Message-ID: <29237306.1075841124282.JavaMail.evans@thyme> Date: Wed, 23 Jan 2002 14:39:35 -0800 (PST) From: sarah.palmer@enron.com To: sarah.palmer@enron.com Subject: Enron Mentions -- 01/23/02 Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: Palmer, Sarah X-To: Palmer, Sarah X-cc: X-bcc: X-Folder: \ExMerge - Martin, Thomas A.\Deleted Items X-Origin: MARTIN-T X-FileName: tom martin 6-25-02.PST Enron Board Learned Of Executive's Concerns In Oct -Atty Dow Jones Energy Service, 01/23/2002 Enron's Board Ignored Signs of Losses, Dorgan Says Bloomberg, 01/23/2002 Enron Board Protected From Lawsuits, Experts Say Bloomberg, 01/23/2002 What Did They Know And...When Did They Know It?; Meet Sherron Watkins, who = sounded the alarm on Enron long before its collapse Time Magazine, 01/28/2002 Enron affiliate challenges PUC call for suspension, revocation Associated Press Newswires, 01/23/2002 USA: FACTBOX-US congressional hearings schedule on Enron. Reuters English News Service, 01/23/2002 Judge to consider lawyers' plan to investigate Arthur Andersen Associated Press Newswires, 01/23/2002 Enron suit cites racketeering charges CBS Marketwatch.com, 01/23/2002 Enron Employees Sue Andersen, Claiming Auditor Violated Racketeering Laws Dow Jones Business News, 01/23/2002 On Capitol Hill, Members of Congress Taking Up Where They Left Off; Enron E= mployees Scheduled Meeting Won't Happen Today CNN: Live Today, 01/23/2002 Judge Won't Allow Insurers Immediate Access To Enron Info Dow Jones News Service, 01/23/2002 Senate panel asks Enron to authorize public disclosure of tax returns since= 1985 Associated Press Newswires, 01/23/2002 Enron Asked to Release Its Tax Records Dating Back to 1985 Bloomberg, 01/23/2002 USA: U.S. Senate panel wants to release Enron tax data. Reuters English News Service, 01/23/2002 White House Cites Urgency In SEC Appointments Dow Jones International News, 01/23/2002 Andersen CEO won't show=20 CNN, 01/23/2002 Auditor Refuses To Testify In Enron Hearing KPRC Channel 2 Houston, 01/23/2002 USA: Former Andersen partner seeks to defer testimony. Reuters English News Service, 01/23/2002 Perspectives Newsweek, 01/28/2002 You're On Your Own ; The Enron lesson: in making critical decisions, consum= ers are at sea. Here is a survival guide Time Magazine, 01/28/2002 Your Money: Old Safety Nets Are Gone. Here's What To Do Time Magazine, 01/28/2002 What $6 Million Can Buy Time Magazine, 01/28/2002 The Enron Effect; As the accounting scandal spreads, regulators and politic= ians are pounding the table for reform. But will anything really change? Newsweek, 01/28/2002 The Great Giveback; Enron's turned a capital pastime upside down: the Beltw= ay's racing to give away, not pocket, the giant's cash Newsweek, 01/28/2002 'Events, Dear Boy, Events'; Enron is not--yet--much of a political scandal,= but has many facets awkward for Republicans Newsweek, 01/28/2002 Judicial nominee to face questions about Enron contributions Associated Press Newswires, 01/23/2002 Congress's Enron Hearings May Open Way to New Laws Bloomberg, 01/23/2002 State GOP sends $15,000 Enron contribution to employees' fund Associated Press Newswires, 01/23/2002 LOU DOBBS MONEYLINE; CNNfn CNNfn: Moneyline News Hour, 01/22/2002 ___________________________________________________________________________= __________ Enron Board Learned Of Executive's Concerns In Oct -Atty By Jason Leopold 01/23/2002 Dow Jones Energy Service (Copyright (c) 2002, Dow Jones & Company, Inc.) Of DOW JONES NEWSWIRES=20 LOS ANGELES -(Dow Jones)- Enron Corp.'s (ENRNQ) board of directors didn't l= earn until October that an Enron executive had serious concerns that accoun= ting improprieties could bring down the company, according to an attorney f= or the board, although word of those concerns had spread throughout the com= pany by early September. The executive, Sherron Watkins, raised her concerns with Chairman and Chief= Executive Ken Lay in August. But they weren't shared with board members be= sides Lay until it was too late to do anything, said attorney Neil Egglesto= n, who represents Enron's board in federal investigations of the company.= =20 "The first they remember hearing of this issue is in early October in conne= ction with the Vinson & Elkins review," Eggleston said.=20 Vinson & Elkins, Enron's outside law firm, conducted a review of Watkins' c= oncerns at Lay's request. The firm submitted its findings in a report dated= Oct. 15, concluding that the company's handling of its off-balance-sheet p= artnerships was proper but could be portrayed in a way that could be damagi= ng to Enron.=20 Enron's board is named in a number of civil and class action lawsuits assoc= iated with the company's collapse. The audit committee had reviewed some of= the off-balance sheet partnerships now at the center of federal investigat= ions, and the full board voted twice to suspend Enron's code of ethics to a= llow former Chief Financial Officer Andrew Fastow to run partnerships even = as he served as an officer for Enron.=20 Robert Jaedicke, the chairman of the board's audit committee, became aware = of Watkins' concerns a few days before the committee met on Oct. 8, Egglest= on said. Vinson & Elkins advised others on the committee at the meeting, an= d the rest of the board was informed a couple of days before the firm relea= sed its report.=20 The text of the Vinson & Elkins report supports that chain of events. Rober= t Bennett, an attorney representing Enron in federal investigations of the = company, wasn't sure when management first notified the board, but deferred= to Eggleston's account.=20 Board Committee Established Later=20 On Oct. 31, after news of losses related to transactions with partnerships = run by Enron executives had set off the energy company's spiral into bankru= ptcy court, Enron established a special board committee to look into the tr= ansactions. William Powers, dean of the University of Texas Law School, was= named to head the committee.=20 Watkins' concerns about accounting practices related to the off-balance she= et partnerships were already known in August by the company's general couns= el, Enron auditor Arthur Andersen and the company's top management.=20 Watkins detailed her concerns in a letter to Lay on Aug. 15. She met with L= ay on Aug. 22 to discuss the letter, in which she specifically cautioned La= y against using Vinson & Elkins to look into the matter "due to conflict."= =20 By September, lower-level employees at the company were also aware.=20 "I heard in September, maybe the first week in September, for the first tim= e that someone accused Enron of shady practices," said Inderpal Singh, a ma= nager of finance who works for Enron global markets in the finance and stru= cturing department. "Everybody in my division started talking about it, and= we were worried because we all thought everything was OK at Enron."=20 Philip Hilder, Watkins attorney, said his client tried in September and Oct= ober to contact other people in Enron, including the board of directors, to= warn them about accounting improprieties, because she wasn't satisfied wit= h the steps Lay was taking to ensure Enron's financial health.=20 "Yes, she did write additional letters to others at Enron about her concern= s after she met with Mr. Lay," Hilder said in an interview Sunday.=20 Eggleston said Monday that board members don't recall having received a pho= ne call, fax or email from Watkins.=20 "But then again, if the board received a call from Sherron Watkins, they wo= uldn't necessarily know who she is," Eggleston added.=20 Other Letters=20 Ken Johnson, a spokesman for the House Energy and Commerce Committee, which= released Watkins' Aug. 15 letter last week, said late Tuesday that the com= mittee is aware of additional written warnings sent by Watkins to others at= the company following her contacts with Lay.=20 "I can't say specifically who she sent them to at Enron, but we're in the p= rocess of reviewing them and at some point we intend to discuss them with h= er," Johnson said.=20 One Enron executive said Watkins appeared to be on a "mission," warning "ev= eryone she came in contact with" about the partnerships and questionable ac= counting practices she believed would ruin the company.=20 One of the letters Watkins wrote was sent to Enron Chief Financial Officer = Jeff McMahon on Oct. 16, the day Enron released third-quarter earnings that= showed a $618 million loss due in part to transactions with off-balance sh= eet partnerships run by the company's executives, Hilder said.=20 Watkins, 42, who currently earns $165,000 a year as a vice president of com= munications at Enron, wrote that her "worst nightmare" had come true, refer= ring to the scenario she had described in her much-publicized August letter= to Lay, Hilder said.=20 Watkins, who has done work for four off-balance sheet partnerships includin= g JEDI, Cash, Cactus I and Caribou, was upset that Enron officers made only= scant reference to the partnerships in the earnings announcement and faile= d to explain adequately the reasons behind the writeoffs, Hilder said.=20 McMahon didn't return a call seeking comment.=20 Richard Watkins, Sherron Watkins' husband, said his wife called him Oct. 16= after the earnings report to express her concerns.=20 "She was disappointed and frustrated no one listened to her," Richard Watki= ns said in an interview.=20 Sherron Watkins met with Lay again at the end of October, at which time Lay= told her a special board committee would be formed to look into her allega= tions, Hilder said.=20 Bennett confirmed the meeting.=20 According to Richard Watkins, when Enron said in early November that it was= restating four years' worth of earnings, his wife told him: "I'm going to = have to look for another job. This company is going to go bankrupt."=20 -By Jason Leopold, Dow Jones Newswires; 323-658-3874; jason.leopold@dowjone= s.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron's Board Ignored Signs of Losses, Dorgan Says 2002-01-23 14:46 (New York) Washington, Jan. 23 (Bloomberg) -- Enron Corp.'s board failed to act w= hen it knew partnerships that were used to hide debt and unprofitable inves= tments were leading to losses that shareholders would eventually absorb, Se= nator Byron Dorgan said. ``It seems to me they had some warnings, and probably even considered = those warnings and must have discarded them,'' Dorgan, who is leading an in= vestigation into Enron's bankruptcy, said in an interview. ``I'm very surpr= ised.'' The Consumer Affairs Subcommittee, led by Dorgan, a North Dakota Democ= rat, has received transcripts and minutes of meetings that show Enron's boa= rd discussed the roles played by former Chief Financial Officer Andrew Fast= ow and Chief Executive Officer Jeffrey Skilling in setting and running Enro= n's partnerships. Those partnerships had losses that forced Enron to restate $586 millio= n in income since 1996. That led lenders to cut off credit, impairing the c= ompany's main business, trading electricity and natural gas. Shareholders l= ost $26 billion in market value and $850 million in pension funds vanished. Dorgan, who will chair a hearing Feb. 4, said his panel received 41 bo= xes of documents from Enron. Chairman Kenneth Lay has agreed to testify. Fa= stow, who Enron ousted Oct. 24, and Skilling, who resigned Aug. 14, haven't= responded to requests they testify, Dorgan said. Information Needed The committee is still seeking some documents Enron hasn't supplied, i= ncluding details about who invested in the partnerships and evidence of the= board's approval, Dorgan said. He said he didn't have any independent info= rmation about document shredding at Enron that may have happened as recentl= y as two weeks ago. ``One would expect what has happened here probably includes some viola= tion of law,'' Dorgan said. ``At this point we don't know enough.'' Dorgan plans several hearings that will investigate possible conflicts= of interest in the accounting and investment banking industries that were = highlighted by the Enron bankruptcy, the largest in U.S. history. Nine othe= r House and Senate committees are examining other aspects of Enron's failur= e. Auditor Arthur Andersen LLP's acceptance of Enron's accounting has ren= ewed interest in passing laws preventing auditors from consulting and accou= nting for the same client. ``It's likely we'll want to evaluate some legislative changes,'' said = Dorgan, who served as North Dakota's tax commissioner from 1966 until 1980. Pensions, Analysts and Partnerships Dorgan said he saw good chances for legislation to restrict 401(k) ret= irement plans from being heavily invested in one stock. He said rules shoul= d also be changed to remove conflicts of interest in large investment banki= ng firms that may have caused stock analysts to rate Enron a ``buy'' or bet= ter until shares collapsed. The Senate Commerce Committee asked Enron in a Jan. 8 letter for a f= ull accounting of all affiliated partnerships the company formed. The partn= erships, set up throughout the 1990s, hid debt and investment losses and created buyers for power plants. Some of the= m were capitalized only with Enron stock, according to a letter an Enron ex= ecutive sent Lay in August. ``The construct of those partnerships played a significant role in the= destruction of this company,'' Dorgan said. The role of the board of directors in Enron's downfall has received ne= w scrutiny since the disclosure last week that an internal probe by the law= firm of Vinson & Elkins last October said the board's audit committee revi= ewed some partnerships. The directors approved the partnerships and they suspended the company= ethics code to allow partnerships to be created, the report says. The law = firm said it didn't uncover any wrongdoing. Conflict of Interest Enron lawyer Robert Bennett repeated earlier claims that many of the d= etails of the questionable transactions weren't shared with the board. ``What will become clear if the good senator is prepared to wait for t= he completion of his investigation is that a tremendous amount of informati= on was not known by members of the board,'' Bennett said. ``Why are we havi= ng hearings if conclusions have already been reached?'' Citing transcripts, Dorgan disagreed. ``They clearly talked about the= conflict of interest,'' he said. ``They actually had some discussions abou= t what Fastow was doing and what Skilling was learning.'' Under one arrangement, controlled by Fastow, Enron avoided $550 millio= n in losses through a partnership called Raptor, according to the letter se= nt to Lay. Raptor agreed to pay Enron if the energy trader's investment por= tfolio of Internet and energy shares fell. If those shares rose, Raptor boo= ked the gain and paid the income to Enron. Raptor's only asset was the prom= ise that Enron would issue enough shares to pay back the partnership for wh= atever it had paid to cover stock losses. `What Was Their Risk' In another case, Enron used stock to set up a partnership that sold $1= .2 billion in bonds and paid Enron $800 million for 14 power plants. Enron = booked the money as net income. ``We need to get information on who invested in the partnerships, what= are the names, what were their investment stakes, what were their returns,= what was their risk,'' Dorgan said. Besides Lay and Skilling, directors named in lawsuits include Wendy Le= e Gramm, a professor at George Mason University and wife of U.S. Senator Ph= il Gramm; Norman P. Blake Jr., the chief executive officer of Comdisco Inc.= ; Robert A. Belfer, former chairman of Belco Oil & Gas Corp.; Ronnie Chan C= hichung, chairman of Grand Hotel Holdings Ltd.; John H. Duncan, former pres= ident of Gulf & Western Industries Inc.; Charles Lemaistre, former chancell= or of the University of Texas system; and Robert Jaedicke, a Stanford Unive= rsity professor Emeritus. Those directors allowed Fastow to ``profit handsomely'' from managing = two partnerships known as LJM, receiving his salary and $30 million in comm= issions for overseeing them, Dorgan said. According to Dorgan, the transcripts show directors didn't know how mu= ch Fastow was being paid. ``It looks like they were surprised at the kind o= f compensation he received when they discovered later,'' he said. The board also oversaw Enron's transformation from a pipeline operator= into a trader dependent on income from derivatives transactions that were = hard for investors to understand, Dorgan said. ``Part of the fallout of this could very well be an interest in some c= oncern about regulation of hedge funds and derivatives,'' Dorgan said. --Alex Canizares and Russell Hubbard in Washington at (202) 624-1820 or aca= nizares@bloomberg.net. Editors: Willen, Sobczyk Enron Board Protected From Lawsuits, Experts Say 2002-01-23 14:50 (New York) New York, Jan. 23 (Bloomberg) -- Enron Corp.'s directors enjoy legal p= rotection that may make it difficult for investors to sue them successfully= , legal experts say. The directors are named as defendants in 40 investor lawsuits claiming= the company concealed losses that led to Enron's bankruptcy. The company a= nd its officials also are targets of government criminal and civil investig= ations. ``All it takes is a pencil to sue a board of directors,'' said Larry H= amermesh, a corporate law professor at Widener University. ``Making a case= against directors is a lot harder.'' Federal and state laws hold boards responsible for only the most serio= us fraud and misrepresentation, experts say. They are designed to shield di= rectors from legal liability to make service on the board more attractive. U.S. Senator Byron Dorgan said transcripts of Enron board meetings sho= w that directors discussed conflicts of interest and the roles of senior executives in partnerships used to shield the company's= debt. The transcripts show they ignored warnings about the company's problems, said Dorgan, a North Dakota Democrat leading a Sena= te Commerce Committee investigation. W. Neil Eggleston, attorney for Enron's outside directors, declined to= comment on the suits against his clients. He said none has been asked to testify before any congressional committee investigating = Enron. Robert S. Bennett, who represents board members who also are corpora= te officers, wasn't available for comment, his office said. Eggleston said a ``motion to dismiss'' for lack of grounds to sue is t= ypically the first step a lawyer for directors will take when a corporate b= oard is sued. ``In this suit, it is hard to say what will happen,'' he said= . Liability Insurance The Enron board and officers have liability insurance with the St. Pau= l Companies and the Associated Electric & Gas Insurance Services Ltd. ``We can't discuss the terms of the policy,'' said Pat Hirigo= yen, a spokesman for St. Paul. St. Paul said its policies provide Enron off= icers and directors with $19 million in coverage. The AEGIS policy provides $35 million in coverage for legal fees and r= elated expenses, according to the policy filed in the bankruptcy documents. Mark Palmer, a spokesman for Enron, said the company provides insuranc= e for the legal costs of directors and executives. He declined to comment on liability coverage. Elson said most policies don't pay off if the directors are successful= ly sued for fraud but may cover reckless behavior. Enron, once the largest energy trader and the nation's seventh largest= company, filed for bankruptcy in December after reporting its earnings ove= r five years were inflated by $586 million. The company admitted it hid muc= h of its debt in off-the- books partnerships. `Poor Judgment' ``Just having poor judgment or being sloppy isn't enough'' for a succe= ssful suit against the directors, said Charles Elson, director of the Center for Corporate Governance at the University of Delawa= re. ``If it was easy to sue directors, it would be hard to get anyone to sit on a board.'' Elson said shareholders, to be successful, must show directors were ``= reckless or fraudulent.'' Still, the board approved the partnerships and, according to a report = by Enron's counsel, Vinson & Elkins, suspended the company ethics code to let former Chief Financial Officer Andrew Fastow cre= ate partnerships between himself and Enron. ``The board determined that Mr. Fastow's participation in the partners= hips would not adversely affect the interest of Enron,'' the company said in a securities filing in November. Seven of 12 outside board members received consulting fees or business= deals from Enron, and four board members sold stock while Enron was issuin= g inaccurate financial statements. Material Disclosure ``This may make a securities action a little easier,'' Elson said. ``F= or it raises the question of whether the board failed to make a material disclosure it should have.'' Two corporate officers, Kenneth Lay, the chairman and founder of Enron= , and Jeffrey Skilling, chief executive officer before he resigned in August, also sat on the board. Besides Lay, Enron directors named in some of the lawsuits include Wen= dy Lee Gramm, a professor at George Mason University and wife of U.S. Senat= or Phil Gramm; Norman P. Blake Jr., the chief executive officer of Comdisco= Inc.; Enron Vice Chairman Mark A. Frevert; Robert A. Belfer, former chairm= an of Belco Oil & Gas Corp.; Ronnie Chan Chichung, chairman of Grand Hotel = Holdings Ltd.; John H. Duncan, former president of Gulf & Western Industrie= s Inc.; Charles LeMaistre, former chancellor of the University of Texas sys= tem; and Robert Jaedicke, a former Stanford University accounting professor= . Former Directors In addition to Skilling, former directors named in the suits include R= ichard Causey, Enron's chief accounting officer; Enron General Counsel James Vinson Derrick Jr.; former Enron Vice Chairman J. Cli= fford Baxter; Joe H. Foy, retired senior partner at the Bracewell & Patterson law firm; Ken L. Harrison, former chairman of Enr= on's Portland General Electric Co. unit; and former Enron Chairman Joseph W. Sutton. Federal securities laws say directors may be liable if they fail to re= sponsibly disclose all information, their behavior widely departs from acce= pted standards or as ``controlling individuals'' of the corporation. Dorgan