NYSE Moves To Delist Enron Stock
Dow Jones News Service, 01/15/2002
NYSE says delisting Enron shares - UPDATE
AFX News, 01/15/2002

Writer Of Enron Warning Letter Worked With Ex-CFO Fastow
Dow Jones Energy Service, 01/15/2002

Enron DIP Financing Now Likely Halved To About $700M
Dow Jones News Service, 01/15/2002

Enron Executives, Andersen Sued By Shareholder
Dow Jones Energy Service, 01/15/2002

UBS won't pay anything in deal for Enron trading operation
Associated Press Newswires, 01/15/2002

Enron loans sting bank's bottom line
Associated Press Newswires, 01/15/2002

ODJ Market Special: Bond Futures Rally On Enron Delisting
Dow Jones Commodities Service, 01/15/2002

CAPITAL VIEWS: Early Washington Noise On Budget, Enron
Dow Jones Capital Markets Report, 01/15/2002

Lieberman Asked to Recuse Himself From Enron Probe
PR Newswire, 01/15/2002

Sen. Lieberman Asked to Recuse Himself From Enron Probe
Dow Jones Energy Service,  01/15/2002

USA: Treasury's O'Neill sees positive US economic signs.
Reuters English News Service, 01/15/2002

Nevada Sen. Ensign on panel probing Enron
Associated Press Newswires, 01/15/2002

Enron, which lobbied for corporate tax repeal, faces Congress probe over its own tax returns
Associated Press Newswires, 01/15/2002

Fired Andersen Executive Says He Followed Company Orders
Dow Jones News Service, 01/15/2002

USA: UPDATE 1-Fired Andersen partner to meet investigators Wed.
Reuters English News Service, 01/15/2002

ROUNDUP Andersen fires Enron auditor who knowingly destroyed documents
AFX News, 01/15/2002

Arthur Andersen fires chief Enron auditor; 3 other partners sent on leave
AFX News, 01/15/2002

USA: Business group wary of new regs from Enron case.
Reuters English News Service, 01/15/2002

USA: US official sees Enron slowing energy mart change.
Reuters English News Service, 01/15/2002

Power Trading Business Could Be Good Fit For UBS Warburg
Dow Jones Energy Service, 01/15/2002

USA: UPDATE 1-US lawmaker seeks Enron pension, accounting probes.
Reuters English News Service, 01/15/2002

Enron debacle costs state millions of dollars
Associated Press Newswires, 01/15/2002

Forbes.com Exclusive; Enron: the Wrong Focus
Business Wire, 01/15/2002

Farewell to all that
U.S. News & World Report, 01/21/2002

The Nation Enron Chief Was Warned of Problems Energy: A top officer's memo to Chairman Lay, found by congressional investigators, cautioned that 'funny accounting' practices could embroil the firm in scandal.
Los Angeles Times , 01/15/2002

Enron Analysis
CNNfn: The Money Gang, 01/15/2002

Andersen`s Role in the Enron Collapse
CNNfn: The Money Gang, 01/15/2002

Commentary Bush to Lay: What Was Your Name Again?
Los Angeles Times , 01/15/2002

Commentary When Going Gets Tough, the Tough Shred
Los Angeles Times, 01/15/2002

Search for the Truth Regarding Enron
Los Angeles Times, 01/15/2002

Enron Could End Up Where It Started Energy: The auctions of assets would remove core businesses, leaving a pipeline operator.
Los Angeles Times , 01/15/2002

Ex-Enron Execs Launch Firm to Market Energy
Los Angeles Times, 01/15/2002

Compaq, HP Detail Retention Bonuses Merger: Packages are designed to keep important employees during integration of the technology companies.
Los Angeles Times, 01/15/2002

Back to Business
U.S. News & World Report, 01/21/2002

Leavitt accepted $10,000 from Enron
Associated Press Newswires, 01/15/2002

Employee Warned Enron CEO of Implosion
CNN: Special Report With Aaron Brown, 01/15/2002

__________________________________________________________________

NYSE Moves To Delist Enron Stock
By Gaston F. Ceron

01/15/2002
Dow Jones News Service
(Copyright (c) 2002, Dow Jones & Company, Inc.)

Of DOW JONES NEWSWIRES 

NEW YORK -(Dow Jones)- The New York Stock Exchange said it is suspending trading in Enron Corp. (ENE) and moved to delist the embattled energy company's shares from the Big Board.
The NYSE said in a statement that it "has determined that the company's securities are no longer suitable for trading on the NYSE." The exchange's action affects not only Enron stock, but also other Enron securities, such as preferred convertible stock. 
Enron officials weren't immediately available for comment. 

Enron's collapse last year triggered a huge drop in the company's stock, sending it down to mere pennies a share, as well as layoffs at the Houston company. It also set off the biggest U.S. corporate bankruptcy ever. 
The NYSE moved to delist Enron after the company's stock traded below the critical level of $1 for 30 consecutive days, placing it in violation of the Big Board's listing standards. 
"The exchange notes that today's action is being taken due to the expected protracted nature of the company's bankruptcy process and the uncertainty at this time as to the timing and outcome of this process as well as the ultimate effect on the company's common shareholders," the NYSE said in a written statement. 
The exchange said it will apply to the Securities and Exchange Commission to delist Enron securities "upon the completion of applicable procedures, including any appeal by the company of the NYSE staff's decision." 
The last time Enron shares traded at the NYSE was Thursday. Trading in the shares has been halted since. 
-Gaston F. Ceron, Dow Jones Newswires; 201-938-5234; gaston.ceron@dowjones.com 
Christina Cheddar contributed to this article. 

Reached later, Enron spokeswoman Karen Denne said the NYSE's decision wasn't a surprise to the company. 
"This will have no effect on our business," Denne said. "We are still evaluating the NYSE's decision and have not yet made a final determination of any action we may take." 
-Gaston F. Ceron and Christina Cheddar, Dow Jones Newswires; 201-938-5166; christina.cheddar@dowjones.com

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

NYSE says delisting Enron shares - UPDATE

01/15/2002
AFX News
(c) 2002 by AFP-Extel News Ltd

(Updating to add further details) 
NEW YORK (AFX) - The New York Stock Exchange said it is delisting Enron Corp shares with immediate effect after they traded below the exchange's one usd threshold for more than a month.
The shares, which have been suspended from trading for the past several days pending the announcement of details of the company's sale of its wholesale energy trading unit to UBS Warburg, last traded at 67 cents. 
In a statement, the NYSE said Enron has the right to a review of the decision by a committee of the board of directors of the exchange. 
"The Exchange notes that today's action is being taken due to the expected protracted nature of the company's bankruptcy process and the uncertainty at this time as to the timing and outcome of this process as well as the ultimate effect on the company's common shareholders," said the statement. 
cl/gc

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

Writer Of Enron Warning Letter Worked With Ex-CFO Fastow
By Jason Leopold

01/15/2002
Dow Jones Energy Service
(Copyright (c) 2002, Dow Jones & Company, Inc.)

Of DOW JONES NEWSWIRES 

LOS ANGELES -(Dow Jones)- The letter to Enron Corp. (ENE) Chairman and Chief Executive Ken Lay last August, warning that irregularities relating to Enron's off-balance sheet partnerships could bring about the company's demise, was written by Sherron Watkins, the company's vice president of communications in charge of corporate investigations, employee relations and policy, Enron confirmed late Monday.
The existence of the letter was disclosed Monday afternoon by the House Commerce and Energy Committee, which is investigating the one-time market leader's collapse. 
Watkins had worked for former Chief Financial Officer Andrew Fastow, whose involvement with some of the off-balance sheet partnerships raised questions of conflicts of interest. Enron removed Fastow from his position in October after reporting losses related to transactions involving the Fastow partnerships. 
The letter released by the House committee raised questions about the secrecy and accounting of the off-balance sheet partnerships. 
"I am incredibly nervous that we will implode in a wave of accounting scandals," the letter said. 
Watkins said in the letter that other Enron officials "consistently and constantly" had questioned the accounting methods to senior Enron officials, and directly to Jeff Skilling, Enron's former president and chief executive. 
"Mr. Skilling flatly denies the allegations in the letter related to him," said Judy Leon, a spokeswoman for Skilling. 
On Oct. 16, Enron announced hundreds of millions of dollars in third-quarter losses and a writedown of more than a billion dollars in shareholder equity relating to the partnerships. The company filed for bankruptcy Dec. 2. 
Watkins' letter is the earliest known communication to Enron's CEO that the handling of the partnerships could prove disastrous for the company. 
Letter Writer In Position To 'Learn Things' 

Robert S. Bennett, Enron's attorney, confirmed that Watkins wrote the letter, but didn't immediately know the date. Skilling resigned from the company Aug. 14, citing personal reasons. Skilling said in an interview last month that he had no idea the partnerships posed any threat to Enron. 
Bennett said Watkins had worked closely with Fastow and was in a position to "learn things" about Enron. Bennett couldn't describe the extent of Watkins' work for Enron, nor could a company spokeswoman. 
"She wrote the letter, which was initially an anonymous letter, and when it came to Mr. Lay's attention he became concerned," Bennett said in an interview with Dow Jones Newswires. Lay "went to the general counsel to investigate and get to the bottom of it." 
Bennett said Watkins met Lay for an hour last August to discuss the concerns she brought up in the letter, and he said she left the meeting "quite impressed" when Lay said he would investigate the issue. 
Lay directed Vinson & Elkins, a law firm with offices in Houston, to look into the concerns raised by Watkins, but not to "second-guess" the accounting advice from Andersen, the committee noted. 
Vinson & Elkins concluded that "further widespread investigation by independent counsel and auditors" was unwarranted. But the firm warned that "bad cosmetics" involving the transactions and the decline of Enron's stock posed the "serious risk of adverse publicity and litigation." 
The House Committee on Energy and Commerce acted unfairly by releasing the letter, Bennett said. 
"It's very unfair to suggest the company was trying to whitewash anything," Bennett said. Lay "wanted an answer quickly and not spend a year with a law firm doing an inquiry. I think this shows that what Mr. Lay did is very responsible. If the law firm said an investigation was needed, then Mr. Lay would have agreed." 
Enron, however, made only scant reference to the partnerships on Oct. 16, when the company released its third quarter earnings, which included losses related to transactions with the partnerships. 
It was those losses combined with other disclosures that led to a loss of investor confidence and eventually led to Enron filing for bankruptcy in December. 
Letter Writer Asked To Be Reassigned 

Reached late Monday evening, Philip Hilder, Watkins' Houston attorney, said Watkins worked for Fastow for a couple of months last summer and asked to be reassigned in late August because she was concerned about accounting irregularities she witnessed related to the Fastow partnerships. Hilder wouldn't elaborate. 
"She worked for Mr. Fastow for a short period of time last summer. Maybe a couple of months," said Hilder, who worked for the Department of Justice and was a former federal prosecutor. "She asked to be reassigned." 
Gordon Andrew, Fastow's spokesman, said Fastow "would not comment at this time on any aspect of the investigation." 
Watkins, who had previously worked in the company's broadband division as vice president, has been subpoenaed by the Securities and Exchange Commission but hasn't testified yet, Hilder said. Neither the Justice Department nor the various congressional committees investigating Enron's collapse has subpoenaed Watkins, he said. 
"It's unclear when Watkins will testify before the SEC," Hilder said. 
Hilder said Watkins wasn't a stakeholder in any of the partnerships set up by Fastow nor did she benefit financially from them, but Watkins was "involved" in some capacity in the various entities, the extent of which Hilder wouldn't disclose. Hilder said the letter Watkins wrote to Lay didn't include a date and was, at first, anonymous. He wouldn't say what the events were that led up to her meeting with Lay last August, why she wrote the letter or how her identity as the author became known. 
While Enron's most recent roster lists Watkins as vice president of communications, Hilder said Watkins title was previously vice president of corporate development and that her title may have changed with the company's bankruptcy and restructuring. 
-By Jason Leopold, Dow Jones Newswires; 323-658-3874; jason.leopold@dowjones.com

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

Enron DIP Financing Now Likely Halved To About $700M
By Carol S. Remond

01/15/2002
Dow Jones News Service
(Copyright (c) 2002, Dow Jones & Company, Inc.)

Of DOW JONES NEWSWIRES 

NEW YORK -(Dow Jones)- Despite receiving no cash upfront from the spinoff of its core trading business, bankrupt Enron Corp. (ENE) now stands to get a smaller-than-expected interim financing package.
Bankers are putting final touches on a downsized debtor-in-possession, or DIP, financing deal under which the energy company will have access to up to $700 million to $800 million, people familiar with the situation said. 
That's half of what the company was first expected to receive. 
Enron confirmed earlier Tuesday that it has entered a trading partnership with Swiss banking institution UBS Warburg (U.UBS). Under the deal, UBS will acquire all of Enron's oil and power trading business without cash changing hands. UBS won't take on any of Enron's liabilities, but Enron will receive a 33% share of the new venture profits for at least two years. 
Under the original financing plan approved last month shortly after Enron filed for Chapter 11 protection in New York, J.P. Morgan Chase & Co. (JPM) and Citigroup (C) had agreed to put together a $1.5 billion interim financing deal to help the company back on its feet. 
But continued apathy among bankers recruited to help J.P. Morgan Chase and Citigroup foot the bill has now resulted in a smaller financing plan. 

A first $250 million DIP installment was made available to the company in early December. Enron has yet to tap that credit line. 
An additional $250 million will likely become available over the next couple of weeks after J.P. Morgan Chase and Citigroup approve the energy company's new business plan. 
Additional financing above that $500 million is contingent upon other banks agreeing to participate in the deal with J.P. Morgan Chase and Citigroup. 
Enron's new business plan, which was provided to the banks in early January, has not been made public. But people familiar with the situation said the company now has between $400 million and $500 million in available cash. 
That better-than-anticipated cash position is also cited as one of the reasons behind the DIP downsizing. 
Final approval of the DIP, which is crucial for Enron to continue operating, is now scheduled for Jan. 30. 
Once they approve Enron's new business plan, J.P. Morgan Chase and Citigroup are expected to float a syndication term sheet to other large banks. The banks first approached other financial institutions in mid-December, with the original $1.5 billion financing deal, but found that most were reluctant to take on more exposure to Enron. 
J.P. Morgan Chase's exposure to Enron stands at $2.6 billion. Meanwhile, Citigroup's Enron liabilities are believed to be around $1 billion. 
-By Carol S. Remond, Dow Jones Newswires, 201-938-2074; carol.remond@dowjones.com

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

Enron Executives, Andersen Sued By Shareholder

01/15/2002
Dow Jones Energy Service
(Copyright (c) 2002, Dow Jones & Company, Inc.)

HOUSTON -(Dow Jones)- Executives of bankrupt Enron Corp. (ENE) were named as defendants in a class-action lawsuit filed Monday by an Enron shareholder in federal court in Houston. 
Also named as a defendant is Enron's auditing firm, Arthur Andersen L.L.P.
The Enron shareholder, Howard Bruce Klein, alleges "each of the defendants knew or recklessly disregarded the fact that...misleading statements and omissions would adversely affect the integrity of the market in Enron common stock. Had the adverse facts defendants concealed been properly disclosed, Enron's shares would not have sold at the artificially inflated prices they did," according to the filing. 
Enron and Andersen representatives didn't reply to phone messages left at their offices. In response to similar previous requests, Andersen spokesmen have declined comment. 
Klein is represented by Houston-based lawyer Tom Alan Cunningham. 
The Enron executives named in the suit are Chairman Kenneth Lay, former Chief Executive Jeffrey Skilling and former Chief Financial Officer Andrew Fastow. 
Nearly 40 shareholder class-action lawsuits are pending against Enron in the U.S. District Court for the Southern District of Texas in Houston. 
Enron filed for chapter 11 bankruptcy protection in December after the company's equity collapsed in the face of revelations about of related party transactions involving executives including Fastow. The related party transactions kept hundreds of millions of dollars off Enron's balance sheet. The company is the subject of more than 60 civil lawsuits, congressional investigations and a federal criminal probe. 
-By Erwin Seba, Dow Jones Newswires; 713-547-9214; erwin.seba@dowjones.com

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

UBS won't pay anything in deal for Enron trading operation
By ALAN CLENDENNING
AP Business Writer

01/15/2002
Associated Press Newswires
Copyright 2002. The Associated Press. All Rights Reserved.

