If you are in the middle of a big media story and have some feel for its nuances, the coverage of that story always seems ridiculously inadequate. A lot of Enron's employees seem to feel the press doesn't fully understand what has happened to them.
     At any rate, a number of Old Enronians have felt compelled to call or write to me. Thanks to them I know that the now notorious Raptor partnership, into which Enron's top executives stuffed many bad investments, got its name because raptors ate garbage.
     Thanks to them I understand that the documents Arthur Andersen shredded were probably butt-covering memos from junior accountants to their bosses that spelled out the tacit understanding between the junior accountants and Enron that enabled Arthur Andersen to turn a blind eye to Enron's deceits.
     Thanks to them I know that Jeffrey Skilling was widely regarded as the shrewdest of the top executives and, by resigning for ``personal reasons,'' signaled to everyone else that Enron was doomed.
     But these letters from Enron's employees -- especially the ones from people still working at Enron -- are frustrating, because they usually come with a request that I avoid contacting them for further discussion. They don't want to be famous, just understood.

Unanswered Questions

     With no one on the inside to quiz, I still don't understand the story as it demands to be understood. Big questions remain about Enron, including:
     1) Why did Enron make so many really stupid investments?
     At the heart of the company's problems were a lot of inexplicable purchases of Indian power plants and Brazilian pipelines and so on. As one especially acute Enron correspondent put it, ``it really takes a ton of people to flush billions down the toilet. Popular wisdom would have us believe that it was just a few bad apples at the top (but) at the very least hundreds of employees knew about a couple of bad deals they worked on. Why weren't they wondering who was making all the money?''
     Enron's investment decisions were so colossally inept as to suggest an ulterior motive. But the best explanation I've received -- that Enron bought power plants in far-flung places to gain access to information about supply and demand in those markets that it could use in trading -- still rings hollow.

Fastow Mystery

     2) Why didn't Enron's former chief financial officer, Andrew Fastow, sell his Enron stock on the way down? Kenneth Lay and Skilling and other top executives clearly knew that they had to
get out while the getting was good and sold millions of dollars of Enron shares.
     Lay was more or less hand-selling his private holdings to his employees. But Fastow, who knew as much about the rot as anyone, held on when he must have known the stock was likely to collapse. Why? Even as he functioned as Enron's CFO was he grooming himself for the courtroom? Is that why he was so quick to hire crack trial lawyer David Boies?
     3) Why isn't it considered strange that Enron lent millions of dollars to its already rich chairman? Lay's lawyer has claimed that Lay sold some of his Enron stock simply to repay personal loans the company made to him. But why was the company lending him money in the first place?

This Is Morality?

     4) Why was Sherron Watkins, the author of the now famous letter to Lay, reprinted last week in the New York Times, regarded within Enron as a deeply moral person?
     Her letter has been waved about in the media as a weapon against Lay, as evidence that the boss ignored warnings from below, and that there was at least one good woman inside Enron who was deeply, deeply disturbed by the bad behavior.
     But Watkins' letter was not a work of moral philosophy. Her chief concern was not that Enron was breaking the law and cheating its investors, but that people outside Enron might find out that Enron was breaking the law and cheating investors -- and that, as she put it, ``my eight years of Enron work history will be worth nothing on my resume.''
     5) Why do people continue to work for companies even after they've concluded the people who run them are dishonest?
     Watkins' letter quotes a fellow employee saying ``I know it would be devastating to all of us, but I wish we would get caught. We're such a crooked company.'' Many of Enron's employees now claim to have been equally cynical about their enterprise.
     None of the many I've heard from has risen to the defense of Lay, Skilling, Fastow, et al. But all of these people seem to believe that their cynicism absolves them from any personal responsibility. Many of them apparently see themselves as innocent victims. Were they?

-- Michael Lewis in Berkeley, California, at mlewis1@bloomberg.net through the New York newsroom (212) 318-2320/ Editor: Rooney

Enron delinquent in state tax payments

01/24/2002
Associated Press Newswires
Copyright 2002. The Associated Press. All Rights Reserved.

SACRAMENTO (AP) - California tax officials say the embattled Enron Corp. is more than a year late in paying a $493,000 tax bill. 
The bankrupt energy giant is facing investigations by congressional committees and the Securities and Exchange Commission. California Attorney General Bill Lockyer has subpoenaed the company regarding his investigation into last year's price spikes in the wholesale energy market.
And a California legislative committee investigating possible price manipulation has served additional subpoenas on Enron officials about possible destruction of documents. 
The California Franchise Tax Board said Enron's corporate tax payment was due March 15 of last year. 
The state will send a notice to Enron later this spring if it doesn't receive its money, said Pat Hill, a spokesman for the Franchise Tax Board, which collects individual and business taxes. 
"Whatever taxes you owe, you have to pay by the deadline, which in Enron's case was March 15. The return isn't due until October," Hill said. He didn't know if the company had filed a return by the deadline. 
Enron's bill is accruing 7 percent interest while it goes unpaid, he said. 
The state may have to file a claim in the company's bankruptcy hearing to get paid. 
"We'll be in the same line as all those families of employees the company owes," said Steve Maviglio, spokesman for the governor. 
The taxes are owed for earnings in California in 2000. Corporate taxes are typically not public information, but the tax board does release the amount of money companies owe when they are delinquent. 
Every year, about 600,000 California residents and 22,000 corporations get a letter from the tax board because they haven't paid, Hill said. The board usually gives companies as long as 15 months after the due date before it sends the letter. 
If companies refuse to pay taxes, the board can revoke their corporation status, effectively ending their ability to do business in the state. 
"Enron has other more pressing issues, I think," Hill said. 
Enron's bill is a small fraction of the state's annual tax collection, about $40 billion.

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

Andersen employees paid overtime to shred Enron documents - internal memo

01/24/2002
AFX News
(c) 2002 by AFP-Extel News Ltd

WASHINGTON (AFX) - Employees working for Andersen LLP were paid overtime to shred documents related to Enron Corp, according to an internal Andersen memo released by the House of Representatives' Energy and Commerce Subcommittee on Oversight and Investigations. 
"We do expect that people will be able to do this on an overtime basis, if necessary, for the remainder of this week, or for however long it takes for each of you to be comfortable" that the document retention and destruction guidelines are being met, the Oct 24 e-mail message said.
On Nov 10, a new policy instructing Andersen employees to stop shredding documents was implemented, but the prior policy allowed for destruction of certain documents. 
The memo was released following a hearing where Andersen executives were questioned by committee members about the company's role in the growing Enron scandal. 
cbd/gc

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

USA: Judge grants early Andersen depositions in Enron suit.
By C. Bryson Hull

01/24/2002
Reuters English News Service
(C) Reuters Limited 2002.

HOUSTON, Jan 24 (Reuters) - A federal judge on Thursday ordered six key Andersen employees to give early depositions about the shredding of Enron-related documents, handing an initial victory to shareholders suing the auditor and the failed energy giant's top insiders. 
U.S. District Judge Melinda Harmon granted in full a motion for discovery in the massive suit that requires the preservation of all Enron-related records held by Andersen, the accounting firm that Enron Corp. fired last week. The motion was requested by all but one plaintiff in the suit.
Allegations of systematic document shredding at Andersen and Enron rapidly mobilized plaintiffs' attorneys, who pushed for the early discovery and depositions to preserve as much evidence as possible in what is certain to be a lengthy lawsuit with billions of dollars at stake. 
The six employees include Andersen's fired top partner on the Enron account, David Duncan, who on Thursday asserted his Fifth Amendment right against self-incrimination during a hearing before the U.S. House Energy and Commerce Subcommittee on Oversight and Investigations. 
Andersen fired him on Jan. 15 for ordering the destruction of Enron documents after a U.S. Securities and Exchange Commission probe was launched in October. 
Also giving depositions will be four other Andersen partners in Houston who were relieved of their management responsibilities and a lawyer who sent an e-mail explaining Andersen's document-destruction policy to the auditor's Houston office. 
Harmon's order waives a provision of U.S. securities law that delays depositions until a judge determines whether a suit is frivolous. The provision is intended to prevent legal interviews from being improperly used to gather business information. 
The depositions cannot be taken until 20 days from now, and are restricted to eight hours and limited to the topic of document and data destruction or storage. 
The order allows Andersen's outside lawyers to guard the documents at their own sites and permits the plaintiffs to inspect those sites immediately. Andersen must within 20 days categorize and report the documents they have found or recovered, and explain the steps it took to recover deleted documents, the order says. 
One lawyer said the plaintiffs were delighted with the judge's ruling. 
Andersen, joined by lawyers who are suing them on behalf of the New York City and state of Florida pension funds, had opposed only the early depositions. 
"We had asked for 95 percent of this, and even had suggested a lot of it," Andersen attorney Rusty Hardin said. "We'll make those people available. We just thought it would be more convenient for them to give the depositions a few months from now, when they were more familiar with the documents." 
Hardin said he only had control over the appearances of the five current Andersen employees, who all have their own attorneys. 
Since Duncan has been fired, his own attorney will handle the depositions, Hardin said. A Duncan representative had no immediate comment, having just learned of the order.