said in an interview that the transcripts of board meetings tha= t his committee has obtained demonstrates that directors ``had some warnings, and probably even considered those warnings = and must have discarded them.'' Most state laws hold board members responsible for overseeing a compan= y and making timely disclosures of information. They also have to offer acc= urate information in their recommendations to stockholders. Hamermesh said that board members would be liable if they intentionall= y failed to disclose information to stockholders on an issue up for a vote. ``This doesn't seem to be the case with Enron,'' he sa= id. Self-Dealing Evidence of self-dealing by directors, taking official actions that be= nefit them personally, would also be grounds for a successful suit. Board m= embers also may be legally accountable if they demonstrated bad faith, expe= rts said. Both those tests impose standards of proof that are hard to meet, Elso= n said. ``It can't just be a bad decision or bad behavior,'' he said. ``It has to be really, really bad.'' Still, he said, evidence of conflicts of interest and insider trading = would aid any claim of self-dealing. Eli Gottesdiner, a lawyer for Enron employees who lost their retiremen= t savings in the company 401(k) stock plan, said board members would be listed as defendants in his clients' suit. ``We believe that there is evidence suggesting that the board aided an= d abetted others in breaching their fiduciary responsibility,'' he said. An Easier Case Elson said the directors may be able to withstand attack by saying man= agement misinformed the board. ``Now if management was telling them the sky= was red, and they accepted that, it wouldn't work,'' he said. That principle may make it easier to win a case against corporate offi= cers who serve on the board. They ``have much deeper liability than the outside members because of their information advantage,'= ' Elson said. Enron board members have refused to comment on the company's collapse = and didn't return calls regarding their liability. Jaedicke, chairman of the board's audit committee, declined to comment= on legal issues. ``I'm sorry. I can't discuss anything,'' he said from his= home in Bozeman, Montana. -- Mark Jaffe in New York at (212)-893-4159 or at mjaffe3@bloomberg.net, wi= th reporting by Alex Canizares and Jeff St. Onge in Washington, through the= Washington newsroom (202) 624-1862. Editor: Rubin/Hendrie. Business What Did They Know And...When Did They Know It?; Meet Sherron Watkins, who = sounded the alarm on Enron long before its collapse Michael Duffy; Reported by Cathy Booth Thomas/Houston, Bernard Baumohl ; an= d Deirdre van Dyk/New York, James Carney, ; Michael Weisskopf and Adam Zago= rin/Washington, and ; Sally Duros and David Thigpen/Chicago 01/28/2002 Time Magazine Time Inc. 16 (Copyright 2002) You can smell the fish sticks from lunch in Sherron Watkins' 60- year-old h= ouse near downtown Houston, see the framed pictures of the family vacation = and the baby in bunny ears and even one of her country-crooning second cous= in, Lyle Lovett. Things have been so hectic, Watkins apologizes, that the C= hristmas ornaments haven't been put away yet. The daughter of two educators= , Watkins grew up in nearby Tomball, where she worked the cash register at = the family grocery store and began saving her money. By 1982, she'd picked = up two accounting degrees in Austin and quickly found a job with Arthur And= ersen. She eventually landed a job with Enron, Houston's red-hot energy tra= ding firm, rising in eight years to vice president for corporate developmen= t. Her quick ascent surprised no one, says her husband Rick: "She always ha= d a flair for numbers."=20 That flair led Watkins last summer to conclude there was something rotten a= t Enron. The numbers didn't add up. A pair of letters that she wrote to Cha= irman Kenneth Lay exposed top officials--perhaps including Lay himself--who= for months had been trying to hide a mountain of debt, and started a chain= reaction of events that brought down the company. Watkins' letters, along = with thousands of other documents, are now in the hands of congressional an= d criminal investigators who are probing how Enron, its pet-rock auditors a= t Andersen and a host of other supporting actors allowed the country's seve= nth largest company to suddenly go bankrupt in December. "I am incredibly n= ervous that we will implode in a wave of accounting scandals," Watkins wrot= e of Enron's financial health. "I have heard one manager-level employee fro= m the principal investments group say, 'I know it would be devastating to a= ll of us, but I wish we would get caught. We're such a crooked company.'" Maybe you can only glimpse the soul of a company when it breaks open right = before your eyes. But we know now, thanks to Watkins, that Enron hid billio= ns of dollars in debts and operating losses inside private partnerships and= dizzyingly complex accounting schemes that were intended to pump up the bu= zz about the company and support its inflated stock price. We also learned = last week that executives at Andersen, the accounting giant that enabled En= ron's every move, fretted about the arrangement but saw the chance to doubl= e their fees if they just kept their heads down. And now that the party's o= ver and the damage control is in full swing from Houston to Chicago to Wash= ington, just about everyone who helped create this mess is busy pointing fi= ngers, scapegoating the other guys, firing the lower- downs and diming out = the higher-ups. Last week what was once envisioned as a new kind of company= resembled little more than a circular firing squad of executives, accounta= nts, consultants and lawyers, all fighting to stay in business or, at least= , out of jail.=20 As these characters tell their self-serving stories, the fall of Enron is t= he most revealing sort of failure. It is a failure of the old-fashioned ide= a that auditors, directors and stock analysts are supposed to put the inter= ests of shareholders above their own thirst for fees. It is a failure of go= vernment: having greased nearly every campaigner's palm in Washington, Enro= n worked overtime to keep the regulators from looking too closely at a bala= nce sheet gone bad. And it is a failure of character, especially inside Enr= on, where managers who knew something was badly wrong did not say anything = publicly until the subpoenas began to arrive.=20 About the only thing that didn't fail was Sherron Watkins' flair for number= s. In the sad tale of Enron's collapse, Watkins is the closest thing to a h= ero in sight. When she goes out for coffee, strangers stop to give her "att= agirls" and ask for her autograph. She still goes to work each day at the c= ompany's headquarters in downtown Houston, where the tilted logo out front = has yielded Enron a new nickname: the Crooked E.=20 Normally when public companies flame out in scandal, top executives can be = seen running from headquarters mumbling that they are shocked to learn that= there was gambling going on in the casino. But there's not much of that he= re. Enron and Andersen officials hardly deny the dubious deals, the 881 off= shore tax havens or the stupid accounting tricks. That's partly because nob= ody can be sure that those dodges were inherently illegal. Many companies m= aintain similar arrangements, usually intended to avoid taxes--a benefit of= interest to Enron too. Enron avoided paying federal income tax for four ou= t of the last five years and instead received millions of dollars in federa= l-tax refunds.=20 For now, the House Energy and Commerce Committee and federal agents probing= Enron's fall are skipping over the accounting schemes and other questionab= le business practices--including a bizarre sex angle: a scheme to offer por= nography via the Internet. The investigators instead have zeroed in on what= officials from Enron and Andersen did and did not do once they realized th= at the debts were mounting, that the stock price was falling and that the l= ast people to learn of the looming reckoning were going to be millions of E= nron shareholders. Watkins' two letters provide the road map for their inqu= iry.=20 It took Watkins weeks to work up the nerve to write her first letter to Lay= . She had been working for chief financial officer Andrew Fastow last summe= r, looking for assets to sell as Enron ran into financial trouble while tra= nsforming itself into a company that traded energy, water, weather derivati= ves and anything else it could turn into a commodity. Watkins wanted to hel= p, but everywhere she looked she ran into off-the-books arrangements that n= o one could explain or seemed to want to investigate. She knew that others = who had pressed then CEO Jeffrey Skilling about the investments had run int= o trouble. One of her friends, then company treasurer Jeff McMahon, had bee= n transferred when he "complained mightily" to Skilling about the "veil of = secrecy" surrounding the outside deals.=20 Watkins learned Enron was losing money on two equity investments: network-e= quipment supplier Avici lost 98% of its value, and another, New Power, an e= nergy retailer that had Ken Lay on the board, dropped more than 80%. Becaus= e both firms were backed by Enron stock, Watkins knew their downfall was dr= agging down Enron too. None of that was being reflected in the company's pu= blic filings, as far as she could tell. As her lawyer Philip Hilder explain= s, "The numbers just didn't add up."=20 Already known as outspoken, Watkins didn't want to approach Skilling direct= ly for fear of losing her job, Hilder says. "She thought it would be fruitl= ess while he was there." When Skilling suddenly quit on Aug. 14, Lay called= an all-employees meeting two days later and asked for comments from worker= s beforehand. That's when Watkins finally sat down to write a one-page anon= ymous letter on her computer at work. She dropped it in the box at headquar= ters the next day.=20 The letter laid out what many executives knew but no one had the courage to= say. Watkins homed in on two sets of transactions called Condor and Raptor= (Enron had a penchant for names inspired by Jurassic Park and Star Wars) a= nd argued that the accounting treatment was unsound, if not dishonest. Enro= n had booked huge profits from these entities while its stock price soared = in 2000, despite the fact that neither Condor nor Raptor had any hard asset= s. But now that Enron's price was dropping, the company had to note these d= evaluations or pour more money into the companies when cash was short. "It = sure looks to the layman on the street that we are hiding losses in a relat= ed company and will compensate that company with Enron stock in the future.= "=20 But what gave the brief letter its power was its overwhelming sense of doom= . "Skilling is resigning now for 'personal reasons' but I would think he wa= sn't having fun, looked down the road and knew this stuff was unfixable and= would rather abandon ship now than resign in shame in two years."=20 At the Aug. 16 companywide meeting, Lay invited anyone troubled by Skilling= 's departure to meet with him. Four days later Watkins called a friend at A= ndersen and asked for advice. On Aug. 21 the friend drafted a memo detailin= g Watkins' concerns for Andersen auditors on the Enron account. Meanwhile, = Watkins went to Lay seeking a meeting. The next day she met with the chairm= an.=20 The session was businesslike, and Lay seemed genuinely concerned. Watkins b= rought along a six-page letter detailing her worries, and Lay promised to h= ave a team of lawyers review the controversial deals. But he decided to use= Enron's law firm, Vinson & Elkins, despite Watkins' unease about a conflic= t of interest. Vinson & Elkins had been paid for work on Condor and Raptor = transactions. But Lay went ahead with the review--whose scope he kept stric= tly limited.=20 By then, Lay was in the middle of a personal stock sell-off. On Aug. 20 he = exercised options to buy 25,000 shares at $20.78 a share. The next day he e= xercised an additional 68,000 shares at $21.56. On both days, the stock clo= sed around $36, which meant Lay netted nearly $1.5 million before taxes. He= continued to be a huge booster for the stock for another month. As late as= Sept. 26, Lay would try to reassure Enron employees that "our financial li= quidity has never been stronger." But as the stock fell last fall, company = employees were told that they would be unable to move any assets held in En= ron stock into other securities in their 401(k) plan while the company swit= ched plan administrators.=20 The end was near. On Oct. 15 Vinson & Elkins issued a nine-page report stat= ing that Andersen approved of the Condor and Raptor deals and that Enron ha= d done nothing wrong. On Oct. 16 the company announced a $618 million third= -quarter loss and a $1.2 billion reduction in shareholder equity. On Oct. 3= 1 the SEC opened a formal inquiry into Enron. Last week, a Vinson & Elkins = spokesman said the law firm was "not in a position to talk about our engage= ment with Enron or any other client."=20 Enron too said as little as possible last week as the company tried to reor= ganize itself and as Lay and other top executives tried to fend off lawsuit= s filed by angry employees and other investors. The law makes it extremely = difficult to confiscate the personal assets of corporate officers in punish= ment for actions on behalf of the company, but if there were ever a chairma= n who courted that fate, it is Lay. Last week he put three properties in As= pen up for sale, for $16 million, and huddled with his lawyers in preparati= on for congressional hearings next month. Few in business have ever fallen = so far so fast: the man who once could raise Cabinet officials with a singl= e telephone call and rated the only one-on-one meeting with the Vice Presid= ent on energy policy last year can't show his face in Houston for fear of r= eprisals.=20 While Enron suffered in silence last week, Andersen was tripping over its o= wn attempts at damage control. Andersen has the most to gain by coming clea= n because if it doesn't, it stands to lose a lot of business. So with help = from an army of just-hired p.r. agents, the Chicago company worked overtime= to show that in its work for Enron, it was merely trying to serve a secret= ive and aggressive client who was pushing the envelope on accounting rules = that aren't very clear anyway. Last week, two days after TIME reported that= Andersen ordered the destruction of documents in October, the company sent= CEO Joe Berardino out in public to strike a contrite tone. Andersen placed= three auditors in its Houston office on leave and took out full-page ads i= n the newspapers promising to "deal with these issues, candidly and directl= y... Without question, this is the most difficult and challenging episode i= n our firm's history."=20 And it abruptly fired David Duncan, who managed the Enron account in Housto= n, saying he had "without any consultation with others in the firm" organiz= ed the destruction of documents as Enron's losses mounted in October. Seeki= ng to put as much distance as possible between the home office and a waywar= d Houston branch, the company pointed out that all shredding had ceased onc= e the SEC issued a subpoena in the Enron matter. As a former Andersen partn= er in Chicago told TIME, "The issue of document deletion is entirely depend= ent on when the organization was aware that there might be a liability issu= e. Liability begins once there is knowledge."=20 Which explains why things got worse--much worse--for Andersen a few days la= ter, when it was revealed that officials at the company's headquarters in C= hicago had discussed the questionable Enron accounting very early in the ga= me--in a conference call last Feb. 5. Enron was no longer a problem that An= dersen's Houston office had kept to itself.=20 Nor were the top Andersen officials worrying about the actions of some low-= level, rogue Enron trader back on Feb. 5. What concerned the auditors that = morning was how to account for losses piling up in an off-the-books partner= ship between the company and a firm called LJM. The manager of LJM was none= other than Enron's chief financial officer, Fastow. Putting aside the Texa= s-size conflict of interest for Fastow--whose day job involved vouching for= Enron's financial health--Andersen knew that Enron's debts to LJM were ris= ing to a level that required public disclosure no matter who was in charge.= Such a disclosure would have sent Enron's stock into a dive. But no disclo= sure was made in the company's next quarterly report. Why not? One memo of = the Feb. 5 conference call noted that Enron "often is creating industries a= nd markets and transactions for which there are no specific rules."=20 And yet Andersen's understanding of Enron's strange business practices was = extensive enough that Andersen executives, during the same conference call,= contemplated dropping Enron as a client. That would have been a kick in th= e teeth for the auditing firm: Enron was paying Andersen some $50 million a= year in auditing and "consulting" fees--and officials said in the conferen= ce call that they envisioned billings doubling in the coming years. Ultimat= ely, Andersen decided to stick with Enron because, according to an e-mail r= ecord of the call, "we had the appropriate people and processes in place to= serve Enron and manage our engagement risks." That engagement ended late l= ast week when, in a largely symbolic move, Enron fired Andersen instead.=20 In Washington, of course, the politicians weren't just firing Enron and And= ersen; they were plucking them from their Rolodexes and sending back their = gifts. Lawmakers of both parties--led by those in close contests this Novem= ber--scrambled to give back hundreds of thousands of dollars in campaign co= ntributions Enron employees had sprinkled across the political landscape la= st year. Just for good measure, lawmakers have launched seven separate Enro= n probes.=20 The Republican White House, which received the vast majority of the Enron m= oney, struck an unbothered pose, relieved that neither Treasury Secretary P= aul O'Neill nor Commerce Secretary Don Evans had lifted a finger when Enron= came calling for help last fall. Still, the Bush team made one tiny bow to= the explosive potential of the Enron scandal, hinting for the first time t= hat it might fork over the details of Vice President Cheney's closed-door m= eetings with energy- industry officials last spring if a congressional comm= ittee requested them. Bush spokesman Dan Bartlett predicted that those pape= rs, if released, would provide no evidence of a smoking quid pro quo betwee= n the Administration and Enron. "News flash," dry-quipped Bartlett. "We wan= t to increase domestic natural-gas production. Tell me what Democrat doesn'= t."=20 If anyone was having trouble making Enron go away, it was Harvey Pitt, a la= wyer who represented the Big Five accounting firms before Bush named him to= chair the Securities and Exchange Commission last year. Until the Enron sc= andal broke, Pitt had waved away demands for stronger regulation of corpora= te accounting and auditing. There were calls from lawmakers for Pitt to rec= use himself from the SEC probe of Enron, but Pitt refused--after a fashion,= anyway--saying that such a step would hurt the agency's standing. He added= , however, that director of enforcement Stephen Cutler would run the probe = anyway. Bush last month named two other accounting executives to empty seat= s on the SEC: Paul Atkins, a partner with Pricewaterhouse Coopers, and Cynt= hia Glassman of Ernst & Young.=20 These rookies, like Pitt, face a rough season. "There could be other Enron-= like situations out there," says Arthur Levitt, the activist former SEC cha= irman. "Financial legerdemain from seduced audit committees, compromised ac= countants and inadequate standards could certainly crop up again at other U= .S. companies." At the moment, the public's best protection against that so= rt of surprise is other brave whistle-blowers like Sherron Watkins.=20 --Reported by Cathy Booth Thomas/Houston, Bernard Baumohl and Deirdre van D= yk/New York, James Carney, Michael Weisskopf and Adam Zagorin/Washington, a= nd Sally Duros and David Thigpen/Chicago=20 Feb. 5: In a meeting and subsequent e-mail, some senior Andersen officials = discuss dropping Enron as a client=20 Feb. 12: Jeffrey Skilling becomes Enron's CEO. Kenneth Lay stays as chairma= n=20 May: Vice-Chair Clifford Baxter complains of the "inappropriateness" of Enr= on's partnership deals, one of three executives to do so. He later resigns= =20 June 26: $44=20 Aug. 15: Lay receives Watkins' warning letter=20 Aug. 20, 21: Lay sells 93,000 shares, earns $2 million=20 Through August 2001, Lay cashes out $16.1 million in stock. Skilling gets $= 15.5 million from selling his shares=20 Sept. 26: $25 Lay urges employees to buy stock=20 Oct. 16: Enron reveals $1.2 billion decrease in company value=20 Oct. 23: Arthur Andersen accelerates disposal of Enron-related documents=20 Nov. 8: Andersen receives a subpoena from the SEC. Enron admits inflating i= ncome almost $600 million since 1997=20 Nov. 9: Duncan's assistant e-mails other secretaries to "stop the shredding= "=20 Nov. 30: 26[cents]=20 Dec. 2: Enron files for bankruptcy=20 Jan. 15: Enron suspended from New York Stock Exchange=20 PLAYING THE BLAME GAME As information trickles out and the finger pointing = begins, it's clear that many people involved had spotted warning signs of E= nron's accounting malfeasance long before the company's fall=20 AUGUST Rising Suspicions=20 AUG. 14 CEO Jeffrey Skilling resigns abruptly, and Kenneth Lay takes over. = As Enron's Broadband division reports losses of $137 million, Lay tries to = calm investors. Unappeased, analysts lower Enron's rating.=20 AUG. 15 Enron vice president Sherron Watkins anonymously sends a brief lett= er to Lay, warning him that Skilling's sudden departure could "raise suspic= ions of accounting improprieties."=20 AUG. 20 Watkins voices her worries in a call to a former Andersen colleague= .