NEW YORK (AP) - A Swiss investment bank won't pay anything to acquire Enron Corp.'s energy trading business nor assume any of the troubled company's debts but will share a third of the energy operation's profits with Enron and its creditors. 
Stamford, Conn.-based UBS Warburg, a division of Swiss banking giant UBS AG, and Enron will file for approval of the deal with the Federal Trade Commission and the Justice Department within five business days, according to documents filed Tuesday in U.S. Bankruptcy Court in Manhattan.
The plan to revive Enron's trading business calls for UBS Warburg to purchase the unit without paying any cash up front, said Mark Palmer, an Enron spokesman. 
Enron and its creditors will initially get 33 percent of the new business' pretax profits and UBS Warburg the remainder, the documents indicate. After three years, UBS Warburg can begin to buy out some of those profit-sharing rights and eventually buy the rights to all of the profits. 
"This is an extremely positive deal for Enron and its creditors that confirms the substantial value of Enron's trading operation," said Enron chief financial officer Jeff McMahon. "We believe this is a first step among many towards an overall plan of reorganization and planned emergence from bankruptcy." 
Palmer said UBS Warburg is expected to lease Enron offices in Houston and employ about 800 of the division's workers. Court documents also indicated that UBS Warburg plans to lease Enron office space in Portland, Ore., Toronto and Calgary, Alberta. 
Enron's energy trading business generated about 90 percent of the company's $101 billion in revenue in 2000. The deal does not include existing contracts Enron has to supply power, valued at between $6 billion and $7 billion. 
Enron collapsed late last year amid revelations of complex partnerships used to keep billions of dollars in debt off its books and mask financial problems so it could continue to get cash and credit to run the trading business. 
UBS Warburg won the bidding for the trading operation, beating out Citigroup Inc., a large Enron creditor. 
The investment bank was selected after intense negotiations during a court-sponsored auction that began Thursday morning and ended more than 24 hours later. 
The deal with UBS Warburg is for 10 years, but allows the investment bank to to exercise a series of options to buy out Enron's profit-sharing agreement starting in the third year of the pact, Enron said in a statement. 
A creditors' committee approved the deal, but other Enron creditors have questioned it, saying they want more information about how the agreement was reached and how the proceeds will be allocated. 
The deal must be approved by Judge Arthur J. Gonzalez. A hearing is set for Friday. 
Some two dozen Enron creditors had already filed objections to the sale before the selection was announced. Dissatisfied creditors will have 10 days to appeal Gonzalez's ruling. 
Before its collapse late last year, Enron was the world's largest energy merchant and the nation's seventh largest company by revenue. Enron differed from competitors in its penchant for complex bets on everything under the sun - advertising space, broadband, paper, the weather and more than 1,000 other products. 
Trading of Enron shares, which sold for $83 a year ago but have changed hands at no higher than $1 since December, has been halted since Friday on the New York Stock Exchange pending the sale announcement. UBS' U.S.-traded shares fell 4 cents to $49.17 Tuesday morning on the NYSE. 
--- 
On the Net: 
http://www.enron.com

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

Enron loans sting bank's bottom line

01/15/2002
Associated Press Newswires
Copyright 2002. The Associated Press. All Rights Reserved.

CHICAGO (AP) - Northern Trust Corp. says losses on loans to bankrupt Enron Corp. have caused fourth-quarter earnings to fall short of Wall Street's expectations. 
Northern Trust reported net income fell 18 percent to $102.4 million, or 45 cents a diluted share, from $125.5 million, or 54 cents a share, during the same period last year. Thomson Financial/First Call said analysts expected the Chicago-based banking and financial-services company to report results of 54 cents per share.
Northern Trust says its results were dragged down by an increase in the amount of money set aside to cover potential loan losses, from $5 million to $45 million. On Monday, the bank disclosed it had $43.5 million in outstanding Enron-related loans, of which $24.6 million is in the form of loans unsecured by collateral. 
Chief Financial Officer Perry Pero said the bank has written off the $24.6 million in unsecured loans. 
Northern Trust was the trustee of Enron's 401(k) pension plan until the now bankrupt energy trader transferred in October to another provider. The bank held the assets but had no investment discretion, according to spokeswoman Sue Rageas. 
It was during the shift of trustees that a "lockdown" was imposed, barring employees from altering their plan holdings. The bank remains a co-defendant with Enron in litigation brought by Enron workers angry because they were not permitted to sell their Enron shares while their value was falling. 
Houston-based Enron filed for Chapter 11 bankruptcy protection last month after disclosing it used questionable bookkeeping practices to conceal the size of its debt. 
For the year, Northern Trust's net income was $487.5 million, or $2.11 a share, up from $485.1 million, or $2.11 a share, a year earlier.

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

ODJ Market Special: Bond Futures Rally On Enron Delisting

01/15/2002
Dow Jones Commodities Service
(Copyright (c) 2002, Dow Jones & Company, Inc.)

Chicago, Jan. 15 (OsterDowJones) - Treasury bonds are rallying at
the 
Chicago Board of Trade as investors respond to Enron's de-listing. 
"The market is more sensitive to the Enron-Arthur Andersen issue
than the 
probability of a strong GDP number," said Nick Kalivas, Refco's
assistant vice 
president of financial research. 
At 1230 CT, The Mar 30-year contract is 24 ticks higher, at 104-05, 
and 
Mar 10-year notes are up 10 ticks, at 107-01. 
The New York Stock Exchange earlier said it was delisting Enron
shares 
after they had traded below the exchange's one-usd threshold for more
than a 
month. 
--- 
Kate Gibson, OsterDowJones, (312) 977-1673 
kgibson@osterdowjones.com 

1832GMT

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

CAPITAL VIEWS: Early Washington Noise On Budget, Enron
By John Connor

01/15/2002
Dow Jones Capital Markets Report
(Copyright (c) 2002, Dow Jones & Company, Inc.)

A Dow Jones Newswires Column 

WASHINGTON -(Dow Jones)- The pace will pick up soon in the Nation's Capital in areas of interest to the business and financial communities.
Congress returns to work next week, with Congressional Budget Office Director Dan Crippen testifying Wednesday on the budget outlook before the Senate Budget Committee. The next day, a Senate committee will hold the first of many Enron hearings this year. 
President George W. Bush will deliver his State of the Union Address Jan. 29. 
And the Federal Open Market Committee will announce its latest monetary policy decision the following day, Jan. 30, which also will feature the Treasury Department's quarterly refunding announcement. 
President Bush will unveil his fiscal 2003 budget Feb. 4, which also is the day when Enron Chairman and CEO Kenneth Lay is scheduled to testify before two Congressional committees. 
On Feb. 12, the Senate Banking Committee will hear, in the context of the Enron debacle, from five former chairmen of the Securities and Exchange Commission. 
And sometime not long thereafter, in the latter part of February, Federal Reserve Chairman Alan Greenspan will present what used to be known as his Humphrey-Hawkins testimony. 
Prospects of Congress enacting much if any meaningful legislation in this, an election year, are slim, but there should be no shortage of noise, particularly on the fiscal policy front as Democrats ask in wide-eyed wonder "who lost the surplus?" while Republicans accuse the Democrats of trying to raise everyone's taxes. 
Veteran budget observer Stan Collender of Fleishman-Hillard Inc., said preliminary expectations are that the Administration's budget and CBO's January forecast will show a fiscal 2003 deficit of between $10 billion and $25 billion. 
But he said those numbers aren't likely to include a variety of things that will add to the red ink, and warned that the fiscal 2003 deficit will be well above what is projected in January and February. 
"A (2003) deficit of $100 billion or more is not out of the question," Collender added. 
And somewhere along the line, perhaps sooner rather than later (the Treasury has cited February as a potential pressure point) the $5.95 trillion debt ceiling will have to be raised. 
On Enron, the old Watergate line of then Sen. Howard Baker, R-Tenn., - "what did he know and when did he know it" - is likely to get a thorough workout. 

Subscribers can find Capital Views on: 
Telerate page [4021] 
Dow Jones Newswires by searching the code N/POV 
Bloomberg by entering NI POV 
Reuters by entering keyword Capital Views 

(John Connor, a veteran observer of the financial markets and the Washington scene, is Washington bureau chief for Dow Jones Newswires. He can be reached by E-Mail at John.Connor@DowJones.Com)

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

Lieberman Asked to Recuse Himself From Enron Probe

01/15/2002
PR Newswire
(Copyright (c) 2002, PR Newswire)

WASHINGTON, Jan. 15 /PRNewswire/ -- The following letter was sent today by Peter Flaherty, President of the National Legal and Policy Center to Senator Joseph Lieberman: 
I am writing to ask you to recuse yourself from any participation in the Senate Governmental Affairs Committee's upcoming hearing and consideration of the Enron case.
Last Thursday, Attorney General Ashcroft recused himself from the Enron case the same day he received a letter from Rep. Henry Waxman in which Waxman questioned the approximately $50,000 that had gone to committees affiliated with Ashcroft by Enron-related individuals and groups. 
As you know, the amount that you and committees affiliated with you received from Enron interests, Enron's top creditor -- Citigroup, Inc. and Enron's auditor, Arthur Anderson, dwarfed anything received by Attorney General Ashcroft. 
Enron contributed at total of $25,000 in 2000 to the group you founded, the New Democrat Network, according to IRS records. Also, Enron's biggest creditor, Citigroup, Inc. is listed as your largest single contributor ($112,546) for the period 1997-2002 by the web site Opensecrets.org, relying on Federal Election Commission records. Citigroup, Inc. also made $100,000 in contributions to the New Democrat Network in 2001. Arthur Andersen, Enron's auditing firm, contributed $20,000 to the New Democrat Network in 2001. 
In order to assure the public of the integrity of the Senate investigation and to avoid the appearance of a double standard, I hope you agree with me that recusing yourself is the only appropriate step for you to take. 
NLPC is a nonpartisan, nonprofit foundation promoting ethics and accountability in government through research, education and legal action. 
MAKE YOUR OPINION COUNT - Click Here 
http://tbutton.prnewswire.com/prn/11690X60795515


/CONTACT: Peter Flaherty or Patrick Chisholm, both of the National Legal and Policy Center, +1-703-237-1970/ 15:03 EST 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Sen. Lieberman Asked to Recuse Himself From Enron Probe

01/15/2002
Dow Jones Energy Service
(Copyright (c) 2002, Dow Jones & Company, Inc.)

WASHINGTON -(Dow Jones)- The National Legal and Policy Center, or NLPC, asked U.S. Senator Joseph Lieberman to recuse himself from any participation in the Senate Governmental Affairs Committee's upcoming hearing and consideration of the Enron Corp. (ENE) case. 
In a press release Tuesday, the NLPC said Lieberman and committees affiliated with him received funds from Enron and Enron interests that made recusal the "only appropriate step" to assure the public of the integrity of the Senate investigation.
Specifically, the NLPC said the amount that Lieberman, a Democrat from Connecticut, and committees affiliated with him received far exceeded the roughly $50,000 that went to committees affiliated with U.S. Attorney General John Ashcroft, who recused himself last week. 
Senator Lieberman wasn't immediately available for comment.

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

O'Neill says 'something clearly went awry' with Enron information disclosure

01/15/2002
AFX News
(c) 2002 by AFP-Extel News Ltd

NEW YORK (AFX) - Treasury Secretary Paul O'Neill said something clearly went wrong with Enron Corp's disclosure of financial information, and employees of the firm will be punished if rules were broken. 
O'Neill said "something clearly went awry" in Enron's disclosure of financial information, in remarks to the National Retail Federation here.
In the US system of information disclosure, "individuals...are confident that they have the information they need to make sound decisions and the ability to act on that information as they see fit." 
But "in the Enron case, something clearly went awry," he said. 
"If anyone at Enron broke the rules, they will be punished," he concluded, noting the Justice Department's investigation. 
cxa/gc

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

USA: Treasury's O'Neill sees positive US economic signs.

01/15/2002
Reuters English News Service
(C) Reuters Limited 2002.

WASHINGTON, Jan 15 (Reuters) - Treasury Secretary Paul O'Neill said on Tuesday that he now saw some signs of positive growth among the mixed signals the U.S. economy was giving off. 
"The data that I'm looking at tell me the economy is and has been moving from a slow period to one where the data is kind of mixed and we are seeing some positives," O'Neill said on CNBC television.
"But I think the balance is now decidedly on the positive side and I think it foretells movement back into significant positive growth as we go through the year," he added. 
The Treasury chief, in New York to address a business group, said the economy should get a short-term lift simply from restocking inventories. After that, O'Neill added, "we need to kick in the investment side of business activity" to get a sustained recovery from recession that began last march. 
"But that's the uncertainty that we have, that the inventory reversal and movement back up will be followed by business investment picking up more of the???ed. 
In response to a question, O'Neill said he has not given up on reviving a package of economic stimulus measures to spur growth. A proposed package failed at the end of last year amid acrimony on Capitol Hill over how best to craft measures but O'Neill said he thought lawmakers might have changed their minds by now. 
If so, "we're very hopeful we can get it done in a few weeks," O'Neill added. 
He said there should not be a rush to judgment about what happened in the case of bankrupt energy trader Enron Corp. but said if it was shown that there were legal violations that contributed to its collapse, then there should be punishment. 
"I believe this: if people knowingly, intentionally violated the law, then they should be brought to justice," O'Neill said. Enron and its former officers are under investigation on several fronts. 
Enron was a major contributor to the successful presidential campaign of George W. Bush but gave money to both Republicans and Democrats who were seeking office. O'Neill said he was not concerned that Enron had undue influence over lawmakers or over the shaping of national energy policy. 
He said it was natural for people crafting energy policy and for lawmakers to talk to experts on the topic. 
"If you really followed the dictates of the people who are on the extreme edges of this, you would only talk to people who don't know anything, which doesn't seem to be a brilliant idea to me," O'Neill added.

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

Nevada Sen. Ensign on panel probing Enron

01/15/2002
Associated Press Newswires
Copyright 2002. The Associated Press. All Rights Reserved.

WASHINGTON (AP) - Sen. John Ensign, R-Nev., who is among numerous lawmakers who took campaign money from Enron Corp., is also among those investigating the firm's collapse. 
Ensign took $7,500 in campaign contributions from Enron since 1989, according to the Center for Responsive Politics, a campaign-money watchdog group.
Ensign is on the Senate Commerce Committee, and the panel's consumer affairs subcommittee, which is holding hearings on Enron's collapse. 
Ensign said the contributions "absolutely" wouldn't hinder his ability to rigorously investigate how Enron plummeted into bankruptcy and left investors, including company employees, holding nearly worthless stock. 
Ensign stressed that the Justice Department was the lead Enron investigator. 
"As it appears, fraud took place," Ensign said. "If that's the case, Justice needs to put some people in jail. It's very unfortunate that we had people perpetrate this sort of thing, especially when you are dealing with employees and the top people were trying to protect their own rear ends." 
Ensign also said the Bush administration should be lauded for not stepping in to help Enron, whose executives gave sizable donations to the president. 
As many as eight congressional committees plan to look into Enron, but Commerce was among the first to get started. Seventy-one senators and 188 House members - more than half of Congress - got money from Enron, according to the center. 
One other Nevada lawmaker has taken money from Enron in recent years: Sen. Harry Reid, D-Nev., got $1,000 in 1998. Reid doesn't sit on any committee that intends to investigate the Enron debacle.