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

Arthur Andersen Ordered to Protect Enron Documents
2002-01-24 13:21 (New York)

     Houston, Jan. 24 (Bloomberg) -- Arthur Andersen LLP officials must answer questions about what Enron Corp. auditing records have been destroyed and protect remaining documents, a federal judge ruled.
     U.S. District Judge Melinda Harmon gave Andersen officials 20 days to investigate the destruction of Enron documents and report to the court how many can be reconstructed.
     Enron Corp. shareholders sought the order after officials of Andersen acknowledged earlier this month that they shredded or deleted ``a significant number'' of Enron documents. The Justice Department, Securities and Exchange Commission, congressional committees and shareholders' lawyers want the documents to help determine how Enron collapsed.
      ``I expect we'll learn through this questioning that the document destruction was a deliberate, calculated effort to protect Andersen from liability,'' said William Lerach, a San Diego-based lawyer representing Enron investors in lawsuits over the energy trader's collapse.
``We've got full protection for the documents now.''
     Officials of Chicago-based Andersen weren't immediately available for comment on the ruling. Shares of Houston-based Enron, which filed for Chapter 11 bankruptcy protection in December, rose 4 cents to 38 cents in mid afternoon trading.
     Lawyers for Enron investors, bondholders and former employees began pushing for a court order to safeguard Enron-related records after reports surfaced that document-shredding continued following internal orders to halt it.
     A fired Enron project manager said in court filings that documents were being destroyed at Enron's Houston headquarters as late as Jan. 14. Company officials sent out e-mails in November ordering workers to set aside any records that may be involved in Enron-related probes.
     Earlier this week, Enron officials said they found a trash can full of shredded documents on the 19th floor of the company's downtown Houston skyscraper. That led investors' lawyers to allege record destruction was continuing.

Questioning Slated

     Under Harmon's four-page order, Andersen officials must set aside documents, letters, e-mails and other records related to Enron audits. They also must try to reconstruct any destroyed documents or recreate deleted electronic files from backup tapes.
     Andersen also must make a group of employees available to be questioned by shareholders' lawyers on what documents were destroyed, when they were destroyed and who ordered their
destruction, under Harmon's order.
     The Andersen employees to be questioned include Thomas H. Bauer, Michael M. Lowther, Michael C. Odom and Stephen Goddard Jr., all partners in Andersen's Houston office.
      Goddard, the office's former managing partner, has been placed on administrative leave along with Bauer, Lowther and Odom following the shredding disclosures, according to Harmon's order.
     Nancy Temple, an Andersen in-house lawyer in Chicago, also has been ordered to submit to questioning by shareholders' lawyers. Temple answered questions about Enron's collapse and the document destruction on Capitol Hill today.
     David B. Duncan, the fired former lead partner in charge of Andersen's Enron group, also must submit to questions by plaintiffs' lawyers about the document destruction, Harmon ruled.

Fifth Amendment

     Andersen lawyers told the judge yesterday that they can't force Duncan to show up for the questioning because he's no longer an employee.
     Duncan, who invoked the Fifth Amendment to avoid a congressional committee's questions today, is likely to do the same thing at any deposition in the shareholder suits, said Rusty Hardin, a Houston lawyer representing the U.S.'s fifth-largest accounting firm.
     Investors' lawyers also can inspect the four secure sites that Andersen's lawyers are using to store documents and computers containing Enron-related material, the judge said.
     Finally, she ordered the accounting firm to hand out a copy of the order to all its partners.
     Hardin said plaintiffs' lawyers unfairly fanned public outrage about the shredding.
     ``There needs to be some modicum of decency in the way this company is treated,'' Hardin said.

--Jef Feeley in Houston (713) 353-4873, or jfeeley@bloomberg.net through the Washington newsroom (202) 624-1917. Editor: Asseo


Andersen Workers Told to Work Overtime on Shredding, Rep. Says
2002-01-24 15:00 (New York)

     Washington, Jan. 24 (Bloomberg) -- Arthur Andersen LLP employees were ordered to work overtime to destroy documents related to Enron Corp., U.S. Representative James Greenwood said, citing an Andersen memo.
     Greenwood, a Pennsylvania Republican, made the comments at an impromptu press conference after congressional hearings into the Enron case.
     A federal judge ruled today that Andersen officials must answer questions about what Enron auditing records have been destroyed and must protect remaining documents.

--Chris Dolmetsch in the Princeton newsroom (609) 750-4652, or cdolmetsch@bloomberg.net. Editor: Sabo