=20 AUG. 21 Lay assures Enron employees in an e-mail that the company is on sol= id footing. Over two days, though, Lay makes $1.5 million by exercising opt= ions. Four Andersen officials, including lead partner David Duncan, meet to= discuss Watkins' concerns.=20 AUG. 22 After telling her bosses that she wrote the memo, Watkins is invite= d to meet with Lay and hands him a more detailed letter.=20 OCTOBER Shredding, Calling, Crumbling=20 MID-OCTOBER A White House study, led by top economic adviser and former Enr= on consultant Lawrence Lindsey, looks at the possible economic consequences= of an Enron failure.=20 OCT. 15 As a result of the Watkins letter, Enron commissions a report from = law firm Vinson & Elkins. It concludes that Enron did no wrong.=20 OCT. 16 Enron discloses a $618 million loss in the third quarter and a $1.2= billion value write-off, tied mostly to its investment partnerships, run b= y Enron CFO Andrew Fastow.=20 OCT 23 Lay reassures investors in a conference call. Andersen's Duncan call= s an urgent meeting to step up disposal of Enron documents.=20 OCT. 24 Enron ousts CFO Fastow.=20 OCT. 31 Enron announces the SEC has begun an inquiry.=20 LATE OCTOBER-EARLY NOVEMBER Lay phones various Administration officials to = warn of Enron's dire straits.=20 LATE OCTOBER Treasury officials conclude Enron's collapse won't hurt market= s. Lindsey's White House study concurs.=20 JANUARY Clear Culpability=20 JAN. 10 Andersen admits destroying documents.=20 JAN. 15 Andersen fires Duncan for shredding documents. N.Y.S.E. takes Enron= off the board, saying "the company's securities are no longer suitable for= trading on the N.Y.S.E."=20 JAN. 16 Duncan tells congressional investigators that Andersen officials ta= lked about Enron last February and says he was aware that the account posed= a "significant risk."=20 JAN. 17 White House reveals it conducted a review of Enron's troubles in mi= d-October. Enron fires Andersen.=20 JAN. 18 White House confirms that Vice President Cheney met in June with a = politician from India about an Enron project.=20 AGGRESSIVE ACCOUNTING By capitalizing its web of complex partnerships with = its own stock, Enron managed to make losses look like gains=20 THE STRATEGY When Enron wanted to invest in other companies' stocks--a comm= onplace transaction for large corporations--it could have negotiated a fair= price with a competitor to raise capital to make the stock purchases. Inst= ead, it created thousands of complex partnerships, including two called Con= dor and Raptor, to allow the transactions to be treated as gains rather tha= n liabilities on Enron's books. According to Enron vice president Sherron W= atkins' August memo, here's how these partnerships worked:=20 THE TACTIC In order to sell its own assets at the price it wanted, Enron le= nt Condor $800 million in Enron stock, which Condor then used to buy the as= sets. Enron listed the transaction as a cash gain.=20 Enron lent the Raptor partnership more than $550 million in stock so Raptor= could invest in entities like the New Power Co. and Avici. Enron listed th= e Raptor loan as an asset. As guarantor of its own loan, Enron promised to = issue more stock if Raptor defaulted. The tactic worked as long as stock pr= ices rose.=20 THE COMPLICATION Instead of rising, Raptor's stock holdings plummeted in va= lue. Whistle-blower Watkins warned in her memo that to offset Raptor's sign= ificant losses--Avici's stock dropped 98%, from $178 million to $5 million,= and the New Power Co. shares dropped from $40 to $6--Enron would have to i= ssue even more stock to keep Raptor afloat.=20 THE WRITE-DOWN As of last week, these transactions were not accounted for o= n Enron's books. What this means is that Enron may have to restate its earn= ings yet again, posting even bigger losses.=20 Quote: Skilling's abrupt departure will raise suspicions of accounting impr= oprieties and valuation issues... --Excerpts from the letter Watkins sent t= o Lay on Aug. 15, 2001 I am incredibly nervous that we will implode in a wa= ve of accounting scandals... It sure looks to the layman on the street that= we are hiding losses in a related company... COLOR PHOTO: JAMES MCGOON--GAMMA JEFF SKILLING: Former CEO, Enron COLOR PHO= TO: STEVE LISS--GAMMA FOR TIME SHERRON WATKINS: Enron vice president COLOR = PHOTO: GREG SMITH--CORBIS SABA FOR FORTUNE KENNETH LAY: CEO, Enron COLOR PH= OTO: JAY MALLIN--PICTUREDESK INTERNATIONAL Duncan COLOR PHOTO: MIKE SEGAR--= REUTERS Fastow COLOR CHART COLOR PHOTO: SHAWN THEW--AFP FEDS MOVE IN House = investigators pore over documents in the Enron case COLOR PHOTO: GRAHAM/ROL= L CALL--CORBIS SYGMA Berardino FOUR COLOR ILLUSTRATIONS COLOR PHOTO: MICHAE= L BRANDS ON THE BLOCK This $6.5 million home is one of three Aspen properti= es Lay is selling COLOR PHOTO BIDDING ON ENRON The name now fetches profits= on eBay, where opportunists are capitalizing on the company's demise by se= lling its goods Firm manual COLOR PHOTO [See caption above] Tiffany key rin= g COLOR PHOTO [See caption above] Quartz watch COLOR PHOTO [See caption abo= ve] Candleholder bearing the name of a shell company=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron affiliate challenges PUC call for suspension, revocation 01/23/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. AUSTIN (AP) - An Enron Corp. affiliate is challenging the Texas Public Util= ity Commission's attempt to block it from marketing power as a retail elect= ric provider.=20 Enron Energy Services had about 11,600 customers, mostly small business cus= tomers, the PUC staff said in a petition this month. The PUC claims the company should have its retail electric provider certifi= cate suspended or revoked because it has failed to meet the minimum level o= f financial resources.=20 Enron Energy Services relied on the investment credit rating of Enron for i= ts financial qualifications as a power provider, but Enron lost its investm= ent grade rating on Nov. 28, the PUC petition said. The company and some of= its subsidiaries, including Enron Energy Services, filed for bankruptcy on= Dec. 2.=20 In a filing with the PUC last week, an EES attorney said the company has no= t violated the public utility regulatory act "such that its (retail electri= c provider) certificate should be suspended or revoked."=20 The filing said that while EES has experienced "material changes in the fin= ancial and technical conditions" since it was certified as a retail electri= c provider, it still meets the criteria necessary to retain its certificate= to operate in Texas.=20 An attorney for the company did not immediately return telephone calls from= The Associated Press.=20 A hearing before PUC commissioners is scheduled for Feb. 27. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 USA: FACTBOX-US congressional hearings schedule on Enron. 01/23/2002 Reuters English News Service (C) Reuters Limited 2002. WASHINGTON, Jan 23 (Reuters) - Following are the eight hearings which Congr= ess has firmly scheduled on the collapse of Enron Corp. and related regulat= ory issues over the next four weeks.=20 Jan 24, 9:30 a.m. EST (1430 GMT), House of Representatives Energy and Comme= rce Subcommittee on Oversight and Investigations. Chairman Pennsylvania Rep= ublican Rep. James Greenwood. Witness list undetermined. Focus on Andersen,= Enron and destruction of documents sought by investigators. Jan 24, 10:00 a.m EST (1500 GMT), Senate Governmental Affairs Committee. Ch= airman Connecticut Democratic Sen. Joseph Lieberman. Witnesses: former SEC = Chairman Arthur Levitt, former SEC Chief Accountant Lynn Turner. Focus on p= ensions rules, investor confidence, derivatives trading and the energy mark= et.=20 Jan 29, 9:30 a.m. EST (1430 GMT), Senate Energy and Natural Resources. Chai= rman New Mexico Democratic Sen. Jeff Bingaman. Witnesses: Federal Energy Re= gulatory Commission Chairman Pat Wood, federal and state energy market regu= lators. Focus on energy markets.=20 Jan. 29, 3:30 p.m. EST (2030 GMT), House Energy and Commerce Committee. Cha= irman Louisiana Republican Rep. Billy Tauzin. Takes opening statements for = Jan. 30 full hearing.=20 Jan. 30, 9:30 a.m. EST (1430 GMT), House Energy and Commerce Committee. Cha= irman Tauzin leads full hearing. Focus on Enron and its relationship with A= ndersen.=20 Feb 4, 9:30 a.m. EST (1430 GMT), Senate Commerce Committee. Chairman South = Carolina Democratic Sen. Ernest Hollings. Witnesses: Enron Chairman Kenneth= Lay has agreed to testify. Broad focus.=20 Feb 7, 10:00 a.m. EST (1500 GMT), Senate Health, Education, Labor and Pensi= ons Committee. Chairman Massachusetts Democratic Sen. Edward Kennedy. Witne= ss list undetermined. Focus on pension law, 401(k) retirement plans and how= to better protect investors.=20 Feb 12, 10:00 a.m. (1500 GMT), Senate Banking, Housing and Urban Affairs Co= mmittee. Chairman Maryland Democratic Sen. Paul Sarbanes. Witnesses include= five former SEC chairmen: Arthur Levitt, Richard Breeden, David Ruder, Har= old Williams and Roderick Hills. Focus on accounting and investor protectio= n issues related to Enron.=20 Feb 26, 10:00 a.m. (1500 GMT), Senate Banking, Housing and Urban Affairs Co= mmittee. Chairman Maryland Democratic Sen. Paul Sarbanes. Witnesses include= three former SEC chief accountants: Walter Schuetze, Michael Sutton and Ly= nn Turner; and former Financial Accounting Standards Board chairman Dennis = Beresford. Focus on accounting and investor protection issues.=20 In addition to the above, several other congressional panels are probing th= e Enron affair, but have not firmly established dates for public hearings:= =20 Senate Finance Committee: Investigating Enron compliance with tax laws.=20 Senate Governmental Affairs Committee's Permanent Subcommittee on Investiga= tions: Investigating ties between Enron and Andersen. Has issued 51 documen= t subpoenas.=20 House Education and the Work Force Committee: Tentative initial hearing in = a series beginning week of Feb. 4. Focus on oversight of retirement plan la= ws.=20 House Financial Services Committee: Focused on impact on commodities market= s, 401(k) plans, potential securities fraud and accounting irregularities. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Judge to consider lawyers' plan to investigate Arthur Andersen By KRISTEN HAYS Associated Press Writer 01/23/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. HOUSTON (AP) - Lawyers for shareholders suing 29 current and former Enron C= orp. executives and board members added finishing touches Wednesday to a pl= an intended to bar the fallen energy giant's auditor from any further shred= ding of documents related to its audits.=20 U.S. District Judge Melinda Harmon scheduled an afternoon hearing to consid= er the plan. Plaintiffs include Amalgamated Bank, the University of California Regents a= nd pension funds for Florida, New York City, Georgia, Ohio and other states= .=20 William Lerach, who represents Amalgamated, said lawyers want Harmon to all= ow them to inspect Arthur Andersen's Enron-related documents and their stor= age; eliminate any Andersen policies that would allow shredding of Enron do= cuments after a certain amount of time; and allow them to take depositions = from top Andersen personnel.=20 Meanwhile, former Enron employees who lost $1.3 billion in retirement funds= when the company collapsed late last year sued the Chicago-based auditor, = Arthur Andersen LLP, and several current and former Enron executives, alleg= ing that they violated federal racketeering laws by conspiring to hide Enro= n's true financial condition.=20 Andersen's acknowledgment two weeks ago that its Houston office had destroy= ed a significant but undetermined number of Enron-related documents prompte= d the racketeering lawsuit filed Tuesday in federal court.=20 "That kind of tipped the scale," said Seattle attorney Steve Berman. "Ander= sen has admitted that it knew of serious accounting issues."=20 Neither Rusty Hardin, a Houston attorney representing Andersen, nor an Ande= rsen spokesman immediately returned calls for comment Wednesday.=20 Hardin assured Judge Harmon Tuesday that Andersen's Enron-related documents= were under guard, and nothing more is being destroyed.=20 Berman also is suing Enron in a separate case on behalf of its employees. T= hat lawsuit, like many of the more than 60 others filed across the country = that name Enron as a defendant, is on hold as Enron works to emerge from ba= nkruptcy. The company filed the largest Chapter 11 reorganization in histor= y on Dec. 2 in New York.=20 Lerach's lawsuit names individuals rather than Enron Corp. as defendants, s= o it can proceed despite the bankruptcy. The plaintiffs seek more than $1 b= illion in proceeds executives and board members made by selling Enron stock= from October 1998 through November 2001.=20 Andersen is under a Texas judge's order prohibiting any further shredding o= f Enron-related documents. Lerach's team wants Harmon to issue a similar or= der to help them investigate its case.=20 Lerach also wants to take depositions from Enron chairman and chief executi= ve Kenneth Lay and others regarding Andersen shredding. He said Harmon shou= ld consider that issue later.=20 On Tuesday, Enron invited the FBI to investigate allegations from a former = executive that employees shredded their own financial documents from Hallow= een through as recently as last week. The executive, Maureen Raymond Castan= eda, said she saw the shredding until she was laid off last week.=20 FBI spokesman Jay Spadafore declined comment on whether agents remained at = Enron on Wednesday. Spokespeople for Enron and the Justice Department did n= ot immediately return calls about the FBI investigation.=20 The Rev. Al Sharpton appeared briefly at Enron Wednesday morning, calling f= or a government bailout of employees left without retirement funds after th= e company's collapse.=20 "Why can't we bail out people we allow to be victimized?" he asked. "Had th= ey been more proficient in regulating this, it would not have been such a d= ebacle."=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron suit cites racketeering charges By Lisa Sanders, CBS.MarketWatch.com Last Update: 12:53 PM ET Jan. 23, 2002 HOUSTON (CBS.MW) -- Enron employees are citing alleged violations of racket= eering laws in a new lawsuit that blames company officers and fired auditor= Andersen for employees losing some $1.3 billion in retirement savings. The litigation marks the first Enron-related class-action lawsuit, among do= zens, to cite the Racketeering Influences and Corrupt Organizations Act. Ha= gens Berman, a Seattle-based law firm, filed the suit in U.S. District Cour= t in Houston on Tuesday. An Andersen spokesperson did not immediately have a comment. Enron declined= to comment.=20 In addition to Andersen, the suit names Ken Lay, Enron's chairman, Jeffrey = Skilling, Enron's former chief executive, Andrew Fastow, the former chief f= inancial officer, the Northern Trust Co., and David Duncan, the former Enro= n audit partner fired by Andersen last week. The suit charges the parties with conspiring to hide Enron's true financial= status by "withholding critical information." "Now that the facts of Andersen are coming to light, it shows that Andersen= was well aware of the accounting problems, and it was so bad that Andersen= was destroying documents," attorney Steve Berman said in an interview.=20 "We have a strong basis for suing Andersen for racketeering. There is a spe= cific provision of RICO, which makes it a crime to embezzle or convert the = asset of any employee welfare benefit plan, and we're alleging that Anderse= n engaged in a conspiracy with Enron to do just that." The suit also claims that Northern Trust and administrators of the Enron sa= vings plan breached their fiduciary duty to company employees by locking do= wn the retirement savings plan. Judge Melinda Harmon, who's overseeing all the Enron-related lawsuits filed= in Houston, has scheduled a Feb. 25 hearing to come up with a case managem= ent plan, Berman said. Lisa Sanders is a Dallas-based reporter for CBS.MarketWatch.com. Enron Employees Sue Andersen, Claiming Auditor Violated Racketeering Laws 01/23/2002 Dow Jones Business News (Copyright (c) 2002, Dow Jones & Company, Inc.) Dow Jones Newswires=20 HOUSTON -- Enron Corp. employees filed suit against Enron officials and the= energy trader's auditor, Arthur Andersen LLP, alleging violations of feder= al racketeering laws by illegal manipulation of retirement funds. Wednesday's action is the latest in a flurry of lawsuits related to the col= lapse of Enron, but it is the first suit to charge Andersen with violations= under the Racketeering Influences and Corrupt Organizations law, known as = the RICO Act.=20 The law firm Hagens Berman said in a news release that it filed the action = on behalf of more than 100 named plaintiffs and seeks to represent an estim= ated 21,000 Enron savings plans participants.=20 The suit claims Andersen and individual Enron officers conspired to hide En= ron's true financial condition by withholding critical information, causing= employees to lose more than $1.3 billion from their retirement funds.=20 It also alleges David Duncan, Andersen's chief Enron auditor, repeatedly ce= rtified financial statements he knew were false in an attempt to cover debt= s and losses. Enron Chief Executive Kenneth Lay then knowingly used that fa= lse information to promote the overvalued Enron stock to employees as "comp= ensation," to secure their loyalty and to have stock holdings available to = fend off any hostile takeovers, the suit contends.=20 The 1970 RICO law increases penalties against enterprises that carry out cr= iminal acts that affect interstate commerce and prohibits any person from u= sing the assets of an employee pension plan for personal gain.=20 The suit charges that Mr. Lay and several Enron officers violated RICO by c= onspiring to defraud Enron employees by contributing worthless Enron stock = to retirement plans as part of what the suit calls a "retirement plan consp= iracy."=20 The suit also claims wrongdoing by Northern Trust Corp. (NTRS), a trustee o= f the Enron retirement plan, as well as by retirement plan administrators.= =20 Representatives from Andersen and Enron weren't immediately available for c= omment.=20 Enron faces suits from shareholders as well as former employees over billio= ns of dollars lost in the company's collapse, while the company's Chapter 1= 1 filing promises to be one of the largest and most complex bankruptcy case= s in U.S. history.=20 In addition, eight congressional committees and three federal agencies are = investigating various aspects of Enron and its collapse. The Justice Depart= ment is leading a criminal investigation, the Department of Labor is probin= g Enron's retirement plan and the Securities and Exchange Commission is loo= king into the auditing practices of Andersen.=20 Also this week, the House Subcommittee on Oversight and Investigations set = a hearing for Thursday on alleged shredding of thousands of company documen= ts by Enron officials.=20 In late-morning trading, shares of Enron (ENRNQ) were down seven cents to 3= 6.5 cents on the over-the-counter Bulletin Board. Enron traded at more than= $90 a share a year ago on the New York Stock Exchange; the Big Board delis= ted the stock earlier this month as a result of Enron's bankruptcy filing.= =20 -By Bill Platt; Dow Jones Newswires; 201-938-5400=20 Copyright (c) 2002 Dow Jones & Company, Inc.=20 All Rights Reserved. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 News; Domestic On Capitol Hill, Members of Congress Taking Up Where They Left Off; Enron E= mployees Scheduled Meeting Won't Happen Today Leon Harris, Jonathan Karl, Ed Lavandera 01/23/2002 CNN: Live Today (c) Copyright eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House,= Inc.). All Rights Reserved. On Capitol Hill, members of Congress are taking up pretty much where they l= eft off a month ago. Enron employees are looking to a scheduled meeting tod= ay to ease their concerns about the company's future, but that meeting did = not happen.=20 --excerpts only-- KARL: One big issue up here, perhaps the big issue, aside from the question= of the economy, is going to be Enron. The first Enron hearings kickoff tom= orrow, Leon, one on the Senate side with Senator Joseph Lieberman, one over= on the House side with Representative Billy Tauzin, and what's interesting= here is that we also heard from Trent Lott who talked about the various --= here is Trent Lott, the Republican leader -- here is what Trent Lott had t= o say.=20 (BEGIN VIDEO CLIP)=20 SEN. TRENT LOTT (R-MS), MINORITY LEADER: I do think that the Congress has a= responsibility to ask questions and inquire about what happened here. Obvi= ously, there were problems with business transactions. We need to know more= about what caused this problem, and why the employees were put in the posi= tion that they were in, and do we need some sort of a legislation or reform= as a result of that?=20 (END VIDEO CLIP)=20 KARL: And Lott and the other Republican leaders in the Senate were also ask= ed about the controversy regarding Vice President Dick Cheney and the infor= mation regarding his energy task force. As you know, the Government Account= ing Office is considering suing the White House to get information about wh= o was consulting the vice president on the issue of energy policy. The vice= president, the White House has said that they do not want to turn that inf= ormation to the GAO, but Trent Lott asked about this, said that he expects = in the next few days that we will hear from the vice president, that he wil= l have more to say on this issue, so that's something we will clearly be wa= tching for, Leon.=20 HARRIS: Good deal. Thanks, Jon. Jon Karl on Capitol Hill.=20 We've got more on Enron right now, though, from ground zero of Enron. Emplo= yees of that company are looking to a scheduled meeting today to ease their= concerns about the company's future. However, that meeting did not happen.= =20 CNN's Ed Lavandera is covering Enron development. He joins us now live from= Houston. He's got the latest -- Ed.