Message-ID: <2943840.1075841146795.JavaMail.evans@thyme> Date: Wed, 6 Feb 2002 06:47:29 -0800 (PST) From: sarah.palmer@enron.com To: sarah.palmer@enron.com Subject: Enron Mentions (major papers only) -- 02/06/02 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.\Inbox X-Origin: MARTIN-T X-FileName: tom martin 6-25-02.PST Questioning the Books: Enron Official Failed to Warn Participants Of 401(k)= Plan The Wall Street Journal, 02/06/2002 ENRON EXECUTIVES SAY THEY DEBATED FREEZE ON PENSION The New York Times, 02/06/2002 Rich Employee, Poor Employee; Senate Panel Looking at Pensions Shown Both S= ides of the Enron Coin The Washington Post, 02/06/2002 Execs say they tried to protect workers' money=20 Houston Chronicle, 02/06/2002 Enron CEO Felt 'Betrayed,' Panel Told; Head of Internal Probe Testifies on = the Hill The Washington Post, 02/06/2002 Enron Officials Sought Lawyer's Dismissal Over Negotiations With Outside Pa= rtnership The Wall Street Journal, 02/06/2002 The Financial Wizard Tied to Enron's Fall The New York Times, 02/06/2002 Enron CEO Felt 'Betrayed,' Panel Told; Head of Internal Probe Testifies on = the Hill The Washington Post, 02/06/2002 $270 Million Man Stays in the Background The Washington Post, 02/06/2002 Enron Execs Sold Stock as Losses Grew Probe: The $44-million sell-off came = amid concern that problems at partnerships could become public. The action = raises questions of possible insider trading. Los Angeles Times, 02/06/2002 2 Officials Are Expected To Leave the Company The New York Times, 02/06/2002 Investigators Buying Time For Inquiry The New York Times, 02/06/2002 Enron Team Says Lay Took Some Blame Hearings: Former chief admits lapse in = oversight, according to internal investigator questioned by lawmakers. Los Angeles Times, 02/06/2002 Astros want out of naming-rights deal=20 Houston Chronicle, 02/06/2002 For Houston Astros, a Sponsorship Turns Sour The Washington Post, 02/06/2002 Astros Cry Foul and Try for an Enron Pickoff Play The New York Times, 02/06/2002 Questioning the Books: Enron's Fall Spurs Desire to Revisit Laws The Wall Street Journal, 02/06/2002 Former chairman of Enron to face lawmakers next week=20 Houston Chronicle, 02/06/2002 Creditors' committee can quiz auditor - COURT RULING. Financial Times, 02/06/2002 Andersen chief urges change in accounting rules. Financial Times, 02/06/2002 Populist Pitch -- Without the Punch; Both Parties Claim Title, but Neither = Makes Full-Scale Attack on Moneyed Interests The Washington Post, 02/06/2002 Enron Is Grist for Business School Courses The New York Times, 02/06/2002 Lerach's Enron Gambit The Wall Street Journal, 02/06/2002 Questioning the Books: Panel, in Enron's Wake, to Review Lawsuit Curbs The Wall Street Journal, 02/06/2002 Enron equity fears fuel 'flight from risk'. Financial Times, 02/06/2002 Barbie Loves Math The New York Times, 02/06/2002 ___________________________________________________________________________= _ Questioning the Books: Enron Official Failed to Warn Participants Of 401(k)= Plan By Kathy Chen and Theo Francis Staff Reporters of The Wall Street Journal 02/06/2002 The Wall Street Journal C1 (Copyright (c) 2002, Dow Jones & Company, Inc.) WASHINGTON -- A top Enron Corp. human-resources executive who also served a= s a trustee of the company's 401(k) plan said she became aware of serious a= llegations about the company's financial practices in August, but did nothi= ng to protect retirement-plan members.=20 Speaking at a Senate government affairs committee hearing, Cindy Olson said= Enron Vice President Sherron Watkins approached her for advice before send= ing her now well-publicized e-mail to former Enron Chairman Kenneth Lay in = August voicing concerns about the company's accounting practices. Ms. Olson= said Ms. Watkins also sought out Jeffrey McMahon, currently Enron's chief = operating officer, who was then its treasurer, for guidance at the time. Enron's retirement plans, decimated by the collapse of the Houston energy c= oncern, will come under further scrutiny in Congress this week. Today, Labo= r Secretary Elaine Chao testifies before the House Education and Workforce = Committee about whether retirement-plan rules should change in the wake of = Enron's collapse; tomorrow the Senate Committee on Health, Education, Labor= and Pensions will hear from former Enron workers.=20 In yesterday's hearing, Ms. Olson said she didn't share Ms. Watkins's alleg= ations with the other 401(k) plan trustees because she didn't feel it was h= er responsibility to repeat "hearsay." In addition, she said, Ms. Watkins h= ad come to her in confidence. After Ms. Watkins took her concerns to Mr. La= y and he ordered an investigation, "I felt it was all in good hands," Ms. O= lson said.