Wide Effort Seen in Shredding Data on Enron's Audits
By RICHARD A. OPPEL Jr.
January 24, 2002
WASHINGTON, Jan. 24 - Scores of people who worked at Arthur Andersen's Houston office were involved in the destruction of documents related to the Enron Corporation according to the chairman of one of the Congressional subcommittees that began hearings today on Enron's collapse. 
The chairman, Representative James C. Greenwood, Republican of Pennsylvania, head of the House Energy and Commerce oversight subcommittee, said investigators for the subcommittee had determined that document shredding was widespread and that up to 80 people had received orders to destroy papers. He said it called into question Andersen's attempts to blame rogue employees for the episode.
The hearings today are Congress's first public exploration into the Enron collapse, the largest corporate Chapter 11 bankruptcy filing in American history. 
Enron's chairman and chief executive, Kenneth L. Lay, announced his resignation late Wednesday, saying the many investigations into the company's collapse would require too much of his attention.
Last week, Andersen, one of the Big Five accounting firms, fired the lead partner on the Enron account, David B. Duncan, saying he orchestrated widespread document destruction shortly after learning of a government investigation into Enron's finances.
But Mr. Greenwood expressed skepticism on Wednesday about that account. "Do you believe that 80 Andersen employees were directed by Mr. Duncan to violate an express provision of policy by Andersen in the face of yet another investigation, and none of them picked up the phone and called their superiors and said, `This doesn't seem right'?" he asked. "The question we need to get to is, Were there instructions from above."
Other people close to the investigation said they doubted that the number of Andersen employees was as high as Mr. Greenwood's estimate, but they said it was a much larger group than the company had suggested. Mr. Duncan appeared today under subpoena at the energy and commerce subcommittee hearing, but as expected, he invoked his Fifth Amendment right against self-incrimination. His lawyer, Robert Giuffra, told the committee in a letter on Wednesday, that Mr. Duncan would "rely on his Constitutional right not to testify" unless he is given immunity.
Congressional investigators made public on Wednesday a memo Mr. Duncan wrote last October saying he expressed concerns about the way in which Enron was about to disclose huge losses from controversial dealings that investigators believed played a significant role in the company's collapse. The disclosure, he said, was misleading to investors and possibly illegal.
On Oct. 16, Enron disclosed that it lost $618 million during the third quarter and that it would have to reduce its net worth by $1.2 billion, partly because of dealings with investment partnerships that had been headed by Andrew S. Fastow, who was then the company's chief financial officer. At the time, the company said the losses were the result of one-time losses, leaving the impression that the company could weather the bad quarterly results.
But two days earlier, Mr. Duncan warned the company's chief accounting officer, Rick Causey, that the way the company planned to disclose the information might be "misconstrued or misunderstood by investors," according to a memo Mr. Duncan wrote to his files on Oct. 15 that was made available to Congressional investigators. However, the press release Enron issued the next day was "essentially the original presentation," Mr. Duncan wrote.
Mr. Duncan said in his memo that he had warned Mr. Causey that the Securities and Exchange Commission initiates enforcement actions against companies that issue financial information that is "materially misleading." He said the company should rewrite its earnings report and bring in lawyers to assure that its statements were not false.
One week later, officials in Andersen's Houston office began to shred Enron-related documents on a massive scale, even though Enron had just disclosed that the Securities and Exchange Commission had begun an investigation into its finances. Andersen fired Mr. Duncan last week, saying he had ordered the destruction of the Enron papers.
An Andersen spokesman, Charlie Leonard, characterized Mr. Duncan's memo as routine and said it reflected internal debates about accounting issues that occur between auditors and corporate executives. He added: "It looks like that with the exception of some inappropriate phrasing, Mr. Duncan was doing what he was supposed to."
An Andersen official on Wednesday evening repeated the firm's assertion that Mr. Duncan's actions, aided by other partners in the Houston office who were demoted or placed on leave last week, had not been sanctioned. 
"The one glaring fact here is that David Duncan, with full knowledge of an S.E.C. investigation, initiated a massive document destruction campaign," official said.
The hearings that began today, which will eventually involve 10 different committees, could lead to changes in pension, tax, securities and accounting laws, though many experts are skeptical how far lawmakers will go. Past efforts to tighten laws in these areas, particularly auditing standards, have been beaten back by industry lobbying.
The fall of Enron has touched off a scramble in the capital to assign blame and avoid the taint of the company's prodigious political donations.
Some Democrats in Congress see the Enron case as a windfall that could dent President Bush's lofty public approval ratings. But many Democrats are also vulnerable because the company spread its largess so widely and the accounting and regulatory practices that led to Enron's collapse took place under Democratic and Republican administrations.
In the House, the Energy and Commerce subcommittee cross-examined senior Arthur Andersen officials about why the firm destroyed Enron documents after learning about an S.E.C. investigation into the company's finances.
Also, the Senate Governmental Affairs Committee was examining whether government policies failed and what new legislation is needed. The first witness was Arthur Levitt, the former S.E.C. chairman whose efforts to tighten auditing standards two years ago were derailed by opposition from Congress. 
Separately, Representative John Conyers Jr. of Michigan, the ranking Democrat on the House Judiciary Committee, formally asked the Justice Department to appoint a special counsel to investigate Enron, arguing the case "represents one of the largest corporate frauds in the nation's history" and citing the large campaign donations Enron has provided to President Bush over the years and the large number of senior administration officials who worked for or invested in the company.
A Justice Department official said that he had not seen Mr. Conyers's letter and that officials were still proceeding with their criminal investigation.
The Senate Finance Committee asked Enron on Wednesday to turn over tax returns for the past 16 years, in a letter sent by the committee chairman, Max Baucus, Democrat of Montana, and the ranking Republican, Charles E. Grassley of Iowa. Their request follows the disclosure in The New York Times last week that Enron used almost 900 subsidiaries in tax-haven countries and other techniques to pay no income taxes in four of the last five years.
In an interview, Mr. Greenwood said Mr. Duncan had sought immunity for his testimony but had been rebuffed. Justice Department officials are worried that grants of immunity made by Congress might hamper their criminal investigation of Enron and Andersen.
Investigators had asked Andersen's chief executive, Joseph F. Berardino, to appear, but Mr. Berardino said he would be willing to attend on a later date. Instead, Dorsey Baskin, a senior technical expert at Andersen, testified, as did Nancy Temple, an in-house lawyer for Andersen in Chicago.
While the House subcommittee hearing is focusing on Andersen's document destruction, attention will turn later to the reasons for Enron's flawed accounting. In Mr. Duncan's memo, the auditor says Andersen had expressed serious reservations about Enron's accounting, particularly the company's description of large losses as "nonrecurring," or one-time, charges.
Andersen had advised Enron that its use of the term "could potentially be misunderstood by investors," Mr. Duncan's memo states. "We pointed out that such items are, more often than not, included in normal operating earnings in" financial statements that are put together using generally accepted accounting practices.
The next day - the same day Enron disclosed the earnings press release that Mr. Duncan objected to - Ms. Temple, who had been involved in discussing the matter with Mr. Duncan, sent an e-mail message to Mr. Duncan and others at the firm suggesting that language be deleted from the memo "that might suggest we have concluded the release is misleading."
A copy of the message showed that Ms. Temple appeared to be worried about potential litigation on Enron's finances and she sought to remove her name from the list of people who received the document: "If my name is mentioned it increases the chances that I might be a witness, which I prefer to avoid."
Ms. Temple's lawyer did not return a telephone call for comment. Mr. Leonard, the Andersen spokesman, said Ms. Temple was simply worried about waiving attorney-client privilege. Her reference to not concluding that the press release is misleading reflects her understanding that auditors "don't have a right or responsibility to pass judgment on press releases," only formal financial statements, he added.
Mr. Duncan, 42, has told investigators that he was only destroying documents in keeping with an Oct. 12 e-mail message from Ms. Temple that emphasized that they follow a policy requiring some documents be destroyed. Mr. Duncan has told investigators he stopped shredding after Ms. Temple ordered it halted Nov. 9.
While Andersen officials have sought to blame Mr. Duncan and other employees in Houston office for the destruction of the documents, investigators are skeptical and want to probe why the firm waited more than two weeks after Enron disclosed the S.E.C. investigation to order the shredding stopped.
Mr. Greenwood said that in interviews with committee investigators, Mr. Duncan stated that on at least two occasions before Oct. 12, Ms. Temple asked him, "How are you on compliance with the document-retention on Enron?" 
"Did she really mean that," Mr. Greenwood asked, "or did she mean, `How are you doing on getting rid of the documents?"'

Enron's chief auditor refuses to testify
Lawmakers describe widespread destruction of Enron documents at Andersen
January 24, 2002 Posted: 1:17 PM EST (1817 GMT)
WASHINGTON (CNN) -- The former Andersen LLP auditor who handled Enron's books refused to testify at Thursday's opening hearing of a congressional panel investigating the shredding of documents related to the Enron collapse. 
Top auditor David Duncan, since fired by Anderson -- which did Enron's accounts -- invoked his Fifth Amendment rights against self incrimination and declined to speak further. 
Lawmakers on the investigative subcommittee of the House Energy and Commerce Committee described on Thursday what they called widespread and systematic effort to shred Enron-related documents at the company's accounting firm and charged that the practice, which was later suspended, has impeded investigations and could lead to criminal charges. 
Duncan, who was the first to be called to testify, had earlier said through his lawyer that he would refuse to testify before the congressional panel unless he was granted immunity. Lawmakers left open the possibility that he will return before the committee at a later date. 
"Mr. Duncan, Enron robbed a bank. Arthur Andersen provided the getaway car and they say you were at the wheel," Rep. James Greenwood, R-Pennsylvania, the subcommittee chairman, told Duncan shortly after he was sworn in to testify. 
But when Greenwood asked whether he ordered the destruction of Enron documents in an attempt to subvert investigators, Duncan declined to answer. 
"Mr. Chairman, I would like to answer the committee's questions but on the advice of my counsel I respectfully decline to answer the question based on the protection afforded to me under the Constitution of the United States," Duncan said, repeating it when asked to clarify. 
Greenwood dismissed him from the hearing room, but said Duncan might return to testify at a later date. 
Other Andersen executives were also scheduled to testify at the hearing on Enron, the energy giant that filed the biggest bankruptcy case in U.S. history 
Panel members were highly critical of Andersen executives. 
"It is clear that scores of professionals and support staff were involved in the shredding of paper and deletion of computer files relating to the Enron audit. Yet to date, committee investigators have been unable to locate or learn about a single Andersen employee who raised any concerns or objections about destroying Enron-related documents even after the [Securities and Exchange Commission] inquiry became public," Greenwood said. 
Rep. John Dingell, D-Michigan, the ranking member on the panel, said the accounting firm's shredding of documents "was either criminally stupid or stupidly criminal, or both." 
Lawmakers vowed to get to the bottom of Enron's bankruptcy. 
"Let me make it clear, this committee will cut no one any slack as we go forward," said Rep. Billy Tauzin, R-Louisiana, the chairman of the full Energy and Commerce Committee. "If there has been corporate wrongdoing, we'll unroot it. If there's personal or corporate attempts to hide the facts, we'll uncover them and people will answer for them." 
Tauzin said before the hearing that it is likely criminal charges will be filed because of indications that both Enron and Anderson shredded financial documents after Enron filed for bankruptcy and as it faced numerous investigations and lawsuits. 
"I would not be surprised if some criminal indictments come out of this," Tauzin told CNN in an interview before the hearing started. 
One congressional aide said the shredding at Andersen was more widespread than the company has acknowledged, involving as many as 80 employees. 
The hearing came a day after Kenneth Lay resigned from his role as chairman and chief executive of the collapsed energy giant. 
"I want to see Enron survive, and for that to happen, we need someone at the helm who can focus 100 percent of his efforts on reorganizing the company and preserving value for our creditors and hard-working employees," Lay said in a written statement. 
"Unfortunately, with the multiple inquiries and investigations that currently require much of my time, it is becoming increasingly difficult to concentrate fully on what is most important to Enron's stakeholders." 
Lay will remain on Enron's board, but he will step down as the company's leadership post, the company announced. The move came after talks with the creditor's committee at Enron, Lay said. 
Enron filed for bankruptcy in December. Before its sudden collapse, it was ranked the seventh-largest U.S. company in terms of revenue. 
In October, Enron was forced to disclose that it had concealed more than $500 million in debt from related partnerships led by company executives. Its stock, which once traded at nearly $90 a share, sank to less than $1 a share. 
The company's collapse has sparked a Justice Department probe and numerous congressional investigations. The company and its executives have been the single biggest group of contributors to President Bush and other Republican campaigns, and they have donated to many Democratic lawmakers as well. 
Enron's executives and directors sold about $1.3 billion worth of stock in the last three years, with Lay making $119 million, according to a Thomson Financial study that CNN commissioned. One particularly controversial aspect of the company's collapse is that employees were barred from selling stock held in their 401 (k) plans even as executives were unloading their plummeting shares. The prohibition decimated the retirement accounts of many employees. 
The Andersen accounting firm admitted its employees shredded documents relating to Enron audits in the days after the company's problems became public. 
Andersen CEO Joseph Berardino conceded Sunday that his company made errors but said that Enron's demise ultimately was the result of a failed business model, not shady accounting. 
A former Enron executive said Monday that employees at the company's headquarters in Houston, Texas, were shredding documents as late as January 14 in spite of the company's bankruptcy filing that costs thousands of investors and employees their life savings. Security guards were posted in the building Wednesday to prevent further shredding. 