=20 ED LAVANDERA, CNN CORRESPONDENT: Well, Leon, these company-wide meetings ar= e not unusual at Enron over the course of the last several months. We repor= ted about a meeting that happened in August when Ken Lay resumed the power = as chairman of the company, and another one in September, where Ken Lay rec= eived a rather terse reception from a lot of the employees, who started ask= ing some very difficult questions and started expressing publicly their dis= pleasure with the way the company was going. We had reported last Friday th= at Enron executives, four Enron executives, were meeting with Enron employe= es, the ones that are left working inside the budding, to meet at a hotel j= ust across the street, where they would be able to answer questions of empl= oyees. Ken Lay, was, we are told by sources, not going to be a part of that= meeting, but that four hiring executives were be going to be able to.=20 We obtained an e-mail that was sent out to employees in the last couple of = hours, that said, "We had planned to hold an all-employee meeting. However,= we don't want to subject you to the media frenzy that would certainly surr= ound such a meeting, so we've decided to postpone it. We are currently maki= ng arrangements to hold a series of employee meetings within the building t= o protect your privacy."=20 The e-mail goes onto say, that with all of the issues and the pending litig= ation in the investigations that are happening right now, it would be very = difficult for them, if not impossible, to answer some of the more specific = and of course the more difficult questions that many of these employees sti= ll have about the direction and future of their company. They say they woul= d not be able to answer any of those e-mails, and that the meeting would be= focusing on the overview of Enron's organizational structure, and they're = told to expect a memo on that shortly.=20 So a lot of movement here at Enron, and behind me, you might be able to see= as well, the Reverend Al Sharpton has just showed up, and he's back there = talking to reporters as well, and that is the latest from here in Houston.= =20 Leon, back to you.=20 HARRIS: Thanks, Ed. We will let you go back and listen and see what he has = to say.=20 Ed Lavandera in Houston, we will check back with you later on.=20 TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SE= CURE ONLINE ORDER FORM LOCATED AT www.fdch.com=20 THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY B= E UPDATED.=20 Content and programming copyright 2002 Cable News Network, Inc. ALL RIGHTS = RESERVED. Prepared by eMediaMillWorks, Inc. (f/k/a Federal Document Clearin= g House, Inc.) No license is granted to the user of this material other tha= n for research. User may not reproduce or redistribute the material except = for user's personal or internal use and, in such case, only one copy may be= printed, nor shall user use any material for commercial purposes or in any= fashion that may infringe upon Cable News Network, Inc.'s copyright or oth= er proprietary rights or interests in the material; provided, however, that= members of the news media may redistribute limited portions (less than 250= words) of this material without a specific license from CNN so long as the= y provide conspicuous attribution to CNN as the originator and copyright ho= lder of such material. This is not a legal transcript for purposes of litig= ation. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Judge Won't Allow Insurers Immediate Access To Enron Info By Kathy Chu 01/23/2002 Dow Jones News Service (Copyright (c) 2002, Dow Jones & Company, Inc.) DOW JONES NEWSWIRES=20 NEW YORK -(Dow Jones)- Enron Corp. (ENRNQ) and its official creditors commi= ttee asked a federal judge here to stop a class-action proceeding in Housto= n that seeks to take control of the bankrupt company's financial books and = records. "I am very concerned that a court other than this bankruptcy court may deci= de this matter," said Luc Despins of Milbank Tweed, which represents Enron'= s creditors committee. "This goes directly to the issue of Your Honor's jur= isdiction," he told the judge.=20 While having guidelines to preserve documents is important, these guideline= s should be decided upon in the New York court, according to Despins. Judge= Arthur Gonzalez of the U.S. Bankruptcy Court of the Southern District of N= ew York is presiding over Enron's bankruptcy case.=20 In Houston, where Enron is headquartered, a shareholders' class-action laws= uit led by Amalgamated Bank has been filed, seeking to freeze the proceeds = of alleged insider trading by 29 Enron executives.=20 As part of these proceedings, some shareholders have filed a motion to prev= ent Enron and auditor Arthur Andersen from destroying information related t= o the distressed company's financial condition.=20 Three former Enron employees claimed that the company shredded documents we= ll after federal investigators started a probe into alleged accounting irre= gularities.=20 Tuesday afternoon, U.S. District Judge Melinda Harmon in Houston postponed = a ruling on the document-preservation motion.=20 At a bankruptcy court hearing in New York Wednesday, Judge Gonzalez told En= ron and its creditor committee - both of whom participated in the proceedin= gs via telephone - that he would talk to Judge Harmon about these parties' = concerns.=20 Also Wednesday, the bankruptcy court declined to give nine insurers immedia= te access to Enron's financial information.=20 Continental Casualty Co., National Fire Insurance Co. and others have quest= ioned whether forward sales contracts guaranteed by $2 billion in Enron-rel= ated surety bonds ever existed. The insurers believe that opening the bankr= upt company's books will allow them to make this determination.=20 The insurers also want to know the relationships between J.P. Morgan Chase = & Co. (JPM), one of Enron's largest lenders, and two Enron-related offshore= entities that participated in the forward contracts.=20 J.P. Morgan filed a lawsuit in a New York state court last month, after the= insurers declined to pay $1.1 billion owed under the surety bonds, includi= ng about $965 million to J.P. Morgan. The lawsuit has been moved to the U.S= . District Court for the Southern District of New York.=20 On Wednesday, Judge Gonzalez told Enron and its insurers that the request f= or information is likely to be heard in the district court.=20 He delayed a decision on the insurers' motion, and scheduled another hearin= g for Jan. 25. The judge also asked Enron to provide the insurers with the = location of relevant documents and the names of witnesses by Feb. 1, in cas= e this information is needed later.=20 -By Kathy Chu, Dow Jones Newswires; 201-938-5392 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Senate panel asks Enron to authorize public disclosure of tax returns since= 1985 By CURT ANDERSON AP Tax Writer 01/23/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. WASHINGTON (AP) - A Senate committee asked Enron Corp. on Wednesday to auth= orize release of its tax returns to give the public and Congress a "more in= formed understanding" of the bankrupt energy trader's financial dealings.= =20 The Senate Finance Committee is in the beginning stages of a probe into Enr= on's possible use of tax shelters, its creation of more than 800 subsidiari= es and the impact they may have had on the company's bottom line. The panel= is also looking into Enron's pension programs, including its 401(k) plan a= nd employer stock ownership plan. In a letter to Enron Chief Financial Officer Jeffrey McMahon, Finance Commi= ttee Chairman Max Baucus, D-Mont., and the panel's senior Republican, Sen. = Charles Grassley of Iowa, sought company authorization to make public Enron= tax records since 1985 - including those of its affiliated companies or pa= rtnerships.=20 Although the Finance Committee and the House Ways and Means Committee alrea= dy have access to the tax records, their release to the public is limited d= ue to privacy laws. This could restrict any hearings or public comments on = the company's tax situation.=20 "It is critical that the public and the Congress have a more informed under= standing of the activities and transactions related to Enron's tax returns = and pension programs," the senators said in their letter.=20 Enron officials did not immediately return a telephone call seeking comment= . The company and Arthur Andersen, the accounting firm that audited its boo= ks, are already involved in numerous congressional investigations stemming = from Enron's rapid financial downfall last year.=20 The Finance Committee has not yet scheduled any hearings, but a spokesman s= aid they could occur within a matter of weeks. Committee investigators are = planning to meet this week with the Internal Revenue Service to begin the p= rocess of obtaining Enron tax records.=20 Citizens for Tax Justice, a liberal tax research organization, has estimate= d that Enron paid no corporate income taxes in four of the past five years.= Enron paid $17 million in taxes in 1997 and got refunds totaling $381 mill= ion in all other years between 1996 to 2000, according to the group's analy= sis. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron Asked to Release Its Tax Records Dating Back to 1985 2002-01-23 16:04 (New York) Washington, Jan. 23 (Bloomberg) -- The Senate Finance Committee asked = Enron Corp. to publicly release all tax records for the company, its partne= rships and affiliated companies. Senate Finance Chairman Max Baucus, Democrat of Montana, and Senator C= harles Grassley of Iowa, the committee's top Republican, made the request i= n a letter to Enron Chief Financial Officer Jeffrey McMahon. They asked McM= ahon for permission to release tax information the committee has dating to = Enron's creation in 1985. ``It is critical that the public and the Congress have a more informed= understanding of the activities and transactions related to Enron's tax re= turns and pension programs,'' Baucus and Grassley's letter said. The Finance Committee has authority to review tax returns of Enron. Ta= xpayer confidentiality laws prevent it from releasing that information unle= ss the company grants permission. An Enron spokesman wasn't immediately ava= ilable for comment. The Finance Committee is investigating Enron pension losses and its us= e of corporate tax shelters. Release of tax information would provide inves= tigators and shareholders details about the company's financial health and = underpinnings of its decline. Enron was once the largest U.S. energy trader until it filed for bankr= uptcy last month. Shareholders and creditors lost $60 billion in the collap= se of the Houston-based Enron. The Senate Finance Committee, which oversees tax policy, is one of at = least 10 congressional panels examining Enron's bankruptcy. The Senate Bank= ing Committee today said it will hold a Feb. 26 hearing on accounting failu= res in cases such as Enron's and proposals to improve oversight. Three form= er Securities and Exchange Commission chief accountants and the former head= of the Financial Accounting Standards Board were asked to testify. Senate Banking Committee Chairman Paul Sarbanes, Democrat of Maryland,= asked the investigative arm of Congress, the General Accounting Office, to= examine the numerous earnings restatements by companies such as Enron, Cen= dant Corp. and Waste Management Inc. ``Frequent restatements of earnings go directly to the heart of our fi= nancial system,'' Sarbanes said in a statement. ``Because by raising questi= ons about the reliability of published financial statements, they threaten = to undermine investors' confidence in the way our securities markets operate.'' He asked the GAO to examine all earnings restatements between 1997 and= 2000, their affect on investors and recommendations for reform. The Senate Banking Committee previously announced a Feb. 12 hearing at= which it would listen to five former SEC chairmen discuss accounting issue= s. --Rob Wells in the Washington newsroom (202) 624-1933 or rwells@bloomberg.n= et. Editor: Gettinger. USA: U.S. Senate panel wants to release Enron tax data. 01/23/2002 Reuters English News Service (C) Reuters Limited 2002. WASHINGTON, Jan 23 (Reuters) - The Senate Finance Committee on Wednesday so= ught permission from Enron Corp. to release the collapsed company's tax ret= urns to the public.=20 "It is critical that the public and the Congress have a more informed under= standing of the activities and transactions related to Enron's tax returns = and pension programs," the panel said in a letter to Enron's chief financia= l officer, Jeffrey McMahon. The committee said it had the authority under the law to review Enron's con= solidated tax returns as well as those of its affiliated companies and part= nerships, and expects to exercise that authority.=20 But it said there were limitations on its ability to release the informatio= n to the public without Enron's authorization.=20 "Therefore, we request that you please provide the Finance committee writte= n authorization to release to the public information contained in Enron's f= ederal consolidated tax returns or any tax information related to Enron's a= ffiliated companies or partnerships that is not included in the consolidate= d tax returns," said the letter, from the committee chairman, Montana Democ= rat Sen. Max Baucus, and the ranking Republican on the panel, Charles Grass= ley of Iowa.=20 "This would be for all time periods since the creation of Enron in 1985," i= t added.=20 Last week, the head of a tax watchdog group said Enron had not paid U.S. in= come taxes in four of five years through 2000, receiving tax refunds close = to $400 million in the period.=20 Robert McIntyre, director of Citizens for Tax Justice, a labor-backed tax r= esearch group, said he had analyzed Enron's financial reports for 1996 to 2= 000, the most recent year for which they were available.=20 The Senate Finance Committee is one of several panels on Capitol Hill looki= ng into the fall of the energy-trading giant. In particular, it is investig= ating whether Enron has been complying with federal tax laws, aides say. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 White House Cites Urgency In SEC Appointments 01/23/2002 Dow Jones International News (Copyright (c) 2002, Dow Jones & Company, Inc.) WASHINGTON -(Dow Jones)- The Bush administration said Wednesday that Presid= ent George W. Bush felt a sense of urgency in filling empty slots on the U.= S. Securities and Exchange Commission when he announced two people would be= placed on the board as recess appointments.=20 "There are critical issues facing the SEC and it was important to get them = in there and do their work," said deputy White House spokesman Scott McClel= lan. Asked if the White House were concerned either of the appointees would face= opposition in a Senate vote, McClellan said, "I would emphasize the import= ance of getting these people in there immediately.=20 McClellan didn't specifically mention the scandal surrounding the collapse = of Enron but clearly securities regulators will have their hands full in de= aling with the fallout from the bankruptcy.=20 Late Tuesday, the White House announced that Bush had appointed Cynthia A. = Glassman and Isaac C. Hunt Jr. to the SEC.=20 Glassman has been with Ernst and Young since 1997 and is their principal in= the National Tax Department. Bush originally announced his intention to no= minate Glassman to the SEC on Dec. 20.=20 Hunt has completed a term at the SEC and was nominated to the SEC first by = former President Bill Clinton in 1995. He was sworn into office Feb. 29, 19= 96.=20 -By Alex Keto, Dow Jones Newswires; 202-862-9256; Alex.Keto@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Andersen CEO won't show=20 January 23, 2002: 2:29 p.m. ET Fired Andersen auditor David Duncan wants immunity while CEO not subpoenaed= .=20 NEW YORK (CNN/Money) - Fired Andersen partner David Duncan wants immunity f= rom prosecution or he will not testify at a Congressional hearing Thursday = while the firm's CEO Joseph Berardino won't appear at the hearing and will = send a replacement instead. Berardino did not receive a subpoena to testify Thursday before the Subcomm= ittee on Oversight and Investigation. Instead, Andersen executive Dorsey Ba= skin, who is in charge of Andersen's document retention and disposal policy= , will appear to explain the policy, Congressman James Greenwood (R-PA), wh= o heads the subcommittee, told CNNfn. The change came after the committee negotiated with the accounting firm. Separately, former Andersen auditor Duncan is relying on his Fifth Amendmen= t constitutional right to protect himself from self-incrimination as a reas= on not to testify at the hearing. "Mr. Duncan will testify on Jan. 24 if the Committee votes to grant him imm= unity," attorney Robert Giuffra, who is representing Duncan, said in a lett= er to the Subcommittee. But Andersen's embattled in-house counsel Nancy Temple will appear at the h= earing. Temple sent an Oct. 12 memo reminding Andersen's Houston office of = the firm's document retention policy, which executives claim, caused staff = to start shredding Enron documents. Michael Odom, a partner at Andersen's Houston office who has been stripped = of managerial responsibilities, will also be present. Both Temple and Odom = have requested subpoenas which provides legal protection from employers whe= n testifying. Also Wednesday, Senate Finance Committee Chairman Max Baucus and Ranking Me= mber Chuck Grassley asked Enron Corp. Wednesday to publicly disclose all co= mpany tax records, including those related to Enron's affiliated companies = or partnerships. Auditor Refuses To Testify In Enron Hearing Duncan Was Fired By Andersen For Destroying Documents KPRC Channel 2, Houston Posted: 11:49 p.m. EST January 22, 2002 Updated: 1:33 p.m. EST January 23, 2002 The former chief auditor at Andersen is refusing to tell a congressional pa= nel what he knows about the destruction of Enron-related documents.=20 The lawyer for David Duncan, who was fired last week by accounting firm And= ersen for supervising the shredding of documents related to the troubles of= the now-bankrupt energy-trading giant Enron Corp., told the House Commerce= Committee that Duncan will rely on his "constitutional right not to testif= y" unless he's given immunity.=20 Congress can compel witnesses to show up, but it can't force them to answer= potentially incriminating questions without granting them immunity from cr= iminal prosecution.=20 The House committee is holding a hearing Thursday, and Duncan wanted a dela= y in order to prepare.=20 Andersen officials said last week that Duncan began destroying documents sh= ortly after learning the government was asking Enron for accounting informa= tion.=20 Duncan's lawyers say he did nothing wrong -- that he followed the instructi= ons of an Andersen lawyer in handling documents.=20 Congressional investigators subpoenaed senior officials of Andersen, includ= ing the Chief Executive Joseph Berardino, Duncan, attorney Nancy Temple and= Risk Manager Michael Odom in an effort to force their testimony Thursday.= =20 Temple and Odom, while expressing willingness to testify, have raised conce= rns about protecting confidential information relating to the investigation= . The firm's chief executive had been interviewed over the weekend on telev= ision.=20 Berardino voluntarily testified at the first congressional hearings on Enro= n last month, defending Andersen's work for Enron but acknowledging that fi= nancial reporting practices must change.=20 He said Andersen notified Enron's audit committee on Nov. 2 of "possible il= legal acts within the company.'' Berardino did not mention the document shr= edding. More recently, he said executives of the Chicago-based firm didn't = learn of the destruction until shortly after New Year's.=20 Patrick Dorton, an Andersen spokesman, said, "We have not received a subpoe= na. We have told the committee that we would testify but the only question = is when.''=20 News of the planned subpoenas came as FBI agents and federal prosecutors en= tered Enron's Houston headquarters to investigate allegations that massive = document destruction took place at the company starting after Thanksgiving = and continuing until as recently as last week. According to a CNN report, F= BI placed guards inside the Enron building to prevent any further shredding= of documents.=20 The Securities and Exchange Commission started looking into Enron's account= ing in mid-October, after the company reported a third-quarter loss of more= than $600 million. The SEC's inquiry eventually included demands for finan= cial documents from Enron and Andersen.=20 Enron filed the largest bankruptcy in U.S. history on Dec. 2.=20 New Appointee To SEC As the controversy swirled, President George W. Bush used his recess appoin= tment power Tuesday to put an official from another major accounting firm o= n the SEC, bypassing the Senate approval process. Bush appointed Cynthia A.= Glassman, a principal at Ernst and Young, to fill a Republican vacancy on = the five-member commission a day before Congress convened.=20 Bush also reappointed Isaac Hunt, a Democrat named to the SEC by former Pre= sident Bill Clinton in 1996. Hunt's term recently expired.=20 The Energy and Commerce panel is one of two committees holding Enron hearin= gs on Thursday. The Senate Governmental Affairs Committee is calling offici= als from the SEC, the Federal Energy Regulatory Commission and the Commodit= y Futures Trading Commission to determine whether regulators missed signs o= f trouble at Enron.=20 In another development Tuesday, Sen. Phil Gramm, one of Congress' biggest r= ecipients of Enron campaign donations, has decided to remove himself from p= art of the wide-ranging congressional investigations.=20 Gramm will be absent from hearings focusing on what went wrong at Enron but= will take part in more general inquiries into accounting standards, invest= or protection issues and other matters, spokesman Larry Neal said.=20 In a sprawling inquiry with both financial and political overtones, 11 Hous= e and Senate committees are investigating the Enron debacle, while the Just= ice Department and the SEC pursue their own less visible probes.