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Accounting for Enron: Obstruction Charges Likely to Be First Step in Enron =
Criminal Case
The Wall Street Journal, 01/28/2002

ENRON'S MANY STRANDS: EARLY SCRUTINY
10 Months Ago, Questions on Enron Came and Went With Little Notice
The New York Times, 01/28/2002

A Fog Over Enron, And the Legal Landscape
The New York Times, 01/27/2002

ENRON'S MANY STRANDS: THE PROSECUTOR
Noted Brooklyn Prosecutor Joins U.S. Inquiry Into Enron Collapse
The New York Times, 01/28/2002

THE FALLOF ENRON Convictions for Enron Execs Would Be Hard Won
Los Angeles Times, 01/28/2002

Building the House of Enron: As Enron's Derivatives Trading Comes Into Focu=
s, Gap in Oversight Is Spotlighted
The Wall Street Journal, 01/28/2002

ENRON'S MANY STRANDS: SEEKING EVIDENCE
Hard-to-Miss Box of Scraps Catches F.B.I. Agent's Eye
The New York Times, 01/28/2002

ENRON'S MANY STRANDS: LEGAL STRATEGY
SHREDDED PAPERS KEY IN ENRON CASE
The New York Times, 01/28/2002

ENRON'S MANY STRANDS: THE VICE PRESIDENT
Cheney Is Set to Battle Congress To Keep His Enron Talks Secret
The New York Times, 01/28/2002

Enron and the Lawyers
The New York Times, 01/28/2002

Enron Case Attracts Lawyers Like a Flame Attracts Moths, More Than You Can =
Shake a Stick at
The Washington Post, 01/28/2002

Greed, Pain, Excesses. Oh, What a Lovely Issue.
The New York Times, 01/27/2002

How a Top Medical Researcher Became Entangled With Enron
The New York Times, 01/28/2002

While Enron's future is uncertain, its trademarked name could live on for a=
 decade.
The New York Times, 01/28/2002

A Suicide and a Resignation as the Formal Inquiries Get Under Way
The New York Times, 01/27/2002

Police Probe Ex-Enron Executive's Death --- Baxter, an Apparent Suicide, Wo=
rked to Sell Assets Of Energy-Trading Firm
The Wall Street Journal, 01/28/2002

ENRON'S MANY STRANDS: THE SUICIDE
Despite His Qualms, Scandal Engulfed Executive
The New York Times, 01/27/2002

The Astros Should Give Some of the Money Back
The New York Times, 01/27/2002

Planet Of the Privileged
The New York Times, 01/27/2002

I Am Woman, Hear Me Roar in the Enron Scandal
The New York Times, 01/27/2002

Private Enterprise, Public Outrage
Los Angeles Times, 01/28/2002

_____________________________________________________________________


Accounting for Enron: Obstruction Charges Likely to Be First Step in Enron =
Criminal Case
By Wall Street Journal staff reporters Richard B. Schmitt, Gary Fields and =
John R. Wilke

01/28/2002
The Wall Street Journal
A6
(Copyright (c) 2002, Dow Jones & Company, Inc.)

WASHINGTON -- Federal prosecutors likely would file obstruction-of-justice =
charges first in any criminal case arising from the collapse of Enron Corp.=
, as they look to build a broader indictment based on possible securities f=
raud, insider trading and tax fraud, lawyers close to the case said.=20
Obstruction charges, including any allegations of deliberate destruction of=
 evidence, could come as soon as this summer and likely would be filed in f=
ederal court in Houston, these lawyers said. Such initial criminal charges =
could provide prosecutors with powerful leverage against defendants whose c=
ooperation might then be sought to pursue any inquiry into any underlying c=
rimes, these people said.
Enron's spectacular collapse last month triggered more than a dozen civil, =
criminal and congressional investigations and already has had significant p=
olitical repercussions. But for officers and executives of the Houston-base=
d energy-trading company and its former auditor, Arthur Andersen LLP, the s=
takes are highest in the Justice Department's wide-ranging criminal investi=
gation.=20
One crucial factor for these men and women could be the dates that any alle=
ged obstruction and fraud occurred. Penalties for most federal white-collar=
 crimes were stiffened Nov. 1, in some cases nearly doubling prison sentenc=
es and fines.=20
A senior Justice Department official refused Friday to discuss possible cha=
rges or other details of the case, except to confirm that it could unfold r=
elatively quickly. Others close to the case cautioned, though, that with in=
vestigators still grappling to determine just what happened, few firm decis=
ions have been made about legal tactics or where initial charges should be =
filed.=20
An attorney for Enron said discussion of criminal charges against the compa=
ny is premature. The company has been cooperating with federal investigator=
s looking into document shredding by its employees, and a report by a speci=
al committee of Enron's board looking into the debacle is expected out soon=
, possibly this week.=20
"I think it is grossly unfair to draw any conclusions at this early stage. =
There is no evidence at all, at least on the part of Enron, that any shredd=
ing of documents was criminal in any way. I think before anybody rushes to =
judgment, they should see what the FBI concludes," said Robert Bennett, an =
Enron attorney here.=20
"This board of directors is trying very hard to reorganize this company, an=
d bring it out of bankruptcy so stakeholders can get paid back and so 20,00=
0 employees can keep their jobs," he added.=20
In any event, prosecutors face enormous hurdles. Complex white-collar crime=
 cases can take months, if not years, to untangle, and figuring out what oc=
curred at Enron -- with its hundreds of offshore companies and affiliates a=
llegedly set up to sweep debt from Enron's books and juggle tax liabilities=
 -- could prove especially difficult. At the same time, proving criminal in=
tent in such cases can be tough, and often must be established with circums=
tantial evidence; what's more, defendants in such cases sometimes argue tha=
t they reasonably relied on the advice of lawyers in their actions and deci=
sions, which can make it difficult to establish criminal intent.=20
Auditors and lawyers in such cases rarely face prosecution. But Arthur Ande=
rsen and Vinson & Elkins, Enron's longtime legal counsel, have been sharply=
 criticized for failing to probe more deeply into concerns about possible f=
raud. Arthur Andersen or its employees, in particular, could be liable if t=
hey knowingly destroyed evidence. A Vinson & Elkins spokesman said the firm=
's work for Enron met "the highest professional and ethical standards." An =
Arthur Andersen spokesman said the firm is cooperating in the probe, and no=
ted that it had volunteered information to investigators about the destruct=
ion of documents. "We are not speculating on outcomes," the spokesman said.=
 "We are focused on helping them to do their jobs."=20
While the investigations are still in their infancy, with new and startling=
 facts emerging almost daily, some defense lawyers and former prosecutors s=
ay they wouldn't be surprised if the Justice Department brought initial cri=
minal charges as soon as the summer.=20
The government's roadmap in such cases often includes early charges of obst=
ruction for making false statements or destroying evidence. Obstruction cha=
rges are relatively straightforward; prosecutors don't have to prove a defe=
ndant was involved in any underlying crime, only that he or she lied, destr=
oyed evidence or otherwise hindered prosecutors. And such defendants -- who=
 can face prison time -- often end up being valuable witnesses in guiding i=
nvestigators through the morass as they attempt to build a broader case.=20
"The government loves the obstruction angle," said James Volling, head of t=
he business-litigation group at Minneapolis's Faegre & Benson law firm. "It=
 doesn't come with all the baggage that securities claims often do. It is p=
retty easy to establish the facts. That is something they clearly will purs=
ue."=20
Beyond initial obstruction charges in the Enron matter, "there is a smorgas=
bord of potential criminal charges," said Henry Hockeimer, a Philadelphia d=
efense lawyer and former federal prosecutor. Already, shareholders have fil=
ed civil suits alleging that Enron officers violated securities laws by not=
 disclosing material information about circuitous, off-balance-sheet partne=
rship arrangements. They also have alleged that company officers sold more =
than $1 billion of Enron stock using inside information that should have be=
en disclosed to the public.=20
The same allegations could form the basis of criminal securities-fraud and =
insider-trading charges if the government thinks it can prove the officers =
acted while knowing what they were doing was wrong, or were warned and went=
 ahead anyway. Other possible claims include mail and wire fraud, and even =
violations of the federal bank-fraud statute, if Enron or its officers kept=
 material information from its lenders.=20
The timing of specific acts could be an issue if charges are proven in cour=
t because sentencing guidelines on hundreds of white-collar crimes got more=
 severe Nov. 1. For example, the maximum penalty for the basic crime of ins=
ider trading or fraud in excess of $1 million has nearly doubled, from 37 m=
onths in prison to 63 months. Enron is the first major white-collar crime i=
nvestigation since the new guidelines became effective.=20
According to federal sentencing commission statistics, about 10,000 people =
were sentenced to federal prison for financial crimes in 2000. If the new g=
uidelines had been in place, a third of them would have received more priso=
n time and those sentences would have been an average of 40% longer.=20
---=20
Question of the Day: What will be the biggest fallout from the Enron disclo=
sures? Visit WSJ.com/Question to vote.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09

National Desk; Section A
ENRON'S MANY STRANDS: EARLY SCRUTINY
10 Months Ago, Questions on Enron Came and Went With Little Notice
By FELICITY BARRINGER

01/28/2002
The New York Times
Page 11, Column 1
c. 2002 New York Times Company

A paramount virtue in journalism is being the first to reveal startling fac=
ts. Editors notice. Colleagues notice. Competitors notice.=20
Except when they do not.
Ten months ago, Bethany McLean of Fortune magazine became the first journal=
ist to highlight hard questions about Enron's balance sheet. The most start=
ling fact she revealed was the absence of crucial information in the compan=
y's financial reports. ''How exactly does Enron make its money?'' she wrote=
.=20
Her questions were so pointed that Enron's chief executive, Jeffrey K. Skil=
ling, called her unethical for failing to do more research. Three Enron exe=
cutives flew to New York in an unsuccessful effort to convince her editors =
that she was wrongheaded. Enron's chairman, Kenneth L. Lay, called Fortune'=
s managing editor, Rik Kirkland, to complain that Fortune was relying on a =
source who stood to profit if the share price fell.=20
The lobbying by Enron had no effect on what Fortune published, highlighted =
on its cover with the headline, ''Is Enron Overpriced?'' Then inertia did w=
hat corporate pressure could not do -- it buried the article. Only TheStree=
t.com picked it up and peppered Enron with critical reporting.=20
Even Ms. McLean left leads that were not pursued. She knew, she said, that =
Enron's chief financial officer, Andrew S. Fastow, was a principal in two p=
artnerships alluded to in the financial statements. But she left it out of =
her article.=20
''I knew it was weird, but the accountants had signed off on it,'' she said=
. If the accountants, Arthur Andersen, and Enron's board had not questioned=
 it, she reasoned, why should she? Not until October did The Wall Street Jo=
urnal link Mr. Fastow's partnerships to Enron's write-off of $1.2 billion i=
n shareholder equity.=20
As Mr. Kirkland said, Ms. McLean's report ''was prescient, but it kind of w=
ent out and sank.''=20
''We didn't have the goods, as it were,'' Mr. Kirkland said. Only last fall=
, when Enron began to collapse, did more reporters pay attention to the art=
icle and to its author. Ms. McLean herself has returned to reporting on Enr=
on.=20
Ms. McLean, who is 31, is now the financial reporter everyone loves to lion=
ize. Her photogenic smile and the analytical ability honed at Goldman, Sach=
s have won her appearances on PBS's ''NewsHour With Jim Lehrer,'' CNN's ''G=
reenfield at Large'' with Jeff Greenfield, and two NBC News shows. NBC, For=
tune executives said, has offered her a consulting contract.=20
The arc of Ms. McLean's experience with Enron illustrates the dynamics of f=
inancial journalism, which tends to be sucked into the gravitational pull o=
f the stock markets. Companies with highflying stocks tend to get positive =
coverage; those whose stocks slide tend to provoke critical assessments.=20
Other magazines like Business Week and even Fortune had written glowing acc=
ounts of Enron's transformative effect on energy markets, and the trajector=
y of its stock price, which rose about 50 percent in 1999 and about 90 perc=
ent in 2000. As Ms. McLean was working on her article, in the midst of the =
California power crisis, Business Week published a cover article entitled: =
''Enron, the nation's largest energy merchant, won't let California stand i=
n its way.''=20
But as the share price rose, Enron's financial reports stayed opaque. One w=
ould almost have to have written them to understand them. And few financial=
 reporters have written corporate financial reports.=20
Ms. McLean is part of that small group. For three years after she graduated=
 from Williams College with a double major in math and English, she worked =
for investment banking division of Goldman, Sachs. ''You work literally 100=
 hours a week, sitting at your computer doing a lot of calculating, a lot o=
f spread sheets,'' she said on Friday.=20
She would review the books of companies being offered for sale and write me=
morandums describing their virtues and faults. ''I learned,'' she said, ''t=
hat numbers can lie.''=20
She also had an epiphany about accounting and its potential for abuse. ''Wh=
en you come out of a liberal arts background,'' she said, ''you want to kno=
w why something is the way it is.'' In accounting, ''there is no reason why=
. There is no fundamental truth underlying it. It's just based on rules.''=
=20
''These rules create an incentive to get around rules,'' she said. ''This m=
eans getting away from any accounting portraying the fundamental economic r=
eality of a company.''=20
Ms. McLean had never practiced journalism. But after three years at Goldman=
, in a culture where she was never comfortable, she decided to send her res=
ume to several newspapers. She had no takers. Then a friend sent her resume=
 to Fortune. There, she joined its corps of fact-checkers, soon becoming fa=
mous for giving no quarter.=20
The fame stemmed from her tug of war with Andrew S. Grove, then the chief e=
xecutive of Intel. He had written an article about how he had decided among=
 possible treatments for his prostate cancer. Ms. McLean, then 25, challeng=
ed him on his data. And she was right. Both agree on this, though neither r=
emembers the exact details. ''She did a super job,'' Mr. Grove wrote in an =
e-mail message last week. ''She was a royal pain but not one person subsequ=
ently challenged any facts in my article.'' Later he sought her out to than=
k her.=20
The incident brought her to the attention of John Huey, then the magazine's=
 managing editor. Ms. McLean was promoted and slowly mastered the writing s=
ide of the business (paying her editors back for their labors by regularly =
beating them at pool).=20
Five years later, she was tackling Enron, nervously. She had felt indirectl=
y rebuked when her earlier critical financial analysis of I.B.M.'s earnings=
 had no effect on investors or I.B.M.'s share price. Remembering how her ju=
dgment had not been validated, she was afraid Mr. Skilling, the Enron chief=
 executive, was right when he implied she had failed to do the work require=
d to understand Enron's financials.=20
But events proved him to be wrong. He was not wrong, however, when he told =
her that similar questions were being asked ''by people who want to throw r=
ocks at the company.'' The first person to flag Ms. McLean to the odd finan=
cial statements had been someone who had bet against Enron stock.=20
Almost all the reporting on the company at that point was favorable. As Jam=
es S. Chanos, a short seller who is president of Kynikos Associates, a hedg=
e fund in New York, said in a recent interview, ''The stock price conveys l=
egitimacy.''=20
Short sellers like Mr. Chanos, who pointed Ms. McLean toward Enron, are amo=
ng the few skeptics in a business where most interest groups -- analysts, i=
nvestment bankers, shareholders and executives -- profit from a bull market=
.=20
Ms. McLean went on to report about soy milk and Prozac, not Enron. ''The ne=
xt line of reporting wasn't clear,'' she said.=20
But Peter Eavis of TheStreet.com continued to question the valuation of Enr=
on's investment portfolio. Last summer, he reported investor uncertainty ab=
out ''how much Enron's earnings have been aided by deals'' by entities like=
 ''LJM Capital Management, whose general partner is Enron's chief finance o=
fficer, Andrew Fastow.'' Even the revelation of Mr. Fastow's dual loyalties=
 provoked little attention.=20
Maybe, as Mark Roberts, the research director of Off Wall Street Consulting=
 in Cambridge, Mass., said, ''The whole thing was so opaque and so difficul=
t to conceive and so well hidden that it was just beyond the tools of journ=
alists.''=20
Certainly, after the Sept. 11 terrorist attacks, journalists were distracte=
d. But, in the following weeks, investors were not. As Enron's stock price =
kept declining, they asked more questions like Ms. McLean's, and they did n=
ot like the answers. ''What led to all the revelations and the beginning of=
 the end,'' Mr. Roberts said, ''was a crisis of confidence.=20
Ms. McLean is unsure what lessons journalists will learn from covering Enro=
n. ''If we all are more cynical about companies and know that accountants c=
an't be trusted and boards can't be trusted, is that a good thing?'' she as=
ked.