Enron Duncan Text
By The Associated Press

01/24/2002
Associated Press Newswires
Copyright 2002. The Associated Press. All Rights Reserved.

The discussion Thursday between fired Enron auditor David Duncan and Rep. Jim Greenwood, R-Pa., chairman of a House Energy and Commerce subcommittee investigating the Enron collapse: 
GREENWOOD: Good morning, Mr. Duncan.
Mr. Duncan is here with us today under subpoena. To date, Mr. Duncan has cooperated with this committee in our search for the facts by submitting to an interview last week with our committee investigator that lasted more than four hours. 
Yet we received a letter from his counsel yesterday stating that Mr. Duncan authorized his counsel to advise the committee that he will, quote, rely on his constitutional right not to testify, close quote. 
I believe that this privilege should be personally exercised by, before the members, and that's why we have requested Mr. Duncan's appearance here today and request that he reconsider. 
Mr. Duncan, you're aware that the committee is holding an investigative hearing and that in doing so we have the practice of taking testimony under oath. Do you have objection to testifying under oath? 
DUNCAN: No sir. 
GREENWOOD: Thank you. The chair also advises you that under the rules of the House and the rules of the committee, you are entitled to be advised by counsel. Do you desire to be advised by counsel during your testimony today? 
DUNCAN: Yes sir. 
GREENWOOD: In that case, would you please rise and raise your right hand, and I will swear you in. Mr. Duncan, do you swear that you will tell, the testimony you will give this committee is the truth, the whole truth and nothing but the truth? 
DUNCAN: Yes, Mr. Chairman. 
GREENWOOD: Thank you, Mr. Duncan. You are now under oath and you may give a 5-minute summary of your written testimony if you choose to. 
DUNCAN: I have no summary, sir. 
GREENWOOD: OK. The chair will recognize himself for questioning. Mr. Duncan, Enron robbed the bank. Arthur Anderson provided the getaway car, and they say you were at the wheel. 
I have a specific question for you, Mr. Duncan. You were fired by Anderson last week for orchestrating an expedited effort among the Anderson-Enron engagement team to destroy thousands of paper documents and electronic files relating to the Enron matter after learning of an inquiry by the Securities and Exchange Commission into Enron's complex financial transactions. Did you give an order to destroy documents in an attempt to subvert governmental investigations into Enron's financial collapse, and if so, did you do so at the direction or suggestion of anyone at Anderson or at Enron? 
DUNCAN: Mr. Chairman, I would like to answer the committee's questions, but on the advice of my counsel I respectfully decline to answer the question based on the protection afforded me under the Constitution of the United States. 
GREENWOOD: Let me be clear, Mr. Duncan. Are you refusing to answer the question on the basis of the protections afforded to you under the Fifth Amendment to the United States Constitution? 
DUNCAN: Again, on the advice of my counsel, respectfully I respectfully decline to answer the question based on the protection afforded me under the United States Constitution. 
GREENWOOD: Will you invoke your Fifth Amendment rights in response to all of our questions here today? 
DUNCAN: Respectfully that will be my response to all of your questions. 
GREENWOOD: I am disappointed to hear that, but it is therefore the chair's intention to dismiss the witness. Mr. Duncan, we thank you for your attendance today and your respect for this committee's process. You are dismissed.

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

USA: Lawyers see settlement of massive Andersen suits.
By Gail Appleson, Law Correspondent

01/24/2002
Reuters English News Service
(C) Reuters Limited 2002.

NEW YORK, Jan 24 (Reuters) - Andersen, which handled Enron Corp.'s audits, will have to pay what could be hundreds of millions of dollars to settle massive civil litigation if it hopes to survive the scandal over the energy trader's collapse, legal experts say. 
"This is one that will never get to trial," said Robert McTamaney, partner at the New York law firm of Carter, Ledyard & Milburn.
Some experts said Andersen will have to move quickly to reach a deal that will limit civil liabilities and restore confidence in the firm. But they said it will take an enormous sum to do so, raising questions as to just how much Andersen and its insurers can handle. 
While the insurance amount is confidential, insurance sources have told Reuters they think Andersen has a maximum of $500 million in professional liability coverage in the commercial market plus funds held in several self-owned Bermuda insurance entities. 
Even if Andersen can withstand a huge settlement and other costs growing out of potential legal woes, lawyers said it faces an even tougher issue. 
"It's not a question of money, but of the credibility of the firm," said Stephen Younger, a partner at New York's Patterson, Belknap, Webb & Tyler, adding that Andersen's future will be affected by the departures of clients and its own employees. 
Dozens of class-action suits filed by Enron employee benefit plans and outside investors who bought artificially inflated Enron stock are piling up against Andersen mostly in Houston federal court. 
The Chicago-based Andersen has come under fire for approving accounting practices that enabled Enron to use hundreds of partnerships to hide debt or generate questionable profits. 
RACKETEERING LAWS 
As recently as Wednesday a suit was filed by Enron employees alleging Andersen and Enron officials broke federal racketeering laws. The suit alleges the defendants conspired to hide Enron's true financial condition by withholding critical information, causing employees to lose more than $1.3 billion from their retirement funds. 
Lawyers expect the cases will be certified as class actions and consolidated in one court. 
The accounting firm's exposure has grown significantly because Enron's Dec. 2 bankruptcy filing has stayed all litigation against the fallen energy company. 
"Clearly Arthur Andersen is a nice deep pocket," said Marc Galanter, University of Wisconsin law professor, who pointed out that class-action suits rarely go to trial. 
Defendants in class-action litigation often choose to settle cases for a lump sum even if they feel they have done nothing wrong. Such pacts can end the uncertainty over the length and cost of litigation. Therefore, settlements are often seen as less risky and cheaper than fighting individual cases particularly if there are many plaintiffs. 
Although plaintiffs can opt out of a settlement, the majority of them usually participate. 
As the civil cases over Enron's accounting measures are multiplying, Congress, the Justice Department, and state and federal regulators are investigating whether Andersen acted improperly. 
On Thursday, for example, a House subcommittee held a hearing on Andersen's shredding of documents relating to Enron. 
While it is unclear whether these probes will result in charges or other actions against Andersen, the pending civil cases are an existing threat. 
SIX MONTHS? THREE YEARS? 
"The million dollar question is when will they be settled," said Younger. 
Expert's predictions ranged from six months to three years. Some doubted that a judge or jury would ever even have the chance to decide the key allegations of the suits. 
"The train wreck has already happened and this is not about whether the conductor did or didn't switch tracks," said David White, a principal of Washington D.C.-based Mission Strategies, a public affairs consulting firm that specializes in crisis communication and litigation matters. 
"Now it's a matter of picking up the pieces," he said, adding that he thought the settlement would be reached in a matter of months, not years. 
Younger said he would expect it would take at least six months for the different parties to begin building their cases. He said other matters will probably affect the timing including how long it takes to determine the size of the class and whether civil litigation will be stayed by proceedings in Enron's bankruptcy or by possible criminal cases. 
However, he thought Andersen's management would act "sooner rather than later because if they don't, the firm won't survive." 
McTamaney thought it would take two to three years to settle the civil cases, but that Andersen would remain a viable company. 
"I think it's highly unlikely that Arthur Andersen will end up in bankruptcy," he said, adding that he felt the firm's accountants are excellent professionals. 
"I think the claims against them reflect the difficulties inherent in auditing a massively complex financial enterprise which itself seemed determined to possibly misdirect financial attention to arguably more attractive aspects of its business and away from the problem areas," he said.