=20 Bush urged Congress on Tuesday not to be distracted by the Enron investigat= ion.=20 "I'm confident that all the facts will come out on Enron. And I'm also conf= ident that if Congress has the right attitude, we can get a lot done,'' Bus= h said in a pitch for his economic revival plan.=20 He said his mother-in-law, Jenna Welch, had lost about $8,000 on an investm= ent in Enron stock.=20 "A lot of the stockholders didn't know all of the facts, and that's wrong,'= ' Bush said.=20 The president has received large political contributions over the years fro= m Enron Chief Executive Officer and Chairman Kenneth Lay, who is expected t= o testify before two congressional committees on Feb. 4.=20 Bush said Tuesday that officials in his administration had done "the exact = right thing'' in response to Enron's pleas for help as the company was coll= apsing last year. Treasury Secretary Paul O'Neill and Commerce Secretary Do= nald Evans have said they received calls from Lay but took no action.=20 Enron Manager Fired For Computer Use An Enron manager said he deserved to be fired.=20 Clayton Vernon told the New York Times he was fired for posting a message o= nline that criticized Lay as "the sorriest sack of garbage I have ever been= associated with."=20 Vernon was at work when he posted the message using an Enron computer. He s= aid he knew that violated company policy prohibiting personal use of comput= ers.=20 In a September in-house online chat, Vernon questioned Lay about the compan= y's accounting practices. Lay disagreed when Vernon suggested the company w= as sacrificing its future for the sake of present earnings.=20 Vernon is suing Enron over its business practices.=20 USA: Former Andersen partner seeks to defer testimony. 01/23/2002 Reuters English News Service (C) Reuters Limited 2002. WASHINGTON, Jan 23 (Reuters) - The former Andersen partner who led the audi= tor's work at Enron Corp. has advised lawmakers he will not testify at a he= aring on Thursday unless his testimony is protected from use in court again= st him.=20 David Duncan was subpoenaed late Tuesday by the House Energy and Commerce i= nvestigations subcommittee to help shed light on Enron's rapid collapse las= t year from an energy colossus to the biggest U.S. bankruptcy amid question= able company bookkeeping. But a lawyer for Duncan wrote the committee on Wednesday, saying it was pre= mature to require Duncan to testify "at this hearing at this time."=20 Complaining that Duncan had just, on Tuesday, gotten access to documents fr= om his own files at Andersen, the letter said Duncan would invoke his const= itutional Fifth Amendment right not to testify on Jan. 24.=20 However, "Mr Duncan will testify on January 24 if the committee votes to gr= ant him immunity...," said Robert Giuffra of the law firm Sullivan & Cromwe= ll.=20 Giuffra said Duncan sought full disclosure of the truth and remained commit= ted to cooperating with all pending investigations concerning Enron, includ= ing those in Congress, the Justice Department and the Securities and Exchan= ge Commission (SEC).=20 Duncan was fired earlier this month by Andersen, which alleged he had order= ed the destruction of documents once he learned of a request by the SEC for= information on Enron's financial reporting.=20 Legal experts have said that immunity offered in exchange for congressional= testimony could play havoc with the Justice Department's criminal probe of= Enron and Andersen.=20 House Energy and Commerce Committee spokesman Ken Johnson said on Tuesday t= hat although immunity was one option for witnesses there would be consultat= ions with the Justice Department before it was offered. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Perspectives Perspectives 01/28/2002 Newsweek 17 Copyright (C) 2002 Newsweek Inc. All Rights Reserved. "I am incredibly nervous we will implode in a wave of accounting scandals."= Enron exec Sherron Watkins, in an August memo to CEO Kenneth Lay, suggesti= ng that company leaders knew of its precarious financial situation long bef= ore they've admitted they did=20 "All the facts that you know now are just the tip of the iceberg." A lawyer= involved in the Enron bankruptcy, on the energy company's unfolding financ= ial scandal "We may never know why he turned his back on our country and our values, bu= t we cannot ignore that he did. Youth is not absolution for treachery." Att= orney General John Ashcroft, on charging Taliban fighter John Walker with c= onspiring to kill U.S. citizens in Afghanistan=20 "Always chew your pretzels before you swallow." President George W. Bush's = warning to a heartland crowd after his choking-fainting spell=20 THANK YOU JAMES EARL RAY FOR KEEPING THE DREAM ALIVE. A plaque ordered by L= auderhill, Fla., for its Martin Luther King Day celebration. It was suppose= d to honor acting legend James Earl Jones, not Ray--the man who assassinate= d the civil-rights leader in 1968.=20 "Reassurance is good. Cash is better." Ahmad Fawzi, spokesman for the Unite= d Nations special envoy to Afghanistan, on long-term American support for t= he nation=20 "Israel will not remain indifferent when our people are killed... We are go= ing to respond in a manner which will teach the Palestinians a lesson they = will not forget." Israeli government spokesman Avi Pazner, on last week's s= uicide bombing at a bat mitzvah. In retaliation, Israel leveled the Palesti= nian government headquarters in Tulkarem.=20 "He was a time bomb waiting to go off." Dr. Jack Briggs, a coroner for Buch= anan County, Va., where a suspended student at the Appalachian School of La= w apparently went on a shooting spree, killing three and wounding three oth= ers. Briggs had treated the alleged shooter, Peter Odighizuwa, for stress.= =20 "Luxury disgusts me." Billionaire fashion designer Giorgio Armani, on his n= ew proletariat-inspired--though still very expensive--men's collection=20 "Everything has changed in America, but Groundhog Day is one way of showing= the world we are getting back to normal." Bill Cooper, president of the Pu= nxsutawney Groundhog Club in Pennsylvania, which sponsors Phil's annual sha= dow-spotting expedition=20 Quotation sources from top to bottom, left to right: Enron memorandum, New = York Times, Ashcroft press conference, The Washington Post, Reuters, New Yo= rk Times, MSNBC, press conference, Armani's Milan show, Reuters=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business/Cover Stories You're On Your Own ; The Enron lesson: in making critical decisions, consum= ers are at sea. Here is a survival guide Daniel Kadlec 01/28/2002 Time Magazine Time Inc. 24 (Copyright 2002) Choice is good. We Americans consider it a measure of our freedom and a sou= rce of our innovation and prosperity. Riches flow to the person who builds = a better mousetrap--or computer mouse. Yet a grocery shopper blankly starin= g at hundreds of varieties of toothpaste might reasonably conclude that the= re can be too much of a good thing. Mark Lepper, a psychology professor at = Stanford, and Sheena Iyengar, an associate professor of management at Colum= bia, illustrated this point with a simple study. In a grocery store, they s= et up tasting booths that offered either six or 24 types of jam. Shoppers f= ound the wider selection more enticing: 60% who passed it stopped and taste= d, while only 40% stopped at the booth with fewer flavors. Yet the wider se= lection was confounding; just 3% who sampled there bought anything, while 3= 0% made a purchase at the other booth.=20 The tendency to feel overwhelmed and do nothing probably saves us money on = jam. But it is becoming increasingly dangerous as society hands us more and= more responsibility for vital and complex decisions about our savings for = college and retirement, our family's health care and the providers of utili= ties ranging from electricity to cellular-phone service. Responsibility is = always the price of freedom. But we are now responsible for so many decisio= ns requiring so much homework that many of us feel helpless and paralyzed. = The risks of inaction or unwise action are rising, even as many of the prof= essionals on whom we would like to rely for guidance are proving untrustwor= thy and even corrupt. Then came Enron. What makes this case so scary is that the shady ethics and= the deception that suddenly bankrupted one of the world's most innovative = companies have become pervasive--and much of it is legal. It's not unreason= able to fear that the next Enron could be lurking in your 401(k) account or= paying your salary. If the corporate directors and auditors and stock anal= ysts who were supposed to be looking out for the interests of shareholders = at Enron could be bought off with consulting and underwriting fees, we know= they are probably being bought off elsewhere too. From 1998 to 2000, 397 p= ublicly traded companies had to restate their financial results, and big fi= rms like Sunbeam and Cendant have paid to settle shareholder suits alleging= fraud.=20 The social safety net for the unemployed is not the only thing that the gov= ernment has loosened. It has also pulled back from the regulation of busine= ss. That's a direction we have chosen through our own elections, and in man= y ways it has served us well. But what we didn't anticipate was the degree = to which lightly regulated companies would be able to corrupt the professio= nals on whom we have relied to guide us through complex financial and medic= al matters and to look out for our interests. We now know that we can't tru= st stock analysts and financial planners, who often get paid more for selli= ng us shaky stocks and mutual funds than for selling us solid ones.=20 For several months after Sept. 11, Americans have felt ourselves pulling to= gether. But the Enron scandal has shown us or perhaps reminded us that when= money is involved, we are truly on our own.=20 Consider retirement. In 1985 the number of U.S. companies offering guarante= ed pensions to their workers was 114,000. Only 38,000 did so in 2000. Filli= ng the gap are 401(k) and other employer-sponsored plans that have introduc= ed millions of Americans to the benefits of stock investing in the 1990s an= d created many millionaires, at least on paper. But these savings plans don= 't guarantee anything. Future benefits depend on how wisely we invest--whic= h looked pretty easy until the market turned south two years ago. Now we ar= e learning how much we don't know about risk and diversification and how po= orly equipped most of us are to choose among 8,282 U.S. mutual funds. The y= earning for reliable advice is so widespread that a Charles Schwab commerci= al shows a family doctor who makes a house call (remember those?) and winds= up giving investment advice. "Wouldn't it be nice," goes the ad slogan, "i= f the person you trusted most was your financial adviser?"=20 Homeowners, meanwhile, must figure out whether they are better off with a t= raditional 30-year fixed-rate mortgage, a straight adjustable rate or a 3/1= hybrid. Parents must decide whether they should save for college in a Sect= ion 529 plan (who on earth names these things?) or a Coverdell ESA. We all = want Marcus Welby for our doctor, but he is not among the options offered b= y our employer. Instead, we must choose among an HMO, a PPO or a POS. And i= f we lose our jobs, we must learn to get insurance through COBRA. Read a 4-= in. pile of paper, and call me in the morning.=20 We are accustomed to having our dinners (not to mention our HMO homework) i= nterrupted by the peddlers of long-distance phone plans. But now they have = been joined by folks pushing wireless service and, in more and more communi= ties, by sellers of competing local phone service. As a result of the dereg= ulation movement championed by Enron, some Americans must choose among comp= eting electricity suppliers. If you pick the cheap one, does the power go o= ut more often? Who knows? And to access the wonders of the high-speed Inter= net, heads of household must choose among a cable-TV modem, a DSL phone lin= e and a satellite link.=20 Having such choices should be a blessing. And we would probably see it that= way if we could somehow manage to schedule one gnarly piece of homework at= a time--or get some reliable help. What's the answer? Some call for more g= overnment oversight. For now, responding to the anxiety in the air, Republi= cans have set aside their plans for private investment accounts for Social = Security. In the long run there is no turning back this age of self-determi= nism. Sooner or later, your Social Security income will be partly a functio= n of how well you choose stocks--and in many other areas too your choices w= ill make or break you.=20 Some cope by focusing their research not on the best investments or health = plan or broadband provider but on experts to guide them-- preferably friend= s or colleagues, but failing that, professionals paid in a way that puts th= em on your side, not serving someone else's agenda. The following articles = examine three areas in which research is often the most daunting--investing= , health care and wiring your home--and offer some helpful resources. So do= your homework. The choice is yours. B/W PHOTO: PHOTOGRAPH BY WHITE.PACKERT--THE IMAGE BANK COVER So many choice= s, and no one to trust. In today's world... YOU'RE ON YOUR OWN, BABY Could = an Enron happen to me? Can I count on my broker? Can I trust my HMO? Is my = phone service ripping me off? Who's looking after my 401(k)? B/W PHOTO ILLU= STRATION: PHOTO-ILLUSTRATIONS FOR TIME BY AARON GOODMAN=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business/Cover Stories Your Money: Old Safety Nets Are Gone. Here's What To Do Daniel Kadlec; With reporting by Bernard Baumohl and Eric Roston/New York; = and Jeffrey Ressner/Los Angeles 01/28/2002 Time Magazine Time Inc. 26 (Copyright 2002) The little guy was let down by all of them--executives, board members, audi= tors and stock analysts. They all failed to signal trouble at Enron before = it collapsed, and their negligence (or worse) offers the single broadest ex= ample of how workers and individual investors have been abandoned by so man= y of the people they have relied on to look out for their interests in comp= lex financial matters. Each of these groups of professionals had a conflict= of interest--a financial stake in keeping investor dollars flowing into En= ron stock. And the erstwhile government and industry watchdogs over these p= rofessionals face similar conflicts at other big companies.=20 As Enron's stock dropped from $80 to under $1 in less than a year, thousand= s of employees saw their life savings wiped out in the company's 401(k) ret= irement plan. They weren't the first to suffer that fate. Devastating stock= declines have hammered the 401(k) savings of workers at such companies as = Lucent, Waste Management and Xerox. And other big plans are vulnerable. Coc= a-Cola, for example, has 81% of its 401(k) assets in Coke stock. The venera= ble beverage company is no Enron, yet Coke's slumping stock has been pinchi= ng 401(k) participants for years, sliding 49% from its peak in July 1998. O= ther firms that have more than 70% of plan assets tied up in company shares= include McDonald's, Procter & Gamble and Texas Instruments. Protecting the $1.8 trillion that 37 million Americans have in 401(k) plans= is suddenly a hot issue in Washington. Senators Barbara Boxer of Californi= a and Jon Corzine of New Jersey propose forbidding plans to invest more tha= n 20% in any one stock. In an opinion last month, the Labor Department made= clear that it won't hold firms liable for third-party advice they make ava= ilable to 401(k) investors, which could encourage them to offer it, and a b= ill from Representative John Boehner of Ohio would advance the ball by lega= lly removing liability for specific asset allocation and other employer- sp= onsored advice. President Bush ordered "a policy review to protect people's= pensions," which is vague but moving in the same direction. Calpers, the b= ig public-employee pension fund in California, says it will press firms it = invests in to reform their plans to encourage broad diversification.=20 Michael Sparno, a midlevel manager for Xerox, wishes such reforms had come = a couple of years sooner. As the shares of his once mighty employer tumbled= in price from $60 to $10 in less than two years, his 401(k) account--rough= ly 30% invested in Xerox stock--took a big hit. "I'm reviewing things now w= ith a much more hands-on approach," he says. He is contributing less to the= 401(k) and investing more in real estate and alternative tax-favored accou= nts like a Roth IRA.=20 Yet Sparno and other 401(k) victims must accept some responsibility for the= ir troubles. In most plans, the only stock you must hold are shares the com= pany gives you as a matching contribution. Where retirement-fund disasters = have occurred, employees have generally been found to own more company stoc= k than necessary. That was the case at Enron, where management's do-no- wro= ng hubris filtered down to employees, who rode their 401(k)s to huge paper = gains between 1998 and 2001. Even as the stock began to slide, many believe= d it would come back stronger than ever--or were too dumbfounded to sell.= =20 None of this exonerates Enron management, which hid the depth of the firm's= financial problems and talked up the stock while top managers were selling= their personal stakes. The rank and file had an additional problem: the 40= 1(k) plan was in a lockdown--assets were frozen during an administrator cha= nge--for part of the stock's collapse. "Not only are you on your own, but y= ou have to watch your back," advises Eli Gottesdiener, a Washington attorne= y who represents 401(k) participants at Enron.=20 What can you do? Start by telling your Congressman and Senators that you su= pport efforts to lift restrictions on when you can sell company shares that= have been given to you and to place limits on how much employer stock can = be stuffed into a 401(k) or other employer- sponsored plan. But the most im= portant step is for you to take charge of your retirement account. First, m= ake sure you're safely in a mix of diversified stock and bond mutual funds = at all times, in case one of your investments drops suddenly or your plan i= s locked down for several weeks.=20 Next, hold as little as possible of the stock of your employer, whose fortu= nes already affect your job security and career advancement. Most big compa= nies match part of each worker's 401(k) contributions in company stock, whi= ch can't be shifted into other investments until you reach age 50. As soon = as you hit that magic birthday, shift those holdings into diversified stock= and bond funds. If your employer gives you options to buy company stock, c= ash them in periodically after the stock has made a strong move higher. You= 'll owe tax. But you can take what's left and diversify. And if you buy sto= cks outside your 401(k) plan, avoid the shares of companies in the same ind= ustry as your employer.=20 The Enron scandal has revealed that many auditors and accountants- -at that= company and elsewhere--are rubber-stamping stooges of management. It's com= mon practice for accounting firms to collect consulting fees from companies= whose books they audit, often doubling their revenue from one client, as w= as the case with Arthur Andersen and Enron. Any accountant who raises flags= in an audit puts his firm's consulting fees at risk. That's a clear confli= ct of interest and should be outlawed. Short of that, publicly traded compa= nies should be required to change auditors every few years. A new auditor w= ould have a strong incentive to point out, and not get blamed for, any ques= tionable work by his predecessor. Some have suggested that regulators stop = requiring annual audits altogether. "An audited financial statement used to= mean something," sniffs Ed Cowart, a money manager at Eagle Asset Manageme= nt. "Things have deteriorated to where auditor comments are meaningless."= =20 Audits haven't slowed an epidemic of misstated corporate earnings reports. = From 1990 to '97, an average of 49 companies a year had to restate their re= sults. That number jumped to 91, 150 and 156 over the next three years, rep= orts Financial Executives International, which studies accounting issues. I= n each case, shareholders were deceived. The firms that restated earnings b= etween 1997 and 2000 lost a collective $41 billion of market value the week= following their announcements. With the problem growing so broad, it might= be just as well to skip the independent audits, which have turned into sha= m endorsements that mislead investors.=20 Until the system is reformed, what can an individual investor do? Watch for= independent analysis from agencies like Moody's, Standard & Poor's and Val= ue Line. Look skeptically on any stock for which accounting issues have bee= n raised. Tyco International has been the subject of accounting questions f= or two years, during which the stock has gone nowhere. New questions flared= last week, and the stock tumbled 8%.=20 Sarah Teslik, executive director of the Council of Institutional Investors,= is worried that for all the clamor in Washington, not much will change. Th= e Securities and Exchange Commission's proposal to set up an independent ov= ersight board for the accounting industry is just another form of self-poli= cing and won't be effective, she says. "Too many people have a real interes= t in keeping things the way they are," she says, noting that many former la= wmakers end up as corporate- board members while officials at the SEC are o= ften accountants themselves or, like SEC chairman Harvey Pitt, former lawye= rs for accountants.=20 Teslik is especially concerned about corporate-board reform, and would like= to see board members held personally liable for gross mismanagement. At a = minimum, she wants greater disclosure of conflicts of interest. At Enron, f= or example, directors were partners with management in various side investm= ents or earned big fees as consultants. Employees and investors should look= out for such conflicts. "Almost uniformly, when companies go bad, there is= a pattern like this," Teslik says. "The company is trying to buy silence."