Photos: Bethany McLean became the first journalist to ask questions about E=
nron's finances in an article, ''Is Enron Overpriced?'' in Fortune magazine=
. (Frances Roberts for The New York Times)=20
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09

Money and Business/Financial Desk; Section 3
A Fog Over Enron, And the Legal Landscape
By DIANA B. HENRIQUES with KURT EICHENWALD

01/27/2002
The New York Times
Page 1, Column 3
c. 2002 New York Times Company

''ROTTEN.'' ''Horrible.'' ''Indefensible.'' ''Shocking.''=20
With those words, securities law experts around the country condemned the w=
ay Enron had structured and sold a partnership called LJM2, which offered i=
nvestors a chance to profit from confidential information about Enron's inv=
estment plans -- and gave the partnership investors more information about =
the company's finances than Enron's shareholders received.
''This is potentially the most serious revelation about Enron to date,'' sa=
id Joel Seligman, a securities law historian and dean of the Washington Uni=
versity Law School. ''You can't overstate how shocking it is.''=20
But did the arrangement, however unfair it seems to stockholders, actually =
violate the nation's securities laws and regulations? That is far more diff=
icult to answer, legal scholars say -- and far more important. For them, th=
e fundamental question about the sprawling Enron scandal is whether it is a=
 case of strong laws being violated by bad people, or of weak laws renderin=
g such violations unnecessary.=20
''If a company of this size, advised by top-tier accountants and law firms,=
 could conclude that our laws permit some of what happened here, then our l=
aws are inadequate,'' said Richard C. Breeden, a former chairman of the Sec=
urities and Exchange Commission. ''Clearly it violates the spirit and inten=
t of securities laws and the whole concept of full and fair disclosure.''=
=20
The quandary is particularly acute in the case of this partnership, because=
 it seemed to thrive on arrangements -- procedural barriers known as ''Chin=
ese walls'' -- that were actually intended to protect investors. These lega=
l barriers prevented investment bankers who were privy to information about=
 the partnership from legally sharing that information with shareholders. I=
nstead, investors remained in the dark about Enron's actual financial condi=
tion.=20
But the partnership, lawyers and finance experts say, raises novel question=
s about the effectiveness of other parts of the securities laws, as well. T=
hese include prohibitions against trading on inside information; rules agai=
nst selectively disclosing information to some shareholders and not others;=
 efforts to police corporate conflicts of interest and the wisdom of removi=
ng restrictions on the roles that investment banks can play.=20
''No matter how good you make the laws, there will always be a small group =
of people who will push them,'' said John Pound, a former finance professor=
 at Harvard and the president of Integrity Partners, an investment manageme=
nt firm in Boston. ''But the Enron case has raised a lot of useful and impo=
rtant policy questions that will need to be addressed. And the Chinese-wall=
 issue is a perfect example of that.''=20
ENRON'S swift fall, culminating in its bankruptcy filing in early December,=
 came after the company revised its past financial statements to more accur=
ately reflect partnership deals like the LJM2 arrangement. The company and =
its auditor, Arthur Andersen, are the subjects of both criminal and regulat=
ory investigations, and are being examined by nearly a dozen Congressional =
committees.=20
One important focus of those investigations is the way that partnerships li=
ke LJM2 contributed to the company's collapse. Confidential records of that=
 specific partnership, disclosed in The New York Times on Friday, show that=
 Enron tried to attract investors by dangling the prospect of potentially r=
emarkable returns, driven by access to inside information about Enron's fin=
ancial dealings.=20
Potential investors were told, in detail, about the company's off-the-books=
 transactions and assets, information that Enron had not disclosed to its p=
ublic shareholders. Indeed, partnership investors knew that Enron controlle=
d at least 50 percent more assets than the company had disclosed in its aud=
ited financial statements, filed with the S.E.C. and provided to public sha=
reholders.=20
That lopsided flow of information strikes many legal experts as a direct ch=
allenge to traditional thinking about Chinese walls, the common nickname fo=
r the procedures that assure that the confidential information Wall Street =
firms obtain from their corporate investment banking clients remains confid=
ential, even within the firm itself.=20
Chinese walls came into being in the late 1960's, as a regulatory response =
to the increased complexity of Wall Street firms and a more vigorous S.E.C.=
 response to insider trading, said Michael A. Perino, a securities law prof=
essor at St. John's University.=20
Their purpose, quite simply, was to prevent an investment banker from using=
 confidential information about a corporate client to make trades in that c=
lient's stock -- trades in which the banker would have an advantage over ot=
her investors.=20
In 1988, at the end of a decade punctuated by insider trading scandals, Con=
gress made such ''informational partitions'' mandatory, citing the need to =
prevent Wall Street insiders from taking advantage of Main Street investors=
.=20
But in this case, it appears that the protection backfired, legal experts s=
aid. Investment bankers who worked on the Enron partnerships were privy to =
information that may have raised doubts about the information Enron had pro=
vided to public investors -- but they were forbidden by law from raising an=
y red flags.=20
''The purpose of the Chinese wall is to help public investors, but this wor=
ked backwards,'' said Mr. Pound, the former Harvard professor. ''What amaze=
s me is that the people who knew they had information adverse to the public=
 investors would not feel a need to find a way, within the institution, to =
address that issue -- to go up in the institution high enough to say, 'We h=
ave a policy problem here.' ''=20
The LJM2 partnership points up Chinese-wall problems that courts and regula=
tors have been struggling to resolve for years, said John C. Coffee Jr., a =
securities law expert at Columbia University Law School.=20
If the investment banking divisions of a brokerage firm had information tha=
t raised questions about the value of a public company's stock, there is no=
thing under the current law that the bankers could do to help the firm's re=
tail investors. But there are more limited actions the firm could take, Mr.=
 Coffee said.=20
''They can't go out and privately tell their clients the full information t=
hey have received without being part of an insider trading scheme,'' Mr. Co=
ffee said. ''But they could arguably use the information to withdraw their =
recommendation on the stock.'' That, he added, ''will cause some consternat=
ion and adverse publicity that would alert the market to a problem.''=20
OTHER legal experts worry that the investment banks dealing with Enron were=
 constrained by conflicts between their role as lenders and their work as u=
nderwriters.=20
This conflict, too, has roots deep in American financial history. In the de=
cade before the 1929 crash, banks would sometimes help a failing company se=
ll stock to the bank's customers to raise money to repay the bank's loans. =
As part of the New Deal, Congress passed the Glass-Steagall Act, which prev=
ented banks from providing both underwriting and traditional banking servic=
es.=20
But long before Congress officially repealed Glass-Steagall in 1999, both b=
anks and Wall Street firms found legal detours around the prohibition. Now,=
 some securities law experts said, Congress may need to take a fresh look a=
t whether these dual roles in any way affected the flow of significant info=
rmation to public investors in Enron.=20
One specialist in corporate law, who spoke on condition of anonymity becaus=
e his firm is an Enron creditor, said, ''In a case like this, this perverse=
 effect should be discussed at the very highest levels in the firm.''=20
Mr. Breeden, the former S.E.C. chairman, said no direct parallels to the cl=
assic pre-1929 conflicts have appeared. But Enron's evolution ''was a very =
subtle situation, and very complex,'' he said.=20
''In any case,'' he added, ''the public should be able to conclude where th=
e investment banks' greatest interests lie.''=20
That investors in the LJM2 partnership apparently got information that publ=
ic investors could not get -- because Enron had moved certain operations of=
f its balance sheet -- also underscores the importance of preventing select=
ive disclosure by corporations, one former S.E.C. commissioner said.=20
Until last January, corporate executives would routinely hold private brief=
ings for analysts, slipping them details that were not available to public =
investors. To ''level the playing field,'' the S.E.C. enacted Regulation FD=
, which forbids such selective disclosure.=20
It is not clear from available documents whether partnership investors cont=
inued to learn about Enron's finances after the new rule went into effect. =
''But if they did, that raises blazing questions of selective disclosure,''=
 the former commissioner said. More broadly, he said, regulators should det=
ermine whether other corporations that use off-balance-sheet entities are g=
iving investors in those entities more information than public stockholders=
 receive.=20
SHELDON ELSEN, a securities lawyer at Orans Elsen & Lupert in New York, sai=
d the structure of the LJM2 partnership ''really presents some very troubli=
ng problems.''=20
''I don't know that there is anything illegal here,'' Mr. Elsen said, ''but=
 there is a terrible odor about it.''=20
James Moriarty, a Houston lawyer who has represented plaintiffs in a number=
 of securities fraud cases, said: ''That they would tell the truth to the r=
ich investors, and lie to their stockholders, is outside the realm of the c=
omprehensible.''=20
Enron might argue that the information potential partnership investors got =
was not important enough to require disclosure. But lawyers said the fact t=
hat Enron disclosed the information to them at all would be evidence in its=
elf that such details were material.=20
''Given that they give the information to somebody else as part of their ba=
rgain to raise money for another deal, there is a strong likelihood that it=
 would reach the materiality level,'' said Stanley Arkin, a corporate and s=
ecurities lawyer in New York.=20
But the information gap between partnership investors and public stockholde=
rs is just one of the conflicts that litter the Enron battlefield, legal ex=
perts say.=20
Congress is already wrestling with the potential conflicts that confront ou=
tside accounting firms, like Arthur Andersen. The firms act both as indepen=
dent auditors -- which companies must have, by federal law -- and consultan=
ts on tax and technology issues.=20
But that, too, just scratches the surface. The LJM2 partnership, like sever=
al others set up by Enron, was run by a general partnership, LJM2 Capital P=
artners, and managed by a second partnership, LJM2 Capital Management. The =
people behind both partnerships -- the ''principals'' -- were all Enron exe=
cutives, including Andrew S. Fastow, Enron's chief financial officer, and M=
ichael J. Kopper, managing director at Enron's global equity markets group.=
=20
''Investors should be aware that there will be occasions where the general =
partner and its affiliates may encounter potential conflicts of interest in=
 connection with the partnership's activities,'' the partnership sales docu=
ments said. It explained that the principals ''are employees at Enron and o=
we fiduciary duties to Enron and its subsidiaries; such fiduciary duties ma=
y from time to time conflict with fiduciary duties owed to the partnership =
and its partners.''=20
Enron's board specifically approved Mr. Fastow's role by exempting him from=
 the corporate conflict-of-interest policy -- a step that Mr. Breeden found=
 inexplicable.=20
''The very notion that the chief financial officer of a major corporation c=
ould have divided loyalties to this degree of magnitude is something I woul=
dn't have believed any board of directors would allow -- or that any C.F.O.=
 would accept,'' Mr. Breeden said. ''The C.F.O. is the financial conscience=
 of the company, the guardian of the numbers. If he has a conflict, how can=
 the system work?''=20
HE proposed requiring that when any corporate board or chief financial offi=
cer approves a conflict exemption, that action must be reported immediately=
 to the S.E.C., and thus to the public.=20
What is known about Enron's partnership arrangements so far, he said, revea=
ls an even more profound conflict between management and shareholders. Beca=
use Enron had guaranteed the solvency of certain partnerships, obligations =
that were not disclosed on its balance sheet were secretly but steadily ero=
ding its financial health.=20
''It is as if Enron and its top officers had set up a loaded machine gun an=
d aimed it at the company -- and the shareholders didn't know it,'' Mr. Bre=
eden said.=20
With so much turmoil still surrounding the investigation -- and with so muc=
h uncertainty about exactly what went wrong -- few legal scholars are willi=
ng to predict exactly what steps lawmakers and regulators may take to preve=
nt the next Enron.=20
But two things seem certain, they said.=20
The first is that these fresh disclosures about how Enron's partnerships we=
re structured and sold will expand the number of defendants named in the sh=
areholder lawsuits aimed at trying to recover some of investors' market los=
ses, which have been estimated at more than $60 billion.=20
Every large institution -- whether an underwriter or partnership investor -=
- that was aware of material information withheld from Enron investors coul=
d find itself in court, securities lawyers said. Already, they said, lawyer=
s who specialize in suing corporations are discussing which investors, inst=
itutions and advisers are potential defendants.=20
''The image I have in my mind is a long, long line of the wealthy and the p=
owerful who made money out of these deals, all set up to hand it over to th=
e people who lost everything in their Enron investments,'' said Mr. Moriart=
y, the Houston lawyer. ''This is what the Marines like to call a target-ric=
h environment.''=20
The second consequence is likely to be systematic Congressional action to a=
mend the nation's securities laws, said Mr. Seligman, the law school dean a=
nd regulatory historian.=20
The securities laws enacted in the New Deal were ''a response to the genera=
l public belief, after the 1929 crash, that there were two securities marke=
ts -- one for privileged insiders and one for everyone else,'' Mr. Seligman=
 said. Enron's LJM2 partnership ''smacks of that world,'' he added. And whe=
n the American public believes two such markets exist, he said, ''Congress =
-- every time, regardless of party or president -- has acted to address tha=
t concern.''

Photos: The Enron towers in Houston. Scholars say the company's actions rai=
se troubling questions about securities regulations in general. (James Estr=
in/The New York Times)(pg. 1); An excerpt from a document on Enron's LJM2 p=
artnership. The partnership offered investors a chance to profit from inter=
nal information -- not available to stockholders -- about Enron's investmen=
t plans.; Joel Seligman, above, dean of the Washington University Law Schoo=
l, and Richard C. Breeden, left, a former chairman of the Securities and Ex=
change Commission, say revelations about an Enron partnership are likely to=
 lead to action by Congress. (Marilynn K. Yee/The New York Times)(pg. 13) D=
rawing (The New York Times/Illustrations by Christophe Vorlet)(pg. 13) Char=
t: ''Legal Review'' The business activities of Enron -- from the way it str=
uctured and sold some private partnerships to what it did and did not discl=
ose to various parties -- raise questions about some basic protections of A=
merican securities law. Among the issues that must now be reassessed are th=
ese: ''Chinese wall''requirements The information that Wall Street firms re=
ceive while working as investment bankers for public companies may not be s=
hared with other parts of the firm that trade or sell those companies' stoc=
ks. Conflict-of-interest policies Companies must inform investors about imp=
ortant conflicts of interest that arise in the course of business operation=
s. Insider-trading bans People who obtain important confidential informatio=
n about a company may not use it to trade the company's stock if doing so w=
ould violate their legal obligations to other investors or to the source of=
 the information. Selective disclosure rules Since last January, companies =
have been barred from providing important information to some investors but=
 not to others. The Glass-Steagall Act Until its repeal in 1999, Wall Stree=
t firms were barred from serving both as traditional bankers, making loans,=
 and as underwriters, selling stock. (pg. 13)=20
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09

National Desk; Section A
ENRON'S MANY STRANDS: THE PROSECUTOR
Noted Brooklyn Prosecutor Joins U.S. Inquiry Into Enron Collapse
By PHILIP SHENON

01/28/2002
The New York Times
Page 10, Column 3
c. 2002 New York Times Company

WASHINGTON, Jan. 27 -- The Justice Department has named a leading organized=
-crime prosecutor from New York to its investigation of the collapse of the=
 Enron Corporation, department officials said.=20
The prosecutor, Andrew Weissmann, chief of the criminal division of the Uni=
ted States attorney's office in Brooklyn and the lead prosecutor in the 199=
7 trial that ended with the imprisonment of the reputed head of the Genoves=
e crime family, is described by colleagues as a tenacious investigator and =
litigator.
Department officials said they hoped the appointment of Mr. Weissmann would=
 be seen as additional evidence that the Justice Department's Enron inquiry=
 would be aggressive, despite the many ties between the Bush administration=
 and senior Enron executives who were among the largest contributors to Pre=
sident Bush's 2000 campaign.=20
Attorney General John Ashcroft has recused himself from the case because he=
 accepted contributions from Enron in a failed campaign for re-election to =
the Senate.=20
Mr. Weissmann will report to Leslie R. Caldwell, a career federal prosecuto=
r in the United States attorney's office in San Francisco who has been name=
d to head the Enron investigation. Ms. Caldwell, chief of the securities fr=
aud division in the prosecutor's office in San Francisco, has a reputation =
for toughness and for helping juries make sense of complicated criminal cas=
es.=20
Mr. Weissmann, 42, has handled a variety of cases in Brooklyn but is best r=
emembered for his prosecution of organized-crime figures, most notably Vinc=
ent Gigante, the reputed head of the Genovese crime family.=20
Mr. Weissmann won a 1997 conviction of Mr. Gigante on charges of murder-con=
spiracy and racketeering, overcoming defense claims that Mr. Gigante was in=
competent to stand trial. Mr. Gigante was known for walking around Greenwic=
h Village in a bathrobe and pajamas, which resulted in his being dubbed the=
 Oddfather.=20
Mr. Weissmann, a graduate of Princeton University and Columbia Law School, =
was born and raised in New York. He has worked in the United States attorne=
y's office in Brooklyn for 10 years, the last two as chief of the criminal =
division.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09

Financial Desk
THE FALLOF ENRON Convictions for Enron Execs Would Be Hard Won
ERIC LICHTBLAU; DAVID G. SAVAGE
TIMES STAFF WRITERS

01/28/2002
Los Angeles Times
Home Edition
A-1
Copyright 2002 / The Times Mirror Company