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

Enron, which lobbied for corporate tax repeal, faces Congress probe over its own tax returns
By CURT ANDERSON
AP Tax Writer

01/15/2002
Associated Press Newswires
Copyright 2002. The Associated Press. All Rights Reserved.

WASHINGTON (AP) - Enron Corp., which led a lobbying campaign to repeal a corporate tax as it neared collapse, will undergo scrutiny in Congress of its own tax returns to determine if shelters or other practices may have concealed its financial condition. 
Repeal of the alternative minimum tax sought by Enron was included by President Bush in an economic stimulus package and passed by the House, which added a provision that would have given Enron a $254 million infusion of cash. The package ultimately failed.
Now, Senate Finance Committee investigators are "interested in whether Enron has been complying with federal tax laws" said the panel's spokesman, Mike Siegel. 
Whether Enron used any shelters viewed by the Internal Revenue Service as set up mainly to avoid paying taxes is one key point. Sen. Charles Grassley of Iowa, the top committee Republican, said the issue is "whether Enron used certain tax vehicles that might have masked the company's financial condition." 
Enron, the Houston-based energy conglomerate, faces investigations from a growing list of congressional committees, the Justice Department and the Securities and Exchange Commission following its collapse late last year in the nation's biggest corporate bankruptcy. The Finance Committee is one of two congressional panels with access to Enron's tax records. 
Even as its failure loomed last fall, Enron maintained a high-profile lobbying effort on a variety of tax issues. Enron led the AMT Coalition for Economic Growth, a business group dedicated to repeal of the corporate alternative minimum tax, which is intended to guarantee that companies pay at least a minimal amount of income taxes. 
Bush also pushed for repeal in his economic stimulus package, arguing that the provision hits corporations hardest in down years. 
The administration disclosed Tuesday that Enron Chairman Kenneth Lay+ telephoned Mitch Daniels, director of the White House Office of Management and Budget, in early October to discuss prospects for passage of the stimulus measure. 
The two had a general conversation about the legislation and discussed the overall outlook for the economy, said OMB spokeswoman Amy Call. Repeal of the alternative minimum tax was not addressed, she said. 
Enron stood to gain handsomely from language added to the stimulus package by Rep. Bill Thomas, R-Calif., chairman of the House Ways and Means Committee. Under the original House-passed bill, billions of dollars in alternative minimum tax credits built up over past years by dozens of corporations would have been immediately redeemed - handing Enron a $254 million infusion of cash. 
Several corporate lobbyists say Enron was focused on prospective repeal of the tax, not the immediate refund of past credits. Thomas endured fierce criticism from Democrats for proposing the refunds, which he contended would enable struggling corporations to hire more people or boost investments. Other companies, including IBM and General Motors, would have gotten much larger refunds than Enron. 
David Wyss, chief economist at Standard & Poor's Co. in New York, said in any event the money would have done little to help Enron overcome its sinking credit rating and sliding stock price. 
"Maybe they could have staved off bankruptcy for another month," Wyss said. "But it would not have solved their problem." 
Senate Democrats blocked the Republican stimulus package. A second version, again passed by the House and endorsed by Bush, did not include the alternative minimum tax repeal or the immediate refund. 
Enron sought numerous other tax breaks from Congress, according to lobbyist disclosure records. Among them was a five-year extension of a tax credit for electricity generated by wind; Enron is a major producer of wind-generated power. 
An Enron affiliate, Enron Wind, provided a sample letter on its Internet site that people could send to members of Congress advocating extension of the credit. 
Like the stimulus package, however, extension of the wind credit failed to clear Congress and expired on Dec. 31. Lawmakers of both parties say it will be renewed for at least another year and probably made retroactive to the beginning of 2002. 
Enron would also have benefited from provisions of a House-passed energy bill involving oil and gas transmission lines, including tax breaks for certain transmission transactions. Those items would have helped the bottom lines of many other companies, too - and the bill also languishes in the Senate.

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

Fired Andersen Executive Says He Followed Company Orders
By Judith Burns

01/15/2002
Dow Jones News Service
(Copyright (c) 2002, Dow Jones & Company, Inc.)

Of DOW JONES NEWSWIRES 

WASHINGTON -(Dow Jones)- David Duncan, fired by Arthur Andersen Tuesday for his alleged role in destroying documents on Enron Corp. (ENE), was only following orders from Andersen's own attorneys, a spokesman said.
"Mr. Duncan is cooperating with all investigations of this matter. He did nothing wrong. He followed the instructions of an Andersen in-house lawyer in handling documents," the spokesman said. 
Andersen dismissed Duncan, saying it found widespread destruction of Enron-related materials after he called an Oct. 23 meeting. 
Chicago-based Andersen said an Oct. 12 memo from a company attorney on the firm's document retention policy doesn't appear to have prompted the destruction of electronic and paper records related to Enron.

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

USA: UPDATE 1-Fired Andersen partner to meet investigators Wed.
By Jeremy Pelofsky

01/15/2002
Reuters English News Service
(C) Reuters Limited 2002.

WASHINGTON, Jan 15 (Reuters) - David Duncan, who was fired on Tuesday by auditor Andersen for his alleged role in destroying documents related to its review of Enron Corp.'s books, will meet with congressional investigators on Wednesday, a spokesman for the U.S. House Energy and Commerce Committee said Tuesday. 
"Mr. Duncan will be meeting with our investigators tomorrow," said Ken Johnson, the spokesman told Reuters on Tuesday. The panel has been probing Andersen's role in the collapse of the energy trading giant last fall.
"Frankly, now that he's been fired, he may be a little more motivated to be cooperative," Johnson said. "Prior to being terminated, he delivered six boxes of personal files and records to the committee and we're in the process of reviewing them right now." 
Earlier on Tuesday, Andersen said thousands of e-mails and large numbers of paper documents related to Enron were destroyed shortly after lead partner Duncan learned on Oct. 23 of a request by the Securities and Exchange Commission for information about the audit of Enron. 
Duncan could not be reached immediately for comment. 
The House Energy and Commerce Committee also said it would meet later with Sherron Watkins, the Enron executive who wrote a letter to Chief Executive Kenneth Lay last August in which she raised concerns about the company's accounting. 
"We're in the process of setting up a meeting with her," Johnson said at a press briefing. FIRST STEP TO ASSIGN BLAME 
The firing of Duncan was the first public step by the accounting firm to assign individual blame for the problems with its Enron audits. The Houston-based energy giant last month filed for the largest bankruptcy in U.S. history. 
Three other partners responsible for the Enron work were placed on leave by Andersen. 
"This is a useful beginning, but there is much more to be done," Rep. John Dingell, the ranking Democrat on the House panel, said in a statement read by his spokeswoman. 
The collapse of the company came after posting its first quarterly loss in more than four years on Oct. 16, as it took $1 billion in charges against earnings and cut shareholders equity by $1.2 billion. 
Enron debt was listed under partnerships, considered special-purpose entities, in effect keeping the debt off its own books. Andersen was responsible for auditing the company's balance sheets. 
Earlier on Tuesday, the New York Stock Exchange formally suspended trading in Enron shares and related securities while moving to delist the stock. Its shares last traded for 67 cents on Jan. 10, far below the record $90.56 hit in August 2000.

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

ROUNDUP Andersen fires Enron auditor who knowingly destroyed documents

01/15/2002
AFX News
(c) 2002 by AFP-Extel News Ltd

NEW YORK (AFX) - Arthur Andersen LLP said it has fired the leading partner on its Enron audit after it discovered he ordered documents to be destroyed even after learning that the Securities and Exchange Committee wanted to see them. 
The Big Five firm said it has dismissed David Duncan and sent three other partners involved in the case on administrative leave.
Andersen said its initial probe of the Enron matter revealed that Duncan ordered employees to destroy thousands of emails and numerous related papers. 
"These activities were on such a scale and of such a nature as to remove any doubt that Andersen's policies and reasonable good judgment were violated," the firm said. 
The effort began following an urgent meeting that Duncan called on Oct 23, shortly after learning that Enron had received a request from the SEC for information on its financial accounting and reporting. 
"This effort was undertaken without any consultation with others in the firm and at a time when the engagement team should have had serious questions about their actions," said Andersen. 
The firm denied that an Oct 12 e-mail referring to company policy in document handling or any other conversations it knew of around that time had authorized the activity. 
Most of the emails and documents were destroyed in the days following that meeting, although the activity only ended after the lead partner's assistant sent an e-mail to other secretaries on November 9 -- one day after Andersen received a subpoena from the SEC -- telling them to "stop the shredding", said the firm. 
Andersen reiterated its statement of last week that it has successfully retrieved some documents from electronic backup systems, and said it is attempting to restore more. 
The firm also said that is installing new management in its Houston offices, where the audit team was based. 
Andersen managing partner and chief executive officer Joseph Berardino said: "We promised to be forthright and to take action where appropriate. This was a painful decision, but it was absolutely the right thing to do. We are prepared to take all appropriate steps necessary to maintain confidence in the integrity of our firm." 
Arthur Andersen said it would dismiss anyone found to have improperly destroyed audit work papers as well as any employee found to have purposefully deleted Enron-related e-mails or destroyed Enron-related documents after having been informed of the November 8 subpoena. 
"Based on our actions today, it should be perfectly clear that Andersen will not tolerate unethical behavior, gross errors in judgment or willful violation of our policies," said Berardino. 
Andersen's revelations came shortly after the New York Stock Exchange said it is delisting Enron shares with immediate effect. 
It attributed the move to the "expected protracted nature of the company's bankruptcy process and the uncertainty at this time as to the timing and outcome of this process as well as the ultimate effect on the company's common shareholders." 
The shares have also fallen below the exchange's one usd threshold for more than a month. 
Enron shares have been halted from trading for the past several days pending the announcement of details of the company's sale of its wholesale energy trading unit to UBS Warburg. They last changed hands at 67 cents. 
Earlier, Enron said that UBS Warburg will not pay any cash upfront to acquire the unit, but will instead pay Enron royalties equal to 33 pct of the unit's income for 10 years. 
UBS Warburg has a series of options that allow it to begin buying out Enron's royalty interest in the third year of the agreement. 
Following the exercise of the first call, the royalty payment rate will drop from 33 pct to 22 pct. A second option in the fourth year would lower royalties payments to 11 pct. The final option in the fifth year would allow payments to cease altogether. 
If UBS Warburg decides not to exercise these series of options, the royalties will increase from year five through 10. 
UBS is acquiring a staff of about 800 people along with the company's computer systems and hardware. 
Additionally, as Enron lawyers made clear on Friday, the company's trading book is not part of the deal. 
The book contains Enron's derivatives trading positions, which will be slowly unwound. 
The deal still requires approval by Judge Arthur Gonzalez of the US bankruptcy court in the Southern District of New York. 
The court is expected to announce that decision on Friday. 
cl/blms/law/gc

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

Arthur Andersen fires chief Enron auditor; 3 other partners sent on leave

01/15/2002
AFX News
(c) 2002 by AFP-Extel News Ltd

NEW YORK (AFX) - Arthur Andersen LLP said it fired David Duncan, the lead partner on its Enron Corp audit, and will send three other partners involved in the case on administrative leave. 
Arthur Andersen said the three partners to be sent on leave are Thomas Bauer, Debra Cash, and Roger Willard, who were all asssigned, along with Duncan, to its Houston offices.
The accounting firm said its probe of the Enron matter revealed that thousands of emails were destroyed and numerous related papers rushedly destroyed after the US Securities and Exchange Commission issued a subpoena for such documents on Nov 8. 
The destruction of the Enron-related documents was ordered by Duncan, it said. 
Arthur Andersen said it believes that its own policies of "reasonable good judgment" were violated by the four partners. 
Arthur Andersen said its inquiry into the destruction of the Enron-related documents is continuing and that additional persons, beyond the four identified today, are being probed. 
It said it will take action against any employee found to have purposefully deleted Enron-related audit work papers, emails or documents after learning on Nov 8 that such materials were being subpoenaed by the SEC. 
It reiterated its statement of last week that it has successfully retrieved some documents from electronic backup systems, and said it is attempting to restore more such documents. 
The accounting firms said the dismissal of Duncan and the placement of the other three partners on leave were based on "preliminary facts relating to Andersen's inquiry into the disposal of documents related to the action." 
Arthur Andersen also said it is installing new management in the Houston offices. 
Arthur Andersen managing partner and chief executive officer Joseph Beradino said: "We promised to be forthright and to take action where appropriate. This was a painful decision, but it was absolutely the right thing to do. We are prepared to take all appropriate steps necessary to maintain confidence in the integrity of our firm." 
law/gc

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

USA: Business group wary of new regs from Enron case.
By Peter Kaplan

01/15/2002
Reuters English News Service
(C) Reuters Limited 2002.

WASHINGTON, Jan 15 (Reuters) - The head of corporate America's biggest lobbying group on Tuesday said the government should not rush to impose new business regulations in the wake of Enron Corp.'s collapse. 
Thomas Donahue, the president of the U.S. Chamber of Commerce, said the organization would oppose any immediate, "radical overhaul" of laws and regulations stemming from the Enron debacle.
"We have seen one problem with one company and one accounting firm, and with it everybody is rushing to judgment and rushing to: 'We've got to pass legislation,'" Donahue said at a press briefing on the Chamber's 2002 agenda. "Pray we don't until we know what we're talking about." 
Houston-based Enron filed the largest bankruptcy in U.S. history on Dec. 2. Its auditor, Andersen, has said its employees destroyed documents related to the former energy giant's balance sheet. 
Enron's collapse has prompted a criminal probe by the Justice Department. The Securities and Exchange Commission and Labor Department are also investigating. 
President George W. Bush ordered a review headed by Treasury Secretary Paul O'Neill of U.S. pension and corporate disclosure rules to avoid a repeat of the energy trading firm's collapse, in which thousands of employees lost their retirement savings. 
Meanwhile, some lawmakers in Congress are eyeing possible legislation to protect investors and employees from similar breakdowns in future. 
Sens. Jon Corzine, a Democrat from New Jersey, and Barbara Boxer, a Democrat from California, have proposed a law limiting how much company stock can be put into employees' 401(k) plans. Sen. Paul Sarbanes, a Democrat from Maryland, has asked the General Accounting Office to look into the adequacy of financial reporting and employee retirement plan rules. 
Florida Democratic Sen. Bill Nelson has said he also is considering legislation to protect 401(k) account holders' rights to sell shares when they want. And the Federal Energy Regulatory Commission has proposed new requirements for reporting on derivatives and hedge funds. 
Another Chamber of Commerce official at the briefing said the organization does support a bill by Ohio Republican Rep. John Boehner that would let retirement plans providers offer investment advice to individual plan members. 
But Donahue, of the Chamber of Commerce, said the president and Congress should move cautiously when it comes to more radical measures. He characterized the Enron collapse as an isolated case and said there are already rules and regulations in place to protect investors. 
"Let's not start reinventing the process," Donahue said. "Let's adjudicate the process that's in place." 
"After that's done, if there's a habitual problem in American industry and the American accounting industry because of that then we have to change the system," Donahue said. "Right now there is no such habitual problem." 
Donahue said class-action attorneys "are lining up now to see if they can line their pockets on behalf of some number of shareholders from anybody they can target on this."