= =20 Another way investors can monitor a company is by listening in on analyst c= onference calls, which are open to the public via the Internet. You will ge= t a sense of the questions that management is dodging.=20 The conflicts of stock analysts at big brokerage firms have been well aired= since the dotcom collapse. Too many serve the investment bankers at their = firms rather than investors. That was a big problem with Enron. The company= floated billions of dollars of debt and spent billions more gobbling up sm= aller companies--all of it amounting to a fountain of fees for Wall Street = firms that stayed in the company's good graces. Analysts, who often get pai= d on the basis of the underwriting business they help secure rather than on= good stock picking, were under tremendous pressure not to ask tough questi= ons and to maintain their buy rating.=20 This subject was probed in Congress last summer, and the brokerage industry= has responded with guidelines for ethical behavior. As a result, many firm= s are disclosing more conflicts. So take a close look at research documents= to see whether an analyst has bought or sold any of the stock under review= or if the firm is or has been an underwriter of the company's stock or deb= t. When in doubt, the wise investor should be skeptical about stocks touted= by brokers or other representatives of big firms like Merrill Lynch and J.= P. Morgan Chase. Instead, seek independent information and advice from Stan= dardandPoors.com, and from good financial websites like Morningstar.com and= Fool.com.=20 Financial conflicts are also common among experts who advise us closer to h= ome. Ask Laura and Barry Marks, who lost their stationery store, Fine Lines= , in Katonah, N.Y., after their insurance agent told them they couldn't get= flood insurance--and they were flooded. "We asked for a complete commercia= l package to cover any type of inevitability, down to a letter falling off = of our sign," Barry Marks says. But their insurer didn't offer flood insura= nce; only Uncle Sam does. That means private insurers have no incentive to = market it, which is why many agents are misinformed.=20 In recent years, insurance companies have found new ways to shift risk to p= olicyholders. Fast disappearing is homeowner coverage that guarantees repla= cement. Among the very largest underwriters, only Chubb still offers this o= nce common policy. Others shift the risk of miscalculating a home's value t= o the homeowner. But careful shoppers can still find replacement coverage a= t smaller firms.=20 Your financial planner may be selling you poorly performing annuities and o= ther products that earn him a fat commission. One solution: hire a fee-only= planner who agrees to be paid by no one but you. Similarly, the real estat= e agent helping you buy a home may try to rush you into one that's not appr= opriate just to get a deal done quickly. One solution: hire a buyer's agent= who works only for you. In these cases and others, you often have to pay a= little more on the front end to save on the back end. And you're wise to i= nvest time researching the person who will guide you. That way you won't ha= ve to research every new issue that arises in your financial life.=20 --With reporting by Bernard Baumohl and Eric Roston/New York and Jeffrey Re= ssner/Los Angeles=20 IS YOUR BROKER ON THE MONEY?=20 Number of stocks in the benchmark S&P 500 index that one or more analysts (= usually at a small firm) rated "sell" or "strong sell" last year: 89=20 Number of S&P 500 stocks that are down over the past 52 weeks: 272=20 Market value lost in all publicly traded U.S. stocks, past 52 weeks: $2 tri= llion=20 Sources: Zachs Investment Research (2); Wilshire 5000 B/W PHOTO ILLUSTRATION: PHOTO-ILLUSTRATIONS FOR TIME BY AARON GOODMAN COLOR= PHOTO: CHERYL HIMMELSTEIN FOR TIME 401 K-O Sparno was burned by heavy inve= stment in his own employer's stock. He's now diversifying his portfolio=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business/Political Favors What $6 Million Can Buy Karen Tumulty and Michael Weisskopf 01/28/2002 Time Magazine Time Inc. 20 (Copyright 2002) For argument's sake, let's concede the point that everyone in the White Hou= se has been at such pains to make: No one in the Bush Administration lifted= a finger to save Enron from collapse. But that doesn't mean the $6 million= in campaign contributions the company and its executives gave to politicia= ns over the past 12 years should be written off as a bad investment. For mo= st of that time, Enron's Washington friends did pretty much whatever the co= mpany wanted.=20 What Enron wanted most was to be left alone, free of both regulation and sc= rutiny as it transformed itself from a dowdy natural- gas-pipeline company = into a freewheeling energy-and-communications giant. In the early 1990s Enr= on became a new kind of business, selling not just energy but exotic financ= ial instruments such as energy futures and options. The company moved the h= eart of its operations from the oil patch to the trading floor--largely fre= e of regulatory baggage, thanks to allies such as Wendy Gramm. In 1993, as = chairwoman of the Commodities Futures Trading Commission, Gramm helped desi= gn rules that exempted energy trades from government regulation. That meant= Enron could operate an online energy market that, unlike traditional stock= and commodity exchanges, did not have to disclose the price, volume or ter= ms of the contracts it sold. Gramm left government that year and was given = a lucrative spot on the Enron board. She is the wife of Texas Senator Phil = Gramm, to whom the company has donated $97,000 since 1989. There were also times Enron found a little government intervention came in = handy. When India delayed approval of Enron's $3 billion power plant in Dab= hol in 1996, Clinton White House counselor Mack McLarty instructed the U.S.= ambassador in New Delhi to monitor it and gave regular progress reports to= Enron chairman Ken Lay. (Four days before the project received its final O= .K., Enron gave $100,000 to the Democratic National Committee.) And when En= ron was trying to sell its interest in the Indian project, the New York Dai= ly News reported, Vice President Dick Cheney raised the issue in a meeting = last June with Indian opposition leader Sonia Gandhi. The White House says = he was acting not at Enron's behest but on the need to protect $640 million= in federal money.=20 More often than not, Enron's interests and the agenda of George W. Bush hav= e been happily congruent. Enron has given Bush more than $700,000 in contri= butions over the years. Lay was disappointed last year when Bush backed awa= y from a global-warming plan that would have been good for the natural-gas = business, but Bush sided with the company in refusing to back price caps on= California energy, of which Enron was a major supplier. Larry Lindsey, Bus= h's top economic adviser and a former Enron consultant, has battled on free= -market grounds to preserve the kind of overseas tax shelters that hid Enro= n's true financial condition for so long. And in August Lay's backing helpe= d put his friend Patrick Wood at the head of the Federal Energy Regulatory = Commission, replacing a chairman who had opposed Enron's deregulation timet= able.=20 Enron also found plenty to like in the controversial White House energy pla= n that Cheney produced last year: open access to electric- utility transmis= sion lines, more deregulation initiatives and support for Enron's arcane fi= nancial instruments. "There is no company in the country that stood to gain= as much from the White House plan as Enron," wrote California Congressman = Henry Waxman, a leading Democratic critic, in a letter to Cheney last week.= In the recent battle over an economic-stimulus bill, Lay lobbied for--and = Bush supported--retroactive corporate tax relief. Enron would have been one= of many beneficiaries, reaping a $254 million rebate from the government.= =20 For more than a decade, Enron spent lavishly to untether itself from govern= ment oversight. But it became so notorious that it gave up any chance of a = political lifeline. Last fall, when the company was begging for rescue, Bus= h Administration officials say it was unanimously rebuffed. Enron had hired= the best lobbyists-- powerhouses such as Republican chairman Marc Racicot = and Bush adviser Ed Gillespie, who can usually make things happen--but they= too are distancing themselves, saying they were kept in the dark about the= depth of the company's problems. For the first time, what Enron needs is m= ore than money can buy. B/W PHOTO: BROOKS KRAFT--GAMMA TEAMMATES Before he was a Bush aide, Lindsey= , right, served as a consultant for Lay's company COLOR PHOTO: ROGER WOLLEN= BERG--UPI POLITICAL GAIN Gramm and wife, Enron allies, at a state dinner la= st fall=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business The Enron Effect; As the accounting scandal spreads, regulators and politic= ians are pounding the table for reform. But will anything really change? By Allan Sloan and Michael Isikoff With Mark Hosenball and Rich Thomas in W= ashington 01/28/2002 Newsweek 34 Copyright (C) 2002 Newsweek Inc. All Rights Reserved. It was like the surgeon general's accepting a public-health award named aft= er Typhoid Mary. Here was Federal Reserve Board chairman Alan Greenspan, re= nowned for rectitude, accepting the Enron Award for Distinguished Public Se= rvice. This wasn't during Enron's glory days, when the company had a stock-= market value in the tens of billions, but on Nov. 13. That was only a few d= ays after Enron endured a public disgrace by admitting that it had filed fi= ve years' worth of misleading financial reports. And it was three weeks aft= er Greenspan had gotten a call from Enron chairman Kenneth Lay, who despera= tely wanted Greenspan to intervene with credit-rating agencies to help the = stricken company survive.=20 The ceremony had its awkward moments. Consider the answer Greenspan gave du= ring a Q&A session to a student who asked how to succeed in this difficult = job market. "The best chance you have of making a big success in this world= ," Greenspan said, "is to decide from square one that you're going to do it= ethically." Greenspan, through his spokesman, told NEWSWEEK that he hadn't= had Lay in mind when he gave that answer, a Freudian slip if there ever wa= s one. What was Greenspan doing there in the first place? His press aide ex= plained that he had committed a year earlier to former secretary of State J= im Baker to accept the honor. The James A. Baker Institute of Public Affair= s awards the prize, which is funded by Enron. (Baker had once been a consul= tant to Enron, sponsoring its interests in Kuwait not long after the gulf w= ar ended. But that's another story.) Greenspan turned down the $15,000 scul= pture accompanying the prize--imagine that sitting in the Fed's lobby--and = declined the $10,000 honorarium. The Greenspan story may be the most startling example of how Enron managed = to ensnare seemingly everybody and every company worth snaring. Now that we= 're in the all-Enron-all-the-time news cycle, we're getting answers to "Who= knew what when?" Revelations from last week: people at Arthur Andersen, En= ron's outside accountant, were worried about the Enron numbers they were ce= rtifying, but did nothing. Ken Lay got a prescient letter from a whistle-bl= ower in August warning that "I am incredibly nervous that we will implode i= n a wave of accounting scandals," but in September he was still telling emp= loyees that the stock was "an incredible buy." (It's since fallen to almost= nothing.)=20 The focus is now shifting to the next obvious questions: what's being done = to prevent another Enron? And will anything really change once attention mo= ves on, as it inevitably will, to the next scandal? Harvey Pitt, the head o= f the Securities and Exchange Commission, is proposing to set up a new over= sight body to police the accounting profession. Business heavyweights want = to beef up corporate-governance rules to force boards to pay more attention= to what managers are doing. Politicians are calling for rules to limit the= amount of company stock that people can hold in retirement accounts to pro= tect workers from riches-to-rags stock plunges like the one that's turned s= ome Enronites from paper millionaires into people having trouble paying foo= d bills during their golden years.=20 But for all the table-pounding calls for change now, urgency has a tendency= to dissipate. There have been plenty of accounting scandals before--Sunbea= m, Cendant, Waste Management, to name some recent fiascoes--but nothing see= ms to have changed all that much in response to them. Corporate America and= the accounting profession have a remarkable ability to frustrate fundament= al reform. Shortly before he came to the SEC, chairman Pitt, representing A= rthur Andersen as his client, fought fiercely against tougher regulation of= accountants. His current proposal is far milder than the reforms he helped= defeat not long ago. Those would have made accountants accountable to fede= ral regulators, not to a self-policing body, as Pitt proposes. And Sen. Jos= eph Lieberman, who's holding hearings and demanding post-Enron reforms, led= the assault on the Financial Accounting Standards Board when it tried to c= lose the most glaring loophole in the accounting system: letting companies = hand out millions or billions of dollars' worth of stock options to employe= es, but not counting that cost as a charge against profits.=20 While politicians and theoreticians struggle with the idea of reform, real = and immediate solutions to particular problems tend to come from people lik= e Enron whistle-blower Sherron Smith Watkins, who warned Lay about accounti= ng problems. Watkins, 42, who recently became a mother for the first time, = has a highly developed moral sense and was incredibly courageous. But even = having the right person in the right place blowing the whistle about the ri= ght thing won't change a place like Enron that didn't want to change.=20 As we now know, thanks to subpoenaed documents that have become public, Wat= kins warned Ken Lay last August that the company had inflated its reported = profits with suspect accounting. Watkins, besieged by interview requests, w= ouldn't talk to us. But we can reconstruct her story with now public docume= nts and with information from her lawyer, Phillip Hilder of Houston. Like m= any of her fellow employees, Watkins, an Enron vice president, was worried = on Aug. 14 when Enron's chief executive and resident numbers whiz, Jeffrey = Skilling, abruptly resigned. Watkins, who has a master's degree in accounti= ng and is a CPA, got a company-wide invitation Lay sent everyone to a meeti= ng at the Houston Hyatt Regency on Aug. 16. The message also urged employee= s to send him letters, anonymously if necessary, if they thought there was = something he should know. Watkins dropped off an anonymous one-page letter = before the meeting. Lay's speech inspired her. So she wrote a detailed six-= page letter and gave it to Lay after meeting with him on Aug. 22. It's not = clear how much Lay knew about Enron's financial shenanigans at the time--al= though ignorance is no excuse for the chief executive officer.=20 "Ken Lay was professional and concerned, and he promised to investigate," l= awyer Hilder said, adding that "the company has treated her in a profession= al manner, and she is still employed there."=20 But what effect did her note have? Not much. As we see from other internal = documents that have become public, Watkins's letter was turned over to Enro= n's outside law firm, Vinson & Elkins, which investigated the charges. The = firm dispatched a nine-page letter to Enron saying that Watkins's concerns = did not, "in our judgment, warrant a further widespread investigation by in= dependent counsel and auditors." The V&E letter hedged, though, by warning = of public-relations and legal dangers if some of the deals Watkins warned a= bout became public.=20 The V&E letter was dated Oct. 15. The very next day, Enron revealed that it= had lost more than $600 million in the third quarter. That touched off the= very meltdown that Watkins had feared.=20 Meanwhile, it turns out, Watkins had aired her concerns with a former Ander= sen colleague at the Houston office, and asked him for a financial-sanity c= heck before delivering her letter to Lay. (We know this from an internal An= dersen memo that's become public.) But no one seems to have done more than = to create a paper trail that showed their concern. Meanwhile, yet another d= isclosed document shows that earlier last year, some Andersenians were cons= idering having the firm drop Enron as a client because Enron's aggressive a= ccounting was making them nervous. But Andersen kept the account, which bro= ught in $52 million in 2000 and had the potential to rise much further, tha= nks to Enron's voracious appetite for consulting services.=20 Andersen is under intense pressure for having certified Enron's bogus numbe= rs. It's also being investigated for shredding Enron documents. And it fire= d the head partner on the Enron account two days after he talked to federal= investigators. It sure looks like Enron and Andersen--each of which claims= to have fired the other--are trying to stick each other with the blame.=20 But even as one part of the federal government is investigating criminal ch= arges against Andersen for document-shredding, among other things, the FBI = is relying on Andersen's information-systems expertise. Last summer Anderse= n undertook the job of reforming the FBI's record-keeping. That was after t= he FBI admitted losing thousands of documents in the Timothy McVeigh case, = which briefly delayed his execution. "This study, by a firm of Andersen's c= aliber, will provide valuable information to enhance the institutional inte= grity and performance of the FBI," Attorney General John Ashcroft said. And= ersen's report is due soon.=20 The key to the Enron mess is that the company was allowed to give misleadin= g financial information to the world for years. Those fictional figures, sh= owing nicely rising profits, enabled Enron to become the nation's seventh l= argest company, with $100 billion of annual revenues. Once accurate numbers= started coming out in October, thanks to pressure from stockholders, lende= rs and the previously quiescent SEC, Enron was bankrupt in six weeks. The b= ottom line: we have to change the rules to make companies deathly afraid of= producing dishonest numbers, and we have to make accountants mortally afra= id of certifying them. Anything else is window dressing.=20 With Mark Hosenball and Rich Thomas in Washington=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business The Great Giveback; Enron's turned a capital pastime upside down: the Beltw= ay's racing to give away, not pocket, the giant's cash By Howard Fineman With Eleanor Clift in Washington 01/28/2002 Newsweek 37 Copyright (C) 2002 Newsweek Inc. All Rights Reserved. The Jefferson is a tiny little hotel, with antiques in the lobby and pillow= ed nooks in the bar. It's a venue for one of Washington's favorite sports: = giving and getting campaign contributions. But last Friday Sen. Joe Lieberm= an and his advisers met there for the opposite reason: to discuss whether h= e should donate to charity the $13,500 he'd received over the years from En= ron and its estranged accounting firm, Arthur Andersen. A star Democrat wit= h his eye on the White House, Lieberman this week launches hearings on the = Enron collapse and on the Bush crowd's ties to the company. Now the senator= is the target of the Republicans' one-word war cry: hypocrisy. "At one lev= el, giving the money back would be a kind of showboating," he told NEWSWEEK= . "On the other hand, it might be worth it to eliminate any question of a c= onflict of interest."=20 Suddenly, giving away is all the rage, and it's not a matter of charity but= political survival. Post-Enron Washington is like post-Taliban Kabul: Ever= yone is shocked, shocked at what was going on in the capital until the tank= s rolled in, and now everyone is frantically shaving his donor lists. Senat= ors who are pledging to give away donations--usually to Enron employee vict= ims' funds--include Kay Bailey Hutchison, Chuck Schumer, Hillary Rodham Cli= nton and John McCain. Their aim is to buy back the privilege of moral indig= nation. "No bones about it," McCain told NEWSWEEK. "I'm tainted by it, too.= " There was no mea culpa or return-to-sender from President George W. Bush. H= is aides insisted that they had neither been tainted nor guided by Enron, a= nd there was no evidence that they had done anything illegal or even unseem= ly. Still, White House insiders behaved like people with something to hide,= and the story was less about the substance of the contacts than their bela= ted, grudging disclosure to the press.=20 The list was a lengthening one. On Jan. 11, a top administration aide denie= d that Commerce Secretary Don Evans had told White House officials about En= ron's shaky finances in October. In fact, Evans admitted Jan. 13, he had to= ld chief of staff Andy Card. Last week it emerged that economic adviser Lar= ry Lindsey, formerly a $50,000-a-year consultant to Enron, had conducted a = study of the company's weak condition. Vice President Dick Cheney acknowled= ged that he'd touted the cause of an Enron power-plant project supported by= Team Bush. Even so, the White House refused to release records of the Chen= ey Energy Task Force, while insisting it contained no favors for Enron.