WASHINGTON -- Although Enron Corp. may have destroyed thousands of document=
s, misled shareholders and left the retirement accounts of many of its empl=
oyees nearly worthless, legal experts say the prospect of serious criminal =
convictions of corporate executives is far from certain.=20
Despite some recent success in corporate fraud cases, prosecutors must over=
come daunting hurdles, including changes in federal regulation of insider t=
rading, the vagaries of securities law and the sometimes conflicting agenda=
 of congressional investigators, according to law professors, attorneys who=
 specialize in white-collar crime and law enforcement officials.
Evidence that Enron destroyed documents related to the company's meteoric c=
ollapse offers the most compelling prospect for a criminal case, suggesting=
 possible obstruction of justice charges, legal experts and law enforcement=
 officials agree.=20
But it could take years for authorities to build more serious charges of co=
nspiracy, insider trading or securities fraud against Enron's higher-ups, a=
nd even then it may prove tough to return convictions, experts predicted.=
=20
"Financial fraud cases are very hard to prove. [Executives] can say they ma=
de bad business judgments, but you have to prove unanimously and beyond a r=
easonable doubt that they deliberately intended to deceive" the public and =
their shareholders about the company's finances, said Columbia University l=
aw professor Jeffrey N. Gordon.=20
Even as FBI investigators began descending on Enron's Houston headquarters =
last week to probe possible crimes, they probably will confront several leg=
al and political realities that could work to Enron's advantage. Among the =
potential roadblocks:=20
* The entire U.S. attorney's office in Houston has pulled out of the invest=
igation because too many prosecutors are related to Enron employees, forcin=
g the Justice Department to create a special task force that must start fro=
m scratch in probing the energy company's labyrinth of partnerships.=20
* Democrats already have called for an independent counsel to probe Enron's=
 well-documented political connections to the Bush administration, but the =
demise of the outside counsel law in 1999 has muddied the process for deter=
mining how and when to appoint an outside counsel.=20
* A recent rule change at the Securities and Exchange Commission, authorizi=
ng prearranged sell-offs of executives' stock, gives added insulation to al=
legations of insider trading and could provide former Enron Chairman and Ch=
ief Executive Kenneth L. Lay and other executives with a built-in defense.=
=20
* And Congress' zeal to conduct high-profile hearings on Enron could compli=
cate the use of testimony from witnesses who become part of the criminal pr=
obe, as happened in the Iran-Contra scandal. In that case, charges against =
Oliver L. North and John M. Poindexter were thrown out in 1990 because thei=
r prosecutions were deemed tainted by immunized congressional testimony.=20
Coordinating Immunity Offers=20
Justice Department officials have begun discussions with Congress on how to=
 coordinate immunity offers that Congress might make to witnesses, such as =
David B. Duncan, the partner at accounting firm Andersen who oversaw the En=
ron account. Duncan, who since has been fired, invoked the 5th Amendment la=
st week before a congressional committee rather than answer questions about=
 the destruction of Enron documents.=20
The department hopes to blunt the effect that any congressional immunity de=
als would have on future criminal cases.=20
"We never like to see potential witnesses paraded before Congress, but that=
's always a danger in a case like this," acknowledged a law enforcement off=
icial who asked not to be identified.=20
Enron spokesman Eric Thode said it would be premature to discuss any crimin=
al allegations, noting: "We'll just let the investigations take their cours=
e, and, of course, we're cooperating fully."=20
Despite the obstacles that prosecutors face, authorities are buoyed by the =
recent progress they have made in several other high-profile financial frau=
d cases.=20
In Pennsylvania, the former chief financial officer of apparel maker Leslie=
 Fay Cos. was sentenced last week to nine years in prison for inflating the=
 company's earnings by $81 million. The scheme forced the company into Chap=
ter 11 bankruptcy protection for four years.=20
In San Francisco, former executives at health services giant McKesson Corp.=
, are facing civil and criminal charges for allegedly concocting bogus reve=
nue figures. The losses for the company's shareholders: $9 billion.=20
And in New Jersey, in a case with even more telltale similarities to Enron,=
 the former chairman and vice chairman of Cendant Corp.--a franchiser whose=
 brands include Howard Johnson, Avis and Century 21--are awaiting trial on =
charges of conspiracy and securities fraud.=20
Authorities allege that Cendant, in perhaps the longest-running scheme of i=
ts kind, was "cooking the books" for more than a decade, with former Chairm=
an Walter A. Forbes reaping $30 million as the company's stock soared amid =
misleading financial reports.=20
Once irregularities in the company's accounting were exposed in 1998, the v=
alue of Cendant's stock plunged $14 billion in a single day.=20
Cendant and accounting giant Ernst & Young, accused of whitewashing the irr=
egularities, agreed last year to pay a near-record total of $3.2 billion to=
 shareholders who claimed they were defrauded by the scheme.=20
But Forbes and former Vice Chairman E. Kirk Shelton, who have declared thei=
r innocence in the affair, are not expected to go to trial until late this =
year, about 4 1/2 years after the scandal first broke. That arduous legal p=
ath is testament to the difficulty of bringing such complex financial fraud=
 cases, law enforcement officials say.=20
"It's a brutally hard case," said one official close to the Cendant prosecu=
tion. "It takes a special accounting knowledge, it's an incredible paper tr=
ail, and you have to have cooperators. We had [three] people pleading guilt=
y, all the ones just below the top. . . . Without them, it would be a much =
more formidable task" to prosecute the company's top executives.=20
Reports of widespread shredding of Enron documents give authorities substan=
tial leverage to try to persuade witnesses to cooperate, experts said.=20
"As a prosecutor, you are looking for evidence that the senior people had k=
nowledge of the scheme," said San Francisco attorney Stephen Meagher, a for=
mer prosecutor of white-collar crime cases.=20
"And typically, when you find documents were being destroyed, that answers =
the question. That means certain people were aware of problems and they wer=
e determined to destroy the evidence. It's the prosecutor's dream come true=
 because it shifts the burden to the other side. They have to explain what =
they were trying to hide."=20
Duncan, the Andersen auditor, has spoken with federal investigators at leas=
t twice, a sign that he may be willing to cooperate in exchange for a plea =
deal.=20
It remains to be seen whether Duncan or someone at Enron turns out to be th=
e star witness prosecutors are seeking. But Columbia Law School professor J=
ohn C. Coffee, a securities specialist, noted that "historically in white-c=
ollar crime cases, you have a trail of falling dominoes, and you start low =
and offer leniency to cooperate and get evidence against the higher-ups. I =
think you're going to get a whole succession of people cutting deals here."=
=20
The danger, however, is that such witnesses have a potential credibility pr=
oblem: If they admit to destroying documents, will a jury believe their tes=
timony fingering higher executives?=20
"Those aren't necessarily the most credible witnesses on the stand," said P=
aul Fishman, a former Justice Department official who specializes in white-=
collar defense.=20
Sending a Strong Message=20
Beyond the obstruction issue, law enforcement officials say possible charge=
s against executives at Enron and Andersen could include securities fraud, =
insider trading, wire and mail fraud, conspiracy and even racketeering.=20
The case, if it can be proved, would hinge on a simple premise: that execut=
ives fooled the public and its shareholders into thinking the company was m=
ore profitable than it was--and enriched themselves in the process as the c=
ompany's stock went up in value.=20
The corporation itself faces possible indictment and criminal penalties, bu=
t legal observers said anything short of indicting top Enron executives cou=
ld be seen as a failure in the eyes of the public.=20
"Indicting a bankrupt company achieves next to nothing," Coffee said.=20
Indeed, Duke University law professor James D. Cox said indicting Enron exe=
cutives would send a strong message.=20
"If they are serious about eliminating financial fraud, this is the battle =
the government needs to take on," he said. "This looks to be a case of purp=
oseful manipulation of earnings and purposeful concealment of debt. They cr=
eated a truly false facade."=20
Class-action lawsuits against Enron maintain that Lay made more than $100 m=
illion from stock sales before the company's value plummeted. But Lay's law=
yers have maintained that many sales were from prearranged sell-offs, which=
 could give him insulation under a rule adopted by the SEC in 2000 regardin=
g what constitutes insider trading.=20
The so-called 10b5-1 rule holds that even if insiders possess sensitive cor=
porate information, they can legally buy and sell company stock so long as =
it is part of a prearranged trading plan. The SEC and various courts have w=
rangled over how the new rule should be interpreted, and allegations of ins=
ider trading against Lay and other Enron executives could prove "a key test=
," said Jill Fisch, a corporate and securities law expert at Fordham Law Sc=
hool.=20
Fisch compared the Enron probe to the financial scandal that led to the con=
viction of former junk bond kingpin Michael Milken and other Wall Street tr=
aders in the 1980s.=20
As in the Milken case, Fisch said, she believes Enron is "an impure case on=
 a lot of legal questions." But, she added, the public backlash--fueled by =
headlines about document shredding--may be enough to drive the investigatio=
n in the absence of clear law.

PHOTO: Former Enron CEO Kenneth L. Lay and other executives face allegation=
s of insider trading.; ; PHOTOGRAPHER: BRETT COOMER / For The Times; PHOTO:=
 Andersen auditor David B. Duncan pleaded the Fifth last week before a cong=
ressional panel.; ; PHOTOGRAPHER: Associated Press=20
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09

Building the House of Enron: As Enron's Derivatives Trading Comes Into Focu=
s, Gap in Oversight Is Spotlighted
By Michael Schroeder
Staff Reporter of The Wall Street Journal

01/28/2002
The Wall Street Journal
C1
(Copyright (c) 2002, Dow Jones & Company, Inc.)

WASHINGTON -- As the significant role that derivatives played in Enron Corp=
.'s downfall comes into focus, lawmakers and regulators are lining up in fa=
vor of more oversight of these risky investments.=20
While the Houston-based company's core energy operations involved natural-g=
as and electricity transmission, its largest and most-profitable business w=
as trading derivatives -- unregulated financial instruments that derive the=
ir value from an underlying commodity or wager on the future. Now, informat=
ion is surfacing that Enron's derivatives trading may have been used to mas=
k weakness in the company's other businesses such as fiber-optic bandwidth,=
 retail gas and power, and water systems.
"Enron was more of a hedge fund than an energy company," said Rep. Richard =
Baker (R., La.), chairman of a Financial Services Committee panel that is l=
ooking into the derivatives issue, in an interview.=20
After listening to testimony at his committee's Enron hearing last week, Se=
nate Governmental Affairs Chairman Joseph Lieberman said he would hold a he=
aring specifically on the need for derivatives regulation. The Connecticut =
Democrat was responding in part to the testimony of San Diego University la=
w professor Frank Partnoy, who outlined a series of methods that he said En=
ron used "to create false profit and loss entries for the derivatives Enron=
 traded."=20
To ensure that Enron met Wall Street quarterly earnings estimates, it used =
derivatives and off-balance-sheet partnerships, or so-called special-purpos=
e vehicles, to hide losses on technology stocks and debts incurred to finan=
ce unprofitable businesses, Mr. Partnoy said. In addition, he said, "it app=
ears that some Enron employees used dummy accounts and rigged valuation met=
hodologies." The entries, he said, "were systematic and occurred over sever=
al years, beginning as early as 1997."=20
Based on independent research and conversations with Enron traders, Mr. Par=
tnoy said he learned that some traders apparently hid losses and understate=
d profits, which had the effect of making derivatives trading appear less v=
olatile than it was. Randall Dodd, director of the Derivatives Study Center=
, an independent, nonpartisan Washington group, said in an interview that h=
e has reached similar conclusions. Mr. Dodd is advising three government ag=
encies and three congressional committees investigating Enron.=20
Declining to address specific allegations, Enron spokesman Vance Meyer said=
 in a statement, "Derivatives were not our business. They complemented our =
core business of buying and selling natural gas and power." Mr. Meyer also =
said: "I think it's safe to say that we are not going to agree with every v=
iew about Enron presented in the congressional hearings, but we do respect =
the process and hope, when all is said and done, that something positive wi=
ll come out of it."=20
In 1989, the energy company, originally a utility that produced and transpo=
rted natural gas and electricity, had begun shifting its focus to energy tr=
ading. The derivatives included not only Enron's very profitable trading op=
erations in natural-gas derivatives, but also the more-esoteric financial i=
nstruments it began trading recently -- such as fiber-optic bandwidth and w=
eather derivatives.=20
During 2000 alone, Enron's derivatives-related assets increased from $2.2 b=
illion to $12 billion, with most of the growth coming from increased tradin=
g through its EnronOnline, an Internet trading system, according to Enron's=
 financial reports. Mr. Dodd figures that if Enron were a bank, it would ra=
nk as the 10th largest derivatives dealer.=20
Innovations in technology and finance have helped obliterate clear distinct=
ions between banks, brokerage firms and newer hybrids, such as Enron. But f=
inancial regulators hew to decades-old divisions of authority, continuing t=
o keep a close watch on banks, brokerage firms and conventional exchanges, =
while leaving new entrants such as Enron to police themselves.=20
In late 2000, Congress passed legislation that exempted from regulation ove=
r-the-counter derivatives, which are contracts arranged among sophisticated=
 buyers and sellers such as banks, Wall Street firms and public companies. =
The measure had support from both parties, as well as the Federal Reserve a=
nd the Clinton administration.=20
Advocates of derivatives say the instruments give companies, investors and =
lenders a way to reduce their exposure to many kinds of financial risks. Mo=
st regulators and financial-industry executives insist that the country's f=
inancial system remains sound.=20
But the Enron scandal spotlights an enormous void in the nation's system of=
 financial regulation, and it is rekindling a thorny debate over just how t=
hat gap should be filled.=20
As a publicly traded company, Enron routinely provided the SEC with general=
 information about its finances but wasn't obliged to divulge to any agency=
 detailed information about its over-the-counter trading activities.=20
In the wake of Enron's bankruptcy, federal energy regulators say they plan =
rules for energy-derivatives accounting. Treasury Secretary Paul O'Neill sa=
id derivatives regulations may need modernizing.=20
"In this case, I think it's fair to say it may be that our rules and regula=
tions have gotten behind practices," Mr. O'Neill said in a recent interview=
 on the "Charlie Rose Show."=20
---=20
Enron assembled a complex structure of partnership deals. In the end, it ca=
me tumbling down. See an interactive graphic at WSJ.com

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09

National Desk; Section A
ENRON'S MANY STRANDS: SEEKING EVIDENCE
Hard-to-Miss Box of Scraps Catches F.B.I. Agent's Eye
By MICHAEL BRICK

01/28/2002
The New York Times
Page 10, Column 1
c. 2002 New York Times Company

HOUSTON, Jan. 27 -- Agents of both the F.B.I. and the Securities and Exchan=
ge Commission have expressed interest in reviewing the remains of documents=
 that a former Enron executive said were recently shredded at the company's=
 headquarters.=20
An F.B.I. agent here approached lawyers for shareholders who are suing Enro=
n to discuss the documents, the lawyers said. The shareholders' lawyers had=
 displayed a box of shredded documents last Tuesday. The agent also talked =
to lawyers representing Enron. The S.E.C. also has pursued the matter by is=
suing a subpoena to the former executive, Maureen Castaneda, people familia=
r with that investigation said.
The S.E.C. had already issued subpoenas to more than 30 Enron employees in =
a variety of departments, according to several people, including an Enron e=
mployee who received one in December. The subpoena to Ms. Castaneda was iss=
ued last week, when she discussed the documents in interviews with ABC News=
 and The New York Times.=20
It is not clear what the documents said or why they were shredded. The fede=
ral judge in the shareholder lawsuits, Melinda Harmon, ordered an accelerat=
ed schedule of information gathering last week. Shareholders' lawyers had a=
rgued for haste, and they said they had reason to believe destruction of do=
cuments was continuing.=20
An Enron spokesman said the company is cooperating with investigations abou=
t the shredded documents. ''It's a good time to let the facts come from the=
 proper authorities investigating this,'' Mark Palmer, a spokesman for Enro=
n, said. ''We are the ones that called the Justice Department.''=20
The documents were generally shredded horizontally rather than vertically, =
so it is possible to make out words and even sentence fragments. The shreds=
 include accounting records, and some bear the names of the off-the-balance=
-sheet partnerships that have been linked to transactions allowing Enron to=
 keep some of its problems hidden.=20
Shareholders' lawyers have said they might eventually try to reassemble the=
 documents, but it is unclear whether government investigators will make a =
similar effort.=20
Mr. Palmer said he did not know whether Enron usually shredded documents ho=
rizontally. The company has said it repeatedly ordered employees not to des=
troy documents that could be relevant to investigations. It announced on Oc=
t. 31 that the S.E.C. had upgraded its inquiry to a formal investigation.=
=20
Knowingly destroying records that have the potential to be of interest to g=
overnment investigators would be a crime. Investigators did not signal that=
 the documents discussed by Ms. Castaneda were definitely of interest until=
 after the shredding took place and became public.=20
Ms. Castaneda made her comments last Monday. The next day, the S.E.C. notif=
ied shareholders' lawyers, who have been working with her, that a subpoena =
had been issued for Ms. Castaneda's appointment books, all documents concer=
ning entities that have had dealings with Enron and all documents related t=
o Enron other than her pay stubs.=20
The F.B.I. agent approached the lawyers for Enron and those for its shareho=
lders in the courthouse last Tuesday to discuss the box of shredded paper t=
hat the shareholders' lawyers had put on a table in the courtroom. A lawyer=
 for Arthur Andersen, Enron's accounting firm, suggested in court that the =
shredded documents should be turned over to the Justice Department.=20
The F.B.I. agent did not take the documents, so they remained in the posses=
sion of Milberg Weiss, one of the law firms suing Enron. A spokesman for th=
e firm said it would work with Ms. Castaneda's lawyer to comply with the su=
bpoena.=20
One possible reason the agent may have left the documents alone is that if =
they were taken for a criminal investigation, they might be subject to gran=
d jury secrecy rules. Such rules would not apply in a civil investigation. =
Thus, investigators in a civil inquiry, such as S.E.C representatives, can =
share the information with F.B.I. and other criminal investigators. But cri=
minal investigators might be prevented by grand jury secrecy from sharing t=
he documents with S.E.C. investigators.=20
A lawyer for Ms. Castaneda declined to comment.