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

USA: US official sees Enron slowing energy mart change.

01/15/2002
Reuters English News Service
(C) Reuters Limited 2002.

WASHINGTON, Jan 15 (Reuters) - The Enron Corp. debacle won't end federal and state efforts to further restructure U.S. energy markets, but it will slow the process for the next two or three years, a top Bush administration energy official said on Tuesday. 
"I think we've gone too far to go back," said Vicky Bailey, Assistant Secretary of Energy for International Affairs and Domestic Policy.
Bailey, speaking to reporters at a U.S.-Canada energy conference, said that Enron's problems along with last year's California energy crisis will drag out the process of bringing more competition to the nation's electricity market. 
"You've got the bookends of the California crisis and Enron. It doesn't help," Bailey said. It slows (restructuring efforts) down for probably two or three more years." 
Bailey said it was unfortunate that the Enron fiasco would effect energy restructuring, because energy issues were not the cause of the company's downfall. 
"The Enron issue is a financial issue, banking issue, accounting issue," she said. "It shouldn't be the death knell for energy legislation, because that's larger than Enron." 
During the seven years that Bailey served as a member of the Federal Energy Regulatory Commission, she said Enron officials were "out front" and "aggressive" in pushing to open U.S. energy markets to competition. 
"There was nothing wrong with that. We needed somebody out there championing that," said Bailey, referring to Enron. 
With congressional scrutiny of Enron, Bailey said she did not think another energy firm would be willing to step in any time soon to become the new cheerleader for restructured energy markets. "I think you'll see a fair amount of timidness," she said.

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

Power Trading Business Could Be Good Fit For UBS Warburg
By Cheryl Winokur Munk and Christina Cheddar

01/15/2002
Dow Jones Energy Service
(Copyright (c) 2002, Dow Jones & Company, Inc.)

Of DOW JONES NEWSWIRES 

NEW YORK -(Dow Jones)- UBS Warburg's winning bid for Enron Corp.'s (ENE) power trading business could prove to be a good strategic move for the Swiss investment bank, analysts said.
The purchase of Enron's trading operations marks UBS Warburg's entry into a new business line that adds to its experience in equity and fixed-income trading. The deal is in line with UBS's stated goal to expand its U.S. market share, a focus since its 2000 purchase of brokerage firm PaineWebber Inc. 
"It will be a valuable extension of our worldwide trading activities," said John Costas, chief executive of UBS Warburg in a recent statement. 
Enron's demonstrated track record and high-quality traders offer "potentially a very complimentary fit to the trading operations of a brokerage firm," said Gene Pisasale, senior investment officer with Wilmington Trust Co. 
Although observers are skeptical that the trading unit could reclaim its top dog status in the power trading industry, UBS's backing could revive the business that has been virtually dormant since Enron's bankruptcy in early December. 
Putting UBS's name behind it should eliminate concerns about the soundness of the business, said John Leonard, an analyst with Schroder Salomon Smith Barney in London. 
"I don't think that UBS is taking a lot of risk," said Romain Burnand, European bank analyst at J.P. Morgan in London. He said UBS's risk seems to be limited to potential negative cash flow if the trading activity does not resume quickly enough. 
A spokesman for UBS Warburg, a unit of UBS AG (UBS), did not immediately return telephone calls seeking comment. 

Still, there are questions about just how much business Enron's old trading operation can recapture under UBS control, given the already crowded industry playing field. Enron had about 20% of the market, said Leonard of Schroder Salomon Smith Barney. 
UBS will be armed with Enron's technology and the talent of some of its employees. According to a person familiar with the transaction, UBS is expected to keep between 500 to 800 of Enron's employees. 
The staff will include executives who ran Enron's trading floor, but not any of Enron's corporate employees, the person said. 
Since trading is a relationship business, the retention of key staff is an important part of the picture. However, there are concerns among industry watchers that Enron's staff may have lost important momentum in the weeks that Enron's business wasn't operating. 
"Enron's trading business was so big," said Commerzbank Securities analyst Andre Meade. "It had such a big market share that it had an information advantage that is unlikely to persist." 
Also, having gone through the painful adjustment of having to operate without Enron, some customers may be hesitant to go back, according to Meade. 
Indeed, the energy market has moved on since Enron's abrupt exit and typically new entrants in the energy market have had difficulty obtaining top-tier status. However, since many energy traders have credit ratings below A-level, UBS may have an edge over its competition, some industry observers said. 
UBS is rated Double-A-Plus, and good credit goes a long way in the energy market. 
"It's a question of stability," said ABN AMRO energy analyst Paul Patterson. "What you find is that it gives (trading partners) more confidence." 
The importance of confidence among trading partners cannot be overstated. Many likened Enron's own collapse to a run on a bank. As the trading parties rushed to unwind their deals, Enron's situation began to spiral out of control. 
Historically, energy traders with Triple-B credits haven't been penalized, for their lower credit ratings, but that situation may be evolving post-Enron. 
For that reason, it is important for UBS to maintain its status, observers said. 

UBS hasn't indicated whether it will seek a separate rating for the trading business, as is the case with many energy trading companies. 
A person familiar with UBS said the credit of UBS' trading business will likely be considered along with the credit of its parent. However, credit rating agencies will make the final determination. 
Officials from Standard & Poor's and Moody's Investors Service weren't immediately available to comment. 
Eileen Fahey, a banking industry analyst for Fitch Investors Service, said the addition of the trading business adds an element of risk to UBS's profile. 
"It's a new business for them. They had scaled down their commodities trading," she said. However, the analyst sees the move as consistent with UBS Warburg's strategy of becoming a large, core investment bank. 
Furthermore, UBS has the advantage of buying "a premiere platform," according to Fahey. 
Historically, the strength of the UBS credit rating has been based on the strength of its private client business and the support of the Swiss government, she said. However, neither of these strengths are applicable to the energy trading business. 
Fitch's review will look closely at how much capital the business will require, how much liquidity the business can generate and in which areas will the company focus. These details are unknown at this time. 

Reached later, UBS spokesman David Walker declined to provide details about the new venture until after the bankruptcy court hearing to discuss the deal on Friday. He did, however, say UBS is hoping to get the business up and running in 30 days, providing it gets all the necessary approvals. 
According to a person familiar with the transaction, UBS only expects to trade gas and power, and will abandon some of the other business lines Enron previously traded such as pulp and paper, metals and weather-risk. 
Fitch's Fahey expects UBS will be best suited to trade short-term contracts for power and gas. UBS could have difficulty competing for long-term contracts because physical assets and logistical experience are important advantages the firm will lack, she said. 
Long-term contracts, however, tend to be the most profitable. According to Commerzbank's Meade, short-term contracts reap profit margins in the "single digits." 
Without pipes and wires, the UBS trading business also will have difficulty trading some short-term contracts that rely on assets, Meade said. These include ancillary services such as spinning reserve, or energy a power plant needs to have as an operating reserve. 
-By Cheryl Winokur Munk, Dow Jones Newswires; 201-938-2123; cheryl.munk@dowjones.com 
-By Christina Cheddar, Dow Jones Newswires; 201-938-5166; christina.cheddar@dowjones.com 

-Lynn Cowan, Anita Greil, Carol Remond and Evelina Shmukler contributed to this story.

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

USA: UPDATE 1-US lawmaker seeks Enron pension, accounting probes.
By Kevin Drawbaugh

01/15/2002
Reuters English News Service
(C) Reuters Limited 2002.

WASHINGTON, Jan 15 (Reuters) - The chairman of a powerful Senate committee probing Enron Corp.'s collapse on Tuesday requested investigations into financial reporting and employee retirement fund investments in company stock, matching a White House call last week for reviews in the same areas. 
Maryland Democratic Sen. Paul Sarbanes asked Congress' investigative arm to look into laws governing employee stock ownership in retirement funds such as 401(k) plans, as well as how corporations report their finances to the public.
In a move that will bring the hard-hitting General Accounting Office into the debate over regulatory responses to the Enron affair, Sarbanes kept up Congress' push for answers on how Enron collapsed by focusing on two key policy issues. 
"Accurate and honestly presented financial information is essential to the efficiency of our capital and security markets, yet in recent years costly accounting irregularities have proliferated," Sarbanes, chairman of the Senate Banking Committee, said in a statement. 
Houston-based Enron filed the largest bankruptcy in U.S. history on Dec. 2, and last week the Justice Department launched a criminal probe of the company. The Securities and Exchange Commission and Labor Department are also investigating. 
A sharp decline in Enron's share price last fall sapped the savings of thousands of the fallen energy trader's employees whose 401(k) accounts were heavily invested in Enron stock. Similar losses have been seen in recent years at other firms. 
"Investment of retirement funds in company stock can enable employees to share in the fruits of their labor - as reflected in a company's stock price. However, the reported results of Enron's bankruptcy raise significant issues about the adequacy of our laws and their enforcement," Sarbanes said. 
President George W. Bush, who got major campaign support from Enron and its top executives, last week called for reviews of retirement fund and financial reporting rules, as well. 
Sarbanes asked the GAO "to evaluate the governance system of the accounting profession in the United States and consider the extent to which defects in that system may have contributed to or increased the risks of such irregularities," he said. 
Questions about Enron's financial reports and their review by its auditor, Andersen, are at the heart of the SEC probe. 
Chicago-based Andersen also audited the books of other companies that later disclosed bookkeeping irregularities, such as Waste Management Inc and Sunbeam Corp. 
The accounting profession largely regulates itself through the American Institute of Certified Public Accountants. 
Sarbanes has scheduled a banking committee hearing for Feb. 12 on Enron. Five other congressional committees are looking into Enron, with other hearings set for Jan. 24 and Feb. 4.

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

Enron debacle costs state millions of dollars

01/15/2002
Associated Press Newswires
Copyright 2002. The Associated Press. All Rights Reserved.

SANTA FE (AP) - The collapse of Enron Corp. cost four of New Mexico's largest investment funds $54.5 million - less than 1 percent of their values, officials said. 
The losses did not significantly affect the land grant and severance tax permanent funds, the Education Retirement Board investment fund or the Public Employees Retirement Association fund, investment managers said.
Enron, an energy-trading company, entered the biggest corporate bankruptcy in U.S. history on Dec. 2, leaving countless investors burned and thousands of employees out of work. 
"I'm sorry we got into it," Phil Archibeck, chief investment officer for the state Investment Council, said of the Enron holdings. "Nobody knew the stock would be hit that way." 
The land grant and severance tax permanent funds lost $26 million - one-quarter of 1 percent of the funds, which are worth a combined $12 billion, he said. 
"This (Enron) was not a large holding related to the size of the funds," Archibeck said. "Although you hate to lose the money, the portfolio was diversified." 
The Education Retirement Board investment fund lost about $20 million - about three-tenths of 1 percent of the $6.5 billion fund, said Frank Foy, the fund's chief investment officer. 
"It's a big hit, but it's not going to hurt the fund," he said. 
The PERA fund lost $8.5 million - less than one-tenth of 1 percent of the $8 billion fund, said Bob Gish, PERA's chief investment officer. 
"This shouldn't cripple the fund in any way," he said.

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

Forbes.com Exclusive; Enron: the Wrong Focus

01/15/2002
Business Wire
(Copyright (c) 2002, Business Wire)

NEW YORK--(BUSINESS WIRE)--January 15, 2002--Everyone seems to be focusing on how Enron hid its debt by allocating it to supposedly independent private partnerships. But perhaps the real focus should be on Enron's creation of revenues. 
In "Enron The Incredible," Forbes.com staff editor Dan Ackman explores how Enron booked its revenue and how incredible its reported performance was. Some of his findings:
-- A practice called gross accounting rather than net accounting 
led Enron to get away with reporting such huge numbers, 
appearing to "outperform the world." 

-- Compared to companies with similar sales, Enron's revenue per 
employee was $5.3 million, more than triple Goldman Sachs 
($1.7 million). And Microsoft's revenues-per-employee, were, 
by contrast, $610,000. 

-- Compared to companies with a similar number of employees, 
Enron's revenue per employee was more that four-times Chevron 
and more than 13 times Micron Technology 

For the full story, go to: 

http://www.forbes.com/2002/01/15/0115enron.html


CONTACT: Forbes.com, New York Debbie Weathers, 212/366-8848 
13:07 EST JANUARY 15, 2002 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Nation & World
Farewell to all that
Christopher H. Schmitt; Julian E. Barnes; Megan Barnett

01/21/2002
U.S. News & World Report
22
c Copyright 2002 U.S. News & World Report. All rights reserved.