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

State Board Confirms Investigation into Arthur Andersen LLP/Enron Audit

01/24/2002
PR Newswire
(Copyright (c) 2002, PR Newswire)

AUSTIN, Texas, Jan. 24 /PRNewswire/ -- Attorneys for Arthur Andersen LLP have given the Texas State Board of Public Accountancy permission to disclose that in November 2001 the Board opened an official investigation into Andersen's audit of Enron. 
The Texas Board is prohibited by law from disclosing any specific details of this matter. The Public Accountancy Act, the Board's enabling statute, expressly states that information gathered or received regarding a disciplinary action against a license holder is confidential and not subject to public disclosure until: 
* the Board receives the respondent's written permission to disclose 
that an investigation is underway; 
* the Board has issued a final order in a disciplinary action resulting 
from an informal proceeding; or 
* the Board has held a formal public hearing in the matter.
The Texas Board is statutorily mandated to protect the public by ensuring that persons issued CPA certificates possess the necessary education, skills, and capabilities and that they perform competently when serving the public. 
Each state board of public accountancy issues its own CPA certificate and license, and therefore is the only entity that can carry out disciplinary actions involving the forfeiture of a certificate or license. Individual state boards of accountancy regulate not only CPAs who provide services to SEC registrants, but also those who work with smaller companies. 
The Texas Board's efforts include ensuring that appropriate action is taken and that due process is carried out in all enforcement cases. The staff annually investigates and prosecutes approximately 300 alleged violations of the rules of professional conduct and the statute. 
The Texas Board's disciplinary process begins with a complaint, filed either by a member of the public, another government entity, or on the Board's own initiative. A staff investigation follows, sometimes with the assistance of an outside technical consultant. 
The Texas Board designates certain investigations as "major cases." These involve CPA firms implicated in the audits of failed or troubled savings and loan organizations, financial institutions, insurance companies, and other cases of a major nature. Such cases are more complex and require substantial resources for pre-hearing preparations and prosecution. The Texas Board engages the Texas Attorney General's office to assist in the prosecutorial process. 
"I am proud of the Board's long record of vigorously investigating all complaints against CPAs," said K. Michael Conway, CPA from Midland and the Texas Board's presiding officer. "The Board administers a wide range of sanctions against individual CPAs and/or CPA firms that are found to have violated the Public Accountancy Act or Board rules. The publishing of sanctions against CPAs and/or CPA firms is an integral part of protecting the public." 
For additional information on the Texas Board and its enforcement process, see http://www.tsbpa.state.tx.us. On the home page, scroll down to QUICK LINKS and then click on TEXAS STATE BOARD REPORTS. This newsletter is distributed to all Texas CPAs and contains summaries of the Board's recent sanctions. 

/CONTACT: William Treacy for Texas State Board of Public Accountancy, +1-512-305-7801/ 14:06 EST 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	


Fed's Greenspan Comments on `Egregious' Accounting at Enron
2002-01-24 12:40 (New York)

     Washington, Jan. 24 (Bloomberg) -- The following are comments from Federal Reserve Chairman Alan Greenspan on accounting practices at Enron Corp. Greenspan's remarks came during the question-and-answer part of testimony to the Senate Budget Committee.
     ``I think that the extraordinary response to Enron is something I think is very helpful and indeed an indication that the people in this society have required that we maintain a very high standard of trustworthiness in our business operations,'' Greenspan said.
     ``If everybody did what is alleged in the Enron accounting system, our system could not work,'' he said. ``That is, if you have a system, a market system, it works off information. If you don't have a way to evaluate a particular asset you cannot price it and if you cannot price it you cannot get the appropriate allocation of capital in a market society.''
     As to Enron's accounting practices, Greenspan said: ``I think that was an egregious act. I tried as hard as I could to find an economic reason why those affiliates were constructed the way they were. The simplest explanation was the obvious explanation: that they did not want to indicate what their true earnings position was.''
     Greenspan said he would be concerned about Enron's practices harming the economy ``if there wasn't a reaction to it.''
     ``But the reaction, I think, is going to create a really major rethinking by a lot of people about whether there is a spin game going on with respect to the information coming out of business into the investment community,'' he said.
     While ``there's been an element of that'' in the past, ``I think there's going to be a good deal less of that. The old issue of competing for reputation is going to re-emerge. 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 `our accounts you can rely on' and that probably will increase their price-earnings ratios.''

--Michael McKee in Washington (202) 624-1895 or mmckee@bloomberg.net. Editor: Greene


Greenspan Says Enron 'Abrogated' Good Will Of US Public

01/24/2002
Dow Jones Capital Markets Report
(Copyright (c) 2002, Dow Jones & Company, Inc.)

WASHINGTON -(Dow Jones)- Federal Reserve Chairman Alan Greenspan on Thursday joined President George W. Bush in denouncing the business conduct of Enron Corp. (ENRNQ), accusing the company of abrogating the "good will" that it enjoyed from the public and its own employees. 
Testifying before the Senate Budget Committee, Greenspan said the public outrage over Enron's conduct before its collapse was justified. "I think it is a very good sign," he said. "I think it tells us that because the whole structure of American business is so fundamentally based on trust, any abrogation of that trust creates a real furor, which it should.
"There are other places in the world in which an episode like this would be shrugged off as normal business," Greenspan said. "This is not the case here. It essentially tells us that we are not an economy that takes an erosion of reputation as a minor question." 
Enron is the largest U.S. corporation in history to seek bankruptcy-court protection. It announced last November that it had overstated its earnings by $586 million in the past four years. Its stock lost nearly all its value, depleting the 401(k) retirement accounts of thousands of Enron employees and retirees. 
Bush said this week he was "outraged" that Enron had misled its employees and investors, and said the government should require corporations to disclose more financial information. Greenspan, for his part, said Enron's behavior has been properly condemned. 
"An abrogation of that good will, that clearly has happened - has been taken very seriously by the American public," he said. 
-By Joseph Rebello, Dow Jones Newswires; 202-862-9279; joseph.rebello@dowjones.com

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

USA: Derivatives at root of Enron collapse, expert says.
By Andrew Clark

01/24/2002
Reuters English News Service
(C) Reuters Limited 2002.