Photo: Strands of paper displayed by lawyers for shareholders suing Enron s=
how that despite shredding many words can still be read. (James Estrin/The =
New York Times)=20
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09

Business/Financial Desk; Section A
ENRON'S MANY STRANDS: LEGAL STRATEGY
SHREDDED PAPERS KEY IN ENRON CASE
By KURT EICHENWALD

01/28/2002
The New York Times
Page 1, Column 1
c. 2002 New York Times Company

For all its eye-popping revelations, the Enron case presents an enormous ch=
allenge to government investigators, one that could require years of diggin=
g to unravel. At this point, no one knows for sure whether the actions that=
 led to the collapse of the company constituted financial crimes, and, if t=
hey did, which should be the focus of the investigation.=20
For that reason, legal experts said, the best things that happened for the =
criminal investigators in the case were the decisions by employees at Enron=
 and its auditor, Arthur Andersen & Company, to begin shredding documents.
Unlike the financial investigations, which will require forensic accountant=
s to unwind complex transactions, the document shredding gives investigator=
s comparatively simple cases of possible obstruction of justice. In such ca=
ses, witnesses are confronted, evidence is collected, the law is checked, a=
nd the decision whether to seek an indictment is made.=20
As a result, these experts said, the focus in the earliest days will be on =
pursuing possible criminal cases from those events.=20
The government's intent will be to use the leverage of potential indictment=
s to push possible defendants into the role of witnesses to get evidence fo=
r the broader financial investigation. ''The potential obstruction of justi=
ce is critical to the progress of this investigation,'' said Efrem M. Grail=
, a former prosecutor who is a partner with the Pittsburgh law firm of Reed=
 Smith. ''It is easier for the government to make an obstruction of justice=
 case than it is to make a case that people violated criminal securities la=
w or criminal fraud statutes.''=20
It is critical to start with such limits, legal experts said, to make sure =
that the case does not go off track, especially in its earliest days.=20
''It's essential that the government disciplines itself during the investig=
ation and reins in the scope of the inquiry,'' said Chris Bebel, a former f=
ederal prosecutor and former lawyer with the Securities and Exchange Commis=
sion. ''Otherwise, it is going to get bogged down in a sea of documents and=
 conflicting statements about complex transactions.''=20
According to people who have spoken with government officials involved in t=
he case, there is strong pressure from senior Justice Department officials =
to show some quick results from the investigation. That pressure will incre=
ase the attention focused on matters like document destruction, where the f=
acts are relatively easy to establish.=20
Until now, the most public investigations have been those conducted by a se=
ries of Congressional committees. But none of them have the power to bring =
charges in the case. That responsibility falls instead to prosecutors worki=
ng on a special Justice Department task force and to a group of agents with=
 the Federal Bureau of Investigation.=20
On the regulatory side, one investigation is being handled by the enforceme=
nt division at the S.E.C. The Labor Department is also reviewing whether En=
ron violated any rules while the stock price was plunging when it told empl=
oyees that they could not sell company shares from their retirement account=
s.=20
For government investigators, the scandal presents a difficult challenge. I=
n contrast with other well-known white-collar investigations, this inquiry =
begins with the government's having little guidance on where it should be l=
ooking.=20
Unlike the insider trading scandals on Wall Street in the 80's -- which beg=
an with revelations from Ivan F. Boesky, a stock trader -- the Enron inquir=
y has no central witness to provide a map of criminal activity. Unlike the =
Treasury market scandals that enveloped Salomon Brothers in the early 90's,=
 the Enron investigation begins with no admission from the company that it =
did anything improper. Unlike the price-fixing cases at the Archer Daniels =
Midland Company, later in the 90's, the Enron case does not have years of i=
ncriminating tape recordings provided by a cooperating witness.=20
''In this case, unlike in those in the past,'' said Stephen Meagher, a form=
er federal prosecutor who handled white-collar cases in San Francisco, ''th=
ere are many dimensions, and you just don't have a clear trail to a central=
 theory of the prosecution.''=20
As a result, the government begins the first major corporate scandal of the=
 new millennium with no strong handle on whether the trouble was brought ab=
out by criminal activity or folly. The distinction is critical. Experts say=
 any criminal case stemming from the Enron collapse would be related to som=
e sort of fraud: tax fraud, wire or mail fraud, securities fraud.=20
But to get such an indictment, prosecutors would have to prove that the peo=
ple charged had criminal intent -- that they knew they were engaging in fra=
ud when they were committing the acts in question.=20
In other words, if Enron executives or advisers filed or disseminated infor=
mation about the company that has since proved to be false, the government =
must be able to demonstrate that they knew about the falsehoods at the time=
. In this case, establishing such proof could be challenging.=20
According to internal Enron documents, every major transaction between the =
company and the series of partnerships that played a role in the collapse w=
ere supposed to have been reviewed by senior company managers and by Arthur=
 Andersen, the company's auditor.=20
If information about such deals was presented to Andersen truthfully, and t=
he accountant rendering the opinion was clear of any undisclosed personal o=
r financial conflicts, those rulings by the accountants will be some of the=
 most important weapons in any defense lawyer's argument against indictment=
.=20
Enron officials would effectively be left saying that they had relied on th=
e professionals, and the professionals would maintain that they had offered=
 unbiased judgments -- even if those judgments subsequently proved to be wr=
ong. But here again, legal experts said, the document destruction will prob=
ably prove to be critical in giving investigators a means of combating that=
 challenge.=20
''Without document destruction, the auditors would have been explaining tha=
t they made judgment calls,'' said Franklin B. Velie, a former federal pros=
ecutor now with the law firm of Salans Hertzfeld & Heilbronn in New York, '=
'and the company would have been saying that they relied on the auditors.=
=20
''It would be hard to know whether this was a horrible mistake or a crime. =
With document destruction, the path for the investigators seems a lot clear=
er.''

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09

National Desk; Section A
ENRON'S MANY STRANDS: THE VICE PRESIDENT
Cheney Is Set to Battle Congress To Keep His Enron Talks Secret
By ELISABETH BUMILLER

01/28/2002
The New York Times
Page 1, Column 1
c. 2002 New York Times Company

WASHINGTON, Jan. 27 -- Vice President Dick Cheney said today that the White=
 House was prepared to go to court to fight the release of documents demand=
ed by Congress as part of the investigation into any influence the Enron Co=
rporation had in formulating the Bush administration's energy policy.=20
Mr. Cheney said that the General Accounting Office, the agency demanding th=
e documents, was overstepping its authority and that he had a right to keep=
 the documents secret to preserve his ability to get ''unvarnished'' advice=
 from outside consultants.
David M. Walker, the head of the General Accounting Office, responded this =
evening in an interview that it was now ''highly likely'' that he would fil=
e a lawsuit against the Bush administration if Mr. Cheney did not turn over=
 the documents by the end of this week. Of the vice president's assertion t=
hat the agency was overstepping its bounds, Mr. Walker, the comptroller gen=
eral of the United States, replied, ''Talk is cheap.''=20
It would be the first time that the accounting office, the investigative ar=
m of Congress, sued another government department for not cooperating with =
an inquiry.=20
In interviews on the ABC program ''This Week'' and ''Fox News Sunday,'' Mr.=
 Cheney said that it was the right of the president and vice president to k=
eep secret meetings like those that Mr. Cheney and his energy task force ha=
d over the last year with Enron executives as the administration devised it=
s energy policy.=20
''What I object to,'' Mr. Cheney said on ''Fox News Sunday,'' ''and what th=
e president's objected to, and what we've told G.A.O. we won't do, is make =
it impossible for me or future vice presidents to ever have a conversation =
in confidence with anybody without having, ultimately, to tell a member of =
Congress what we talked about and what was said.''=20
At issue is how much Enron, a major contributor to the Republican Party, in=
fluenced the Bush energy plan, which eases environmental rules, opens publi=
c land to drilling and provides tax incentives to energy companies for expl=
oration. Enron and the White House have acknowledged that Enron executives =
met five times with Mr. Cheney or members of his staff about energy last ye=
ar, and documents from the meetings could show whether the administration p=
olicy mirrored any specific recommendations of Enron's.=20
A lawsuit would increase pressure on Mr. Cheney, who is under criticism fro=
m Democrats for his relationship with Enron, the giant energy trading compa=
ny that filed for bankruptcy protection and that has ties to officials in t=
he Bush administration.=20
''Now, the fact is, Enron didn't get any special deals,'' Mr. Cheney said o=
n ABC. ''Enron's been treated appropriately by this administration.''=20
Mr. Cheney also said that turning over the documents would be detrimental t=
o the presidency.=20
''We've seen it in cases like this before, where it's demanded that preside=
nts cough up and compromise on important principles,'' Mr. Cheney said. As =
a result, he said, ''we are weaker today as an institution because of the u=
nwise compromises that have been made over the last 30 to 35 years.''=20
Some Republican strategists have begun to worry that Mr. Cheney's stance is=
 contributing to perceptions that the White House has something to hide on =
the issue. The New York Times/CBS News Poll published today showed that a m=
ajority of Republicans believed that the administration had not been forthc=
oming about its dealings with Enron.=20
Mr. Walker, a member of the Reagan and first Bush administrations, who was =
appointed by President Bill Clinton in 1998 to a 15-year term as comptrolle=
r general, said that he did not agree with Mr. Cheney's position that he wa=
s allowed to keep the meetings secret because of his position as vice presi=
dent.=20
''This is not about the vice president's constitutional position,'' Mr. Wal=
ker said. ''It's about his capacity as chairman of the national energy poli=
cy development group. From Day 1, this has not had anything to do with the =
constitutional position of the vice president. I know they want to present =
it that way because they think people will be more sympathetic, but that's =
not factually accurate.''=20
Mr. Walker said that it was his view that the White House had put Mr. Chene=
y in charge of energy policy for that very reason -- to claim executive pri=
vilege and avoid oversight of the group by Congress. ''But that's a loophol=
e big enough to drive a truck through,'' Mr. Walker said.=20
Mr. Walker also took issue with an assertion by Mr. Cheney that the account=
ing office was pursuing the information only because of the political heat =
generated by the Enron scandal. In the ABC interview, Mr. Cheney said that =
the accounting office first pursued the documents last summer but then rele=
nted under the administration's stance that the information was privileged.=
=20
''The G.A.O. sort of backed off,'' Mr. Cheney said. ''They in effect said, =
'Well, maybe we aren't going to pursue it at this point.' What's re-energiz=
ed it now is the question of Enron, and some efforts by my Democratic frien=
ds on the Hill to try to create a political issue out of what's really a co=
rporate issue.''=20
At least 10 Congressional committees are investigating the Enron debacle.=
=20
Mr. Walker responded that Mr. Cheney's statement was ''absolutely false'' a=
nd said that the accounting office had been prepared to go to court in Sept=
ember, before the attacks on the World Trade Center and the Pentagon occurr=
ed. He decided, he said, to wait until the crisis had abated before pursuin=
g the matter.=20
An administration official said today that it was likely that any court fig=
ht over the documents would take years, and that the White House was convin=
ced it had a strong case.=20
White House officials continue to say that the Enron debacle is a financial=
 scandal, not a political one, and point out that the president's approval =
ratings remain high, above 80 percent. White House officials also say that =
even if Mr. Cheney turns over the documents, this will only whet the Democr=
ats' appetite.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09

Editorial Desk; Section A
Enron and the Lawyers

01/28/2002
The New York Times
Page 14, Column 1
c. 2002 New York Times Company

In the Enron scandal, the accounting industry has been the profession takin=
g the most heat. Before the dust settles, however, it seems inevitable that=
 more questions will be raised about the role that lawyers played in Enron'=
s alleged misdeeds.=20
Some of those concerns are already being raised about Vinson & Elkins, Enro=
n's law firm. When the time came for a review of some of the company's ques=
tionable partnerships, Enron's internal whistleblower, Sherron Watkins, a v=
ice president, urged the company's chairman, Kenneth Lay, not to assign the=
 task to Vinson & Elkins, since it had approved some of the very partnershi=
ps that needed to be investigated. Even so, the assignment was given to tha=
t very law firm, which concluded that problems with the partnerships were j=
ust cosmetic. It is likely that investigators will want to examine the lega=
l work of Vinson & Elkins, and whether it told Enron about the law firm's p=
ossible conflict in the matter.
Other law firms and lawyers will no doubt also be caught up in the investig=
ation. Much of the Enron scandal involves complex financial arrangements th=
at teams of lawyers helped to cobble together, and to which law firms gave =
their professional imprimatur. If any of these arrangements were in fact il=
legal, the lawyers may have been in the best position to know.=20
The Enron scandal is already producing cries for reform in the accounting i=
ndustry. Senator Barbara Boxer wants to prohibit accountants from consultin=
g for companies they audit, as Anderson did for Enron. The accounting indus=
try is reportedly in talks with the Securities and Exchange Commission abou=
t ways accountants can better regulate themselves.=20
It would be gratifying to report that the legal profession had been similar=
ly moved. Despite the recent revelations, the organized bar appears to be r=
egressing on the subject of financial fraud. Last August, an ethics commiss=
ion presented the American Bar Association with proposals for easing the or=
ganization's model rules on lawyer-client confidentiality so that lawyers n=
eed not remain silent while their clients engage in illegal activity. The A=
.B.A. adopted one proposal permitting lawyers to speak out to prevent clien=
ts from committing crimes reasonably certain to result in death or serious =
bodily harm. But it defeated a second proposal that would have let lawyers =
break confidentiality to prevent their clients from committing fraud reason=
ably certain to substantially injure the financial interests of another.=20
The A.B.A. is meeting again this week in Philadelphia. Despite the interven=
ing Enron scandal, there is apparently little chance it will reconsider its=
 financial fraud vote and some chance it will reverse last August's reform.=
 Even though the association's model rules are largely advisory, this would=
 be precisely the wrong message right now.=20
As scrutiny turns from accountants to lawyers in this scandal, the legal pr=
ofession should be looking for ways to assure Americans that when fraudulen=
t activities are under way that threaten their livelihoods, their investmen=
ts and their pensions, lawyers will be on their side, not on the side of th=
e criminals.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09

Financial
HEARSAY The Lawyer's Column
Enron Case Attracts Lawyers Like a Flame Attracts Moths, More Than You Can =
Shake a Stick at
James V. Grimaldi
Washington Post Staff Writer

01/28/2002
The Washington Post
FINAL
E02
Copyright 2002, The Washington Post Co. All Rights Reserved