Even with all that has attended the implosion of energy giant Enron Corp., last week's disclosure was seismic: As the company hurtled toward the largest bankruptcy in U.S. history, Chairman Kenneth Lay picked up the phone and called two cabinet members, telling one he would welcome government help. After considering Enron's plight, Treasury Secretary Paul O'Neill and Commerce Secretary Donald Evans say they declined to step in. 
It's not unusual, of course, for even the closest of political friends to melt away in the face of an ally's death spiral; the company is now virtually radioactive in Washington. But for Enron, which has spread money freely in political circles and enjoyed an outsize reputation as one of the capital's most powerful players, this ultimate denial was less a denouement than another chapter in a less appreciated story: Despite several big policy wins, Enron may not have been the political juggernaut its extraordinary connections suggested.
Pushing into an expanding array of businesses, Enron had sharply escalated its lobbying attack in Washington in recent years, boosting its spending by a stunning 400 percent since 1996. It had buttressed a small army of highly paid lobbyists with nearly $6 million in campaign contributions since the 1990 elections. And then there were all those close ties to the Bush administration. 
Undeniably, Enron has enjoyed considerable success in Washington. Both House energy legislation and Vice President Cheney's national energy plan include key Enron provisions, such as speeding up approval for new energy facilities and encouraging electricity deregulation. In 1993, with the backing of Wendy Gramm, then the chairwoman of the Commodity Futures Trading Commission and the wife of Texas Sen. Phil Gramm, Enron fended off stronger regulation of energy derivatives, the complex financial instruments on which it built its trading empire. (Just weeks after the CFTC vote, Wendy Gramm joined Enron's board of directors; Phil Gramm, a Republican, counts Enron as his top corporate contributor, and, as former chairman of the Senate Banking Committee, he helped thwart energy trading regulations.) Enron had strong input in the appointment of the chair of the Federal Energy Regulatory Commission, who has backed regional electricity transmission groups--a central part of Enron's business plan. 
Despite these victories, however, Enron suffered significant political setbacks before the curtain came crashing down. It couldn't, for example, persuade the Bush administration to push for telecommunications providers to open up their networks--something that would have allowed Enron to provide high-speed services, like movies on demand. "In the energy world, they had a lot more chips on the table to play with," says one former Enron lobbyist. "In [others], they had to negotiate their way in--they were like a start-up." 
Enron tried hard. Even by Washington's revolving-door standards, its lineup of former government officials was impressive: former top energy regulators, members of Congress, key congressional staffers, top White House officials, influential tax writers, and officials from the Treasury, Commerce, State, and Defense departments. But Enron's collapse, which has cost investors billions of dollars and employees their jobs and savings, has fanned partisan flames because of the company's remarkable ties with the Bush administration. Bush officials who have worked for Enron include economic adviser Lawrence Lindsey, Trade Representative Robert Zoellick, Army Secretary Thomas White, and Commerce Department general counsel Theodore Kassinger. Bush himself counts Enron as his biggest single benefactor, hauling in nearly $625,000 in contributions over the years, according to the Center for Public Integrity. Lay has personally donated at least $883,000 to candidates, about 90 percent Republicans. 
A vivid example of Enron's Bush connections is newly disclosed details of meetings between Enron officials and the vice president and his aides, including while Cheney was drafting the administration's hush-hush energy policy. Cheney had previously acknowledged a half-hour meeting with Lay. But last week, the White House said Cheney aides met five other times with Enron officials last year. The final meeting occurred a little more than a week before the company said it was writing off $1.2 billion--news that touched off its bankruptcy. 
Empire building. Enron's sharpest increase in lobbying coincides with Bush's arrival in Washington. But as the company's agenda expanded, it was forced to ramp up its Washington efforts to protect its interests in the new territories. Early last year, for instance, company lobbyists began working the administration on steel and trade protection--part of Enron's attempts to extend its trailblazing empire into steel products. 
But Enron failed to derail legislation that would require trading firms to disclose more information about their activities. It could only watch as the FERC waded into California's electricity crisis with price controls. The company suffered a setback when the president bailed out of the Kyoto Protocol, which calls for capping greenhouse-gas emissions. Such limits would help the company trade pollution credits while also giving a boost to natural gas, which could help Enron's pipeline business. Enron was also frustrated in its push for national retail competition in electricity. "They had a lot of relationships," says a former Enron lobbyist. "But when it came to making things happen, they couldn't exert enough influence." 
In Washington, seldom does an interest win all the time, but Enron's failures have come in crucial areas. The company also didn't help itself with what some saw as an abrasive style. "There was a sense of entitlement--`We are Enron, dammit,' " says one former company lobbyist. He said the company swept its offices for bugs and hired private detectives to follow competitors, including Jeffrey MacKinnon, a utility lobbyist. "It's amazing what they were willing to do," MacKinnon says. 
Meanwhile, even before last week's developments, investigation of Enron's collapse was growing broader. On top of several congressional and regulatory probes, the Justice Department has opened a criminal investigation--although Attorney General John Ashcroft has recused himself, having accepted about $57,500 in Enron-related contributions for his failed 2000 Senate campaign. (The Justice Department's Houston office has also recused itself, citing too many homegrown ties to Enron.) Investigators are examining everything from the behavior of Enron's auditors to the impact of the crash on investors to the stupefying range of partnerships the company created to help pump up its earnings. Congressional investigators expect to receive millions of documents, and they are stepping up visits to company offices, U.S. News is told. 
Even Enron's past Washington successes may be fleeting. Though Enron triumphed in the battle over regulating derivatives, FERC has effectively reopened the issue by considering new rules that would require energy firms to disclose more information about their derivatives exposure. When the Senate takes up its energy bill next month, lawmakers are expected to show new support for regulatory reforms that Democrats proposed even before the Enron crash. 
Concluding there was little Washington could offer, Enron all but shuttered its lobbying operation soon after filing for bankruptcy. As the company is learning, money and attitude may not guarantee success, but there's nothing like the stench of failure to bring the walls tumbling down. 
More questions for the auditor 
Vanishing Act 
The smoke around Enron's spectacular collapse is beginning to choke the bean counters. Arthur Andersen, the energy firm's auditor for 16 years, shocked investigators last week when it announced that some of its employees disposed of "a significant but undetermined number of electronic and paper documents and correspondence" relating to Enron in recent months. The firm said it did not know whether some of the destruction occurred after government investigations of Enron were underway; U.S. Rep. Billy Tauzin said such actions could be criminal and he would expand his probe. -M.B. 
Enron's White House ties 
At least 23 Bush administration officials owned Enron stock, and other appointees once worked for the company. 
I. LEWIS LIBBY 
He sold Enron stock worth up to $15,000 when he became Dick Cheney's chief of staff. 
ROBERT ZOELLICK 
Before Bush named him U.S. trade representative, he served on Enron's advisory council. 
MARC RACICOT 
Bush's choice to lead the Republican National Committee worked as an Enron lobbyist last year. 
THOMAS WHITE 
The Army secretary was an Enron top executive who earned millions in company stock. 
LAWRENCE LINDSEY 
Enron paid Bush's economic adviser a $50,000 fee before he joined the White House. 
KARL ROVE 
The White House's chief political strategist once held Enron stock worth up to $250,000.

Picture: OLD FRIENDS. Kenneth Lay, CEO of Enron, greets former President George H. W. Bush at Houston's Enron Field. In the foreground is then Gov. George W. Bush of Texas. (ERIC GAY--AP); Picture: I. LEWIS LIBBY (RICK BLOOM); Picture: ROBERT ZOELLICK (AP); Picture: MARC RACICOT (RICK BLOOM); Picture: THOMAS WHITE (R. D. WARD--DOD); Picture: LAWRENCE LINDSEY (RICK BLOOM); Picture: KARL ROVE (RICK BLOOM) 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Financial Desk
The Nation Enron Chief Was Warned of Problems Energy: A top officer's memo to Chairman Lay, found by congressional investigators, cautioned that 'funny accounting' practices could embroil the firm in scandal.
EDMUND SANDERS; RICHARD SIMON; DAVID STREITFELD
TIMES STAFF WRITERS

01/15/2002
Los Angeles Times 
Home Edition
A-1
Copyright 2002 / The Times Mirror Company 

WASHINGTON -- Enron Corp. Chairman Kenneth L. Lay was warned last summer by a company vice president that the energy company's financial practices might cause it to "implode in a wave of accounting scandals," congressional investigators said Monday. 
The vice president, Sherron Watkins, complained in an August letter to Lay and other senior Enron executives that a "veil of secrecy" surrounding the company's "funny accounting" of complex partnerships had not been adequately disclosed to the public and merited further investigation, according to excerpts from the memo.
The seven-page memo was found by investigators sifting through 40 boxes of Enron documents obtained from the company after it filed the largest bankruptcy in U.S. history Dec. 2. The investigators said it raises troubling questions about the extent to which Enron officers and the company's auditor, Andersen, were aware of the financial transactions and accounting practices that contributed to the energy giant's fall. 
But Robert S. Bennett, Enron's Washington lawyer, said Lay took the employee's concerns seriously--and, in fact, met with her and ordered an investigation. He said the review by an outside law firm found that "no further investigation was necessary." 
"This really isn't fair to the people under investigation," Bennett said. 
Since Enron's collapse, investigators have alleged that the Houston company used a network of partnerships to mask debt and make its balance sheet appear stronger. In mid-October, the company acknowledged accounting problems relating to those partnerships and slashed shareholder equity by $1.2 billion. 
Congressional committees are investigating whether Enron and its auditor withheld information from employees and investors that led to billions of dollars in losses as the company's stock plummeted. 
Investigators said they plan to interview Watkins, whom they declined to name publicly but who was confirmed as the author by her attorney, Philip Hilder. 
Watkins worked for Enron Chief Financial Officer Andrew S. Fastow as vice president of corporate development. She wrote the memo anonymously, Hilder said, and then sought out Chairman Lay to express her concerns directly. 
"She doesn't perceive herself as a heroine; she was just doing her job," said Hilder, who said Watkins had written the undated memo in mid-August. After talking to Lay about it, Hilder said, she asked to be reassigned so she would no longer report to Fastow. 
Before Watkins joined Enron, Hilder said, she worked for Andersen--the accounting firm that has come under fire for not sounding alarms on Enron's precarious financial condition. 
Watkins, in her late 30s, still works for Enron in a variety of capacities, her lawyer said. Hilder said she remains on the job because she "felt loyalty to the company." 
"She's been there for eight years," he said. "It's very difficult to just pick up and leave if you have a disagreement." 
The excerpts from her August letter provide a window on an internal debate underway at Enron about the company's accounting practices before its problems were widely known. 
Watkins wrote that she had complained directly to Jeffrey K. Skilling, who resigned as Enron's chief executive Aug. 14. Skilling has denied any knowledge of the firm's financial problems. 
"Mr. Skilling flatly denies the allegations in the letter related to him," said Judy Leon, a spokeswoman for Skilling. 
The memo was written about the time that Lay was reassuring investors and telling employees that Enron would eventually see "a significantly higher stock price," according to one Aug. 27 e-mail from Lay released last weekend. Instead, Enron's stock plummeted as investors grew more concerned about the controversial partnerships. On Dec. 2, the company filed for Chapter 11 bankruptcy protection. 
Ken Johnson, a spokesman for the House Energy and Commerce Committee, said the memo "clearly shows that top Enron executives, including Kenneth Lay, were warned of serious financial problems months before the company reduced shareholder equity." 
"What's also troublesome is that some people may have tried to hide the truth or simply did not want to know it," Johnson said. 
According to excerpts from the memo released Monday, Watkins questioned the company's accounting methods for numerous partnerships involving Fastow and for other "special purpose" entities. 
Fastow was replaced Oct. 24. On Nov. 8, the company announced that it had overstated its profit since 1997 by $586 million. 
But as early as August, several senior Enron employees were "consistently and constantly" questioning the company's accounting methods and use of stock swaps with related entities, Watkins wrote. 
"It sure looks to the layman on the street that we are hiding losses in a related company and will compensate that company with Enron stock in the future," she warned. 
House Energy and Commerce Committee Chairman W.J. "Billy" Tauzin (R-La.) and Rep. James C. Greenwood (R-Pa.), chairman of the subcommittee on oversight and investigations, sent letters to Enron, Andersen and the Houston law firm Vinson & Elkins seeking records on their review of the concerns. Tauzin questioned whether Enron officers had instructed Vinson & Elkins not to second-guess "the accounting advice and treatment provided by" Andersen. 
The review by the outside attorneys concluded that the concerns did not warrant "further investigation by independent counsel and auditors," given that they raised no facts that had not either been known or disclosed by company executives and auditors, according to congressional investigators. The firm, however, warned of "a serious risk of adverse publicity and litigation," investigators said. It was unclear when the firm completed the review. 
A spokesman for Vinson & Elkins said the firm is reviewing the request for information. 
Separately Monday, Sen. Paul S. Sarbanes (D-Md.), who chairs the Banking, Housing and Urban Affairs Committee, added his panel to the growing list of those looking into the Enron matter. 
Sarbanes has asked five former chairmen of the Securities and Exchange Commission to testify at a Feb. 12 hearing that will explore accounting and investor protection issues surrounding the problems with Enron and other public companies, such as Waste Management and Sunbeam Corp. 
The panel will include Arthur Levitt Jr., Richard C. Breeden, David Ruder, Harold M. Williams and Roderick M. Hills. A spokesman for Sarbanes said Enron's collapse, which wiped out the retirement savings of thousands of employees and cost investors billions of dollars, has brought investor protection to the forefront of the legislative agenda. 
The senator also asked the General Accounting Office on Monday to investigate how Enron's employee funds were handled. 
The banking committee's ranking Republican is Sen. Phil Gramm of Texas, whose wife, Wendy, is on Enron's board of directors. 
In another development, Andersen, known until last year as Arthur Andersen, said an Oct. 12 memo sent by the accounting firm's in-house lawyer "never told the audit team that they should destroy documents for past audit work that was already completed." Time magazine reported this week that the memo directed the destruction of Enron documents in possible violation of the law. 
Congressional investigators were focusing on the memo in the hope it would explain why Andersen had destroyed what they termed a "significant" number of documents related to Enron. 
* 
Sanders and Simon reported from Washington, and Streitfeld reported from Houston. For background and earlier Times articles on Enron, go to: 
www.latimes.com/enron

Business
Enron Analysis
Pat Kiernan, Ali Velshi

01/15/2002
CNNfn: The Money Gang
(c) Copyright eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House, Inc.). All Rights Reserved.

PAT KIERNAN, CNNfn ANCHOR, THE MONEY GANG: Congressional investigators say an Enron (URL: http://.www.enron.com/) employee warned the company`s chairman about the company`s accounting practices months before the firm filed for bankruptcy. The Enron executive wrote an internal letter of warning that said problems could, as the memo explained it, implode the company. 
ALI VELSHI, CNNfn ANCHOR, THE MONEY GANG: Yesterday the top Enron story concerned another memo. This one from a lawyer for Enron`s auditor, Arthur Andersen. A congressional committee note authorized the destruction of documents pertaining to Enron. "Time" magazine`s Wall Street correspondent, Dan Kadlec, broke that news over the weekend he joins us know for a look at this and everything else that we can fit on Enron into the next few minutes.
DAN KADLEC, "TIME": You talk about smoking guns. You know, destroyed evidence and memos that were ignored by the chairman of the company, if not ignored at lease not given proper attention to. I mean, these things really opened the door to broader issues and possibly charges. You know, it`s been serious all along but this is really getting hot now. 
KIERNAN: The auditors know better. 
(CROSSTALK) 
KADLEC: You`ve got this pattern with Arthur Andersen, you know, their behavior in this case is obscene anyway. But you go back and you got this pattern with the fines and the penalties they`ve paid Waste Management (URL: http://www.wastemanagement.com/) and Sunbeam (URL: http://www.sunbeam.com/) , you know, it just looks like a pattern for doing business at this place and there`s serious question whether the firm`s even going to survive at this point. 
ALI VELSHI, CNNfn MONEY GANG ANCHOR: All right. Now the smoking gun unfortunately doesn`t tell us what -- what we`re missing. It doesn`t tell us whether these are even material documents. Do we know that in effect that they are? 
KADLEC: We don`t know. We don`t know. Odds are the material stuff has been saved. Okay. That`s beyond -- we don`t know if a few things were ditched down here or not. Mostly what has been gotten rid of is emails and informal memos but these are the kinds of things that an investigator would love to have. 
KIERNAN: Yeah. 
KADLEC: . because you`re a little more revealing in an offhanded comment or an email that things that show motivation and intent and this stuff is now missing. I mean, what they have are the work papers but what`s that but just. 
VELSHI: Presumably drafted by people who know not to break the wrong things exactly. 
KIERNAN: From the prospective of the investor the audit is very important in that it is the shareholders advocate in the financial process making sure that everything is as it appears to be and the accounting firms have been very successful in convincing regulators that they don`t need to be regulated. 
KADLEC: This whole concept of self-policing is under a black cloud. I mean, we saw it all this year and last with the analysts, I mean, Wall Street and IPOs and underwriting are supposed to be a self-policing mechanism, well it didn`t work there. You know, the auditors are supposed to self-police but they have this thing called peer review. I mean, please that just means that I`m looking at what you`re doing and. 
(CROSSTALK) 
KADLEC: . and you know, next -- you know, you`re going to do the same thing for me next week. So, you know, you`re really inviting additional oversight and Congressional inquiries, there`s just no ending where this thing is going to go. 
VELSHI: Where does the word scandal or conspiracy -- at what point do you start looking at that? Could this just be ineptitude on two separate parts, both Enron and Arthur Andersen and they just both happen to coincidentally be doing the wrong thing at the same time? 
KADLEC: I mean, that gets to the question of who knew what and when. 
VELSHI: Right. 
KADLEC: But it`s the age-old question. The pattern -- on the evidence we see it suggests that somebody knew something and was trying to hide it. I mean, that`s a far as we can go, you know, more evidence is sure to come out. 
VELSHI: Enron`s best defenses that this happened -- not Enron, but Andersen`s best defense is that this has happened to them before. Sloppy. 
KADLEC: Let`s face it, other accounting firms have missed things and it`s not a bad defense. I mean companies that want to hide something can hide it and an auditor may not be able to pick it up every time. But the fact that they were paid a million dollars a week to work for this company, there`s just a lot of things that don`t look good. 
KIERNAN: Dan Kadlec, Wall Street columnist, "Time" magazine. Thanks for being here. 
KADLEC: OK. 
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Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Business
Andersen`s Role in the Enron Collapse
Pat Kiernan, Ali Velshi

01/15/2002
CNNfn: The Money Gang
(c) Copyright eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House, Inc.). All Rights Reserved.