=20 The White House remained secure in the knowledge that Enron had tried to li= ne all pockets, not just those in Bush's trousers. Indeed, new evidence eme= rged daily of the company's almost manic attempts at influence acquisition-= -from its support of the Houston Olympic Committee to a $50,000 payment to = Paul Krugman, The New York Times's economic columnist, who disclosed that h= e'd been paid to serve on an Enron advisory board. Last summer, NEWSWEEK ha= s learned, Enron paid one of Al Gore's closest allies, fund-raiser Johnny H= ayes, to lobby Democratic National Committee Chair Terry McAuliffe. The aim= : to indirectly pressure California Gov. Gray Davis into backing off his at= tacks on Enron and other out-of-state energy companies. McAuliffe told Haye= s to get lost. Enron later forked over $100,000 anyway--an apparent attempt= to show ties to both parties.=20 Democrats hoped to gain some traction for attacks on the GOP. "This will re= mind people of where the Republicans' loyalties lie," said poll taker Harri= son Hickman. Still, not all Democrats seemed eager to lead the charge (the = most active Hill investigator seemed to be GOP Rep. Billy Tauzin). The real= beneficiaries--if any--may only be those who can claim the title of "outsi= der."=20 The first step toward that sainted status, McCain argues, is to accept the = Enron mess as proof of the need for campaign-finance reform. His allies in = the House are two votes short of the 218 they need to force a vote. McCain = recorded phone-bank calls aimed at swing districts, and his aides recently = asked Minnesota Gov. Jesse Ventura to call two "undecideds" in the state. "= Failure to pass this now will further lower respect for the two-party syste= m," said McCain, who flirts with running for president as an independent. "= We're piano players in the House of ill repute." The music may have stopped= for Enron, but the band is still playing in town.=20 Photo: SIFTING THROUGH THE ASHES: House investigators examine Enron records= =20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 The Last Word 'Events, Dear Boy, Events'; Enron is not--yet--much of a political scandal,= but has many facets awkward for Republicans By George F. Will 01/28/2002 Newsweek 64 Copyright (C) 2002 Newsweek Inc. All Rights Reserved. When Harold Macmillan became Britain's prime minister, he was asked what wo= uld determine his government's course. He replied with Edwardian languor: "= Events, dear boy, events." As he well knew. An event--the 1956 Suez debacle= --had catapulted him into 10 Downing Street. An event--the sex-and-spies Pr= ofumo scandal--would grease the skids under him in 1963.=20 Pesky things, events. As usual, they are in the saddle, riding mankind. The= y will shape this election year. The first shaping event has happened, in H= ouston. Enron's sudden collapse from overdoses of arrogance and villainy has become= the second most significant event--second only to September 11--since Geor= ge W. Bush became president. It is just the sort of event that Republicans = do not want to raise the curtain on in an election year. It is not like the= Credit Mobilier scandal (corrupt contracting in the construction of the Un= ion Pacific Railroad, 1865-69) or the Teapot Dome scandal (fraudulent leasi= ng of federal oil reserves), both of which involved malfeasance by people i= n Washington. Enron is, in a way, worse.=20 Enron is a systemic failure, implicating the range of institutions, from ac= counting firms to boards of directors, that are designed to justify broad p= ublic confidence in the functioning of what is supposed to be a mature capi= talist system--confidence that is increasingly indispensable, given the rap= idly broadening demographics of stock ownership. (For example, in 1980 less= than 6 percent of Americans participated in mutual funds; today more than = half do.) As an economic scandal--a scandal of behavior in the private sect= or--it may be the worst in American history. But even though the Enron stor= y is--so far--not much of a scandal involving the political class, it is ri= ch in elements potentially awkward for Republicans.=20 It involves Texas. (Anti-Texan stereotyping is a kind of "profiling" that m= any liberals approve.) It involves a (formerly) big corporation. It involve= s the fifth (Arthur Andersen) and 12th (Enron) largest givers to the Bush c= ampaign. It suggests an insufficiency of government regulation relative to = the quantity of private-sector vice.=20 Enron's prosperity was a bubble produced by trickery and pricked by reality= . Bush's stratospheric approval ratings, being the result of solid performa= nce, will not suddenly collapse, but cannot continue. And judging by the th= umping Republican losses in the two important elections in 2001--they lost = the New Jersey and Virginia governorships by 14 and 5 points, respectively-= -his popularity is not transferable. Granted, he did not campaign in either= state. But the reason he did not--the war--may inhibit his political campa= igning this year.=20 In 2000, for the first time since 1952, Democrats failed to win either the = White House, the House or the Senate. They now control the Senate. Can they= capture the House this November?=20 Democrats have gained seats in three consecutive elections. Their three-sea= t gain in 1996 was not surprising: there was bound to be a corrective rebou= nd from the 1994 cymbal-crash elections in which Democrats lost 53 seats, e= nding 40 years of Democratic control of the House. Besides, it was a presid= ential election year in which the Democratic incumbent coasted to a comfort= able victory. The continuing rebound from 1994 also helps explain why Democ= rats gained four seats in 1998--just the second time in 34 elections since = the Civil War that the party holding the presidency gained House seats in m= idterm elections. In 2000, Democrats gained one seat.=20 If Democrats gain seats in a fourth consecutive election, it will be only t= he fourth time a party has done that in the 69 elections since the Civil Wa= r. (Not since the Depression. Democrats gained in 1906, 1908, 1910 and 1912= . Republicans gained in 1914, 1916, 1918 and 1920. Democrats gained in 1930= , 1932, 1934 and 1936.) How likely are they to gain the six seats needed to= produce Speaker Dick Gephardt in 2003?=20 Charles Cook, one of the most acute political analysts, notes that Republic= ans cannot count on benefiting from an impulse to rally around the commande= r in chief's party during a midterm election. In the only such election dur= ing World War I (1918, six days before the armistice), President Wilson's D= emocratic Party lost six Senate seats and 19 House seats--and control of bo= th houses. In the midterm election during World War II, in 1942, FDR's Demo= crats lost 45 seats. In the two midterm elections after the escalation in V= ietnam and before the negotiated de-escalation, Johnson's Democrats lost 47= seats in 1966 and Nixon's Republicans lost 12 in 1970.=20 In 1992, the first election after the last redistricting, there was tremend= ous churning of the House membership: 65 representatives retired and 43 wer= e defeated. But in 1992 the national mood regarding Congress was unusually = dyspeptic--remember that year's scandal surrounding members' overdrafts fro= m the House bank--and the term-limits movement was rapidly gaining strength= . This year, only 24 House members (16 Republicans, eight Democrats) are re= tiring, some from politics, others to run for senator or governor.=20 This year, redistricting, by both parties in the states they control, has b= een, even more than usual, devoted to protecting incumbents. In most cases = that has meant making safe seats even safer. As a result, says Cook, the nu= mber of even potentially competitive races in 2002 has shrunk "enormously,"= to perhaps 50, of which perhaps only 24--a dozen now held by each party--w= ill be hotly contested. Perhaps none of California's 53 races will be reall= y competitive. So for Democrats to gain the six seats necessary for control= of the House, "they must win 18 of the 24 closest races, a 75 percent vict= ory percentage." Cook notes that six is a small number out of 435, but 75 i= s a very high percentage.=20 Election Day is more than twice as distant from today as September 11 is. W= hich means there is ample time for the political climate to be conditioned = by the unexpected. Remember the rule: There are knowns, unknowns and unknow= n unknowns. The last include events, dear reader, events.=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Judicial nominee to face questions about Enron contributions 01/23/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. DALLAS (AP) - A federal judicial nominee who wrote a ruling favorable to En= ron Corp. after taking campaign money from the now-bankrupt energy trader w= ill get close scrutiny, Vermont Sen. Patrick Leahy said.=20 Texas Supreme Court Justice Priscilla Owen wrote a unanimous ruling that sa= ved Enron $225,000 in taxes, two years after taking $8,600 in campaign cont= ributions from the company, according to the watchdog group Texans for Publ= ic Justice. President Bush has tapped Owen to become a member of the 5th U.S. Circuit C= ourt of Appeals in New Orleans. She has been awaiting Senate confirmation.= =20 "The Senate will look at Justice Owen's Enron rulings as part of her overal= l record," Leahy told The Dallas Morning News in Wednesday's editions.=20 "She has a right to take contributions, but any judge - liberal or conserva= tive - faces the legitimate question about whether a contribution influence= d their thinking," said Leahy, a Democrat.=20 Owen, a Republican, was the author of a unanimous Texas Supreme Court opini= on in 1996 that settled a tax issue in Enron's favor. The opinion rejected = the Spring Independent School District's argument that the Enron natural ga= s inventory should be assessed at a value $15 million higher than stated by= the company.=20 That decision spared Enron $225,000 in taxes. It came two years after Owen = accepted $8,600 in Enron contributions, according to Texans for Public Just= ice. The nonprofit group tracks campaign spending.=20 Owen has not fielded questions regarding the Enron contribution or her judi= cial decisions. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Congress's Enron Hearings May Open Way to New Laws 2002-01-23 16:53 (New York) Washington, Jan. 23 (Bloomberg) -- Two congressional committees open h= earings tomorrow into the collapse of Enron Corp. that may pave the way for= new rules affecting investors, accountants and energy traders. The House Energy and Commerce Committee and the Senate Government Affa= irs Committee are the first among at least 10 congressional panels to exami= ne what led to the largest bankruptcy in U.S. history. The probes will incl= ude testimony on the destruction of documents at Enron and its auditor, Art= hur Andersen LLP, and the role of executives, accountants, financial analys= ts and regulators in the company's demise. ``It will begin to lay the groundwork,'' said Robert Litan, director o= f economic studies at the Brookings Institution. ``In order for legislation= to move forward, there has to be a case made that a fix is needed.'' Houston-based Enron's bankruptcy on Dec. 2 wiped out $26 billion in ma= rket value and cost the jobs of thousands of Enron employees, who also lost= about $850 million in their company- sponsored pension plans. The hearings= are a response to demands by lawmakers and shareholders to find out how th= at happened. Washington Sentiment President George W. Bush, who got financial backing for his political = campaigns from Enron Chief Executive Kenneth Lay, expressed the mood preced= ing the hearings yesterday. ``What I'm outraged about is that shareholders and employees didn't kn= ow all the facts about Enron,'' Bush said in disclosing that his mother-in-= law, Jenna Welch, lost about $8,100 on her purchase of Enron stock. There were similar comments from members of Congress. ``What is abundantly apparent is that Enron rather outrageously hid tr= ansactions of hundreds of millions of dollars,'' said Rep. James Greenwood,= the Pennsylvania Republican who is chairman of the House subcommittee hold= ing tomorrow's hearing. ``They did it to make their profits look rosier.'' Among those the panel wants to hear from tomorrow are Andersen Chief E= xecutive Joseph Berardino and former Andersen partner David Duncan, who was= fired by the company over the destruction of documents relating to its aud= it of Enron. Berardino wants to send an Andersen auditing expert to testify in his = place. Duncan's lawyer, Robert Giuffra Jr., said his client will invoke his= Fifth Amendment right not to answer the committee's questions unless he's = granted immunity from prosecution. Potential Evidence Committee Chairman Billy Tauzin, a Republican from Louisiana, said the= panel won't grant immunity without approval from the Justice Department, w= hich is conducting a criminal investigation into the matter. Nancy Temple, an Andersen attorney whose memo on document destruction = policies is at the center of one aspect of the investigation, and Mike Odom= , the risk assessment officer for Andersen's Houston office, have agreed to= testify. Greenwood said his investigation initially would focus on Andersen to = find out how much potential evidence was destroyed by the auditor between S= eptember and November. Andersen admitted to purging the documents, mostly e= -mails to and from Andersen executives. Duncan told investigators last week that when he destroyed the files h= e was following the direction of an Oct. 12 memo from Temple on Andersen's = document policy. The memo, which the committee released, included a note fr= om Temple to Odom, whom investigators interviewed on Friday. Andersen has r= elieved Odom and three other Houston-based partners of management responsib= ilities. Enron's Documents The shredding wasn't confined to Andersen. A former Enron executive to= ld ABC News on Monday that she witnessed documents being destroyed as recen= tly as two weeks ago, in defiance of the company's order in October to pres= erve documents. ``The allegations of continued shredding of documents is a very seriou= s matter and raises additional questions of obstruction of justice,'' said = Rep. John Dingell, the senior Democrat on the commerce committee. Lawmakers have offered a few specific proposals and broad outlines of = possible changes to laws and regulations. Senate Majority Leader Tom Daschl= e, a South Dakota Democrat, said one outcome of Enron hearings will be legi= slation to keep accounting firms from acting as consultants to the companie= s they audit. Andersen had such an arrangement with Enron. The firm has said it earn= ed $52 million in fees from Enron last year, of which $27 million came from= non-audit work. Changing the Law ``My personal view is that we ought not to allow a combination of cons= ulting and accounting,'' Daschle said. Democratic Senators Christopher Dodd of Connecticut and Jon Corzine of= New Jersey say they will introduce a bill that would prohibit such relatio= nships. The House commerce committee plans hearings next week on conflicts of = interest between auditors and their clients, proposals to change accounting= rules and the workings of the energy trading market. Shareholders have acc= used Enron, which at one point handled a quarter of the trading in natural = gas and electricity, of hiding its liabilities in trades. Lawmakers also will question Wall Street analysts who kept ``strong bu= y'' ratings on Enron until the company publicly disclosed the extent of its= troubles in November. Senator Joe Lieberman, a Connecticut Democrat who is chairman of the S= enate Government Affairs panel, said he intends a months- long inquiry into= Enron starting with a look at how accountants, financial analysts and regu= lators failed to issue warnings or prevent Enron's failure. `Legislative Fix' Among those who'll be testifying are former Securities and Exchange Co= mmission Chairman Arthur Levitt Jr. He has said he will tell the committee = to support legislation to give the SEC more control over U.S. accounting st= andards. ``The power to change it could come from the Congress, it could come f= rom the SEC with a rulemaking, but I think this one calls for a legislative= fix,'' Levitt said last week. The committee also is examining the regulatory authority of the Federa= l Energy Regulatory Commission and the Commodities Futures Trading Commissi= on that governed Enron's energy production and trading businesses. The Senate committee will examine whether tighter regulations for trad= itional pension plans should be applied to 401(K) retirement funds. --Jeff Bliss and William Roberts in Washington (202) 624-1975 or jbliss@bloomberg.net Editors: Sobczyk, *Winski, Sobczyk State GOP sends $15,000 Enron contribution to employees' fund By MARC HUMBERT AP Political Writer 01/23/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. ALBANY, N.Y. (AP) - New York's Republican State Committee has donated a $15= ,000 contribution from the Enron Corp. to a Houston-based fund created to a= id employees of the failed energy giant, a party official said Wednesday.= =20 "We thought it was the right thing to do - to stand by the families," said = Patrick McCarthy, the state party's executive director, of the Enron donati= on the state party had received on Oct. 12. The state GOP's contribution last week to the Enron employees' fund was fir= st reported Wednesday by the New York Post.=20 Also, an aide to Democratic candidate for governor Andrew Cuomo said Wednes= day that the former federal housing secretary had donated a $1,000 Enron co= ntribution to the employees' fund last week. He had received it on June 21.= =20 Campaign financial filings with the state Board of Elections also show that= state Senate Majority Leader Joseph Bruno, a Rensselaer County Republican,= received $1,000 from Enron in 1999 and that state Sen. James Wright, a Wat= ertown Republican, got a $1,000 donation from the company in March of last = year. Aides to both senators said Wednesday that those contributions would = be donated to the employees' fund.=20 The political action committee of the Independent Power Producers of New Yo= rk received a $2,000 Enron donation in May of last year, the records show.= =20 Gavin Donohue, the IPP's executive director, said he would recommend to the= group's board of directors next week that the money be donated to the fund= . He said he expected the board to agree.=20 "It is the right thing to do, and the right time to do it," Donohue said.= =20 New York politicians have been joining others from across the country sendi= ng donations from Enron or its top executives and their relatives to the em= ployees' fund in recent days. Thousands of Enron employees were laid off in= the wake of the company's collapse last month.=20 Last week, Republican Gov. George Pataki donated to the fund an Aug. 1, $5,= 000 contribution from the wife of Enron chief Kenneth Lay. Pataki spokesman= Michael McKeon said Wednesday that the governor had also sent a $1,000 con= tribution to the fund last week that his campaign committee had received fr= om Enron in April of 2000.=20 Also last week, New York's two Democratic U.S. senators, Charles Schumer an= d Hillary Rodham Clinton, sent $68,857 and $7,950, respectively, to the fun= d stemming from Enron-connected donations they had received.=20 Cuomo's main rival for the Democratic nomination for governor, state Comptr= oller H. Carl McCall, has not received any recent Enron-related contributio= ns. The state's more than $112 billion public pension fund, of which McCall= is sole trustee, did lose about $58 million in the Enron collapse. That is= much less than Enron losses suffered by some other major state public pens= ion funds. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business LOU DOBBS MONEYLINE; CNNfn Lou Dobbs, Ed Lavandera, Tim O`Brien, Chris Huntington, Kitty Pilgrim, Chri= stine Romans, Greg Clarkin, Mike Hanna, David Grange, Peter Viles, Wolf Bli= tzer 01/22/2002 CNNfn: Moneyline News Hour (c) Copyright Federal Document Clearing House. All Rights Reserved. --- exceprts only -- ANNOUNCER: Tonight on LOU DOBBS MONEYLINE, we report on Enron`s collapse an= d the unfolding scandal from the epicenter, Houston, Texas.=20 Jeff Bezos` promise to profit and he delivered. The man who runs Amazon.com= (URL: http://www.amazon.com/) tells us how his company discovered success = the old-fashioned way. Talk Magazine silenced after two and a half years. Editor Tina Brown tells = us why what looked like success ended in failure.=20 And tensions in the Middle East rise. We report from Jerusalem. This is a s= pecial edition of Lou Dobbs MONEYLINE for Tuesday, January 22nd LIVE FROM H= OUSTON TEXAS, Lou Dobbs.=20 LOU DOBBS, CNNfn ANCHOR, LOU DOBBS MONEYLINE: Good evening everyone.=20 I`m sitting in front of Enron`s headquarters in Houston, Texas. Tonight thi= s company`s troubles are continuing to mount. The FBI today entered the Enr= on building, looking into charges that Enron employees have been shredding = documents related to the phenomenal collapse of the company.=20 Tomorrow, a Federal judge will decide whether Enron has to turn over any an= d all documents that pertain to its collapse, this after an Enron employee = said Enron workers were shredding papers as late as last week, despite orde= rs not to do so. Ed Lavandera has the story. Ed.=20 ED LAVANDERA, CNN CORRESPONDENT: Well, Lou, it`s been a rather revealing 24= hours in Houston, as late yesterday details started to emerge as attorneys= arrived here in Houston for a pre-trial hearing involving Enron, Andersen,= and several high profile investors who have invested heavily into Enron.= =20 And when those attorneys arrived into town, we started hearing the details = that these attorneys were alleging that they have four or five witnesses in= side Enron, who say that since Thanksgiving they have seen shredding of doc= uments inside the finance and accounting departments inside of Enron on the= 19th and 20th floors. They say that this has happened steadily and lasted = up until last week.=20 Now those details emerged when the first witness came through to attorneys.= They say that this woman, Marie Castanjera (ph) was working across the hal= lway from these departments and witnessed this. She went home, used the scr= aps of paper to pack up her boxes, and when she arrived at home, she notice= d details on the scraps of paper, the names Raptor and Jedi on several of t= he scraps of paper, and of course, those are the names that have become inf= amous in this Enron collapse.