Here we go again. Another parade of lawyers. A gaggle of attorneys. A flock=
 of law firms. This is a lawyer full-employment act. A "Who's Who" of litig=
ators. A full-court press. The lawyers are hiring lawyers. Hang on, sports =
fans. Buckle your seat belts. It's going to be a bumpy column.=20
If we're pulling out all the cliche{acute}s, we must be talking a Washingto=
n scandal.
If it's the scandal du jour, it must be Enron Corp.=20
Thank goodness. This column will write itself. Even the cliche{acute}s will=
 write themselves. Where do we begin? We begin at the eye of storm, with En=
ron. Of course, we need a massive legal personality to fill the role of chi=
ef defender of the alleged corporate plunderer. Robert S. Bennett of Skadde=
n, Arps, Slate, Meagher & Flom fits the bill. We just love our blustery Bob=
 Bennett. We've missed his work defending President Clinton during sex scan=
dals. So it was a delight to see him ride out of the corral with both guns =
blaring, firing at the media and the Congress as Enron's lawyer.=20
But you could just hear a sigh of sadness in the media, though, when report=
ers realized that David Boies would not represent Andrew Fastow, the chief =
financial officer who is the supposed mastermind of the partnerships under =
the microscope. No, it is just a member of Boies's firm, Boies, Schiller & =
Flexner, who is representing Fastow.=20
No slouch himself, Richard Drubel of the firm's New Hampshire office will h=
andle Fastow's civil defense. Who is Drubel and how did he get the call? Tu=
rns out that he worked at Susman Godfrey, one of Enron's Houston firms, and=
 Drubel was friends with Fastow there. While known for plaintiff suits, Sus=
man Godfrey also has defended Enron.=20
Fastow's case apparently is so complex that he has two other lawyers and la=
w firms -- David Gerger of Foreman, DeGeurin, Nugent & Gerger, who is worki=
ng the Justice Department angle, and Lawrence Iason of Morvillo, Abramowitz=
, Grand, Iason & Silberberg, who is handling the Securities and Exchange Co=
mmission aspect of the investigation.=20
Arthur Andersen has Daniel Kolb and Michael Carroll of Davis Polk & Wardwel=
l. David Duncan, lead partner of Andersen's Enron auditing team until he wa=
s fired, has retained Robert J. Giuffra Jr. and Gandolfo V. "Vince" DiBlasi=
 of Sullivan & Cromwell.=20
Vinson & Elkins, Enron's primary outside law firm with which Enron has many=
 close ties, has turned to a big-gun litigator for its defense: John Villa =
of the District's Williams & Connolly, the lawyer and firm that lawyers and=
 law firms turn to when they're in trouble.=20
I think we've run out of space. Somehow we'll get to the rest of the Enron =
lawyers. Let's stretch this out over several columns. There's plenty of tim=
e. This isn't going away. We could devote a couple of columns to the plaint=
iffs' attorneys. More to come. Stay tuned. To be continued.=20
Antitrust Follies=20
Looking for a little something different? Something not as untoward as the =
Enron debacle? A little bit lighter fare? Then I suggest you turn to the an=
titrust division of the U.S. Justice Department, and the Federal Trade Comm=
ission. Can we find better vaudeville in town than the antics of antitrust =
chief Charles James and FTC Chairman Timothy Muris?=20
You missed the show? It was Jan. 17 when James and Muris called in the news=
 media at the FTC to announce a deal between the Justice Department and the=
 FTC on how to divvy up antitrust review of industry mergers. Now, this sho=
uld have been a no-brainer. The old system is so convoluted and confusing t=
hat Hearsay does not understand how it works.=20
But we'll try to explain it anyway.=20
There are a handful of industries in which both the FTC and Justice Departm=
ent have expertise. So when a hot merger comes up, and the staff of each ag=
ency wants a piece of it, the assistant attorney general for antitrust and =
the FTC chairman have to sort it out. This had been done in an ancient ritu=
al that included a series of athletic events such as arm wrestling, mud wre=
stling, greased-pig wrestling and a bull-riding competition, and an essay c=
ontest.=20
Okay, we're making that up. Well, most of it. The agencies really do write =
essays explaining why they are best to review the mergers. And there really=
 has been a lot of wrangling over who would get to review a merger. The "di=
scussions" would last more than two weeks sometimes, and that's almost half=
 the 30 days in which investigators must decide whether to launch a more de=
tailed review, called a "second request" for documents. Delays of more than=
 15 days occurred 32 times in 2000.=20
The system needed to be fixed.=20
So, what did James and Muris do?=20
First, they came up with what on its face seems like a sensible plan: The J=
ustice Department would get oversight for media, telecommunications and ent=
ertainment industry mergers, while the FTC would get health care, energy an=
d electricity cases.=20
So, they have that good idea. But there's a problem. They devise it in secr=
et. They don't tell many people about it, to keep it a big surprise, or in =
hope that opponents won't be able to stop it. They don't even share the pla=
n with all the other members of the Federal Trade Commission. They keep man=
y of the stakeholders out of the process. And finally -- and this is the fu=
nniest part -- they keep members of Congress out of the loop.=20
This happened once before at the antitrust division. Last time, it was when=
 the Justice Department abandoned the plan to break up Microsoft Corp. Hell=
o? Is anybody home? Did you forget that this is a democracy, with three bra=
nches of government and all?=20
At this point, we reveal that Hearsay is biased: We prefer things be done i=
n the open, in public, where there is a vigorous debate and hashing out of =
all of the ramifications. In the marketplace of ideas, the strong ones prev=
ail. If this truly were a good idea, it would have prevailed. This did not =
have to be controversial.=20
One member of our democracy is Sen. Ernest F. "Fritz" Hollings (D-S.C.). He=
 is chairman of the Senate Commerce Committee. That's a pretty important co=
mmittee. Lots of bills important to the Bush administration go through that=
 committee. James and Muris didn't tell Sen. Hollings about their big plan.=
 That did not please the senator. And, as the senator might say, he squeale=
d like a pig stuck in a gate.=20
His hootin' and hollerin' were enough to halt a signing ceremony scheduled =
for 1 p.m. Jan. 17 as the media waited in a room nearby. In fact, Muris sig=
ned it anyway. James did not. Reporters had press packets, complete with st=
atements hailing the deal. Now it had to be called off.=20
Someone pass the popcorn. This is getting good. Who would have thought that=
 the Bush administration antitrust team would be so entertaining?=20
The news conference was abruptly canceled without explanation. Later, spoke=
swoman Gina Talamona offered a statement saying the plan was a good one, bu=
t Justice Department staff would meet and confer with Congress.=20
So how is the conferring going? Here is a report from a meeting on Thursday=
, as provided by Hollings's press man, Andy Davis. "DOJ staff admitted that=
 they had not consulted with consumer groups in any way before formulating =
their proposal," Davis said in an e-mail. "Additionally, they had no statis=
tical data to demonstrate each agency's expertise. Instead, they relied sol=
ely on anecdotal evidence."=20
Hmmm. Doesn't sound like a very good first meeting.=20
In the meantime, perhaps James and Muris could read up on the U.S. Constitu=
tion. There's a very sobering line in there about appropriations coming fro=
m Congress.=20
What were they thinking? Well, this is a pattern that seems to be developin=
g with our antitrust enforcers. Unlike Robert Pitofsky, the previous FTC ch=
airman, who made an effort to develop consensus on policy questions, James =
and Muris seem to like to keep their best ideas hidden from the public, pol=
iticians and the media. Pitofsky spent more than a year in public developin=
g his plan to require spinoffs of companies and divisions before mergers ar=
e approved.=20
One person involved with the process, however, offers this commentary about=
 Hearsay's thesis: "That's absurd." Rather than a marketplace of ideas, thi=
s is a power play, according to the source. This person says that Pitofsky =
and James's predecessor, Joel Klein, attempted to craft such a deal but fai=
led. The mistake, this person suggests, was to go public with the plan.=20
The idea that secrecy is better than openness is very sad.=20
In some ways, the handling of this resembles James's failure to get nine st=
ates to sign the Microsoft agreement. Most of those attorneys general, with=
 the exception of California's and Massachusetts's, were eager to settle th=
e case. But James failed to build a consensus and moved forward without the=
m. In swinging toward Microsoft's position, James appeared to do little to =
try to address problems that several key attorneys general had with his dea=
l. As a result, damage has been done to the years of work to build amicable=
 relations between federal and state antitrust enforcers.=20
Too simplistic? Maybe. After all, Hearsay doesn't pretend to be as smart as=
 Muris and James.=20
Look at this way: From a spectator's standpoint, it has been quite a show.=
=20
Big Billings=20
So, you think Sen. Robert G. Torricelli (D-N.J.) got off scot-free? Hardly.=
 The penalty is steep when you're under investigation, even when charges ar=
en't filed.=20
Torricelli's latest congressional filing shows that his legal bills totaled=
 more than $1.37 million in 13 months.=20
The bills will continue to accumulate as the Senate Ethics Committee consid=
ers U.S. Attorney Mary Jo White's three-year investigation into his politic=
al fundraising. The case closed this month without charges against the sena=
tor, but seven people were convicted of making illegal contributions to his=
 1996 campaign.=20
So far, Torricelli has the bills covered: He's raised about $1.54 million.=
=20
Who wins? The lawyers, of course. In the fourth-quarter filing, the first-p=
lace finisher is Ted Wells Jr. of Paul, Weiss, Rifkind, Wharton & Garrison,=
 whose firm billed $195,750. Second place goes to Abbe David Lowell of Mana=
tt, Phelps & Phillips, which billed $20,000.=20
Other billers for the final three months of 2001 include Sidley Austin Brow=
n & Wood ($10,000), Zuckerman Spaeder ($10,000), Pierce Atwood ($10,000), a=
nd Winston & Strawn ($10,000). Torricelli's ex-wife, Susan Torricelli, also=
 got a piece of the legal defense fund: $5,000.=20
Hearsay tries to build consensus every other Monday in Washington Business.=
 Send your cliche{acute}s to hearsay@washpost.com.

http://www.washingtonpost.com=20
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09

Accounting for Enron: White House Resists Detailing Cheney, Enron Discussio=
ns
By Jeanne Cummings
Staff Reporter of The Wall Street Journal

01/28/2002
The Wall Street Journal
A4
(Copyright (c) 2002, Dow Jones & Company, Inc.)

WASHINGTON -- The Bush administration, struggling to manage the political f=
allout of the collapse of Enron Corp., is walking a tightrope between aggre=
ssive disclosure of government ties to the firm and adamant opposition to r=
eleasing the details of Vice President Dick Cheney's private meetings with =
Enron officials.=20
In an appearance on Fox News yesterday, Mr. Cheney said the White House wil=
l go to court to block the General Accounting Office, Congress's investigat=
ive arm, from learning what was discussed in six meetings he and his staff =
held this past year with executives of the Houston energy-trading concern, =
which filed for U.S. bankruptcy-court protection this past month. Three of =
those meetings occurred while the vice president's office was drafting the =
administration's national energy policy.
Meanwhile, on Friday, the Office of Management and Budget asked the General=
 Services Administration to re-evaluate all government contracts with Enron=
 and its auditors, Arthur Andersen LLP. An OMB senior aide said the work co=
uld include as many as 100 contracts with a total value of about $70 millio=
n.=20
Both actions come as public polls suggest Enron could become a political is=
sue for President Bush and his party going into the midterm elections this =
fall. A New York Times poll released yesterday found 58% of respondents sai=
d they think the White House is mostly telling the truth but probably is hi=
ding something. Republican veterans in Washington worry that the White Hous=
e showdown over the meetings between Mr. Cheney and his staff with Enron of=
ficials could nurture those suspicions.=20
Chief of Staff Andrew Card said on NBC's "Meet the Press" that a compromise=
 is still possible with the GAO. But Mr. Cheney said the White House decide=
d in August that it would fight the disclosures in court rather than yield =
on the principle that the vice president should be able to receive private =
advice from outside experts while formulating policy. The Enron saga, he sa=
id, shouldn't be allowed to "undermine" the White House's position.=20
"The president's bound and determined to defend those principles and to pas=
s on this office, his and mine, to future generations in better shape than =
when we found it," the vice president said. "For us to compromise on this b=
asic, fundamental principle would, in effect, do that. It would further wea=
ken the presidency, and we don't want to do that."=20
Further, Mr. Cheney characterized the GAO as a pawn of Rep. Henry A. Waxman=
 (D., Calif.), who has taken the lead on Capitol Hill in scrutinizing Enron=
's sway on the administration's energy policy, which was released this past=
 spring.=20
On Friday, Mr. Waxman's office released records that suggest a State Depart=
ment energy plan was amended by the White House to add a provision urging t=
he U.S. government to use its influence with India to maximize development =
of natural gas in that country, where Enron has a natural-gas-fired power p=
lant. The draft was changed after a meeting between the vice president's of=
fice and Enron officials, according to Mr. Waxman's staff.=20
OMB Director Mitch Daniels's call for a review of all Enron and Arthur Ande=
rsen government contracts was prompted by disclosures of shredded documents=
, even after an investigation into Enron's financial accounting was launche=
d by the Securities and Exchange Commission. Mr. Daniels said both firms no=
w may be ineligible for government work based on a Federal Acquisition Regu=
lation provision that says a business contracting with the government must =
have a "satisfactory record of business ethics and integrity."=20
Mr. Daniels said the GSA should analyze whether Arthur Andersen and Enron a=
re qualified for future contracts, and "consideration should be given to th=
e initiation of suspensions or disbarment proceedings for all, or a part, o=
f Arthur Andersen and Enron as appropriate."=20
Arthur Andersen spokesman Patrick Dorton said, "We have a demonstrated trac=
k record of excellent performance for government clients. We will certainly=
 address any questions and would welcome the opportunity to discuss our str=
ong history in government consulting."=20
An Enron spokesman said he was unaware of any formal investigation but woul=
d respond to any request for information.=20
The two firms' government work doesn't appear to constitute a large part of=
 their businesses. Enron, once the largest energy trading business in the w=
orld, has a $25 million contract to run the utilities at Fort Hamilton in B=
rooklyn, N.Y., which army officials said is already under review.=20
Senate Judiciary Committee Chairman Patrick J. Leahy (D., Vt.) in the past =
week questioned the appropriateness of an Arthur Andersen contract with the=
 Federal Bureau of Investigation since the auditing firm is now part of a J=
ustice Department criminal probe of the Enron collapse. The $700,000 manage=
ment-consulting contract is for work Andersen is doing to help reorganize t=
he FBI and could provide them with access to confidential and sensitive doc=
uments, Mr. Leahy said.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09

Week in Review Desk; Section 4
Ideas & Trends: Power House
Greed, Pain, Excesses. Oh, What a Lovely Issue.
By RICHARD L. BERKE

01/27/2002
The New York Times
Page 1, Column 1
c. 2002 New York Times Company

WASHINGTON -- ONCE they express their requisite sympathy for stockholders a=
nd investors in Enron, many Democrats are downright giddy over the company'=
s implosion. Not since Watergate and Richard M. Nixon's cozying up to corpo=
rate bigwigs wielding bags of money, they say, has their party had such an =
ideal vehicle to arouse the citizenry and skewer a Republican president as =
favoring monied interests.=20
''It's Teapot Dome,'' said Jim Hightower, the former Texas agriculture comm=
issioner who has built a career on speaking for the disenfranchised. ''It's=
 a perfect populist crusade.'' Though, unlike the Harding administration sc=
andal, no one in this administration is known to have acted illegally regar=
ding Enron.
Stanley B. Greenberg, who helped devise a populist theme for Al Gore in the=
 2000 presidential campaign, said the Democrats' rallying cry in the Novemb=
er elections should be: ''The greed is real. The pain is real. The excesses=
 are real.''=20
And the reality is that the issue could be potent for the Democrats, though=
 some are wary of rushing headlong into making Enron a political issue and =
caution that the company spread its bounty to both parties. Yet Enron was f=
ar more generous to Republicans and has closer ties with Republican officia=
ls in government.=20
Republicans are especially vulnerable because Enron reinforces the long-hel=
d perception that their's is the party of big business and the rich. The Wh=
ite House is already a target because the administration is stocked with of=
ficials formerly involved with the oil industry in Texas. Even religious co=
nservatives, a powerful constituency for the Republican Party, are grousing=
 that their president is showing more fealty to corporate titans than Chris=
tian leaders.=20
Adding to the image of a party more attuned to corporate interests than ord=
inary Americans was the recent election of Marc Racicot as Republican Party=
 chairman. He refused to sever his ties to a law firm that has lobbied exte=
nsively for Enron and other companies. The latest New York Times/CBS News P=
oll, published today, underscores the image of a White House run by the upp=
er crust. It reports that 61 percent of Americans say big business has too =
much influence in the administration. And 50 percent said the administratio=
n's policies favor the rich; only 14 percent said they favor the middle cla=
ss.=20
Democrats may have the best opportunity to capitalize on Enron if they do n=
ot retreat to the simplistic anti-big business slogans of decades past. Nea=
rly a century ago, President Theodore Roosevelt scored by demonizing the St=
andard Oil Company as representing the evils of the newly sprouting corpora=
te giants -- and shattering it into 34 pieces.=20
While the age of trustbusting is long gone, Democrats could portray Enron a=
s symbolizing the evils of a new corporate economy fostered by giant stock =
purchases and multinational companies. They can expand their argument and p=
oint to other disastrous business collapses, like Kmart, as evidence that c=
orporations are running roughshod over working people. ''If they're smart, =
the Democrats' strategy should be to make Bush into another shifty-eyed J. =
R. Ewing,'' said Kevin Phillips, the political analyst who wrote ''The Poli=
tics of Rich and Poor.'' ''If they dig deep enough, they can strike gold: t=
hat this guy has been up to his neck in every facet of the oil business in =
Texas, and it often hasn't reflected well in his judgment.''=20
But turning Enron into a big-business-versus-the-little-people bonanza for =
the Democrats could be more knotty than it seems -- and not just because En=
ron spread its largess to Democrats as well.=20
For one thing, Democrats can no longer fully disassociate themselves from i=
ndustry. President Clinton courted big business -- and it was his White Hou=
se that presided over an era of prosperity for corporate America.=20
There is also a history of populist crusades falling flat. Most recently, v=
oters were not altogether convinced in the 2000 campaign when Mr. Gore ridi=
culed the Bush tax cut proposal as ''a form of class warfare on behalf of b=
illionaires.''=20
In the 1980's, the Democrats' drive to make villains of junk bond trading f=
irms backfired, as did President Harry S. Truman's brazen seizure of big st=
eel companies in 1952. ''Standing up for the little guy will always be part=
 of Democratic Party politics,'' said Senator Evan Bayh of Indiana, chairma=
n of the centrist Democratic Leadership Council. ''But we suffer from the s=
tereotype of resenting people who have been successful even if they have do=
ne nothing wrong. We don't want to play into that stereotype.''=20
There is no question that Enron can help Democrats stir up the party faithf=
ul, just like Whitewater galvanized hard-core conservatives. The question i=
s whether the Democrats can broaden the appeal of the issue.=20
To do so, they cannot merely repeat the party's mantra that Republicans fav=
or the rich, but would have to take the argument to the next step: not only=
 that Republicans are responding to corporate interests, but that they are =
doing so at the expense of ordinary citizens. Even some religious conservat=
ives have accused the administration of overlooking their interests in favo=
r of big business. Many were furious when, at the Republican Party's winter=
 meeting in Austin, Tex., this month, the party installed Lewis Eisenberg, =
an abortion rights activist who has contributed to Democrats, to head the p=
arty's drive to raise money. Mr. Eisenberg's appeal: he's close to business=
 and knows how to get big donations.=20
''It was a terrible appointment,'' said Gary Bauer, a conservative who ran =
for the Republican presidential nomination in 2000. ''Couldn't they find a =
chief fund-raiser who actually agreed with the party's platform?''=20
On the other side of the political spectrum, Mr. Hightower said it would no=
t be sufficient for Democrats to assure voters that ''we're on your side.''=
 He said the party needed to take its argument several steps forward. ''We =
need to wrap up not just the corruption of money in politics but the actual=
 damage to people and pensions and the disrespect for workers and the flim-=
flam of the new economy,'' he said.=20
Recognizing that such populist appeals could succeed, Mr. Bush, in a striki=
ng change of tone, said last week he was outraged by the conduct of Enron, =
and noted that his own mother-in-law had lost more than $8,000 in Enron sha=
res.=20
AS part of their offensive, Republicans are seeking to shift the spotlight =
to Democrats who took Enron donations, and they portray the Enron debacle a=
s a business scandal with no partisan bounds. In fact, White House official=
s are questioning why regulators in the Clinton administration did not pick=
 up on the transgressions at Enron.=20
Dismissing the Democrats as trying to politicize the Enron collapse, Dan Ba=
rtlett, the White House communications director, said, ''The American peopl=
e are savvy enough to understand the difference between political rhetoric =
and fact -- and the fact is that the administration did not make any attemp=
ts to help Enron.''=20
James Carville, the Democratic consultant, countered that the question is n=
ot whether the administration acted to save Enron. ''It's not what they did=
 when they went belly up,'' he said. ''It's what they did when Enron had mo=
ney.''=20
But, like many other Democrats, Mr. Carville is not free of Enron entanglem=
ents. He said he agreed to deliver a speech last October for the corporatio=
n for his usual big fee. The company went belly up, so he never could offer=
 his words of wisdom. But chances are, his remarks would not have been abou=
t corporate greed.