=20 Eli Gottesdiener, a Washington-based lawyer representing Enron workers, cou= ntered those arguments. "She had information that affected the lives of 10,= 000 people and did nothing," he said, adding, "It's so clear that she breac= hed her duty." He said Ms. Olson should have convened an emergency meeting = of the trustees to inform them of Ms. Watkins's allegations so that they co= uld launch their own investigation. The trustees immediately could have sto= pped offering Enron stock as an investment option, and stopped using Enron = stock as a matching contribution in the retirement plan.=20 Ms. Olson testified that the plan trustees felt that they didn't have the a= bility to change the plan design without approval from the board of directo= rs.=20 Ms. Olson herself sold much of her own Enron holdings, most before she knew= of Ms. Watkins's concerns, but some afterward. Responding to sharp questio= ning from lawmakers, including Sen. Joseph Lieberman, a Connecticut Democra= t who heads the Senate's Government Affairs Committee, Ms. Olson acknowledg= ed she sold 83,000 Enron shares for $6.5 million, the bulk from December 20= 00 to March 2001. She said she decided to sell the shares after having a fa= lling out with former Enron President Jeffrey Skilling over their different= management styles. Thinking about leaving the company, she said, she went = to a financial adviser who advised her to diversify her portfolio; at his s= uggestion, she said, she put the proceeds from selling her Enron shares int= o government bonds.=20 A few days before Enron filed for bankruptcy-court protection on Dec. 2, Ms= . Olson said she sold an additional 3,000 Enron shares that were in her emp= loyee stock ownership plan, for $2 each. She said she didn't have knowledge= of the bankruptcy, but suspected the possibility.=20 During the hearing, Mr. Lieberman said he would issue subpoenas to gather m= ore information about the alleged payment of $105 million in bonuses to man= agement around the time Enron filed for Chapter 11, and the company's alleg= ed failure to pay workers severance pay, beyond a one-time $4,500 payment.= =20 As Enron shares plunged last fall, the company also considered postponing a= planned "blackout" during which time employees wouldn't be able to change = their investments or sell Enron stock, said Ms. Olson and Enron benefits ma= nager Mikie Rath. Ms. Olson said she finally decided against a delay after = consulting with other Enron executives and an outside lawyer several days b= efore the scheduled blackout that began on Oct. 26 last year and lasted for= about 10 trading days. She said the lawyer had advised Enron to go ahead w= ith the blackout, on the grounds that it wouldn't be able to notify in time= all employees -- specifically about 11,000 retirees and other workers base= d outside of the Houston headquarters -- about a potential postponement.=20 Executives from Northern Trust Retirement Consulting LLC and Hewitt Associa= tes LLC, the companies that managed Enron's 401(k) plans, confirmed that th= ey were contacted about the possibility of delaying the blackout period.=20 Ms. Olson said Enron hired counsel in early November to seek legal advice o= n whether it "made sense" to advise employees on selling their Enron stockh= oldings.=20 This week's hearings are intended to generate more information for lawmaker= s who will decide whether retirement plans ought to be more carefully regul= ated. House Energy and Commerce Chairman W.J. "Billy" Tauzin (R., La.) says= a top priority this year will be legislation aimed at protecting workers s= uch as those at Enron. "Clearly, we need pension reform," Mr. Tauzin, the l= eading congressional investigator into Enron, said in an interview.=20 However, retirement-plan experts say any significant change will be an uphi= ll battle, as employer groups, Republicans, and the Bush administration opp= ose an overhaul -- in particular, any limits on company stock in retirement= plans.=20 Somewhat less controversial are proposals, by Democrats and more recently b= y President Bush and Rob Portman (R., Ohio) and Ben Cardin (D., Md.), that = would provide employees greater ability to diversify out of stock contribut= ed by their employer. Many employers now lock workers into such shares unti= l age 50 or later.=20 On this issue, there may be more opportunity for compromise, since so far, = all proposals still leave employers with the freedom to lock employees into= company stock for long periods. Mr. Bush's proposal has the weakest divers= ification provisions, as it exempts many defined contribution savings plans= from proposed diversification rules, particularly ESOPs, which hundreds of= large employers use. Consequently, employers could continue to lock worker= s into company stock in many plans until age 55 and later.