=20 Those are the names of the partnerships that led to the company`s demise. E= nron says that it is investigating this at the moment. They do acknowledge = that since all of this came to light, that they have found one wastebasket = inside the building that had shredded documents. Those papers have been tur= ned over to Federal authorities.=20 Now it`s hard to put a lot of this into context because the only thing we`v= e been able to see in the last 24 hours is one box of these little scraps o= f papers, and of course, with everything so shredded, it is hard to put int= o context as to what these documents were.=20 Attorneys for the Enron investors say they have no idea, quite frankly, wha= t these papers are, but that it doesn`t matter. That indeed, they say these= papers were shredded well after Federal investigators launched their inves= tigation, and all of these documents should have been subpoenaed, and there= fore should not have been touched.=20 So, Enron executives putting out another memo to employees worldwide saying= that no documents should be shredded or touched in any way, as investigato= rs across the country lead into this investigation. Lou.=20 DOBBS: Ed, the attorney for Enron, Robert Bennett, Bob Bennett today told m= e that in point of fact it was he who contacted authorities as soon as they= learned of this allegation. Was there any reference today in the hearing a= s to why the plaintiff`s attorneys did not immediately contact authorities?= =20 LAVANDERA: Well it`s kind of interesting, Lou, because these attorneys are = the same people who turned over the Sharon Watkins letter.=20 DOBBS: Right.=20 LAVANDERA: One of the attorneys told me last night that they turned over th= e Sharon Watkins letters to investigators, and they were as a matter of fac= t that sometimes they wanted to use the publicity to their advantage, that = their hope is that this will spur and convince other people, who still migh= t be working inside of Enron, to come forward with more of these allegation= s, if in fact more people have witnessed this document tampering. Lou.=20 DOBBS: Even in collapse, this contest is still all about money. Ed Lavander= a, thank you very much.=20 Well charges of shredding documents are incendiary whether it is on Capitol= Hill or in the courts. It is not only the crime, the original crime that e= xcites the interest of investigators, but shredding, the crime of covering = it up. Tim O`Brien has the report from Washington.=20 (BEGIN VIDEOTAPE)=20 TIM O`BRIEN, CNN CORRESPONDENT (voice over): It wasn`t the Watergate break-= in that drove President Richard Nixon from office, as it was his efforts to= cover it up. A jury never convicted former White House aide, Oliver North,= of the massive arms-for-hostage deal he orchestrated, but rather for shred= ding documents and obstructing Congress. It wasn`t Bill Clinton`s relations= hip with Monica Lewinsky that led to his impeachment, as much as it was his= lying under oath about it. History shows that it is not the underlying off= ense that causes trouble, as often as it is efforts to cover it up.=20 David Duncan, the Arthur Andersen auditor who headed up the Enron audit, ha= s not admitted ordering thousands of Enron-related documents destroyed on O= ctober 23rd, the day after the SEC launched an inquiry of Enron`s finances.= =20 The company fired Duncan citing his bad judgment. Duncan says he followed t= he advice of in-house counsel, but that may not help.=20 PROFESSOR JOHN COFFEE, COLUMBIA LAW SCHOOL: If you either destroy yourself = or persuade others to destroy, alter, mutilate any document with the intent= of making that document unavailable for use in that official proceeding, i= t`s a Federal felony and there`s not much you can say by way of defense. It= `s not easy to say, my lawyer told me to do this. That`s not a recognized d= efense.=20 O`BRIEN: Arthur Andersen did have a policy of routinely shredding documents= . "Accountants are like packrats," said CEO Joseph Berardino. "We save lots= of stuff that`s not relevant."=20 And company lawyer, Nancy Temple, did send a memo out in early October remi= nding Duncan and other employees of that policy concluding, "it would helpf= ul to make sure that we have complied with the policy."=20 (END VIDEOTAPE)=20 O`BRIEN (on camera): House investigators have been questioning both Temple = and Duncan, and Duncan is expected to be called as a witness before the Hou= se Energy and Commerce Committee this Thursday. His lawyers disclosed tonig= ht he will invoke his Fifth Amendment right against self- incrimination. Th= at is, he`ll speak but only if granted immunity, assurances that nothing he= says will be used against him in court. Lou.=20 DOBBS: Tim, thank you very much. Tim O`Brien from Washington. Well, as a ma= tter of fact President Bush has now been added to the list of people who ar= e very angry at Enron. One of the President`s own family members, it turns = out, lost money in the collapse of Enron stock.=20 (BEGIN VIDEO CLIP)=20 GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: My own mother-in-law bought= stock last summer and it`s not worth anything now. If she`d have known all= the facts, I don`t know what her decision would have been, but she didn`t = know all the facts, and a lot of shareholders didn`t know all the facts, an= d that`s wrong. So our government must do something about it, must make sur= e that the accounting practices that have been going on for quite a while a= re addressed.=20 (END VIDEO CLIP)=20 DOBBS: Well, Jenna Welch, the President`s mother-in law, paid almost $41 a = share for 200 Enron shares. She sold that stock last month, two days after = Enron declared bankruptcy, at 42 cents a share. She lost more than $8,000.= =20 Well focusing on Enron`s off-balance-sheet partnerships that enabled Enron = to hide massive amounts of debt. Chris Huntington now takes a look at those= Enron deals and the executive who set them up.=20 (BEGIN VIDEOTAPE)=20 CHRIS HUNTINGTON, CNNfn CORRESPONDENT (voice over): At the center of Enron`= s collapse is this man, Andrew Fastow, the company`s former chief financial= officer. Until he was fired last October, Fastow designed and carried out = a sophisticated strategy that expanded Enron`s business, while keeping loss= es and debt off its books. It was a strategy blessed by Enron`s top brass.= =20 DAVID BOIES, BOIES, SHILLER & PLEXNER: Those transactions will be transacti= ons that were reviewed by the Board of Directors of Enron, reviewed by the = top management of Enron, and which I believe the record will show, the audi= t committee of the board and the outside auditors had reviewed it as well.= =20 HUNTINGTON: In 1999, Fastow`s financial wizardry was applauded by analysts = as groundbreaking and innovative. At the time, CFO Magazine called Enron a = master of creative financing, and presented Fastow with its annual CFO Exce= llence award.=20 While Fastow and Enron`s CEO at the time, Jeff Skilling, boasted about Enro= n`s deals in general terms, they did not divulge all the details. Anyone lo= oking for answers about Enron`s nearly 6,000 off-balance-sheet transactions= in the quarterly or annual reports, found only obscure footnotes.=20 PROFESSION DOUG CARMICHAEL, ACCOUNTING, BARUCH COLLEGE: It`s really impenet= rable detail in the footnotes. Someone with some understanding of business,= should be able to pick up the financial statements, read the notes, and un= derstand the full effects of those transactions on the financial statement.= With Enron, they couldn`t.=20 HUNTINGTON: In August, 2001 Sharon Watkins, an Enron Vice President who rep= orted to Fastow, wrote her now famous letter to Chairman Ken Lay, expressin= g her concerns about some of Fastow`s off-balance-sheet deals.=20 According to Enron documents and a letter from Enron`s lawyer, obtained by = CNN, the transactions worked this way. Fastow set up limited partnerships c= alled LJM. LJM then set up what are called Special Purpose Entities or S.P.= E.s. One of them called Raptor was designed to invest in companies on behal= f of Enron.=20 The structure of the deal required Raptor to pay Enron, even if the investm= ents soured. But Raptor was essentially delivering an I.O.U. What we do kno= w now is Raptor`s only significant source of capital was Enron Stock. Enron= was using its own stock to pay itself.=20 LYNN TURNER, FORMER CHIEF ACCOUNTANT, SEC: It`s kind of like a money- laund= ering case. One of the things that is of interest on LJM, one is the fact t= hat not only the was the debt and the losses kept off the balance sheet by = putting these transactions in a separate corporation, but it was then used = to make payments or provide compensation to the CFO.=20 HUNTINGTON: In an extraordinary move, Enron`s Board of Directors waived its= conflict of interest rules, allowing Fastow an ownership stake in the part= nerships, which earned him millions of dollars.=20 (END VIDEOTAPE)=20 Enron ultimately had to account for the LJM and Raptor transactions last No= vember, when it restated earnings going back to 1997. All tolled, those res= tatements of off-balance-sheet transactions trimmed Enron`s profits by more= than $600 million. Lou.=20 DOBBS: Chris, thank you very much. Chris Huntington. The Enron collapse has= devastated for now at least the reputation of the nation`s accounting indu= stry. There are five major accounting firms. James Copeland is the CEO of o= ne of them, Deloitte & Touche. What can the industry do to restore investor= confidence right now in the financial reporting of corporate America?=20 JAMES COPELAND, CEO, DELOITTE & TOUCHE: Lou, I think there are a number of = things that the financial industry can do in concert with a number of other= people. This is, you know, a real financial crisis for not just our indust= ry but for the shareholders and employees of Enron who have lost, not only = their jobs, but also have lost their life savings in many cases. There`s co= llateral damage with respect to the 335,000 auditors in the United States t= hat go to work every day.=20 DOBBS: Right.=20 COPELAND: Try to do a good job, produce 15,000 audits a year where there ar= e no restatements, where there are no challenges. These people are being ta= rred with the same brush and that`s a tragedy as well.=20 DOBBS: Tarred with the same brush and now a number of recommendations, almo= st instantaneously. Harvey Pitt at the SEC comes forward with his recommend= ations, which have created some controversy, both in terms of its timing an= d, if you will, the lack of commitment behind those proposals in they eyes = of some.=20 Senator Barbara Boxer says "take accounting firms and eliminate the consult= ing fees from their business, divest it, go back to the business you`re bes= t at and that`s auditing." What do you think?=20 COPELAND: Well, I think that Senator Boxer`s comments and the proposed bill= is going to generate a debate that really needs to be held. There is a lot= more heat around this issue than there is light right now, and we really d= o need to debate the issues.=20 Everyone is looking for an answer to a very complex problem, and unfortunat= ely, you know, we all tend to want to move to simplistic answers. Sometimes= a simplistic answer is the right one. Oftentimes, what you end up with are= unintended consequences that are worse than the original problem.=20 So I think we need to be very careful, very prudent. We need to put everyth= ing on the table and talk about all of the potential problems and opportuni= ties and then make some very good, very careful decisions.=20 DOBBS: I know that you probably won`t like this aphorism, but the essence o= f genius is simplicity itself. It is certainly something that can not be sa= id of the accounting system, the financial system in any way.=20 But if you, James Copeland, were to look and perhaps you have at the annual= report of Enron for the year 2000, do you think you, one of the best minds= in accounting and audit, would know, have any suspicion of these secret pa= rtnerships, and I say secret advisedly, and the huge number of off-shore ta= x havens that Enron had in its structure?=20 COPELAND: I think some of my partners are probably laughing right now about= my being one of the best accounting and auditing minds in our profession, = but.=20 DOBBS: Just go with it, James.=20 COPELAND: I would say that to your point, I believe, the complexity of Enro= n and many other companies` financial statements, really is getting to a po= int where they`re very, very hard to understand for all of us, even for exp= erts in the area. But at the same time, you know, making the complex simple= is a real challenge.=20 DOBBS: A real challenge, and certainly no one would be more aware of that t= han you. The fact of the matter is that we have reached a stage where the e= ssence of this country`s financial system, its transparency and its securit= ies markets and its business dealings is, if not already jeopardized and al= ready perhaps overtaken by complex tax and accounting laws, we are also at = risk of losing faith in the system itself. We`re as appalled over these mar= kets right now, cast in the instance for example of Kmart, in which credit = standards are rising simply because of the Enron experience. This has to co= ncern you.=20 COPELAND: It concerns me a lot. One of the things that concerns me most is = that we come up with two or three simple answers that sound good. We all ce= lebrate, go home, and 18 months later you have another body on the table, s= o to speak.=20 DOBBS: Right.=20 COPELAND: And you know, then what happens to the credibility of the system?= We need to quit trying to polish the hood. We have a problem with the engi= ne, you know, and we need to really get our dirt under our fingernails, wor= k hard on the things that will really make a difference in the financial re= porting system.=20 DOBBS: OK. James Copeland, we thank you for taking the time to be with us a= nd we know you`ll be part of the solution.=20 COPELAND: I hope so.=20 DOBBS: James Copeland, Deloitte & Touche.=20 COPELAND: Thanks very much, Lou.=20 DOBBS: We hope you`ll join us tonight at 8:00 Eastern for a one-hour specia= l on the rise and the fall of Enron. We`ll be live here in Houston. We`ll b= e taking a look at the forces that brought about Enron`s collapse, and the = impact it`s had on that company`s employees, the retirement plans of the ci= ty of Houston, and indeed business in America. All of that coming up on CNN= , 8:00 Eastern.=20 On Wall Street today, stocks weaker despite positive earnings news form Ama= zon.com and Lucent Technologies. The Dow Jones Industrials ended the day do= wn 58 points, the Dow closing at 9713. The Dow has fallen nine out of the p= ast eleven sessions.=20 And the Nasdaq tonight is at a two-month low, losing 47 points today, more = than two and a half percent. The broader market, S & P 500, ended down eigh= t points. We`ll have much more on today`s sell off later in the broadcast.= =20 Still ahead, we`ll have more on the fallout from the collapse of Enron and = the scandal now surrounding it. Then, Tyco International is splitting itsel= f into four companies. We`ll have a report for you.=20 Kmart says its bankruptcy isn`t the end, but rather a chance for a new begi= nning. We`ll tell you how the company plans to pull itself back together.= =20 And a dot.com survivor turns into a dot.com success story. Amazon.com promi= ses that the best is yet to come. We`ll find out.=20 ANNOUNCER: Next, Lou speaks with Jeff Bezos, Chairman and CEO of Amazon.com= .=20 (COMMERCIAL BREAK)=20 DOBBS: Kmart (URL: http://www.kmart.com/) in business for more than 100 yea= rs, today filed for bankruptcy. It is the biggest bankruptcy every in the r= etailing industry. One reason, suppliers were cutting off their products be= cause Kmart couldn`t make its payments. And with the collapse of Enron, inc= reasingly companies are demanding prompt payment for their goods and servic= es. Kitty Pilgrim reports.=20 (BEGIN VIDEOTAPE)=20 KITTY PILGRIM, CNNfn CORRESPONDENT (voice over): Kmart is keeping all 2,114= stores=20 (BEGIN VIDEO CLIP)=20 DOBBS: Just ahead here, Enron`s collapse has highlighted the vulnerability = of many retirement plans unfortunately. When we come back, we`ll take a loo= k at what you can do to protect your retirement savings.=20 The Enron debacle has led to the collapse of thousands of 401(k) accounts h= eld by Enron employees. The collapse provoked a debate about investment reg= ulations that could prove precedent setting. At the very core of the debate= : Does the federal government have any business telling you how to invest y= our own retirement money?=20 Peter Viles reports.=20 (BEGIN VIDEOTAPE)=20 PETER VILES, CNNfn CORRESPONDENT (voice-over): You`ve heard about all the E= nron employees who loaded up on the company stock in their retirement accou= nts and lost nearly everything.=20 UNIDENTIFIED MALE: You feel like you`ve almost been raped.=20 VILES: You`ve heard the Bush administration says it`s studying the 401(k) r= ules, with an eye toward protecting your retirement money.=20 ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: I think the public is very unea= sy about their pensions. The public wants to know if what happened to Enron= can happen to them. The president wants to make sure that any action is ta= ken so that others can be protected so that it does not happen to them.=20 VILES: Considering it`s a creation of the IRS, the 401(k) is quite simple. = First off, it is optional. Your employer is not required to offer a 401(k) = plan and you`re not required to participate. The employer has the option of= putting its money or stock into your account, but on the employer`s terms.= And there are no government guarantees or insurance on the money itself. I= t is yours to invest.=20 DAVID RAY, 401(K) PROFIT SHARING ASSOCIATION OF AMERICA: It is not a define= d benefit plan. There are not guarantees. It`s not a program where promises= about future benefits are made. It`s about setting money aside, investing = that money and then using those contributions and returns as your retiremen= t income.=20 VILES: Lastly, the employer does have the right to lock up the plan tempora= rily to switch administrators. The 10-day lockup at Enron is not considered= to be unusually long. So how might Washington protect your 401(k)?=20 Senator Jon Corzine wants mandatory diversity. The government would prevent= you from putting more than 20 percent of your account into any one stock. = But do you really want the government telling you how to invest your money?= =20 MICHAEL HOLLAND, HOLLAND & CO.: When we start getting lawyers and politicia= ns telling us where we can invest our 401(k)s, I think it should send shudd= ers up the spines of individual investors.=20 VILES: Corzine`s argument is that the government sponsors 401(k)s by deferr= ing taxes, so it has an obligation to regulate them.=20 SEN. JOHN CORZINE (D), NEW JERSEY: It is out of bounds for the federal gove= rnment to be sponsoring a policy that doesn`t fit together with what any in= vestment adviser, any reasonable investment strategy coming out of academia= or simple commonsense principals that don`t put all your eggs in one baske= t.=20 (END VIDEOTAPE)=20 VILES (on camera): Well, wait, does that phrase resonate here in Houston, w= here a lot of people wish they had a lot fewer eggs in that one basket of E= nron stock? Total losses by Enron employees in their 401(k)s alone on Enron= stock, estimated at over $1 billion -- Lou.=20 DOBBS: Well, it`s a terrific point. The fact is these 401(k)s are not requi= red by the companies. It`s become, if you will, fashionable and employees r= ely upon them. And it puts in stark contrast here, Enron so much it can be = accused of, the fact is the 401(k), which it contributed, is probably a rea= son to cut them a little slack there.=20 VILES: Yes, a lot of the stock in those accounts was stock that Enron gave = the employees. It was a gift that ultimately became worthless, but it was a= gift in the first place.=20 DOBBS: OK. Thank you very much, Peter Viles.=20 Coming up next here, another victim of the slumping economy. Two-and-a-half= years after Talk Magazine roared into existence, the glossy magazine has f= allen silent. We`ll have the inside scoop with Talk`s editor-in-chief, Tina= Brown.=20 ANNOUNCER: After the break, Lou talks with Tina Brown of Talk Magazine.=20 (COMMERCIAL BREAK)=20 Congress is back in session tomorrow after a lengthy break, and that means = a lot of news ahead. So stay tuned. That`s MONEYLINE for this Tuesday eveni= ng. We thank you for being with us. Live from Enron headquarters in Houston= , please join us tonight 8:00 p.m. Eastern, our one-hour special program --= an in depth look at the collapse and the scandal of Enron.=20 "WOLF BLITZER REPORTS" begins right now.=20 TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 888-CNNFN-01 OR USE OUR SE= CURE ONLINE ORDER FORM LOCATED AT WWW.FDCH.COM=20 THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY B= E UPDATED.=20 Content and programming copyright 2002 Cable News Network, Inc. ALL RIGHTS = RESERVED. Prepared by FDCH-eMedia (Federal Document Clearing House, Inc. -e= MediaMillWorks, Inc.) No license is granted to the user of this material ot= her than for research. User may not reproduce or redistribute the material = except for user`s personal or internal use and, in such case, only one copy= may be printed, nor shall user use any material for commercial purposes or= in any fashion that may infringe upon Cable News Network, Inc.`s copyright= or other proprietary rights or interests in the material; provided, howeve= r, that members of the news media may redistribute limited portions (less t= han 250 words) of this material without a specific license from CNN so long= as they provide conspicuous attribution to CNN as the originator and copyr= ight holder of such material. This is not a legal transcript for purposes o= f litigation. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Sarah Palmer Internal Communications Manager Enron Public Relations (713) 853-9843