Photo: Tourists can still gather on the south side of the White House, but =
vehicles have been rerouted off E Street and concrete barriers have been in=
stalled. (Stephen Crowley/The New York Times)=20
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09

Business/Financial Desk; Section C
How a Top Medical Researcher Became Entangled With Enron
By JO THOMAS with REED ABELSON

01/28/2002
The New York Times
Page 1, Column 3
c. 2002 New York Times Company

HOUSTON, Jan. 26 -- Travelers at the airports here notice the children, fra=
il and bald, on their way to the University of Texas M. D. Anderson Cancer =
Center, but thousands more arrive unseen, by car. There were 20,000 new pat=
ients last year, including 500 children. Most were from Texas, but others c=
ame from across the nation and the world, hoping for a cure.=20
In the five years since Dr. John Mendelsohn, a respected cancer researcher,=
 became president of M. D. Anderson and began courting wealthy donors, poli=
ticians and volunteers, the cancer center's research budget has grown 71 pe=
rcent and the number of patients has increased by 49 percent. Prominent in =
both Houston and the medical community, he is well spoken, and persuasive, =
about the needs of M. D. Anderson and the promise of his own research. Last=
 fall, when former President George Bush, a longtime supporter, became chai=
rman of the board of visitors, the center raised $10.3 million in a single =
gala at Enron Field.
Now, at what should be the pinnacle of his career, Dr. Mendelsohn finds him=
self in the middle of accusations surrounding two controversial companies: =
Enron, whose collapse is the subject of intense scrutiny by Congress and re=
gulators, and ImClone Systems, a biotechnology company that is being accuse=
d of misleading investors about the possible approval of a drug that Dr. Me=
ndelsohn was instrumental in developing. Dr. Mendelsohn serves on the board=
s of both companies.=20
In an interview this week, Dr. Mendelsohn spoke of his involvement with bot=
h companies. Despite criticism about his ability to serve as a director, re=
presenting shareholders' interests, Dr. Mendelsohn defended his independenc=
e and integrity in his involvement with both companies.=20
While Dr. Mendelsohn's role at ImClone has received less scrutiny, his dire=
ctorship at Enron has been attacked as symbolic of the lack of independence=
 on the board.=20
Joining Enron's board in May 1999 and serving on the audit committee, Dr. M=
endelsohn had a pivotal role in overseeing the company's relationship with =
its auditor, Arthur Andersen, and the integrity of the company's financial =
statements.=20
In addition to questions about whether he had the expertise to serve on the=
 committee, there are concerns that, as a fellow member of the Houston elit=
e with Enron's chairman at the time, Kenneth L. Lay, he was reluctant to qu=
estion management and someone who appeared to be a fellow visionary. Mr. La=
y and his company were also generous contributors to M. D. Anderson.=20
''It's beyond clubiness,'' said Richard H. Koppes, a former shareholder act=
ivist who is now a lawyer at Jones, Day, Reavis & Pogue, noting that people=
 who see one another at social events are frequently unable to criticize ea=
ch other. ''These people are human,'' he said.=20
Dr. Mendelsohn brushed aside criticism that he was not independent because =
the cancer center had received donations from Enron. Officials at the cente=
r said it had received $92,508 from the Enron Foundation and the company si=
nce Dr. Mendelsohn joined Enron's board. Mr. Lay, who resigned on Wednesday=
 as Enron's chairman and chief executive, and the Linda and Ken Lay Family =
Foundation also gave M. D. Anderson $240,250 since Dr. Mendelsohn became pr=
esident.=20
''Some of the articles have made it sound like M. D. Anderson was very depe=
ndent on Enron philanthropy to do its work,'' Dr. Mendelsohn said. ''That's=
 far from the case. We've gotten more than that from other companies and pr=
ivate donors.''=20
He added: ''During that same period we've gotten pledges and gifts of more =
than $233 million. Every gift is important, but our operating budget is $1.=
4 billion.''=20
As the president of M. D. Anderson, Dr. Mendelsohn is the public face of th=
e institution and serves as its primary fund-raiser. This week, Dr. Mendels=
ohn said he spent a third of his time raising money to increase the cancer =
center's quality and size.=20
In his role, Dr. Mendelsohn developed close ties to former President George=
 Bush and his wife, Barbara, who lost a child to leukemia. They used their =
joint 75th birthday party in 1999 to raise $10.1 million for the cancer cen=
ter.=20
The Bushes also attended last November's benefit gala, joining 1,900 guests=
. A few weeks before that, George Mitchell, a Texas real estate and natural=
 gas magnate, and his wife, Cynthia, gave M. D. Anderson $20 million to hel=
p build a $174 million basic science research building.=20
And Dr. Mendelsohn has also played a prominent role in Washington, where he=
 has advised President Bush on issues like stem-cell research and the appoi=
ntment of Dr. Andrew C. von Eschenbach, the director of prostate cancer res=
earch at M. D. Anderson, as head of the National Cancer Institute.=20
At the time Mr. Lay named Dr. Mendelsohn to the Enron board, he praised him=
 as ''a visionary in the Houston medical community.'' Both men served on th=
e board of the Greater Houston Partnership. Last year, Dr. Mendelsohn appea=
red with Jeffrey K. Skilling, then chief executive of Enron, at a Houston p=
anel on the future of technology.=20
It seemed like a natural alliance, Dr. Mendelsohn said, because M. D. Ander=
son was ''an important contributor to the well-being of Houston'' and Enron=
 was one of the city's major companies. ''They invited me on the board to t=
ake advantage of certain experience I've had, and I was pleased to accept,'=
' he said.=20
He was soon active in many of the board's most controversial decisions -- t=
he approval in June and October 1999 of the partnerships with the company's=
 chief financial officer at the time, Andrew S. Fastow, and the decision to=
 suspend the company's own code of ethics so Mr. Fastow could serve as the =
general partner of the partnerships. As a member of the audit committee, Dr=
. Mendelsohn was also responsible for reviewing the transactions between th=
e partnerships and Enron in February 2000 and February 2001.=20
''I can't get into details about Enron, because there are a lot of matters =
under investigation,'' he said.=20
But Dr. Mendelsohn has been criticized for not having the appropriate finan=
cial background to serve on Enron's board, especially its audit committee. =
Patrick McGurn, a vice president at Institutional Shareholder Services, whi=
ch advises large investors on corporate governance, said that, when it come=
s to business, there were limits on the capabilities of even the smartest d=
octor. ''At a certain point in time, you are a doctor, and that's your trai=
ning,'' he said. ''You're probably a businessman secondarily.''=20
As head of M. D. Anderson, Dr. Mendelsohn said he was well qualified to be =
an Enron director: ''I am the head of a large organization with a large bud=
get and have had to deal with budget and growth issues. I've relied on supe=
rb business people to work with me. I haven't arranged complicated derivati=
ve deals, but I have been involved in management and growth.''=20
Dr. Mendelsohn has not been the only beneficiary of Enron at M. D. Anderson=
, but he is the most visible. His predecessor, Dr. Charles A. LeMaistre, 77=
, who was president of the cancer center for 18 years, is also an Enron dir=
ector. In 1993, the Enron Foundation pledged $1.5 million to a building cam=
paign, and the Enron Corporation Cancer Screening/Early Detection Clinic wa=
s named in honor of Dr. LeMaistre. So far, officials said, the Enron Founda=
tion has paid $900,000 of what it promised.=20
At ImClone, where he has been a director since 1998, Dr. Mendelsohn's prese=
nce has added to the company's credibility. Within medical circles, he is h=
eld in high regard. ''He is an eminent researcher and has a reputation of b=
eing an excellent leader and administrator,'' said Diana Petitti, vice chai=
rwoman of the National Cancer Policy Board, where Dr. Mendelsohn is also a =
member.=20
Much of the company's promise has to do with the potential of what could be=
 a revolutionary cancer treatment, C-225, the experimental drug whose devel=
opment Dr. Mendelsohn pioneered. ImClone's stock price took off when the dr=
ug seemed to work in clinical trials. The decision, in September, by Bristo=
l-Myers Squibb to pay as much as $2 billion for a 20 percent stake in ImClo=
ne and rights to the drug, named Erbitux, seemed to confirm that optimism.=
=20
In late December, the stock, which had peaked earlier in the month at $75.4=
5, plunged after ImClone announced that the Food and Drug Administration ha=
d refused to even consider the company's application for permission to mark=
et the drug. Although company executives contended that the agency's only r=
eal concern was a lack of certain documentation, The Cancer Letter, a newsl=
etter in Washington, obtained a copy of the F.D.A.'s letter to ImClone and =
reported that the agency's concerns had been more extensive, even as ImClon=
e continued to assure people it was in sync with the agency. On Jan. 18, Co=
ngress announced an investigation.=20
The shares, which had recovered somewhat, fell 16 percent on Friday, to $16=
.49, after the company said it had received inquiries from both the Justice=
 Department and the Securities and Exchange Commission.=20
Dr. Mendelsohn was among the shareholders who had cashed out a portion of t=
heir stock when Bristol bought its stake. Dr. Mendelsohn said he was told a=
t a board meeting to sell 20 percent of his stock, the percentage Bristol w=
as buying. He exercised options on 90,226 shares and received $6.3 million =
of the $149.7 million the original stockholders received from Bristol, all =
of whom had the option to sell some of their stock at $70 a share. His busi=
ness partners, who had borrowed to invest even more heavily in ImClone, rec=
eived the lion's share.=20
As a scientific adviser to ImClone, Dr. Mendelsohn's role in promoting ImCl=
one and the drug is unclear. Although his involvement added credibility in =
the early years, according to Jason Kantor, an analyst with J. P. Morgan, t=
he participation of Dr. Leonard B. Saltz in the clinical trials at the Memo=
rial Sloan-Kettering Cancer Center in Manhattan had more weight in persuadi=
ng people the drug might be effective.=20
Dr. Mendelsohn denied he was overly enthusiastic about the drug's promise. =
''Personally, I've never done anything but describe the merits of the antib=
ody and its results,'' he said. ''I've given lots of lectures. I stressed, =
and it's in print, that this is an experiment.''=20
''I get a lot of calls from people asking me, 'Should I invest? Should I in=
vest?' '' he continued. ''I always say it's an experiment. It's well along,=
 but until we prove to the F.D.A. that this is a satisfactory anticancer ag=
ent, it's an experiment.''=20
Dr. Mendelsohn said he had been careful to avoid any conflict of interest w=
ith ImClone. ''I give a lot of speeches,'' he said, ''and I always state th=
at I am on the board of ImClone and I own stock in the company. I always sa=
y this.'' He said he always took note of these connections in his publicati=
ons about the drug. He takes no money from the corporation for his own rese=
arch, and he does not prescribe C-225 to his own patients.=20
But Dr. Mendelsohn is a paid consultant to ImClone, creating what corporate=
 governance experts view as another threat to his ability to serve as an in=
dependent director. Last year, he was paid $12,000 for his work as a scient=
ific adviser, he said, more than the $10,000 he received as a director. He =
also received 30,000 stock options, which are not vested.=20
And Dr. Mendelsohn serves as an adviser to other companies, including Brist=
ol-Myers and assorted biotechnology concerns.=20
Although Dr. Mendelsohn does not serve on the boards of any other companies=
, he is on the board of a new venture capital fund, the Scientia Health Gro=
up, which plans to invest in health-related ideas and involves ImClone's ma=
nagement. ''I have only a modest knowledge'' of the fund, he said, noting i=
t had only one meeting.''=20
Dr. Mendelsohn acknowledged that the role of a director is much less appeal=
ing these days. His directorships at Enron and ImClone are taking so much o=
f his time, he said, ''I'm probably not going to be on any other board.''

Photo: Dr. John Mendelsohn, president of the University of Texas M. D. Ande=
rson Cancer Center in Houston. Dr. Mendelsohn is on the boards of Enron and=
 ImClone Systems. (F. Carter Smith for The New York Times) Chart: ''Dr. Joh=
n Mendelsohn'' BORN -- Aug. 31, 1936, Cincinnati. HOMETOWN -- Houston. EDUC=
ATION -- B.S. in bio-chemical sciences, Harvard University, 1958; Fulbright=
 scholar; M.D. from Harvard Medical School, 1963. CAREER HIGHLIGHTS 1970-19=
85 -- University of California San Diego Medical School faculty; became dir=
ector of school's cancer center in 1976. 1985-1996 -- Chairman of departmen=
t of medicine, Memorial Sloan-Kettering Cancer Center. 1996-present -- Pres=
ident of University of Texas M.D. Anderson Cancer Center. FAMILY -- Anne, w=
ife; 3 sons. BOARD MEMBERSHIPS -- Enron; ImClone Systems (pg. C2)=20
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09

Business/Financial Desk; Section C
Patents
While Enron's future is uncertain, its trademarked name could live on for a=
 decade.
By Sabra Chartrand

01/28/2002
The New York Times
Page 9, Column 1
c. 2002 New York Times Company

ENRON'S future as a business enterprise is uncertain, but its name could li=
ve on for 10 years -- as a trademark, at least.=20
Enron moved a step closer to winning a trademark for its tilted ''E'' logo =
last week when the United States Office of Patents and Trademarks published=
 the company's application in the office's Official Gazette. Such publicati=
on is a routine part of the process, providing notification of pending trad=
emarks and giving the public a chance to oppose them if a case can be made.
Trademarks are valid for 10 years, and can be renewed for 10-year periods t=
hereafter. Five years after a trademark is granted, however, the owner must=
 file an affidavit stating that the trademark is in use. So if Enron dissol=
ved completely, it would be difficult for the company to maintain its trade=
marks or win renewals.=20
In the application published last week the company requested a trademark on=
 the stylized ''E'' in June, specifying that ''the word 'Enron' and the low=
er element of the letter 'E' are blue, the middle element of the letter 'E'=
 is green, and the top element of the letter 'E' is red.''=20
Despite the company's having filed for bankruptcy in early December, Enron =
has so many pending trademark applications that the trademark office contin=
ued throughout December and January to churn out requests for further infor=
mation, amendments and publication notices. On Jan. 15, the agency awarded =
a trademark to Enron for ''E Enron, Enron Field,'' a logo that refers to th=
e Houston sports stadium and is intended to cover ''information relating to=
 sporting events and related activities by means of a global computer netwo=
rk.''=20
Some of Enron's trademarks and pending trademarks appear to be better candi=
dates for selling or transferring to another company than others. Ten days =
after Enron declared bankruptcy, its application for a trademark on the ter=
m ''Espeak'' was approved and another for ''Ethink'' passed a final review.=
 A third, for ''Emeet'' was being opposed. All the trademarks were intended=
 to cover ''an employee communication program via transmission of messages =
among computer users, namely, an online electronic forum for knowledge shar=
ing, idea generation, creative problem solving and collaboration.'' Theoret=
ically, any number of companies might be interested in taking them off Enro=
n's hands.=20
But for the moment, Enron has no plans to abandon its trademarks or pending=
 applications.=20
''I know that for now, such rights are being maintained,'' said Scott Brown=
, a Houston lawyer who handles Enron's trademark applications. ''One thing =
we're doing on the trademark side is making sure we don't lose any marks du=
ring the bankruptcy period,'' Mr. Brown said. ''I think the bankruptcy cour=
t would govern any continuing work on behalf of Enron.''=20
That might include processing applications for a number of advertising slog=
ans, like ''One Stop Energy Shop'' and ''Puts the Energy into E-Commerce.''=
 Enron has also asked for trademarks on catch phrases like ''Investing Our =
Energy in Your Business'' and ''Click on Your Power'' for its energy manage=
ment services. Some slogans -- like ''Enron Earth Smart Wind,'' for electri=
cal power distribution -- might seem to make sense only to the people who d=
reamed them up.=20
Other pending trademarks include ''Enron Etelligence,'' ''Enron Envest'' an=
d ''Enron Enpower'' -- all intended to promote Enron's ''financial risk man=
agement for energy related facilities.''=20
Investors hoping to recoup money from any of Enron's remaining assets proba=
bly should not look to the company's patent portfolio.=20
When Enron declared bankruptcy, it held 20 patents that had been assigned t=
o it by various inventors. Much of the value is tied to the shelf life of t=
hose patents, and most were issued in the 1980's -- meaning they are due to=
 expire in the next few years. The first to lapse will be patent 4,629,657 =
for a ''biaxially oriented polypropylene film construction for special lami=
nation,'' which was granted in 1986 and will expire in 2004.=20
Seventeen of the patents were issued between 1986 and 1990, and several of =
those were assigned to the Enron Chemical Company and the Enron LNG Develop=
ment Corporation. The Enron Corporation was formed in 1985 with the merger =
of Houston Natural Gas and an Omaha company called InterNorth. The two earl=
ier companies won 26 patents between 1976 and 1985, and Enron may have inhe=
rited some or all of those. But since they were granted 17-year terms, the =
last will expire this year.=20
Many companies count patents as intangible assets, which generate income th=
rough licensing fees and royalties. The value, of course, derives from the =
fact that a patent grants exclusive rights to the holder for 17 to 20 years=
, depending on when it was issued. Most of Enron's patents are unlikely to =
have much appeal to competitors or clients because they are already too old=
 to offer long-term exclusivity. And it is possible that many of them will =
expire before all the legal proceedings around Enron come to an end.=20
The value of the Enron patents is also limited by the fact that they do not=
 cover universal technologies. The two dozen inventors working on behalf of=
 Enron conducted research in very specific areas. Only certain investors or=
 licensees would probably be interested in a ''ship-based system for compre=
ssed natural gas transport'' (patent 5,803,005), a ''direct fuel-fired furn=
ace arrangement for the recovery of gallium and germanium from coal fly ash=
'' (patent 4,643,110) or a ''method of forming a press-fitted pipe joint'' =
(patent 4,769,897).