ALI VELSHI, CNNfn ANCHOR, THE MONEY GANG: We`re continuing on, on the Enron (URL: http://.www.enron.com/) topic. One of the early shareholder lawsuits against Enron and Arthur Andersen comes from Amalgamated Bank . 
PAT KIERNAN, CNNfn ANCHOR, THE MONEY GANG: This case raises a lot of questions about whether small shareholders were left out of the loop about the worsening financial condition at Enron.
William Lerach is one of the lead lawyers for Amalgamated and he joins us from San Diego. Thanks for being with us, Mr. Lerach. 
WILLIAM LERACH, ATTORNEY, AMALGAMATED BANK: Thank you. 
KIERNAN: Bill, let me start by asking you just to summarize exactly what your allegation is and what the lawsuit hopes to achieve as far as compensation. 
LERACH: Amalgamated Bank, a union-owned bank that manages the pension moneys of working people, janitors, laborers, workers, suffered a large loss as a result of the fraud at Enron. The lawsuit alleges that Enron and Arthur Andersen artificially inflated the reported profits of Enron by over $600 million and overstated Enron`s net worth or shareholder equity by over $1 billion during a three-year period. During which 29 top officers and directors personally profited by selling off 1.1 billion shares of their Enron stock at inflated prices, all of this in violation of the federal securities laws. 
VELSHI: Now, noted attorney Robert Bennett working on the Enron side says there`s no proof that any of these 29 executives did anything wrong. What`s your response to that? 
LERACH: Mr. Bennett is being well paid to try to put a positive spin on an impossible situation. This is the largest dose of insider trading we have ever encountered in the 30 years that we`ve been prosecuting these kinds of cases and remember, Enron has now admitted that its financial statements contained hundreds of millions of dollars of phony profits during the time those executives were selling off their stock. If those executives didn`t know it, it was only because they deliberately closed their eyes to what was in front of them. 
CHRIS HUNTINGTON, CNNfn CORRESPONDENT, THE MONEY GANG: William, if I could just ask you a practical question: 
Now that Enron is in bankruptcy protection and certainly you guys out there in the shareholder lawsuit community are seeking class action status, can you just walk us through some of the mechanics of when you might achieve class status, when you might actually get a hearing on your case, when you might actually potentially see some money for your clients? 
LERACH: Well, first of all, the case is actually moving forward rapidly. Amalgamated Bank has made an emergency motion to the court to freeze the $1.1 billion of insider trading proceeds. Remember, Enron is bankrupt. So Enron won`t be able to pay any money. So we`re trying to attach these insider trading proceeds so they`ll be there at the end of the day when we win the case to fund a recovery or a settlement. 
Now the court has ruled in a big victory for Amalgamated Bank that the court has the power to grant this extraordinary remedy. Next what we`re going to do is trace where that $1.1 billion is and if we find out that it`s in offshore bank accounts or otherwise being secreted, then the court, in my opinion, will probably attach it. As the case goes forward, it will take some months for the complaint to be upheld by the court and for class certification status to be obtained but that will all happen later this year. 
VELSHI: You know, you may make a good legal argument and may get a ruling in your favor in the end but what - if we have to go through that entire process of finding out what happened to the proceeds of that $1.1 billion, finding out if they`re offshore, getting the court to attach it, what is the actual chance of recovery in the end? 
LERACH: Oh, there`s a very good chance of recovery here for the victims of this fraud. The Enron officers and directors, in addition to the insider trading money, are covered by $400 million of directors and officers` insurance. In addition, Arthur Andersen, while it`s in a terrible fix, is a very profitable enterprise with over $9 billion of revenue a year and as this case expands and unfolds, several other defendants, many of whom will be institutions with large resources and large insurance, are surely going to be added to the case as defendants. 
HUNTINGTON: How do you account for the fact that shareholders and employee pension funds happily rode Enron`s stock price up to $90 a share and it really, with the exception of the lock down period when the funds were - the 401(k) was shifting administrators, there was really nothing to prevent folks from selling their Enron shares for quite some period of time. 
LERACH: Of course - of course nothing to prevent them from selling their shares other than the fact that the company was representing that it had never been more profitable, lying, that the company was representing that its future had never been brighter, lying, and the securities analysts were - who were, by the way, employed by the investment banking firm, so we`re getting hundreds of millions of dollars from Enron to peddle Enron bonds and stock to the public were issuing ever more rosy analysts` forecasts. How can you fault the victims? All the investors were doing was what investors are supposed to do. Look at the information the company and the analysts give you and if it looks good, believe it and invest. 
VELSHI: William Lerach, thanks very much for joining us here on THE MONEY GANG. 
LERACH: Thank you. 
VELSHI: William Lerach is the managing partner at Milberg Weiss. They`re representing Amalgamated Bank in its suit against Enron. 
KIERNAN: Our thanks to Chris Huntington as well. 
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California; Editorial Pages Desk
Commentary Bush to Lay: What Was Your Name Again?
ROBERT SCHEER
Robert Scheer writes a syndicated column.

01/15/2002
Los Angeles Times 
Home Edition
B-13
Copyright 2002 / The Times Mirror Company 

If you believe President Bush, Kenneth Lay--one of his top financial backers and his "good friend"--was merely an equal-opportunity corrupter of our political system, buying off Democrats and Republicans as needed. It is a convenient claim designed to unlink Bush from the biggest bankruptcy in U.S. history. 
But, as the good ol' boys in Texas--and now Bush spokesman Ari Fleisher--like to say, "That dog won't hunt."
On Friday, Bush attempted to distance himself from the Enron scandal by stating that CEO Lay "was a supporter of Ann Richards in my run in 1994," obscuring the fact that Lay gave Bush three times as much money as he did the Democratic gubernatorial incumbent whom Bush was trying to unseat. Bush added that he really did not get to "know" Lay--the man he nicknamed "Kenny Boy"--until after he won the governor's race. 
I can't speak to the varying levels of intimacy of their relationship, but Bush had considerable contact with Lay two years earlier when the Enron leader served as the chair of the host committee for the 1992 Republican convention in Houston, where Bush the senior was nominated for his second term as president. 
At that time, Investor's Daily reported that "recently, Lay has turned Enron into a corporate bastion for the GOP." After the elder Bush's defeat, the Bush family switched its political ambitions to George W.'s prospects for governor, and Lay came up with the first of many contributions to that effort. 
Lay's loyal support of the Bushes may have been gratitude for the decisive role that the first Bush administration played in Enron's meteoric rise. Building on the Republican-engineered deregulation of the electricity industry that began in the 1980s, Enron got a huge boost during the first Bush administration with passage of the 1992 Energy Act, which forced utility companies to carry Enron's electricity on their wires. 
In fact, Lay publicly thanked Bush with a column in the Dallas Morning News a week before the 1992 election. Calling Bush "the energy president," Lay wrote that "just six months after George Bush became president, he directed Energy Secretary James Watkins to lead the development of a new energy strategy." That resulted in the legislation making Enron's exponential growth possible. 
Lay was effusive in expressing his gratitude, writing that the Bush "strategy is the most ambitious and sweeping energy plan ever proposed." 
That gift to Enron was coupled with a major exemption granted by Wendy Gramm, then chair of the Commodities Futures Trading Commission in the Bush administration, an exemption that permitted Enron to begin lucratively trading energy derivatives. Gramm then joined the board of directors of Enron and served on its auditors committee, where much of the false reporting now being exposed seems to be centered. Her powerful role in the company did not stop her husband, Sen. Phil Gramm (R-Texas), from pushing through legislation that further weakened government oversight of Enron's activities. 
After Bush the elder's defeat in 1992, the ties between Enron and the Bush camp grew even stronger. In March 1993, Enron hired Bush's Commerce secretary, Robert A. Mosbacher, and his secretary of State, James A. Baker III, to line up contracts for Enron around the world. As Enron's representative, Baker--later George W.'s Florida election strategist--even went on a trip accompanying the ex-president to Kuwait to do big business in the nation Bush had fought the Gulf War to save. 
The trip was criticized by Gen. Norman Schwarzkopf, who said that he had turned down millions in proffered deals to do business in Kuwait after the war. 
"I represent 540,000 American men and women, not some private company," said Schwarzkopf. "They were willing to die in Kuwait. Why should I profit from their sacrifice?" 
A decade later, the new Bush administration turned immediately to Lay to get his bearings on an energy policy. Lay met with Vice President Dick Cheney's energy group six times. This was no surprise, given the close ties between Lay and Bush during the latter's days as Texas governor. Consider, for example, that as governor, Bush did not hesitate to call then-Pennsylvania Gov. Tom Ridge and assure him that Lay--then eager to deregulate Pennsylvania's electricity market--was the finest of men, representing the most worthy of companies. 
Keeping true to family traditions, the president has always aggressively supported far-reaching deregulation of utilities--it is, in fact, his political mantra--and Enron appears to be the biggest benefactor of that philosophy. Whether the contacts between them were actually illegal and not merely an egregious betrayal of Enron's employees, shareholders and consumers, it remains for the eight investigations planned or underway to reveal what Bush and White House insiders knew, and when they knew it.
PHOTO: Kenneth Lay; PHOTOGRAPHER: ROMAN GENN 


California; Editorial Pages Desk
Commentary When Going Gets Tough, the Tough Shred
DANIEL SCHORR
Daniel Schorr, senior news analyst for National Public Radio, won three Emmy awards for his coverage of Watergate.

01/15/2002
Los Angeles Times 
Home Edition
B-13
Copyright 2002 / The Times Mirror Company 

It was Watergate in the 1970s and Irangate in the '80s. Will Enrongate become the national scandal of the new century? 
"Gate" has become a metaphor for the corrupt use of power. It remains to be seen whether the Bush administration, consorting with a giant corporation, contributed the regulatory laxity that made possible the victimization of employees, investors and the nation.
Now, as in the past, investigators will have to cope with the cover-up impulse, which is not limited to government officials. For months, the Bush White House has resisted providing the General Accounting Office--the investigative arm of Congress--with data about the workings of Vice President Dick Cheney's energy task force, which produced anti-regulatory policy recommendations much to Enron's liking. The GAO has filed an unprecedented lawsuit against the White House, trying to pry loose the information. 
Yet much of the information is buried in the files of the bankrupt corporation and its accountants in the Andersen company. With a free-enterprise whiff of Watergate, Andersen has now acknowledged that "individuals" disposed of "a significant but undetermined number of electronic and paper documents" related to Enron. The destruction apparently continued after a subpoena had been received from the Securities and Exchange Commission. 
This "Quick-Henry-the-shredder" reflex took me back three decades to June 1972. On the morning after five burglars had been caught in Democratic headquarters in the Watergate office building, G. Gordon Liddy, chief of the enterprise, drove to the office of the Committee to Reelect the President on Pennsylvania Avenue and started shredding files. He shredded everything connected with the project--including hotel soap wrappers and even $100 bills from illegal campaign funds. 
A week later, L. Patrick Gray, acting director of the FBI, was called to the White House and told by Nixon aide John Erlichman to "deep-six" the contents of the safe of H. Howard Hunt, Watergate operative, in the Executive Office Building. "Deep-six" meant that Gray was to drop the contents off the Potomac bridge. Gray chose to keep the material in his home and burn it six months later. 
The prize Watergate suppression was, of course, the erasure of 18 minutes of a discussion between President Nixon and Chief of Staff H.R. Haldeman on a tape subpoenaed by the Watergate special prosecutor. From the context it appears that Nixon and Haldeman were discussing who ordered the break-in and why. Nixon denied making the erasure. His new chief of staff, Alexander Haig, testified to some possible "sinister force." 
Fast-forward to 1985 and the explosive revelation that the Reagan administration had been dealing with the Ayatollah Ruhollah Khomeini's Iranian government to trade antitank missiles for Tehran's help in recovering Americans held hostage in Lebanon. A further development was that proceeds of the missile sales were diverted to support the anti-Communist Contras in Nicaragua. 
Atty. Gen. Edwin Meese ordered an investigation, and immediately Oliver North, the National Security Council staffer managing the enterprise, started shredding. Into the machine he fed paper copies of electronic messages, telephone logs--everything. 
At one point the pile next to the shredder stood 1 1/2 feet high. When the shredder jammed, North went around the building looking for another secure shredder. North's secretary, Fawn Hall, spirited some particularly sensitive papers out of the White House hidden in her clothes. 
Adm. John Poindexter, head of the NSC, tore up the "intelligence finding" bearing President Reagan's signature that authorized the arms shipments. 
During the Clinton administration there was some shredding, tampering and temporary removal of documents related to the investigation that started with the failed investment in the Whitewater Development Co. in Arkansas. White House counsel Bernard Nussbaum was criticized for transferring Whitewater files from the office of lawyer Vincent W. Foster Jr. after Foster's suicide. 
But, unlike Watergate and Irangate, Whitewater was not a scandal that threatened the rights and livelihoods of Americans. Enrongate could be such a scandal, and so it's time to take notice when you hear the shredder at work.


California; Editorial Pages Desk
Search for the Truth Regarding Enron

01/15/2002
Los Angeles Times 
Home Edition
B-12
Copyright 2002 / The Times Mirror Company 

Re "White House's Failure to Sound Alarm Faulted," Jan. 13: Criticism of the Bush administration for not sending a warning to investors about Enron's impending collapse seems more the product of political motivations than sound reasoning. Putting the federal government in the business of providing investment advice would surely create great potential for mischief and conflicts of interest. Private investors and their professional advisors are responsible for the wisdom of their investments. 
The federal government is not without responsibility. If the laws regarding disclosure are inadequate, the Congress can fix that. If companies do not comply with the laws, the federal government can take legal action. Best of all, the Senate should stop its irresponsible behavior and enact meaningful campaign finance reform. And the president should fix the National Labor Relations Board, if Congress lets him, so that it enforces the Supreme Court's 1988 Beck decision preventing unions from improperly using members' money for political purposes. Without that, campaign finance reform would be problematic. The culprit in this issue is really the Congress.
Peter Horton 
Coronado 
* 
Re "Resist Revenge," editorial, Jan. 13: Don't think of it as revenge; it is simply fairness and the search for truth. Bill Clinton's presidency was sabotaged by conservatives who hated him for his intelligence, humor and good looks. If George W. Bush's presidency folds because, with his involvement in the oil business, a conflict of interest appears, it is his own fault and not some plot by liberals. 
Jon Hartmann 
Los Angeles 
* 
When running for president, Bush promised that, if elected, he would bring a new morality into the government. With the Enron scandal, the country did not have to wait long. But with Atty. Gen. John Ashcroft, etc., jumping ship, who will be left to prosecute Enron? 
Louis Robins 
Van Nuys 
* 
Re "Auditor Says It Destroyed Enron Records," Jan. 11: Even though I'm a layman, I know to keep my personal tax records for seven years in case I'm audited. Why have the accountants for Enron destroyed thousands of tax and business documents? Something to hide? 
Was Bush's name involved in these transactions? Or how about the other high-ranking officials who have since bowed out of the investigation due to possible conflicts of interest; did they make enormous profits selling shares as the everyday employees were restricted from selling their shares as they slid from $80 to worthless? 
Larry Bickmann 
Thousand Oaks 
* 
Re "Compassionately Conserving Enron," Commentary, Jan. 10: Arianna Huffington is fast becoming the patron saint of fair play. The Enron debacle is a microcosm of the Bush administration's indifference to average citizens' endeavor to provide a cushion for the autumn of their lives. Greed, the cancer of capitalism, must not be allowed to run rampant while the members of the ruling classes hide in their bunkers, counting out their millions. If "it's the people's money," the slogan of the man who swaggered into the White House, then give it back to the people who are now hurting. And watch that "lockbox," the working man's last vestige of security. 
Kathleen O'Donnell Hunt 
Huntington Beach