WASHINGTON, Jan 24 (Reuters) - Enron Corp.'s extensive use of derivatives, not just its accounting practices, lie at the root of the fallen energy giant's slide into the largest bankruptcy in U.S. history, an expert in the complex financial instruments told Congress on Thursday. 
University of San Diego law professor Frank Partnoy said Enron had used profits from its derivatives trading operation - the full scale of which was little appreciated by investors - to mask losses in its more visible businesses even as some of its employees were fraudulently manipulating those profits.
"It will surprise many investors to learn that Enron was, at its core, a derivatives trading firm," he said in testimony delivered at a Senate Governmental Affairs Committee hearing. 
A former Wall Street derivatives trader and white-collar crime specialist, Partnoy has been researching Enron's business practices for a book he is writing about its collapse. Enron officials had no immediate comment on his allegations. 
"It made billions trading derivatives, but it lost billions on virtually everything else it did, including projects in fiber-optic bandwidth, retail gas and power, water systems and even technology stocks," he said. "Enron used its expertise in derivatives to hide these losses." 
Derivatives are complex financial contracts whose values are linked to underlying variables such as the prices of commodities, stocks or bonds. They are typically used by sophisticated investors to manage risk. 
Partnoy said Enron's use of derivatives both outside and inside the company could be directly linked to its collapse. 
On the outside, he said, they were used to create the company's web of off-balance sheet deals with complex financial partnerships known as special-purpose vehicles. After some of those deals went sour, Enron in October took a $1 billion charge against earnings and a $1.2 billion write-down in shareholder equity, triggering its nosedive into bankruptcy. 
"Specifically, Enron used derivatives and special purpose vehicles in three ways," Partnoy said. 
"First, it hid speculator losses it suffered on technology stocks," he said. "Second, it hid huge debts incurred to finance unprofitable new businesses, including retail energy service. Third, it inflated the value of other troubled businesses, including new ventures in fiber-optic bandwidth." 
MANIPULATION ALLEGED 
But Enron's derivatives problems ran far deeper than the outside special purpose vehicles, Partnoy said, adding he had also gathered information indicating widespread manipulation of the company's derivatives trading revenues. 
"In a nutshell, it appears that some Enron employees used dummy accounts and rigged valuation methodologies to create false profit and loss entries for the derivatives Enron traded," he said. "Simply put, Enron's reported earnings from derivatives seem to be more imagined than real." 
Enron reported more than $16 billion in gains from derivatives over the three years to 2000, Partnoy said. He said the alleged false entries "were systematic and occurred over several years, beginning as early as 1997." 
Partnoy said some Enron traders had misused so-called "prudency reserves," meant to reflect the inherent uncertainty about future profits from derivatives deals, as rainy-day funds to smooth out their profits and losses over time. 
Some had also apparently deliberately misvalued the forward rate curves used to determine the current value of their derivatives portfolios in order to hide losses, he said. 
"I cannot offer fact testimony as to any of these matters," Partnoy told the committee. "Nonetheless, I strongly believe the information I have gathered is credible. It is from many sources, including written information, e-mail correspondence and telephone interviews." 
At least eight congressional committees, as well as the Securities and Exchange Commission and the Department of Justice, are probing Enron's fall from grace and Partnoy said the episode should raise major questions about the regulation of derivatives as well as capital markets in general. 
"The collapse of Enron makes it plain that the key gatekeeper institutions that support our system of market capitalism have failed," he said. "The institutions sharing the blame include auditors, law firms, banks, securities analysts, independent directors and credit rating agencies."

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

Campaign Finance Bill to Get a Vote, Thanks to Enron
2002-01-24 14:24 (New York)

     Washington, Jan. 24 (Bloomberg) -- Advocates of a campaign finance overhaul have obtained the 218 signatures they need to bring their legislation to a vote in the U.S. House, over the
objection of Republican leaders who oppose it.
     The bill's backers said multiple investigations into Enron Corp., which gave almost $6 million to federal candidates since 1989, helped win support from a majority of the 435 lawmakers.
     ``It's a classic reminder of how money buys access and undermines confidence in our democracy,'' said Representative Martin Meehan, a Massachusetts Democrat. ``If anything positive comes out of the Enron scandal, it will be passage of campaign finance reform.''
     The drive to gain signatures on a ``discharge petition'' to enable the debate began last year, after the Senate passed a bill to ban the unlimited and largely unregulated campaign donations known as ``soft money'' and the bill stalled in the House.
     The last four signatures were obtained today, as Enron's December bankruptcy was debated in committees all over Capitol Hill, according to the House Clerk's Office. Representatives
Corrine Brown of Florida, Richard Neal of Massachusetts, Thomas Petri of Wisconsin and Charles Bass of New Hampshire all signed. The first two are Democrats, the last two are Republicans.
     Bass and Petri said they signed after discussing the matter with House Speaker Dennis Hastert, an opponent of the bill.
     ``Unfortunately, we were unable to reach agreement,'' Bass said. ``Today I helped provide the necessary signatures to force a vote.''

Not Scheduled Yet

     Hastert told reporters this week that he anticipated the success of the petition drive. ``We're going to have a leadership discussion on it this weekend,'' he said.
     Representative Christopher Shays, the Republican sponsor from Connecticut, said he expects Hastert to schedule the legislation for floor debate without posing obstacles.
     The petition brings a campaign finance overhaul one step closer to passage, which would change the way U.S. elections are financed. Soft money is one of the few ways that corporations and labor unions can contribute in large amounts.
     Almost $452 million in soft money was given in the last election, including about $30 million from unions and more than $232 million from companies and their trade associations, according to FECInfo, which tracks campaign finance.

No Veto Likely

     The bill before the House is designed to gain approval in the Senate. An administration spokesman said that President George W. Bush is not looking to wield his veto pen.
     ``It depends on what it says, but the president has made it clear he can't be counted on to veto it,'' said White House spokesman Ari Fleischer. ``The president very much wants something
he can sign.''
     In addition to a soft money ban, the bill would limit political advertising close to election time.
     The legislation comes as both parties head toward November's elections, with Democrats controlling the Senate by a single seat out of 100 and Republicans running the House by 11 of the 435 seats.
     The 2000 elections set records for federal spending at about $2.9 billion. This year, both parties are clamoring for cash because fundraising fell off after the Sept. 11 terrorist attacks.
The Republican National Committee, for example, raised $49.4 million in the first six months of 2001 and saw that shrink to $32.6 million in the last half of the year.
     Opponents can still try to change the bill on the House floor with provisions designed to weaken it. Ohio Republican Representative Bob Ney has the support of party leaders with his proposal to limit soft money without banning it.

Enron Boosts Supporters

     Enron and its chairman, Ken Lay, were a major backer of the Republican Party in general and Bush in particular. The company gave almost $6 million in federal contributions since 1989,
including more than $3.6 million in soft money, according to the Center for Responsive Politics, which tracks campaign finance.
     Enron's access to the Bush administration, such as Lay's private meeting with Cheney on energy policy last year, has been a target of editorial-writers. Republicans who defend the
administration use strong language in denouncing the current system.
     ``Here we are again, looking squarely in the face of injustice and abuse of power and privilege,'' said Zach Wamp, a Tennessee Republican. ``People should have had enough and they
should demand change.''
     News of the petition's success traveled quickly through the halls of the Capitol after Brown and Neal appeared on the House floor to deliver the last two signatures. Senator Joe Lieberman, a Connecticut Democrat, interrupted a Governmental Affairs Committee hearing on Enron to announce the ``good news.''

Lobbying Has Begun

     The largest contributor was the American Federation of State, County and Municipal Employees (AFSCME), a labor union that almost $6 million, all to Democrats. The largest corporate contributor was AT&T Corp. at $3.8 million, about 63 percent to Republicans.
     Common Cause, a public interest organization, has dispatched lobbyists to states including Florida and South Dakota to push the bill on radio talk shows and before newspaper editorial boards.
     Senator John McCain, the Arizona Republican credited with getting the bill passed in the Senate, may go out on the stump.
     Opponents of the bill include AFSCME, which sent letters to the entire Congress urging them not to support the bill or sign the petition. A soft money ban will hamper voter participation,
the letter said.
     ``This limitation would significantly interfere with the ability of state and local candidates to communicate with the electorate,'' it said.
     Matthew Keller, a Common Cause lobbyist, said he doesn't mind the opposition.
     ``This means it's real again,'' he said.

--Glen Justice in Washington (202) 624-1984 or gjustice@bloomberg.net. Editor: Gettinger.