Photo=20
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09

National Desk; Section 1
ENRON'S MANY STRANDS: THE WEEK THAT WAS
A Suicide and a Resignation as the Formal Inquiries Get Under Way
By TOM REDBURN

01/27/2002
The New York Times
Page 32, Column 1
c. 2002 New York Times Company

Until Friday, the Enron affair seemed to be a scandal focused on lost money=
, tainted politics and misleading accounting. But then it turned tragic.=20
At the end of a week of high drama in Houston and Washington, J. Clifford B=
axter, a former Enron vice chairman, was found dead in his locked car not f=
ar from his home in a Houston suburb. It was ruled a suicide.
Friends and associates said that Mr. Baxter, who left the company in May, h=
ad clashed last spring with Jeffrey K. Skilling, who was Enron's chief exec=
utive at the time.=20
Mr. Baxter had ''complained mightily'' about the ''inappropriateness'' of E=
nron's financial practices, according to Sherron S. Watkins, the whistleblo=
wer whose August letter to Kenneth L. Lay, the Enron chairman, outlining th=
e accounting practices that ultimately brought down the company surfaced ea=
rlier this month.=20
Mr. Baxter was said by friends to be distraught in recent days over his ina=
bility to end the abuses that led to the collapse of the company.=20
''It makes it real,'' a neighbor of Mr. Baxter said -- ''it'' being the Enr=
on scandal, no longer esoteric.=20
THE CHAIRMAN QUITS -- Under pressure from creditors, Mr. Lay ended his long=
 tenure as leader of the company he created and began his new career as a d=
efendant in lawsuits, a witness before Congressional committees and a poten=
tial target of criminal investigations.=20
The questions about Enron's partnerships and accounting practices confronti=
ng Mr. Lay, who is scheduled to testify before Congress on Feb. 4, hark bac=
k to the classic Watergate query: What did he know, and when did he know it=
? In Houston, the further question on the minds of Enron workers, and forme=
r workers, is: Why did he continue to encourage employees to buy Enron stoc=
k after he knew that doubts had been raised about the company's books?=20
Mr. Lay, who used to trade birthday cards with President Bush, won't be vis=
iting his old friend at the White House. The president, traveling in West V=
irginia, told reporters that he was outraged that Enron executives misled t=
heir employees and investors -- including his mother-in-law, who lost $8,09=
6, the White House said.=20
Just before Mr. Lay resigned, a former Enron employee, Maureen Castaneda, r=
evealed that people working in the accounting unit had been shredding Enron=
 documents for weeks.=20
CONGRESSIONAL INQUIRIES BEGIN -- Two panels of lawmakers held the first of =
what are expected to be many hearings by the 11 subcommittees looking into =
Enron's failure and its implications.=20
A House subcommittee released evidence suggesting that scores of people wer=
e involved in the destruction of documents at the Houston office of Enron's=
 auditor, Arthur Andersen. Andersen officials continued to say the primary =
blame for the shredding belonged to David B. Duncan, the partner responsibl=
e for the Enron account. Lawmakers were skeptical of that account, but Mr. =
Duncan declined to testify, invoking his Fifth Amendment right against self=
-incrimination. Lawmakers are expected to ask questions about document dest=
ruction at Enron during hearings in early February.=20
CAMPAIGN FINANCE REFORM ADVANCES -- The quest to ban the unlimited contribu=
tions to the political parties known as soft money was revived last week by=
 Enron's collapse and the tales of how it spread nearly $6 million in campa=
ign donations across Washington since 1989. More than half of the contribut=
ions were soft money.=20
Advocates of overhauling the nation's campaign finance laws gained enough s=
upport to force a House vote on legislation that would make the most wide-r=
anging change in the law since the Watergate era. The insurgents made their=
 move, a defeat for the House Republican leadership, on the second day of t=
he new Congressional session, collecting the final signatures needed on a p=
etition to send the bill to the floor.=20
For all the expressions of outrage on Capitol Hill at last week's hearings,=
 critics argued that Congress shared responsibility for Enron's demise. Of =
the 248 senators and members of Congress serving on the investigating commi=
ttees, 212 have received campaign contributions from Enron or Arthur Anders=
en. In recent weeks, many politicians have scrambled to erase any financial=
 connections to Enron. They have donated the company's contributions to cha=
ritable causes or to a fund established to assist former Enron employees.=
=20
CONNECTIONS TO BUSH OFFICIALS -- Former Enron employees said that they had =
warned senior executives of evidence that a major division of the company h=
ad overstated its profits by hundreds of millions of dollars. For three yea=
rs, the division's No. 2 executive was Thomas E. White, who left Enron last=
 June to become Secretary of the Army.=20
Mr. White, who owned more Enron stock than any other senior official joinin=
g the Bush administration, disclosed that he held between $25 million and $=
50 million in Enron stock and a like amount in stock options when he joined=
 the administration. Mr. White, who also said he had had 30 ''personal'' co=
ntacts with Enron employees since last June, sold the shares over an extend=
ed period of time under a government ethics agreement.=20
Associates of Karl Rove, President Bush's top political adviser, revealed t=
hat Mr. Rove had recommended the Republican strategist Ralph Reed to Enron =
for a lucrative consulting contract as Mr. Bush was weighing whether to run=
 for president. The move was intended to keep Mr. Reed loyal to the Bush ca=
mpaign, they said, without putting him on the Bush payroll. Both Mr. Reed a=
nd Mr. Rove said the Enron contract had nothing to do with the Bush campaig=
n.=20
WALL STREET'S SKINNY -- Confidential partnership records showed that Enron =
executives wore two hats, offering Wall Street deal makers, banks, insuranc=
e companies, and wealthy investors detailed information about Enron's inner=
 workings and off-the-books holdings that was denied to company shareholder=
s. With the information, Enron enticed the investors to pour cash into one =
of the partnerships that helped wreck the company by dangling the prospect =
that they could double their money in less than a year.=20
Finance experts called the deal shocking, but probably legal, and said it d=
emonstrated the unintended consequences of securities laws meant to level t=
he market playing field, rather than tilt it toward privileged investors. T=
OM REDBURN

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09

Police Probe Ex-Enron Executive's Death --- Baxter, an Apparent Suicide, Wo=
rked to Sell Assets Of Energy-Trading Firm
By Wall Street Journal staff reporters Rebecca Smith, Alexei Barrionuevo an=
d Tom Hamburger

01/28/2002
The Wall Street Journal
A3
(Copyright (c) 2002, Dow Jones & Company, Inc.)

The former Enron Corp. executive who was found dead Friday had been engaged=
 in the difficult task of trying to sell off assets as the company's financ=
es started to take a turn for the worse.=20
Police investigators in Sugar Land, Texas, said they are continuing their i=
nvestigation into the death of former Enron Vice Chairman J. Clifford Baxte=
r, who quit the company in May before a string of negative events became pu=
blic and propelled the Houston energy company into U.S. bankruptcy court la=
st month.
Mr. Baxter was found at 2:23 a.m. Friday morning in his 2002 black Mercedes=
 Benz with a gunshot wound to the head. The car, which police said containe=
d a handgun, was parked in a median about a mile from Mr. Baxter's newly bu=
ilt home that he shared with his wife and two children in the affluent plan=
ned community of Sugar Land, about 30 miles southwest of Houston.=20
Police quickly put out a press release with the headline "Suicide," only la=
ter in the day changing it to read "Death Investigation." Following an auto=
psy, the Harris County Medical Examiner's office said Mr. Baxter's death wa=
s consistent with a suicide. But police spokeswoman Pat Whitty said yesterd=
ay that "in spite of the fact the medical examiner believes it's a suicide,=
 we're still processing the car, gun, hair and fibers . . . to ensure it wa=
s a suicide." Authorities haven't released the note.=20
Those who knew Mr. Baxter, who was 43 years old, expressed shock and disbel=
ief that he should have taken his own life. A former U.S. Air Force captain=
 and investment banker, Mr. Baxter joined Enron in 1991 and quickly became =
a leading dealmaker for the company, according to one person who worked clo=
sely with him. When Enron later became burdened with poorly performing asse=
ts, he was charged with helping dispose of assets, particularly ones overse=
as.=20
In that latter role, Mr. Baxter would have been privy to a wealth of inform=
ation on Enron's hundreds of partnerships and special entities, through whi=
ch the company pumped up profits and kept debt off its balance sheet. Peopl=
e close to the matter say Mr. Baxter found it difficult to sell many of the=
se assets and was bothered by the fact so many were worth less than their b=
ook value.=20
Some of the partnerships that apparently came to his attention were ones in=
 which other senior officers may have had an ownership interest. Federal in=
vestigators are looking into arrangements that involved Enron's former chie=
f financial officer, Andrew Fastow, and possibly others, including the form=
er corporate treasurer, Ben Glisan.=20
Those who knew Mr. Baxter say he regarded himself as the "integrity guy" at=
 Enron. His name appears in a memo written to former Enron Chairman Kenneth=
 Lay in August by whistle-blower Sherron Watkins warning about a potential =
conflict-of-interest disaster that could be awaiting the company because of=
 the partnerships. Ms. Watkins said Mr. Baxter complained "to all who would=
 listen."=20
Like others at Enron, Mr. Baxter was being sought by federal investigators =
who are trying to unravel Enron's complex financial arrangements. Mr. Baxte=
r had been given legal representation, paid for by Enron, through the law f=
irm of Swidler Berlin Shereff Friedman.=20
Mr. Baxter's attorney, Michael Levy, also is representing Enron's chief acc=
ounting officer, Rick Causey. Mr. Levy declined to discuss the case but ins=
tead criticized reporters and politicians for sullying Enron's name. He sai=
d the case "can only truly be understood after months of careful and delibe=
rative investigation. Putting this kind of media spotlight on the topic doe=
sn't help answer those questions any faster."=20
On Wednesday, Mr. Levy was contacted by investigators from the House Energy=
 and Commerce Committee who requested an interview with Mr. Baxter. However=
, no interview date had been set. Earlier this month, Mr. Baxter also recei=
ved a subpoena for Enron-related documents from a Senate Government Affairs=
 subcommittee. It is unclear which, if any, documents he may have turned ov=
er to the panel.=20
Just what Mr. Baxter's mental state was prior to his death is uncertain. Pe=
ople who knew him said he continued to work out and spent time on his 72-fo=
ot Viking yacht, the Tranquility. He continued to do community work, notabl=
y for Junior Achievement.=20
Yet one friend said Mr. Baxter obviously was shaken by what happened at Enr=
on, a company he felt he had helped build. "It wasn't unusual for Cliff to =
be dramatically affected by things," this person said. "That was just his w=
ay. He would obsess over details. That's why he was such a good investment =
banker.=20
"He was trying to get some distance from the situation," this person added,=
 "but his personality wouldn't let him."=20
Mr. Baxter was seen as particularly close with former Enron Chief Executive=
 Jeffrey Skilling, who plucked the one-time PaineWebber dealmaker out of En=
ron's Washington, D.C., office where he worked for the natural-gas side of =
the company. Mr. Skilling, impressed by Mr. Baxter's talent as a negotiator=
, brought him to Enron's Capital and Trade Resources unit -- the engine of =
the company's go-go growth during the 1990s.=20
Mr. Baxter left Enron to work at Koch Industries, a conglomerate with a hea=
vy interest in energy, in 1995 for less than three months in the company's =
equities group, which was based in Wichita, Kan. But he returned to Enron a=
nd in 1998 was instrumental in the purchase of Portland General Electric, a=
n Oregon utility. This was supposed to have been Enron's springboard into t=
he Western power market, especially California, which had just been deregul=
ated. But the plan never panned out, and Mr. Baxter soon found himself look=
ing for a buyer for Portland General.=20
On Friday, four policemen stood guard on the steps of Mr. Baxter's red bric=
k house in Sugar Land, a town named for the cane fields it once contained. =
They turned away reporters seeking comment from Mrs. Baxter and family frie=
nds on hand.=20
Neighbors said the Baxters kept pretty much to themselves and often were aw=
ay.=20
Mr. Baxter spent most weekends on his motorboat and one neighbor said the f=
amily spent most of last summer cruising the Caribbean, arriving back home =
just a few days before school started for Mr. Baxter's fifth-grade daughter=
 and high-school-aged son. "When he retired, we figured we would see a lot =
more of him," said Tom Swonke, a next-door neighbor. "But we didn't."=20
After the scandal broke, one Enron official pointed out, Mr. Baxter would s=
ometimes chat with Mr. Skilling and others he had worked with, and they buo=
yed each other's spirits. But those conversations evidently became less fre=
quent when attorneys advised senior Enron executives facing potential class=
-action lawsuits and criminal inquiries that they shouldn't be in contact a=
ny longer.=20
One person who was close with Mr. Baxter at Enron noted he had seemed "in p=
retty good shape the last time I talked to him," a few days before his deat=
h. Still, this person said, Mr. Baxter had lamented of late: "This is all g=
oing to have a really bad ending."=20
---=20
John R. Emshwiller and Thaddeus Herrick contributed to this article.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09

National Desk; Section 1
ENRON'S MANY STRANDS: THE SUICIDE
Despite His Qualms, Scandal Engulfed Executive
By JIM YARDLEY and SHAILA K. DEWAN

01/27/2002
The New York Times
Page 33, Column 1
c. 2002 New York Times Company

HOUSTON, Jan. 26 -- Cliff Baxter was supposed to be on a boat right now, fl=
oating on some endless expanse of blue water beneath endless blue skies. Th=
at was the party line when he left Enron last May as vice chairman, and if =
former colleagues now say it was never that simple, they nonetheless expect=
ed him to be living the good life.=20
The son of a police sergeant, Mr. Baxter was getting out of Enron as a rich=
 man at a time when his vision for the company apparently clashed with thos=
e of many of its top executives. He had helped create the company's centerp=
iece business, its energy trading operations, and had risen to vice chairma=
n, a grand title for a man from ordinary beginnings.
He had a loving wife and two children and a big new house in an exclusive s=
uburb. He could afford to do anything, or nothing at all.=20
But if Mr. Baxter left Enron months before trouble engulfed the company, th=
ose troubles seemed to be engulfing him when he was found dead early Friday=
 morning, shot once in the head. An autopsy was completed on Friday, and th=
e death has been ruled a suicide, a representative of the Harris County Med=
ical Examiner's Office said today.=20
Mr. Baxter had been subpoenaed by Congress to testify about Enron, and inve=
stigators hoped he would be a helpful witness against his former peers sinc=
e his name had surfaced as someone who had complained ''mightily'' about th=
e financial partnerships now at the center of the company's collapse. He ha=
d also been named as a defendant in a shareholder lawsuit.=20
His anguish became evident to those who bumped into him in recent weeks. Pe=
ople who saw him at the Houston Yacht Club, where until recently Mr. Baxter=
 kept a boat, Tranquility Base, noticed that his salt-and-pepper hair had t=
urned mostly white between December and January, said the club's president,=
 Chuck Buckner.=20
''Cliff was a guy who clearly seemed to be very concerned that people would=
 think ill of him whether he'd done anything wrong or not,'' said Mr. Buckn=
er, a partner with Ernst & Young. At the club's Christmas party in December=
, Mr. Buckner said, he and Mr. Baxter spoke only in general terms about Enr=
on.=20
''I thought he was a man who'd got out on time, but a man who'd be concerne=
d about what happened to the company,'' Mr. Buckner said. ''He worked reall=
y hard. This was the son of a policeman. This wasn't a rich kid.''=20
The mail carrier in the neighborhood, Veronica DeLaCruz, said that Mr. Baxt=
er's mail had been full of certified letters from law firms in Houston and =
elsewhere in recent months, and that his wife regularly signed for them. Bu=
t in recent weeks, as the certified letters kept coming, no one came to the=
 door to sign.=20
''They were very, very to themselves,'' said a next-door neighbor who spoke=
 on the condition of anonymity. ''They spent most of their time on their ya=
cht.''=20
Police investigators in Sugar Land, the affluent Houston suburb where Mr. B=
axter's body was discovered inside his parked Mercedes-Benz, have refused t=
o reveal the contents of a suicide note he left behind, but CNBC has report=
ed that Mr. Baxter wrote that he was distraught over Enron's disintegration=
 and the prospect of having to testify against friends there.=20
His reputation among friends and colleagues was of a man of high integrity =
who could be an intimidating negotiator, sometimes arrogant and brash in a =
typically Enron mold. He liked expensive cars and motorcycles, and one form=
er colleague, Michael P. Moran, recalled seeing a Ferrari, a Lexus, an S.U.=
V. and more in his parking spot.=20
''He was really pretty typical of what the Enron culture was, although he w=
as a very principled individual,'' said Mr. Moran, a retired general counse=
l of Enron's natural gas pipeline group who is now serving on the creditors=
' committee overseeing the bankruptcy.=20
Mr. Moran said he was shocked by Mr. Baxter's death because he had had neit=
her financial problems nor a major hand in the company's decline. But, he s=
aid, Mr. Baxter had always been concerned about the fate of workers when he=
 was buying or selling companies.=20
''The thought has crossed my mind,'' Mr. Moran said, that the suicide came =
because ''he was so disturbed by all the things that were going on.''=20
Before he left Enron, Mr. Baxter, like many of the company's executives, wa=
s active in charity work, particularly for Junior Achievement of Southeast =
Texas. Jerry V. Mutchler, the group's president, described him as ''very gr=
egarious, a very big thinker and one of those people who thought you should=
 give back.''=20
Mr. Mutchler said Mr. Baxter had raised hundreds of thousands of dollars fo=
r the group because he wanted to help make certain young people ''understoo=
d the values of the free enterprise system.''=20
Doug Leach, a vice president of Enron Global Markets, said one of Mr. Baxte=
r's fund-raisers for Junior Achievement was called Birdies for Charity. A p=
utting green was set up in the Enron lobby for employees who passed by. ''T=
hey would pay to make a putt, and Enron would match the funds,'' Mr. Leach =
said. ''He held his own as a putter. He had fun, he got into it.=20
''That's the part of Cliff I got to know, and that's why this is so sad.''=
=20
Mr. Baxter grew up in working-class Amityville, N.Y., on the south shore of=
 Long Island, one of six children of a father who was a local police sergea=
nt and a mother who worked for the Town of Babylon. He graduated with honor=
s from New York University, became a captain in the Air Force and earned a =
master's degree in business at Columbia University.=20
Arriving at Columbia Business School as a married father recently discharge=
d from the Air Force, Mr. Baxter did not fit the typical profile of an inco=
ming student.=20
Dan Nagao recalled that Mr. Baxter had approached him in an accounting clas=
s after noticing in the student directory that Mr. Nagao, too, had served i=
n the military. They became friends, Mr. Nagao said, and he recalled that M=
r. Baxter had joined a rock band as a guitarist, hustled fellow students in=
 pool and joined investment and entrepreneurial clubs on campus.=20
For years, Mr. Baxter and Mr. Nagao stayed in touch, talking, exchanging e-=
mail messages, swapping Christmas cards. Mr. Baxter talked about his two ch=
ildren and his wife, Carol, whom he had met while in the Air Force, but rar=
ely about his job. Only last year, after Mr. Nagao asked Mr. Baxter what he=
 did for Enron, did Mr. Baxter state, almost sheepishly, that he was the co=
mpany's vice chairman.=20
This year, though, Mr. Nagao said the usual Christmas card with the long, h=
andwritten note and the photo of his family did not arrive from Mr. Baxter.=
 ''It was something simple, but I remember mentioning to my wife that it wa=
s odd,'' said Mr. Nagao, who runs a human resources consulting company in P=
alo Alto, Calif.=20
''I thought, maybe he's busy, maybe he's traveling. I was thinking of calli=
ng him, and just asking him, 'Hey, is everything O.K.?' I regret not doing =
that now.''=20
When Mr. Nagao learned of his friend's death on Friday, he was shocked. ''I=
 don't know what happened, and I would hate to even guess,'' he said. ''We =
thought that Cliff would survive anything.''