Business; Business Desk
Enron Could End Up Where It Started Energy: The auctions of assets would remove core businesses, leaving a pipeline operator.
NANCY RIVERA BROOKS
TIMES STAFF WRITER

01/15/2002
Los Angeles Times 
Home Edition
C-1
Copyright 2002 / The Times Mirror Company 

Enron Corp.'s proposed sale of its core energy-trading business to UBS Warburg, raises the question: Without its crown jewel, what is Enron? 
Until only a few months ago, the Houston-based company was the world's largest energy trader and was pushing its vision of deregulated markets into new states and new commodities.
But now, under bankruptcy court protection, Enron is frantically unloading assets, including its once-dominant trading operation, its Oregon utility, its best natural gas pipeline and a variety of international assets. 
If all of these deals are completed, Enron could end up much as it began, a smallish operator of scattered pipelines. 
The heady days when Enron tried to dominate the energy world and the halls of power are over, and its financial meltdown will haunt for years whatever company survives in the form of lawsuits and investigations. 
"Without these assets, Enron is not much," said utilities analyst Andre Meade of Commerzbank Securities in New York. 
"It's going to be a very small entity. My guess is Enron just gets liquidated and never emerges from bankruptcy ... or they might get acquired," Meade said. 
Enron, recently 21,000 employees strong, has fired 6,200 workers and will jettison even more in the months ahead through asset sales and more expected layoffs. A company spokeswoman Monday could not say how big the resulting company would be and how many people it would employ. 
Enron spokeswoman Karen Denne acknowledged the shrinking of Enron but said that "the pipelines are a self-sustaining business." Enron began in 1985 as a traditional natural gas pipeline operator, so "we'll be coming full circle," she said. 
The latest unloading of assets is the auction of Enron's trading business to UBS Warburg, the New York-based investment banking arm of Swiss financial services firm UBS. UBS won a bidding war Friday for Enron's trading operation, which once handled an estimated 25% of all the wholesale energy trading in the nation. 
Enron and UBS were working to complete details of the agreement Monday and delayed filing documents detailing the agreement with the U.S. Bankruptcy Court for the Southern District of New York. 
Enron will sell the entire operation to UBS Warburg, rather than the 51% ownership stake it previously was said to be negotiating, according to published reports. UBS Warburg would pay no cash up front for the business but would give Enron 33% of any pretax profit generated by the trading business for at least two years. 
Enron has all but closed its trading operation, which employs about 850 people and in 2000 generated 90% of the company's nearly $101 billion in revenue. The sale does not include any existing contracts for commodities, which are valued at more than $6 billion. 
Bankruptcy Judge Arthur Gonzalez will hold a hearing on the proposed sale Friday, one day later than previously planned. 
Although Enron's creditor committee backs the sale to UBS Warburg, some other creditors are objecting because they fear that profits would find their way to Enron and not to creditors, who are owed more than $31 billion. 
Enron recently agreed to let Dynegy Inc. buy the 17,000-mile Northern Natural Gas Pipeline, which Enron had pledged as part of the failed $9-billion takeover by its small cross-town rival. 
Dynegy pulled out of the agreement Nov. 28, the day Enron fell into junk-bond status, with Dynegy contending it had not realized the depth of Enron's problems. 
Dynegy is getting the pipeline for $23 million on top of the $1.5 billion in capital it had invested in Enron as part of the takeover agreement. But Enron was mired in an all-but-fatal cash crunch as investors and trading partners fled, and it filed for bankruptcy law protection Dec. 2. 
Enron still hopes to regain that pipeline as part of a $10-billion lawsuit it filed against Dynegy for pulling out of the merger. 
Enron also owns all or part of three smaller pipelines. The largest is Transwestern Pipeline, which operates 2,500 miles of pipe between Texas and the California border. Other Enron businesses include energy marketing and services, which sells electricity, natural gas and energy-management services primarily to business customers who want to bypass the traditional utility. 
Enron is selling assets including its Portland-based utility, Portland General, and international power plants and other assets. 
Enron's trading business was well-regarded and if it can be resurrected, it could give Enron a stream of profit "that would be a nice little start of a business," said Chris Ellinghaus, utility analyst with Williams Capital in New York. 
"The trading business has a lot of credibility to win back," Ellinghaus said. "But that was the part of Enron that actually worked. It was all those other things that they got into that got them into trouble" including investments in water and telecommunications ventures. 
"If they had just stuck with the core business, they would have done just fine," Ellinghaus said.



Business; Business Desk
Ex-Enron Execs Launch Firm to Market Energy
From Associated Press

01/15/2002
Los Angeles Times 
Home Edition
C-14
Copyright 2002 / The Times Mirror Company 

PHILADELPHIA -- Several former Enron Corp. executives launched Monday a firm to market energy services to small and medium-sized businesses instead of large industrial customers the bankrupt giant had sought. 
Celeren Corp. was negotiating the final details of an expected $15-million deal with its first customer, a New York firm, and expected to announce that deal by the end of next week, said President Thomas A. Brigger.
Brigger, Celeren Chief Operating Officer Donald S. Parker and others left Enron in July to organize their new venture, well before the Houston-based energy trader rocked the financial world with its Oct. 16 disclosure of a $638-million third-quarter loss and its bankruptcy filing Dec. 2. 
Brigger had been mid-Atlantic regional manager for Enron Energy Services' outsource fulfillment operation, and Parker had been mid-Atlantic regional director of asset risk management. 
"The group we were with, Enron Energy Services, was doing very well. Our group had nothing to do with accounting," Brigger said.


Business; Business Desk
Compaq, HP Detail Retention Bonuses Merger: Packages are designed to keep important employees during integration of the technology companies.
From Associated Press

01/15/2002
Los Angeles Times 
Home Edition
C-3
Copyright 2002 / The Times Mirror Company 

Hewlett-Packard Co. and Compaq Computer Corp. would shell out $634 million in bonuses to key employees as an incentive to stay on board if their merger goes through, the companies disclosed Monday. 
Hewlett-Packard would pay $33.1 million to 10 top executives and $337 million to about 6,000 selected employees over two years, according to an updated merger prospectus filed with the Securities and Exchange Commission.
Compaq would pay $22.4 million to seven top executives and $242 million to an undisclosed number of employees over two years, the filing said. 
The companies disclosed in their original prospectus on Nov. 15 that HP Chief Carly Fiorina had turned down a merger-related bonus package that would have been worth $8 million, and that Compaq leader Michael Capellas forfeited a $14.4-million plan. Both companies said the CEOs wanted to avoid the appearance of conflicts of interest as they fight hard for the deal. 
The retention bonuses are designed to keep important employees during the difficult integration of the massive technology companies. HP has 86,000 employees; Compaq has 66,500. At least 15,000 layoffs are expected if the deal goes through. 
HP's bonus plan was crafted by board members Sam Ginn, Phil Condit and Walter Hewlett, the co-founder's son who originally voted for the deal and is now encouraging shareholders to torpedo it. 
Compaq's retention package was developed by directors Lawrence Babbio, Judith Craven and Kenneth Lay, the head of shattered Enron Corp. Lay resigned from Compaq's board last month. 
HP and Compaq say their $24.2-billion deal is essential for their long-term growth and would bolster their position in servers, data storage, personal computing and high-tech services. The companies expect merging would save at least $2.5 billion a year by 2004, or $5 to $9 a share. 
Opponents believe the deal is too risky, would shrink the contribution of HP's profitable printing division and overexpose the company to the weak personal-computer market. Hewlett and Packard family interests with 18% of HP shares are against the deal. 
Palo Alto-based HP and Houston-based Compaq are awaiting regulatory approval before setting a date for a shareholder vote. 
European regulators have until Jan. 31 to announce a decision on the deal or to inform the companies they need more time to study it. 
HP shares fell 36 cents, about 1.5%, to $22.52 on the New York Stock Exchange, while Compaq lost 36 cents, or 3%, to $11.14, also on the NYSE.


Nation & World
Back to Business
Kenneth T. Walsh

01/21/2002
U.S. News & World Report
14
c Copyright 2002 U.S. News & World Report. All rights reserved.

As he prepares for his State of the Union address January 29, President Bush is riding high. His war against terrorism is going well, he signed a compromise education bill into law last week, and he has rediscovered his cowboy swagger, declaring that Congress will raise taxes only "over my dead body." More than 80 percent of Americans approve of his job performance. 
But there's trouble ahead. Americans are turning their attention from Osama bin Laden back to domestic problems, especially the recession and unemployment, and Democrats are again attacking Bush on an issue that has plagued him from the start: his coziness with big business and his strong policy tilt toward corporate America. Making the problem markedly worse for the White House is the growing furor over the collapse of Enron Corp., the once mighty energy firm with close ties to Bush and the GOP. Last week, the Justice Department began an investigation into possible wrongdoing--the latest in a series of congressional and media probes into a financial debacle that, at minimum, raises questions about whether big corporations and rich contributors have unfair access to the administration (story, Page 22). "You expect a Republican president to be tied to the corporate interests," says Al From, founder of the centrist Democratic Leadership Council. "But George W. Bush said he'd be a different kind of Republican, and he hasn't done that. . . . Enron will take the halo off him."
Even Bush's advisers admit his current popularity has been inflated by a public desire to rally around the commander in chief, and they anticipate his approval ratings will soon begin to slide. As the nation returns to some semblance of normalcy, adds presidential historian Robert Dallek, Bush will pay a price for his lingering reputation as "the representative of big business and oil and gas and tax breaks for the rich. People are asking if he is just looking out for big business and his corporate friends." 
On domestic issues, says Dallek, Bush reminds him of Charles Wilson, President Dwight Eisenhower's defense secretary and the former president of General Motors, who in 1952 declared that what was "good for General Motors" was "good for our country." "Bush is cut from the same cloth," the historian says. " . . . But people have to feel the president is on their side, that he cares about them. And for Bush, the jury is very much out." 
With the midterm elections looming, pressure is growing on Bush to respond to the wishes of corporate America, which contributed generously to his 2000 campaign and remains a bulwark of Republican fundraising. To that end, White House counselor Karl Rove and other senior aides have been meeting privately with business leaders to assess what is doable this year. Among the possibilities, according to Bush advisers: relief from the corporate alternative minimum tax (already passed by the House and pending in the Senate); tax breaks on depreciation expenses and new capital investments; new protections from lawsuits; legislation to write off operating losses of some airlines and chemical companies; relaxation of workplace and environmental rules; and opposition to healthcare legislation that could raise costs for businesses. 
Bush-appointed regulators already are floating a proposal to relax air-pollution regulations at upgraded power plants--a move long sought by the energy industry, which has strong ties to Bush and Vice President Cheney. Both are former energy executives. Among those who sought the weakened standards was former Montana Gov. Marc Racicot, the incoming chairman of the Republican National Committee and Bush pal. All this has prompted Democratic members of Congress and the attorneys general of nine northeastern states to threaten to challenge the plans if they are implemented. Environmentalists are also up in arms. 
Pocket watch. It's part of a broader picture in which Democrats and their allies will make Bush's corporate attachments an issue in the midterm campaigns this fall--with the Enron case front and center. "Enron is a metaphor for the way they approach managing the economy," Democratic National Chairman Terry McAuliffe said in an interview. " . . . They're in the pockets of big business." 
The White House has a different explanation. "President Bush is a populist," Rove, Bush's chief strategist, told U.S. News. "For him the model is not the big corporation but the entrepreneur--the risk takers, the small-business people." 
The public doesn't see it quite that way. An ABC News/Washington Post Poll taken before the terrorist attacks found that 67 percent of Americans believe "large business corporations" have "too much influence" in the Bush administration; 64 percent said "the oil and gas industries" have too much power; and 72 percent said "wealthy people" are too influential at the White House. 
Not that the White House is upset by the corporate connections. Quite the contrary. Bush is proud of his background in private enterprise, as a Texas oilman and as managing partner of the Texas Rangers baseball team. He tells aides those experiences taught him a great deal about the economy and about the importance of keeping the business climate healthy. "It's not good for the country to bash business," says White House Press Secretary Ari Fleischer. " . . . The fact is we all benefit from growth, and the more widely growth is spread in our society, the better it is for everyone." 
Related interests. A U.S. News review--reinforced by a new survey of the top 100 Bush appointees conducted by the nonpartisan, Washington-based Center for Public Integrity--shows that the administration is filling up rapidly with a substantial number of former CEOs, corporate lobbyists, and other top leaders of commerce and industry. Just as important, Bush has appointed a number of leaders from industry to key government jobs where they will be making policies that could benefit their former companies or the interests they represented. 
Of Bush's top 100 appointees, 34 came directly from for-profit businesses (even though some had served in government before) and 16 were from lobbying firms and law firms with significant lobbying operations, according to the center. An additional 27 were drawn from state, local, and federal governments; 19 were from nonprofit groups, including educational institutions and think tanks; four were from other categories. The center found that 20 of the top 100 officials in the administration have positions in departments or agencies that involve oversight of, or financial dealings with, their former private-sector employers or clients. At the time of their nominations, 57 had investments of $50,000 or more in companies with either regulatory issues or contractual business with the government. 
President Bill Clinton's administration also contained corporate leaders, among them former Goldman Sachs executive Robert Rubin as treasury secretary and former energy executive Mack McLarty as White House chief of staff. But Bill Allison, the center's managing editor, says Clinton drew more of his senior advisers from politics, government, organized labor, academia, and the think tanks. (A precise comparison with Clinton's appointees was not feasible, Allison says, partly because many records from the Clinton era were not available.) Allison adds: "This is not to say you should never ever pick someone from the business community or erect a wall of separation. It's a question of access and bias. Who are these people [in the Bush administration] listening to?" 
Not surprisingly, the business sector--particularly the energy industry--has a very loud megaphone. The top 100 Bush appointees collectively had the biggest concentration of their holdings in the energy sector, according to tabulations by the Center for Public Integrity. Other major sectors: metal and mineral industries as well as financial companies. 
At the vitally important second level of the administration, where many policies are hammered out--the subcabinet--the corporate connections are particularly apparent. In some cases, Bush has filled important subcabinet jobs with industry lobbyists and corporate executives who have a decidedly pro-business outlook. Among them: Agriculture Under Secretary Mark Rey, a former lobbyist for the timber industry who now has jurisdiction over the U.S. Forest Service, and Deputy Interior Secretary Steven Griles, a former lobbyist for energy, chemical, and waste-disposal interests who is a key figure in developing the administration's controversial energy policy that would encourage drilling on public lands. 
The subcabinet picks reinforce Bush's first round of corporate appointments, including Treasury Secretary Paul O'Neill, former chairman and chief executive officer of Alcoa; Defense Secretary Donald Rumsfeld, former CEO and chairman of G. D. Searle & Co., a pharmaceutical company, and General Instrument Corp.; White House Chief of Staff Andrew Card, former president and CEO of the American Automobile Manufacturers Association and former vice president of governmental relations for General Motors; and Commerce Secretary Donald Evans, former CEO of Tom Brown Inc., an oil and gas company with offices in Midland, Texas. 
Naturally enough, the corporate-oriented appointees have set a wide range of pro-business policies in motion. Among them: proposals to allow more energy development on public lands, including the Arctic National Wildlife Refuge; an ongoing re-evaluation of rules that limit road building in national forests; a rollback of ergonomic workplace standards opposed by many businesses; and opposition to the Kyoto Protocol, which would have required stringent action by business and industry to minimize climate change. 
Secret meetings. Coming under particularly heavy fire was Cheney's pro-development energy policy, formulated in secret meetings with business executives and lobbyists. Those meetings are the subject of a growing dispute between the White House and congressional Democrats who, through the General Accounting Office, are demanding a list of attendees. Says Allison: "This [energy policy] is the way energy companies believe this should work--it's the blueprint of the guys who think about development and drilling--and the question is whether or not government should take the same view as the oil companies." 
Another growing source of contention is Bush's economic stimulus plan, now stalled in the Democrat-controlled Senate. One provision backed by the White House would allow companies to write off 30 percent of their new investments annually for three years. Democrats favor a substantially lower tax break. Senate Majority Leader Tom Daschle has tried to link such pro-business provisions to his larger critique of Bush's economic policy; he says that Bush's $1.35 trillion tax cut gave a huge windfall to wealthy individuals and that it's unfair to give similarly large breaks to corporations. 
While Bush has departed from conservative orthodoxy in some ways--spending more money on education, for example, and avoiding GOP "wedge issues" like crime and race--he has been more of a traditional conservative on domestic policy. Yet his views are firmly rooted in the GOP past. For most of the past century, the Republican Party was almost synonymous with corporate America. In 1925, President Calvin Coolidge declared famously, "The chief business of the American people is business." And in 1962, Dwight Eisenhower proudly called the GOP "the party of business." Says Republican pollster Frank Luntz, an informal adviser to the White House: "Republicans believe in free markets. That should come as a surprise to no one." 
Not that Bush has given business everything it wants. In 2001, he deferred consideration of corporate tax breaks in favor of individual tax cuts, and he has shown a willingness to allow patients to sue HMOs in state courts, which business interests oppose. (Bush has shown little interest in a capital-gains-tax cut because he doesn't believe Congress would pass it in the near future.) 
Yet business leaders are delighted with their new leader. "This guy is a Harvard M.B.A., he ran a lot of businesses, and he has a lot of guys on his staff who used to be in positions where they met a payroll," says Tom Donohue, president of the U.S. Chamber of Commerce. "They've got an instinctive and practical understanding" of business's needs, Donohue says, adding that Bush was "fundamentally correct" and "courageous" in rejecting the Kyoto climate-change treaty as potentially harmful to the U.S. economy and in rolling back or reviewing some of Clinton's strongly pro-environment policies. 
Democrats believe that kind of praise from the business community can be turned to their advantage. "The public thinks his agenda is to fight for people in the boardroom and not the folks sitting behind computer screens or working in other jobs," says John Podesta, another former White House chief of staff for Clinton. "If things go badly and the economy stays soft, there's no sense he's in there `fighting for us.' " 
Such perceptions haven't had much effect on Bush's war-inflated popularity so far. But the situation could change--especially if Democrats succeed in arguing that special interests are benefiting from Bush's policies at Middle America's expense. That loss of faith could send his approval ratings tumbling and jeopardize his presidency--just as it did for his dad a decade ago. 
Some of the faces of `Bush Inc.' 
President Bush has been installing corporate leaders and lobbyists in prominent positions throughout his administration, especially at the subcabinet level, where many important policies are formulated and implemented. In the private sector, many of these appointees actively pushed for a pro-business agenda that included development of natural resources on public lands--an ongoing source of controversy in Washington and across the country. A new study by the Center for Public Integrity examines the backgrounds of the president's top 100 appointees. 
Backgrounds of Bush's top 100 appointees 