SEC Chairman Pitt's Plan `Needs More Teeth,' Levitt Says
2002-01-24 12:42 (New York)

     Washington, Jan. 24 (Bloomberg) -- Securities and Exchange Commission Chairman Harvey Pitt's plan for accountant oversight ``needs more teeth,'' and Congress should step in with legislation in the wake of Enron Corp.'s collapse, former SEC Chairman Arthur Levitt told Congress.
     ``We need a truly independent oversight body,'' Levitt told the Senate Government Affairs Committee, which opened hearings today on Enron's bankruptcy and the role played by its auditor, Arthur Andersen LLP.
     Levitt, a Democrat who headed the SEC from July 1993 to February 2001, also called for a ban on accounting firms' auditing and consulting for the same company. He said companies should be required to change auditors every five to seven years.
     Pitt, a Republican, has proposed a private accountants oversight group that would supervise audit reviews and discipline accountants for incompetence and ethics violations. His plan, which is still being worked out, calls for a majority of the board to be made up of public members, and for the group to be funded by the private sector outside the accounting industry.
     ``The initial Pitt proposal needs more teeth,'' Levitt said. All the board members of the new group should be drawn from the public sector, he said.
     Levitt is now a director of Bloomberg LP, parent of Bloomberg News.

--Neil Roland in Washington (202) 624-1868 or nroland@bloomberg.net. Editor: Parry.



Enron Asks Ct For Quick OK Of India Unit Sale To BG Grp
2002-01-24 16:33 (New York)

   By Kathy Chu 
   Of DOW JONES NEWSWIRES 

  NEW YORK (Dow Jones)--Bankrupt Enron Corp. (ENRNQ) is asking a federal
bankruptcy court for speedy approval of its  Enron Oil & Gas India unit sale to
BG Group PLC (BRG) for $350 million cash. 

  The transaction must be completed by Feb. 15, according to court documents,
or BG Group, a U.K. oil and gas company,  can walk away. 

  An "overwhelming need" exists to promptly close the sale, the distressed
company said in a filing with the U.S. Bankruptcy Court of the Southern
District of New York. Failure to "expeditiously authorize the approval of the
sale of EOGIL will adversely affect the ability to close on this valuable
transaction," according to Enron. 

  The operation, or management rights, of Enron's upstream  oil and gas assets
in India is not a condition of the re-negotiated deal. 

  The energy-trading company - which originally signed a deal to sell the
assets to BG for $388 million - is asking the bankruptcy court for an early
February hearing to consider approval of the transaction. 
 
  (MORE) DOW JONES NEWS  01-24-02

SEC Considers Post-Enron Changes To Financial Reports
By Judith Burns

01/24/2002
Dow Jones News Service
(Copyright (c) 2002, Dow Jones & Company, Inc.)

Of DOW JONES NEWSWIRES 

SAN DIEGO -(Dow Jones)- Securities regulators are looking at ways to improve corporate financial reports in light of the collapse of Enron Corp. (ENRNQ), senior Securities and Exchange Commission officials said Thursday.
Changes such as greater scrutiny of Fortune 500 companies already have been announced. Others are in the works, including a proposal to permit companies to provide streamlined financial reports and include information on trends and other nonfinancial topics, SEC officials said. They gave the customary disclaimer that their remarks reflect their own views, not those of the SEC. 
"Enron has been very harmful, in devastating ways, to a lot of people, and the regulatory system did not prevent that," SEC general counsel David Becker said at Northwestern University law conference here. He said that has prompted regulators to consider changes to prevent similar accounting blowups in the future. 
For starters, the SEC will begin screening annual reports filed by Fortune 500 companies, beginning this month when 2001 reports are filed with the agency. 
If screening indicates a need for further scrutiny, "we will undertake a review," promised Alan Beller, director of the SEC's corporation finance division, speaking to the same group. "There will be no communication with the company" in the process, he added. 
The SEC hasn't said what might trigger concerns, but officials noted the agency has highlighted the need for better management discussion and analysis in corporate annual reports, including of off-balance sheet items and related party transactions, two areas that tripped up Enron. 
Enron, formerly ranked No. 7 on the Fortune 500, went bankrupt last year after announcing it had overstated four-and-a-half years' worth of earnings. The Houston energy company and its auditor, Arthur Andersen, are under investigation by the SEC, the Justice Department and various congressional committees. 
In response, SEC Chairman Harvey Pitt proposed creating a new private organization to oversee U.S. accountants and auditors. Becker said he hopes that will lead to reform, "rather than recrimination." 
Pitt's past ties to accountants - he represented Big Five firms in his private legal practice - isn't fair game for critics, Becker suggested. He said critics should focus "on the substance" of Pitt's proposal and not attribute a "darker motive" to him based on his "former clients." 
"All that counts, everything that counts, is what works" to protect investors, Becker said. 
Even before Enron's collapse, critics complained its financial reports obscured the company's real condition and have called for more disclosure of off-balance sheet items and deals. 
To that end, SEC chief accountant Robert Herdman said the SEC is likely to propose new rules to require better disclosure of corporate accounting policies, building on already issued guidance. 
"I guarantee there's going to be something out well before the end of this year," Herdman said Wednesday. 
Corporate decisions such as choosing an aggressive or conservative approach can have a huge impact on reported earnings, a fact Herdman said may be lost on investors. 
The SEC may require companies to identify critical accounting policies that affect reported earnings, making that "a required component of management discussion and analysis," Herdman said. 
"Accounting doesn't all come down to one number," Herdman stressed. While companies report precise earnings per share, he said a range of estimates may be "closer to the truth" than a single number. 
Another change being considered by the SEC, which Herdman outlined Thursday, would allow companies to provide shortened summary financial reports showing key results. 
"We think this has a lot of potential," said Herdman. "We're building a prototype now." 
The SEC floated a similar plan in the past, but withdrew it in the face of strong objections from investors who feared summary reports would omit important details. Corporations also blasted the idea, citing concerns that condensed reports could trigger more lawsuits from aggrieved investors. 
However, Internet technology could make the idea more appealing now and resolve those concerns, said Herdman. 
Herdman said he'd like the SEC to post a sample on the Internet, allowing investors to test how they could use a streamlined financial report with hypertext links to see as much or as little information as they want. 
Whether companies would still need to provide printed copies of complete financial reports to investors if the SEC approves streamlined reports is still being debated, along with technical matters such as whether the SEC's computers would be able to handle such reports. 
In addition to mulling condensed financial reports, Herdman said the SEC is considering other changes that would allow corporations to report nonfinancial information such as industry or corporate trends. Whether the SEC should require companies to disclose this information, or simply permit them to do so if they wish, has yet to be decided, he added. 
-By Judith Burns, Dow Jones Newswires; 202-862-6692; judith.burns@dowjones.com

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

Eyeless in Houston
The Real Values Crisis Behind the Enron Collapse

Commentary By Michael S. Malone
Editor-at-Large, Forbes ASAP
Special to ABCNEWS.com

Jan. 24 - The Enron scandal is really about a crisis of values - including one nobody seems to have noticed. 