Photo: A visitor arrived at the Sugar Land, Tex., home of the former Enron =
vice chairman J. Clifford Baxter, who committed suicide early Friday. (F. C=
arter Smith for The New York Times)=20
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09

Sports Desk; Section 8
Sports of The Times
The Astros Should Give Some of the Money Back
By GEORGE VECSEY

01/27/2002
The New York Times
Page 6, Column 1
c. 2002 New York Times Company

ANY day now, the geniuses who run baseball are going to accept the court ru=
ling that they cannot whack the Minnesota Twins this year.=20
''Never mind our whining about bad teams, shaky finances, unstable future,'=
' they will instruct their staffs. ''Go out and hustle those season tickets=
.''
Selling baseball is going to be a trifle hard in Houston, since folks do no=
t have as much money as they thought they did. Thousands of people have los=
t salaries, stock value and pensions because of the friendly folks from Enr=
on.=20
And anybody who can scrape together a few dollars for a ticket to an Astros=
 game must contemplate walking into Enron Field, named for a company synony=
mous with pumped-up stocks and the shredding of documents.=20
Who wants to go to a ballpark with a name that stinks?=20
Baseball, ostensibly the American pastime, the last bastion of the cheap se=
at, the place where people can go and boo, is now stuck with a name that re=
presents the dangerous friendship between rapacious business and complaisan=
t government.=20
Give it back. That was my first thought when I realized Enron had paid $100=
 million for 30 years to flash its name in lights across the new downtown b=
aseball palace.=20
Most emphatically, the Astros should not cut a check directly to Kenneth L.=
 Lay, Enron's resigned chairman and chief executive. Instead, the club shou=
ld put the money into an account for all the people whose life savings went=
 down the drain after the big people sold their stock and got out, leaving =
the little people once again to hold the bag.=20
The account might provide only quarters per family, but it would be a gestu=
re. At the least, the Astros would not be keeping money that had been spent=
 to glorify Kenneth L. Lay and his house of cards.=20
It's blood money, really.=20
Unfortunately, when I raised the question of giving back the money and the =
name, the Astros said they could not.=20
''We don't have any options,'' said Pam Gardner, the team's president of bu=
siness operations. ''We honor contracts. When you deal with bankruptcy cour=
ts, it's difficult.''=20
According to Gardner, Enron is ''current on payments'' to the club, but she=
 said, ''We're watching the situation carefully.''=20
Apparently, the naming rights to the ballpark can be considered an asset in=
 bankruptcy procedures. Anybody foolish enough to take over the hollow shel=
l of an energy company, even on a penny-for-dollars basis, might be able to=
 stick its own corporate logo on the ball park.=20
Repo Stadium, sponsored by your friendly local repossession agents. That ha=
s a certain ring to it.=20
In the meantime, families and charities, and hospitals and the arts are hur=
ting because they trusted this company that blustered about its smarts and =
hinted broadly at close ties to power.=20
''This is a very sad time in Houston,'' Gardner said. ''This has been devas=
tating to the community.''=20
What stops the management of the Astros from deciding it does not want to b=
e linked to this Enron fiasco? Lawyers, Gardner said.=20
There is no clause in the contract allowing the team to lop off the name in=
 case of adverse publicity and failure to say nothing of the blatant possib=
ility of bad faith.=20
''We do not have that unilateral ability,'' Gardner said.=20
How smart could the Astros' lawyers be? Enron is hardly the first company t=
o go down after making a grandiose commitment to naming rights. There is a =
long list of airlines, 90-day dot-com wonders, banks and other companies th=
at put their names in lights and then tapped out, leaving behind irrelevant=
 logos on downtown skylines. It's an epidemic.=20
These failures ought to be a warning about the risks of increasing synergy =
among major companies. Take money from an energy company and take the chanc=
e of becoming a joke. Buy into a baseball team and suddenly you're a lodge =
brother to Carl Pohlad and Bud Selig and other owners who perform favors fo=
r each other and do not seem to comprehend the meaning of the phrase confli=
ct of interest.=20
Come to think of it, having a naming-rights nightmare in Houston just might=
 fit into the grand poor-mouth strategy of Commissioner Selig and his merry=
 band: ''See, we told you so. Baseball really is in a terrible way.''=20
Maybe the Astros' owners are legally stuck with the name while Congress and=
 the courts and maybe even the feds look into the scandal. But I propose a =
course of passive resistance.=20
The Astros should eliminate the copious use of that disgraced name all over=
 its promotions and brochures. Order new cocktail napkins with no Enron Fie=
ld on them. Tell the public-address announcer to never utter that name agai=
n. Play hardball. Do the bare minimum. Don't insult people who were impover=
ished by flim-flam executives and their docile accountants.=20
Come to think of it: if an energy company can fail, so can electricity itse=
lf. The Enron signs should develop a serious short circuit. What's Enron go=
ing to do, sue? Any lawyers they can afford are surely busy on more importa=
nt fronts.=20
The Astros may not be able to dismantle the sign just yet, but at least the=
 club should cut the power on a shameful name. And when the time comes, the=
 club should donate some money to people who were harmed by Enron.

Photo: The naming rights to the Astros' stadium, for which Enron paid $100 =
million for 30 years, could be an asset in bankruptcy court. (F. Carter Smi=
th for The New York Times)=20
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09

Editorial Desk; Section 4
Planet Of the Privileged
By MAUREEN DOWD

01/27/2002
The New York Times
Page 13, Column 5
c. 2002 New York Times Company

Oh, the pull of Planet Enron.=20
The atmosphere there was so rarefied that its inhabitants were blissfully o=
blivious to how privileged they were.
It was a lovely place, sort of like Aspen with oil rigs. The skiing was gre=
at because there was always a pristine powder of newly shredded financial r=
ecords on the slopes.=20
There was offshore drilling off every shore and offshore subsidiaries on ev=
ery corner.=20
A red flag fluttered on Planet Enron, but nobody paid attention.=20
Journalists in Washington were hunting for Dick Cheney for months, even as =
he was completely visible and accessible on Planet Enron, where he lumbered=
 down golden boulevards.=20
Phil and Wendy Gramm, the king and queen of the Enron prom, cruised around =
in their white stretch limo, rewarded for years of service, exempting and d=
eregulating.=20
Paul O'Neill was also ubiquitous there, his face emblazoned and his words e=
nshrined on the currency, which begins with $1,000 bills. The motto: ''Comp=
anies come and go. It's part of the genius of capitalism.''=20
Mr. O'Neill was not Treasury secretary up there, though, merely a private c=
itizen. Kenneth Lay, still smarting that the president decided not to name =
him Treasury secretary on Earth, anointed himself with the title on Enron.=
=20
The Bushes summered there, and W. and Jeb dropped by when they needed campa=
ign cash. But lately, they began putting brown paper bags over their heads =
when they visited so no one would notice them hobnobbing with Kenny Boy.=20
Everyone was upwardly mobile on Planet Enron, a world more consumed with ha=
vens than have-not's.=20
There were, blessedly, no lower classes or riffraff. Denizens were blue blo=
od or blue chip but never blue. There were the born rich, and there were th=
e new rich the born rich made rich. The congenitally rich create the crony =
rich by ushering them onto the boards and payrolls of oil and energy compan=
ies and defense contractors.=20
There was no conflict of interest on Planet Enron, only confluence of inter=
est. No income tax, only insider tips. No S.E.C. or G.A.O., just C.E.O.'s, =
S.U.V.'s and N.O.B.D.'s (not our bankruptcy, dear). Q.E.D.=20
All meetings on Planet Enron were held in secret, and everyone liked it tha=
t way. Auditing was considered rude. It was a very empathetic place.=20
On Planet Enron, it seemed only fair that chairman-for-life Kenneth Lay sho=
uld reward himself with $51 trillion in a severance package, as opposed to =
the $51 million he was seeking on Planet Earth.=20
On Planet Enron, Secretary of the Army Thomas White could whine that he cam=
e out with only $12 million from sales of the company's stock. He bravely s=
aid he ''would persevere.''=20
On Planet Enron, Karl Rove could expect people to mist up at the poignant t=
ale of how he made mere millions instead of more millions when government e=
thics rules forced him to sell all of his stocks. And he could ingratiate h=
imself with the conservative leader Ralph Reed by offering him a piece of t=
he Enron rock.=20
On Planet Enron, the president, his words muffled by the brown paper bag on=
 his head, could strike a chord complaining that his mother-in-law had lost=
 $8,000 on Enron stock when less connected mortals lost their entire retire=
ments.=20
It was a beautifully sheltered place (and not just in the Caymans sense). A=
 place where inhabitants deluded themselves that their accomplishments and =
windfalls -- Ivy League degrees, energy company sinecures, lucrative consul=
ting contracts, advisory board booty -- were the result of merit and hard w=
ork.=20
But then turmoil struck. The planet has been overrun by the Wrong Kind: gov=
ernment lawyers bearing subpoenas and grand juries poking around. The thin =
and tony air has become noxious with the threat of litigation and incarcera=
tion.=20
Dick Cheney is still there, but he's hiding in a secure location. Now he ha=
s caves on two planets.=20
President Bush, distancing himself by light-years, has ordered the U.S. gov=
ernment to look into cutting off all business with the planet.=20
On Friday, the once-serene orb imploded with the news of the sad death of a=
 leading citizen, who shot himself in his Mercedes after telling friends he=
 did not want to have to turn against his own.=20
But Planet Enron is bigger than one company or one tragedy. It's a state of=
 mind, a subculture, a platinum card aristocracy. Its gravitational pull ha=
s long proven irresistible.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09

Week in Review Desk; Section 4
The Nation
I Am Woman, Hear Me Roar in the Enron Scandal
By JILL ABRAMSON

01/27/2002
The New York Times
Page 3, Column 1
c. 2002 New York Times Company

WASHINGTON -- AS the klieg lights went up on the Enron hearings, many of th=
e familiar elements of Washington scandal were on display -- charges of inf=
luence peddling, expressions of shock from outraged lawmakers and wall-to-w=
all lawyers in dark suits.=20
But there was one novelty. Enron, unlike so many other Capitol messes, feat=
ures powerful women in starring roles in a scandal that, at least so far, h=
as nothing to do with sex.
Nancy Temple, the Arthur Andersen lawyer and a leadoff witness, could even =
emerge as a fall gal. She was raked over the coals by her House inquisitors=
 for sending directives that they believe Andersen employees construed as a=
n invitation to shred thousands of Enron financial documents. Ms. Temple, w=
ho sent her memos at a time when she knew the company could be sued for Enr=
on's mounting accounting problems, denied wrongdoing.=20
Two women are vying for the part of the heroic whistle-blower. There is She=
rron S. Watkins, the Enron executive whose memo warning the chairman, Kenne=
th L. Lay, that their company might ''implode in a wave of accounting scand=
als'' helped rocket the ruckus.=20
Maureen Castaneda, a former Enron executive, last week went public with all=
egations of large-scale document shredding at Enron and provided actual pro=
of. She had taken some of the shreds home to use as packing material, only =
to discover that they were marked with the names Chewco and Jedi, two of En=
ron's legally questionable partnerships.=20
Both women held fancy titles. Ms. Watkins was Enron's vice president for co=
rporate development. Ms. Castaneda was director of foreign exchange and sov=
ereign risk management.=20
In recent days, investigators from the Securities and Exchange Commission h=
ave been talking with Martha P. Stuart about the role played by her law fir=
m, Kirkland & Ellis, in helping to set up some of the partnerships at the c=
enter of the inquiries.=20
The highest-profile women to figure in past Washington scandals, the White =
House intern Monica Lewinsky and the law professor Anita Hill, became famou=
s because they were in the middle of controversies involving charges of sex=
ual misconduct. Both women were in relatively low-level government jobs at =
the time of their fateful tangles with much more powerful men, President Bi=
ll Clinton and Clarence Thomas, then a Supreme Court nominee.=20
Other women have been featured players in nonsexual scandals, but they didn=
't occupy positions near or in the executive suite. Iran-contra's Fawn Hall=
 was a White House secretary. So too, was Watergate's Rose Mary Woods, Pres=
ident Richard Nixon's loyal employee, who was responsible for the famous 18=
.5-minute gap on a crucial White House tape. (She said her foot accidentall=
y hit the delete pedal as she was busily transcribing.)=20
Watergate did feature a professional woman, an ITT lobbyist named Dita Bear=
d, in a bit part, but she missed a bigger role when she went to the hospita=
l in order to avoid testifying before Congress about a memo she wrote.=20
Other supporting female scandal players have included the wives of official=
s under fire, like Martha Mitchell, or subordinate aides, like Deborah Gore=
 Dean, a lieutenant to Housing and Urban Development Secretary Samuel Pierc=
e, who was prosecuted for her role in an influence peddling scandal in the =
1980's.=20
''The scandal glass ceiling seems to have been broken,'' declared Ellen Mil=
ler, a senior fellow at The American Prospect, a liberal magazine, who was =
an outspoken critic of campaign finance abuses during various fund-raising =
scandals in the Clinton years. Is this progress? ''The story has changed. I=
t's not about sex. It's about women as major players in powerful positions.=
''=20
In the Clinton years, a few cracks appeared in that glass ceiling. Three hi=
gh-powered lawyers found themselves on the hot seat: Hillary Rodham Clinton=
 for her Rose Law Firm connections in Whitewater, and Zoe Baird and Kimba W=
ood, whose nominations for attorney general fell apart in what became known=
 as Nannygate.=20
But Mrs. Clinton fell under scrutiny because of whom she was married to, an=
d the problem that beset Ms. Baird and caused the White House to drop suppo=
rt for Ms. Wood flowed from their domestic lives, not their professional wo=
rk.=20
SUZANNE GARMENT, the author of ''Scandal: The Culture of Mistrust in Americ=
an Politics'' (Random House, 1991) is not sure the development is a healthy=
 one.=20
''It is very interesting that women have reached the point when they can be=
 at the center of scandal because of financial reasons instead of sexual re=
asons,'' she observed.=20
''But insofar as you think women have historically had a superior morality =
to that of men, then it isn't a cause for celebration.''=20
Whether cause for celebration or worry, the change does reflect the rising =
status of women in the legal and corporate worlds. They are now high enough=
 on the ladder to drive the action, as Ms. Temple may have done when she in=
structed Andersen employees on the company's policy concerning the retentio=
n (or destruction) of documents.=20
They are close enough to the corridors of power to hear secrets and technic=
ally proficient enough to figure out what is going on, as Ms. Watkins did a=
s she decoded Enron's impenetrable accounting (she had been an executive at=
 Andersen before joining Enron).=20
They may not consider themselves bona fide members of the club of top corpo=
rate officials, however.=20
For example, while Ms. Temple did testify before a House subcommittee on ov=
ersight and investigations, David Duncan, who was the lead Andersen partner=
 on the Enron audit team, refused to answer questions and invoked the Fifth=
 Amendment.=20
Ms. Temple may have less to hide -- or she may have felt less bound by the =
corporate world's brotherhood of silence.

Photo: A former Enron executive, Maureen Castaneda, with shredded Enron doc=
uments. (ABC News)=20
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09

California; Editorial Pages Desk
Private Enterprise, Public Outrage

01/28/2002
Los Angeles Times
Home Edition
B-10
Copyright 2002 / The Times Mirror Company

I was shocked and disgusted but somehow not surprised by a detail of Kennet=
h Lay's compensation structure nearly buried at the end of the story of his=
 resignation (Jan. 24). You reported that Lay had a credit line of $7.5 mil=
lion from Enron, meaning he could borrow that much from the firm at any giv=
en time for his personal use. He took advantage of this arrangement multipl=
e times last summer, and then would repay the loan with his Enron stock, on=
ly to take advantage of the credit line once again.=20
All this was happening in the months just prior to his famous September spe=
ech exhorting his employees to buy the "undervalued" stock. Then Enron anno=
unced its worst quarter ever. Finally, I understand Lay's motives--they wer=
e in his own best interests. Of course.
Lynn Lipinski=20
Culver City=20
*=20
Now that Lay has resigned as chairman of Enron, maybe the Bush administrati=
on can hire its old buddy as a consultant on privatizing Social Security. A=
ll that talent shouldn't go to waste.=20
Margaret Morris=20
Ventura

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09




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