For-profit businesses 34
Government 27
Nonprofits 19
Lobbying firms 16
Other 4 

MARK REY 
Under secretary of agriculture for natural resources and environment, overseeing the Forest Service 
Formerly: Lobbyist for the timber industry and GOP aide to the Senate Energy and Natural Resources Committee 
A supporter of expanded logging on public lands, he is popular with timber interests. One environmentalist labels him "Darth Vader Lite." 
MICHAEL PARKER 
Assistant secretary of the Army for civil works, overseeing the Army Corps of Engineers 
Formerly: A Republican congressman from Mississippi; lobbyist for barge interests 
A longtime critic of shifting the focus of the Corps of Engineers to environmental protection from navigation, flood control, and projects often criticized as congressional pork 
MICHAEL JACKSON 
Deputy secretary of transportation 
Formerly: Executive at Lockheed Martin IMS Corp.; senior vice president, American Trucking Associations; chief of staff to then Transportation Secretary Andrew Card 
Trucking industry lobbied on highway and related issues. Lockheed Martin IMS sold and maintained "red-light runner" cameras and automated toll systems. 
WILLIAM MYERS III 
Solicitor of the Interior Department 
Formerly: Executive director of the Public Lands Council; director of the National Cattlemen's Beef Association; counsel for Cattlemen Advocating Through Litigation; official at Justice and Energy departments 
Longtime links to Western development and ranching interests; specialized in natural resources and public-lands law 
BENNETT RALEY 
Assistant interior secretary for water and science, overseeing the Bureau of Reclamation and U.S. Geological Survey 
Formerly: Represented mining, grazing, and water-development interests; staff counsel to Colorado Republican Sen. Hank Brown 
A critic of the Endangered Species Act and the Clinton administration's environmental policies 
STEVEN GRILES 
Deputy interior secretary 
Formerly: Lobbyist and consultant for various development interests, including the National Mining Association and the American Petroleum Institute; Interior Department official in the Reagan administration 
His support for oil and gas development on some public lands could make him a lightning rod for environmentalists.

Picture: President Bush urges more production of fossil fuels and nuclear power in a speech last May. (ALEX QUESADA--MATRIX FOR USN&WR); Chart: Backgrounds of Bush's Top 100 Appointees; Picture: Mark Rey (USDA); Picture: Michael Parker (ROGELIO SOLIS--AP); Picture: Michael Jackson (DEPARTMENT OF TRANSPORTATION); Picture: William Myers III (DEPARTMENT OF THE INTERIOR); Picture: Bennett Raley (DEPARTMENT OF THE INTERIOR); Picture: Steven Griles (CHRISTOPHER ANDERSON--THE SPOKESMAN-REVIEW); Picture: CEO OF "BUSH INC." President Bush leads an energy policy meeting with Vice President Cheney, senior staff, and others at the White House last April. (PAUL MORSE--THE WHITE HOUSE); Pictures: BUSINESS INTERESTS. Opening the Arctic National Wildlife Refuge (left) for oil exploration; billions of dollars to bail out the airline industry post-9/11 (JIM LO SCALZO FOR USN&WR (2)); Picture: 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Leavitt accepted $10,000 from Enron

01/15/2002
Associated Press Newswires
Copyright 2002. The Associated Press. All Rights Reserved.

SALT LAKE CITY (AP) - Gov. Mike Leavitt met with Enron Corp. executives last year and solicited and received a $10,000 political contribution from the now-bankrupt energy giant. 
Leavitt said Monday that he met with Enron officials, including chairman Kenneth L. Lay, in the normal work of his office.
"I probably first bumped into Enron government affairs officials four or five years ago," he said. 
He does not recall who suggested last year that Enron receive a solicitation for his yearly $10,000-per-person fund-raiser, according to a copyright story in the Deseret News. 
"They do business in a number of Western states, although they don't operate in Utah to my knowledge," Leavitt said. 
The fund-raiser is sometimes used to help get GOP Western governors elected, so it makes sense the company would want to contribute, Leavitt said. 
Enron's check came in on Nov. 6. On Nov. 16, Enron officials met with Leavitt in his Capitol office to discuss energy policy, the governor said. 
Leavitt said he doesn't specifically recall what they wanted to talk about, although he surmises that they wanted to discuss transmission of electricity in the region. 
Enron, based in Houston, became a major player in Texas and national politics through connections with a number of politicians, including President Bush. Now, four congressional committees, several lawsuits and a federal criminal investigation are bearing down on Enron. 
Leavitt, who considers Bush a friend and political ally, invited Enron lobbyists to his $10,000-per-person Cast and Blast fund-raiser at his family's Loa ranch last September. After the Sept. 11 terrorist attacks, the event was rescheduled for November and turned from a weekend of fishing and hunting to skiing and skating. 
Fewer lobbyists and industry leaders attended the rescheduled event, but Enron's vice president of government affairs Paul Kaufman did, said Leavitt spokeswoman Natalie Gochnour. 
Lay is now being investigated for selling off $101 million of his Enron stock during the last year as Enron executives were sending out upbeat memos to Enron employees, whose pension funds backed by Enron stock would ultimately be lost in the company's bankruptcy. 
Leavitt said he never discussed Enron's money troubles with any Enron official. 
The $10,000 contribution came a month before Enron donated $100,000 to the federal Democratic Senate Committee the fund-raising PAC of Democratic U.S. senators. 
After Enron laid off thousands of workers and declared bankruptcy in December, the largest bankruptcy in U.S. history, the Democratic group announced it would donate the money to the laid-off workers. 
Leavitt has not decided what to do with Enron's $10,000, said Gochnour.

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

News; International
Employee Warned Enron CEO of Implosion
Aaron Brown, Bob Franken, Kamal Hyder, Allan Chernoff, Jamie McIntyre, Susan Candiotti, Nic Robertson

01/15/2002
CNN: Special Report With Aaron Brown
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***********Enron excerpts only************
As the latest group of Taliban and al Qaeda prisoners arrived at Guantanamo Bay, Cuba, human rights activists are questioning whether the makeshift prison meets with the spirit of the Geneva Conventions. A letter from an Enron employee to the company's Chief Executive recently came to light, and it reveals that this employee was aware that something was seriously wrong with the company's financial situation. Ken Burns discusses his new documentary, "Mark Twain." 
AARON BROWN, NEWSNIGHT CORRESPONDENT: And good evening again, everyone. I'm not exactly sure what it means, but the program tonight has more variety in it than any we've done in four months. There is war news and there is Enron news and both are interesting and important. But neither dominates the program. Maybe it's a sign of something, or maybe it's just a short break in both stories.
Enron, I'm absolutely certain, has a long way to go and I was troubled reading the e-mails that came in after Friday's program about accusations of bias. The accusations of bias were split, pretty much down the middle. Some felt we had gone too soft on the administration. Others felt, in the words of one writer, "we were licking our lips in anticipation of bringing the Republicans down." It is, I think, pointless to argue with either. The coverage was very careful. 
So I'll tell both sides in this, please relax, take a breath. Let's just see where this goes. It is very early in a complicated story. The business side is complicated. So is the politics. 
If there is a scandal there, if there is one, I hope we're the ones who uncover it. That's our business, but that's different from wishing for a scandal. We're proud of our coverage of the attacks on 9/11, but we didn't wish for it to happen. The right thing to do and what this program and CNN ought to do, is just keep on digging, and the digging has just started. 
So now, onto the whip we go on this 100 days since the war began, and the whip begins at the Pentagon, CNN's Bob Franken. Bob just back from Cuba, a headline please. 
(COMMERCIAL BREAK)*******************
While all of us are working to make sense of the Enron collapse, thank goodness for the company's auditors, Andersen. We may not understand the complexities of business accounting, but we do understand memos from lawyers telling accountants to destroy documents. 
William Sapphire of the New York Times today titled his column, Andersengate. As Sapphire put it, the accountants seemed to forget that the "P" in CPA means public. 
CNN Financial News Correspondent Allan Chernoff is here again to help us sort through this one, and there's plenty to sort through tonight. Allan. 
CHERNOFF: Aaron, tonight we have a new piece of the Enron puzzle. In fact, it is a letter from an Enron employee to the company's Chief Executive. The employee was well aware that something was rotten in Houston. 
(BEGIN VIDEOTAPE) 
CHERNOFF (voice over): The letter to Chief Executive Ken Lay from an anonymous female Enron employee, who appears to be well acquainted with the company's accounting and it's (UNINTELLIGIBLE) partnerships. 
"It sure looks to the layman on the street that we are hiding losses in a related company. I am incredibly nervous that we will implode in a wave of accounting scandals. There are probably one or two disgruntled, redeployed employees who know enough about the funny accounting to get us in trouble." 
The letter was written in August, two months before Enron confessed its profits had been inflated. Congressional investigators believe the writer met with Ken Lay for an hour to discuss here concerns and that Enron later told its attorneys not to second-guess the accounting advice of Andersen, the auditor that had approved Enron's books. 
Tonight, Andersen is working damage control, releasing an e-mail about the Enron audit from in-house attorney Nancy Temple, to a partner at the Houston office, saying: 
"Consider reminding the engagement team of our documentation and retention policy." 
Included in that policy, "only final documents will be retained. Graphs and preliminary versions of information will be destroyed currently. Deletion of information from electronic files will be accomplished in such a way that precludes the possibility of subsequent retrieval by Arthur Andersen personnel or third parties." 
Temple has told Andersen she was referring to an audit that was in progress, not previous audits that were later found to be faulty. Staffers at the House Energy and Commerce Committee say Andersen destroyed documents as late as last November, after Enron had restated its financials and the SEC had begun a formal investigation. Documents that should have been held indefinitely, according to accounting experts. 
ALAN ANDERSON, AMERICAN INSTITUTE OF CPAS: Well, if the records were subject to subpoena, and they are destroyed after the subpoena was rendered, that would be more than unusual. That would be illegal. 
CHERNOFF: Andersen Chief Executive, Joseph Beradino, is fighting dearly to save his company's battered reputation. 
JOSEPH BERADINO, ANDERSEN CHIEF EXECUTIVE: Andersen will have to change to restore the public's interest and confidence, and we are working hard to identify the changes we need to make. 
CHERNOFF: Andersen was also the auditor that approved financials at Sunbeam, and Waste Management, companies that paid fines for crooking their books. 
(END VIDEOTAPE) 
CHERNOFF (on camera): Another Big Five accounting firm is in trouble tonight. The Securities and Exchange Commission is censoring KPMG. The firm violated auditor independence rules at a time when it was a major investor in the short-term investments trust. KPMG was also the auditor of the fund, part of the AIM family of mutual funds. The SEC found that KPMG had no procedures in place to avoid such conflicts. Aaron. 
BROWN: Well that's great. Now I got to keep two accounting firms separate. Let's go back to Andersen and Enron for a minute. When you're talking to people out there, no one knows how this is going to play out. But when you're talking to people, do they believe that Andersen, which is a huge company, will survive this? 
CHERNOFF: There are questions being raised about this. We can't right away say that this is going to take the company down. 
BROWN: No, I don't - right, we're not - I just want to know what people are thinking out there. 
CHERNOFF: The entire profession is in serious trouble right now, and they are going to have to do something to improve their image. Clearly Andersen is in the deepest trouble right now. 
BROWN: If I were being even more cynical than I woke up this morning being, I would come away with the feeling that these accounting firms, to get the business that they get, and these are multi-million dollar accounts, will wink and nod if it is in their company, in the company's interest. Is that - am I being unfair here? CHERNOFF: Not in the least. In fact, there is you could argue, an inherent conflict of interest, because you are hired by a certain company to review their books. If they don't like the way you review it, well they can go hire somebody else. There's another scandal here, potentially. You could call it a scandal, in that the accounting firms also have had these auditing practices, and very often, and this was the case right here with Enron, the firm was doing auditing and also doing consulting at the same time. 
BROWN: Allan, thank you. We're all going to get smarter about this before it's over. Up next, this step's a little easier to understand. Small town murder story. We thought twice about doing it until we learned the town hasn't seen a murder in more than 30 years, so we'll take a look at that. And that's nowhere near the only interesting thing about it, as you'll hear when NEWSNIGHT continues on a Monday. 
(COMMERCIAL BREAK) ***********************
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Sarah Palmer
Internal Communications Manager
Enron Public Relations
(713) 853-9843