Message-ID: <2515734.1075858864456.JavaMail.evans@thyme> Date: Fri, 19 Oct 2001 11:52:48 -0700 (PDT) From: m..schmidt@enron.com To: vance.meyer@enron.com, pr <.palmer@enron.com>, karen.denne@enron.com, meredith.philipp@enron.com, leslie.hiltabrand@enron.com, j..kean@enron.com Subject: DJ Enron Dn-3: Enron Hurting From Fears Of More Disclosures Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: 7bit X-From: Schmidt, Ann M. X-To: Meyer, Vance , Palmer, Mark A. (PR) , Denne, Karen , Philipp, Meredith , Hiltabrand, Leslie , Kean, Steven J. X-cc: X-bcc: X-Folder: \SKEAN (Non-Privileged)\Kean, Steven J.\Deleted Items X-Origin: Kean-S X-FileName: SKEAN (Non-Privileged).pst =DJ Enron Dn-3: Enron Hurting From Fears Of More Disclosures 2001-10-19 14:40 (New York) A.G. Edwards analyst Michael Heim also said Enron's stock drop is "probably related to the articles that have been run in The Wall Street Journal." He said there is now a feeling within the financial community that there might be more surprises and more charges from Enron on the horizon. Heim can't remember more than general allusions to the LJM2 partnership in filings with the Securities and Exchange Commission. There were no details as to the quantity of the impact of transactions between Enron and the partnership, he said. "I don't feel any certainty that there's not other similar problems that might not be revealed," Heim said. Credibility is particularly important for Enron, he said, because it is difficult for analysts to model due to its tens of thousands of trading contracts changing on a daily basis in oil, gas, power, coal, and other areas. "Companies like Enron rely a lot more on reputation than other companies given the clandestine nature of its earnings," Heim said. But Enron has a history of meeting its earnings guidance, which helps, he added. A spokesperson at the company was not immediately available for comment. While Heim is not totally convinced there won't be future charges that could take a toll on Enron's balance sheet, he still thinks the severity of the stock drop over the last few days might be overdone. "My gut feel is that the market has probably overreacted to this," he said. -By Tom Locke, Dow Jones Newswires; 303-293-9294; tom.locke@dowjones.com Enron Shares Fall on Concern Over CFO's Partnerships (Update2) 2001-10-19 14:40 (New York) Enron Shares Fall on Concern Over CFO's Partnerships (Update2) (Adds more businesses with Fastow ties in seventh paragraph.) Houston, Oct. 19 (Bloomberg) -- Enron Corp.'s shares have fallen as much as 28 percent in the past three days on concern the biggest energy trader's dealings with partnerships run by its chief financial officer contributed to investment losses. Shares of Enron fell as much as 13 percent today. Enron's board cost the company at least $35 million by allowing Chief Financial Officer Andrew Fastow to manage LJM Cayman and LJM2 Co-Investment, partnerships that bought Enron assets, a shareholder alleged Wednesday in a lawsuit. The lawsuit came the day after Enron reported $1.01 billion in third-quarter losses from failed investments. The Wall Street Journal reported $35 million of the losses were connected with the two limited partnerships. Enron also reduced shareholders' equity by $1.2 billion when it bought back 55 million shares from the partnerships, the paper reported yesterday. ``It looks sleazy,'' said Roger Hamilton, a manager at John Hancock's Value funds, which own 600,000 shares. ``If you are someone who invests in a company's management, it's almost time to punt with Enron.'' Enron spokeswoman Karen Denne didn't return calls or written requests seeking comment. Fastow and a handful of associates made more than $7 million last year in management fees and about $4 million in capital increases on an investment of about $3 million in one of the partnerships, the Journal reported today. Buying Enron Assets Fastow is involved in 17 other similar companies and partnerships that appear to have ties to Houston-based Enron, based on filings with the Texas secretary of state. The foreign business corporations and limited liability companies have directors, officers or managers whose address is listed as 1400 Smith Street in Houston, Enron's corporate address, according to Texas records. Fastow is listed as a director, officer or managing member in each one. At least one of the companies bought and sold Enron assets, including foreign power plants. Whitewing Management, which lists Fastow as its managing member, received $807 million from the sale of Enron debt last year. Under the terms of the debt sale, Whitewing is allowed to use the proceeds to buy power plants from Enron or make other ``permitted investments.'' Whitewing has bought 14 Enron plants or companies since 1999 and sold four. Enron's Denne has not responded to written requests about Fastow's role at Whitewing or whether he used his knowledge of the value of Enron assets to benefit outside investors or company executives at Enron's expense. Shares of Enron fell $3.40 to $25.60 in midafternoon trading. Earlier, the shares touched $25.15. They have fallen 67 percent in the past 12 months, and 69 percent this year. --Russell Hubbard in the Princeton newsroom at 609-750-4651, or at rhubbard2@Bloomberg.net and Jim Kennett in Houston, (713) 353-4871 or jkennett@bloomberg.net/pjm/alp USA: Enron stock sustains further heavy losses. 10/19/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, Oct 19 (Reuters) - Enron Corp. stock sustained further heavy losses on Friday as investor confidence in the former Wall Street favorite remained at a low ebb after it reported its first quarterly loss in over four years. In early afternoon trading the energy giant's stock was off $3.32 or 11.45 percent at $25.68 per share, making a cumulative loss of 28 percent for a week in which it reported a third-quarter loss of $638 million. Analysts said investor confidence had been rattled by severalarticles in the Wall Street Journal this week alleging possible conflict of interest on the part of Chief Financial Officer Andrew Fastow, who until recently ran a limited partnership that bought assets worth hundreds of millions of dollars from Enron. Enron has rejected the suggestion that there was anything improper about the arrangements, but Fastow severed his ties with the LJM2 partnership earlier this year to allay concerns raised by investors and analysts about his dual responsibilities. "For a company that had a lot of question marks around it already, these questions about financial dealings are really worrisome for investors," said Commerzbank Securities analyst Andre Meade. "It points to poor decision-making on behalf of the board and top management at Enron," he said. Enron, North America's biggest buyer and seller of natural gas and electricity, was one of Wall Street's high flyers last year when its stock posted a gain of 87 percent. The stock's ascent was driven by enthusiasm for the company's plans to build a broadband telecommunications business and the success of its EnronOnline Internet energy trading platform. This year Enron's shares have fallen 69 percent as sentiment toward broadband and the Internet soured, new chief executive Jeff Skilling resigned after six months in the job and a power plant project in India became mired in a financial dispute. Moody's Investor Service said earlier this week that it had placed all of Enron's long-term debt obligations on review for a possible downgrade after Enron took $1.01 billion in writedowns and charges, substantially reducing valuations for several non-core businesses including broadband and water services. Some of Enron's financing arrangements require the company to maintain investment grade credit ratings. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.