Some of the values in disarray in this case are visible to everyone. There is, for example the most obvious one: How did a company with assets of only a few hundred million dollars, or at most a couple billion, have a market value of $100 billion? 
This, of course, isn't Enron's fault, but ours. We're the ones who drove the stock price up over $100 at the height of the boom. We're the ones who actually believed that companies like Enron could, in our lifetimes, actually grow their earnings to justify such stratospheric, and historically unprecedented, multiples. Why did we believe it, despite all reason? Because we were greedy. 
Then there is the value crisis of the industry analysts, those morons who were still putting out "buy" notices on Enron even after it was apparent to even the most dimwitted observer that the companies was a dangerous house of cards. Either these people were perfect fools and dupes (which is precisely what they were hired not to be), or shills for Enron, or were covering their own investments. Whatever, they placed their own interests over the needs of their clients and the public at large. 
Next comes the cravenness of our elected representatives. So far, Enron's well-placed sacks of money seemed to have bought more largesse from the Clinton Adminstration than the Bush (big surprise), but that is hardly any consolation. The bottom line is that everybody Congress to the White House, GOP and Dem, took the money and then they took the calls. Do you think you could call the Treasury Secretary and get a prompt reply? 
Drinking the Kool-Aid 
Then, of course, there is the management of Enron. In certain areas I'm a little more sympathetic than most people to Kenneth Lay and his gang of idiots. I've spent my life around entrepreneurial teams, and I know well how important it is to believe the plan, to drink the Kool-Aid. You have to act like a billion dollar company even as the office equipment company is repossessing the furniture. 
I even understand why the company put such a large percentage of its own stock in the employee 401(k) plan: it thought it was doing the employees a huge favor. The employees thought so too - I don't remember any of them complaining about it when the stock was hovering around $100. 
But one thing was reprehensible: That was when Lay, after he knew the company was going down, still promoted the purchase of company stock to his own employees and to the world at large. That was an unforgivable moral lapse. 
If he was a man of honor he would personally buy back every share bought by employees and private investors in the days after that announcement. If he is financially destroyed in the process, too bad, that's what standing by your values is all about. 
Keeping Up with the Hyperspeed Economy 
That brings us to Arthur Andersen - and the crisis no one is talking about. The obvious scandal is that Arthur Andersen's audit team once again failed miserably. Was it incompetence or conflict of interest? 
If there is any part of this story that demands an investigation - by Congress, by Justice, by the accounting industry itself - it is the moral failure of a leading firm in the profession to fulfill its moral duty to unflinchingly, and without bias, uncover the truth and present to the weak, the vulnerable and those without influence or voice. 
But we can't stop at Arthur Andersen. The real "values" crisis represented by the Enron mess is far deeper, and stretches across our economy. We are all being victimized by it, and the situation is growing ever worse. It is the great unreported business story of our time: the growing failure of the accounting system to accurately capture what is going in the new hyperspeed economy. 
Simply put, we have no idea what any company is worth today. The accounting industry is mired in a system that was devised 600 years ago and has only been fine-tuned ever since. It doesn't work any more. Accountants know it, corporate executives know it, and the stock market knows it. 
The general recognition of this fact has led to a widespread ethical sloppiness made manifest in such things as Arthur Andersen's apparent conflict. The reality is that the only time anybody really checks an audit anymore is after a financial disaster like Enron, when scapegoats must be found. 
Rear-View Mirror Accounting 
I once likened traditional accounting to driving a car by only looking in the rear view mirror. It can tell you where a company has recently been, but it is unable to tell you where that company is now. And in a world in which change occurs in nanoseconds, such obsolete data is worthless. 
Today, events arrive so swiftly, and change so constant, that it is no longer even enough to operate in the present. Modern business now runs in the future. The result is a growing gap between traditional "book" value and actual market value - and through that gap drives not only companies like Enron, but truly valuable firms like General Electric and Intel. 
Traditional accounting has long dealt with that gap through a line entry entitled "goodwill." But it was typically only added when a company sold for more than the total value of its inventory, buildings, etc. At most, this goodwill only represented a few percent of the total value. 
That was then. In the modern economy, for great, fast moving, innovative young companies this so-called "goodwill" can represent 90 percent of their value. When a corporate audit can only tell us about ten percent of a company, what the hell is the point? 
There have been a number of efforts in recent years to come up with innovative new ways to determine corporate value, many of them under the all-encompassing terms "intellectual capital" or "intangible assets". But they are still in their earliest stages, and most slam up against the formidable wall of the traditional accounting industry. 
Perhaps the Enron scandal will finally open our eyes. Maybe even a few company executives and Arthur Andersen accountants will go to jail. Maybe even, wish upon wish, the SEC will demand more timely and encompassing financial reporting. 
But have no illusions. There will be many more Enrons in the years ahead. And until we fix this problem, we are thrashing about without direction. We are blind.
_________________________________

More Enrons to come?
By Wolf Blitzer
CNN Wolf Blitzer Reports
January 24, 2002
WASHINGTON (CNN) -- By now, we have all heard the Enron horror stories about how employees there lost virtually their entire life savings when the once-huge energy giant became the largest bankruptcy in American history. Lest we forget -- it wasn't very long ago when Enron was the seventh largest company in the United States. 
I spoke with two former Enron employees the other day and heard their very sad stories. Roger Boyce worked in the field of safety and security for Enron in Minneapolis. Just months ago his retirement plan was worth more than $2 million. He's now retired, and his plan is worth "probably about $3,000." He's taken a nearly $2 million hit. 
He may have worked in the field of safety and security, but he personally wound up with neither. 
Janice Farmer was an Enron administrator in Orlando. She told me her retirement plan was once worth $700,000. "I was able to sell my stock before it actually hit the rock bottom," she said. "I sold at $4 and a penny [per share], and I received a check for $20,418." That's about a $680,000 hit. 
These are not isolated horror stories. Unfortunately, there are thousands of them. And what makes the matter even sadder is the fact that some of the top Enron executives sold their stock earlier and were able to make tens and even hundreds of millions of dollars. 
"I think it is becoming increasingly clear that employees and retirees were more than victimized by the Enron executives," Farmer said bitterly. "We were sacrificed for their own personal gain." 
Boyce agreed. "It should never have happened. There were risks that companies should never take, and they took it, and we're the victims." 
The Enron collapse has now been followed by the bankruptcy of another U.S. business giant -- Kmart. Indeed, most of us probably had never heard of Enron only a few months ago; all of us know the retail giant Kmart. 
I asked Steve Forbes, the President and CEO of Forbes, Inc, and former Republican presidential candidate, to tell me the difference between Enron and Kmart. As usual, he was blunt. 
Enron, he said, collapsed not only because of bad management, but because that management "went over the edge on fraud." Kmart, on the other hand, is today in dire straits because of bad management. He noted that ten years ago, Kmart had the same sales as Wal-Mart. Today, Wal-Mart has six times the sales of Kmart. "They didn't relocate into more profitable areas," Forbes told me. "They didn't keep up in terms of having good inventory systems, which Wal-Mart did. So that was a case of purely bad management." 
Forbes also pointed out that there are other huge companies out there already in deep financial trouble though he refused to name names. "But you look at areas, and the telecoms, there are still some disasters to come," he said. "They are overloaded with debt. And as a matter of fact, in terms of Enron, where the focus is right now, we have had huge busts in telecommunications and dot-coms. Hundreds of billions of dollars have been lost." 
So get ready for more roller-coaster rides as the economy shakes itself out. Remember -- don't make the mistake in trusting your retirement plans to only one or two investments. Diversify. 
-- Wolf Blitzer 

Media Advisory: Enron Legal Documents Available at FindLaw

01/24/2002
PR Newswire
(Copyright (c) 2002, PR Newswire)

FindLaw Investigations-Enron Hosts Latest Court Documents, High-Level 
Corporate and Government Correspondences, SEC Filings 

MOUNTAIN VIEW, Calif., Jan. 24 /PRNewswire/ -- FindLaw has gathered legal resources relating to the rise and fall of Enron into a free online resource called FindLaw Investigations - Enron. This remarkable collection of court documents, letters and e-mail messages from key Enron and Arthur Andersen figures, and letters and statements relating to congressional inquiries is available at FindLaw.com, the Internet's most highly trafficked legal information Web site.
FindLaw Investigations - Enron is located at http://news.findlaw.com/legalnews/lit/enron/index.html and is frequently updated. Reporters investigating business, legal, political or ethical angles on the Enron story will find documents relating to: 
-- The Enron bankruptcy case (Chapter 11 petition, consolidated list of 
creditors); 
-- Shareholder lawsuits (class action suits naming Kenneth Lay and Enron 
Corp.); 
-- Enron UBS transaction (Master Agreement Among Enron Entities and UBS 
AG, Comprehensive License Agreement, and more); 
-- Enron Political Action Committee, Inc. (report of receipts and 
disbursements from 1999 to 2001); 
-- Arthur Andersen (e-mail regarding Andersen document retention policy 
and company policy statements); 
-- Congressional Inquiries (letter purportedly from Enron employee Sherron 
Watkins sent to Chairman and CEO Kenneth Lay regarding Enron's 
accounting practices, letter from Representative Waxman to Vice 
President Cheney regarding an Enron meeting, and much more); 
-- SEC Filings back to 1996; 
-- Related Web Sites (FindLaw's Securities Law message board, U.S. House 
Committee on Government Reform, as well as the sites for the major 
players); and 
-- FindLaw legal resources, including case law, legal news and analysis. 

If you have any questions about the availability of specific documents, please contact support@findlaw.com. 
About FindLaw 
FindLaw Inc. ( http://findlaw.com ) is the highest-trafficked legal Web site, providing the most comprehensive legal resources on the Internet for lawyers, businesses and individuals. For businesses and the public, FindLaw provides comprehensive, plain-English legal information and the Internet's largest lawyer directory. For lawyers and legal professionals, FindLaw offers the most complete information, resources and services for careers and practices, including free case law, an online legal career center, breaking legal news, marketing and client development tools, newsletters, message boards, service directories, continuing legal education and legal search tools.

/CONTACT: Scott Augustin for FindLaw, +1-651-848-5793, scott.augustin@findlaw.com / 13:16 EST 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	



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