=20 ---=20 Greg Hitt contributed to this article. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business/Financial Desk; Section A ENRON'S MANY STRANDS: THE OVERVIEW ENRON EXECUTIVES SAY THEY DEBATED FREEZE ON PENSION By STEVEN GREENHOUSE and STEPHEN LABATON 02/06/2002 The New York Times Page 1, Column 1 c. 2002 New York Times Company WASHINGTON, Feb. 5 -- Enron executives acknowledged today that before they = temporarily prevented employees from selling company stock in their retirem= ent accounts last fall, the executives had sharply debated delaying the mor= atorium because employees could suffer heavy losses from a plunging stock p= rice.=20 ''We were concerned in the benefits department about the deterioration of t= he stock price,'' Mikie Rath, a benefits manager at Enron, said in testimon= y before the Senate Governmental Affairs Committee. But after the debate on= the eve of the moratorium, they imposed the so-called blackout period to g= ive themselves time to replace the administrators of the retirement plan. Enron executives said they decided it would be too hard to notify the parti= cipants in the company's 401(k) plan immediately. They also said they feare= d they would open themselves to lawsuits by plan participants who were noti= fied about the delay later than others for reasons like mail delays.=20 The disclosures on the pension plan came as other Congressional committees = took up Enron matters.=20 House and Senate lawmakers issued subpoenas to compel the testimony of Enro= n's former chief executive, Kenneth L. Lay, while Congressional and state o= fficials broadened their investigations into why state pension funds and st= ate agencies invested and did business with Enron as it spiraled downward l= ast year.=20 The Senate Commerce Committee voted unanimously to issue the subpoena to re= quire Mr. Lay's appearance next Tuesday. A similar subpoena was issued by R= epresentative Michael G. Oxley, the Ohio Republican who is chairman of the = House Financial Services Committee.=20 A spokeswoman for Mr. Lay, who had been scheduled to testify on Monday but = bowed out, said his lawyers would work out details for his appearance, alth= ough lawmakers said they expected that he would invoke his Fifth Amendment = right against self-incrimination.=20 While Mr. Lay may not answer any questions, members of a House subcommittee= on oversight and investigation focused on him today, trying to glean, by p= roxy, what he might say.=20 Under questioning, William C. Powers, chairman of the special investigative= committee of Enron's board that wrote a harshly critical report, said that= in his four-hour interview with Mr. Lay, the former chairman understood th= at off-the-books partnerships were set up to hide losses. ''But,'' Mr. Powe= rs said, ''he didn't understand or appreciate that there was anything wrong= with that. That's his story. The accountants signed off, and he was O.K. w= ith that.''=20 President Bush brushed aside a demand by Senator Ernest F. Hollings, the So= uth Carolina Democrat who heads the Commerce Committee, that a special coun= sel should be appointed to supervise the criminal investigation of Enron. M= r. Hollings cited Enron's ties to administration officials, including the a= ttorney general.=20 Mr. Bush told reporters as he toured a research laboratory in Pittsburgh: '= 'This is a business problem, and my Justice Department is going to investig= ate. If there's wrongdoing, we'll hold them accountable for mistreatment of= employees and shareholders.''=20 Lawyers representing the employees have accused Enron of stock fraud for im= posing the moratorium and for not disclosing the company's financial condit= ion, resulting, the lawyers say, in losses of more than $1.2 billion for th= e 15,000 participants in Enron's retirement plan. During the moratorium, em= ployees could not sell stock in the retirement plan, but senior executives = faced no restrictions in selling their stock.=20 The testimony prompted a new round of criticism of Enron's senior officials= for looking out for their own interests while turning their backs on their= employees.=20 ''Management knew full well that their employees' 401(k)'s were overloaded = with shares of Enron,'' said Senator Joseph I. Lieberman, the Connecticut D= emocrat who is chairman of the governmental affairs committee. ''Shouldn't = that have prompted them to postpone the lockdown when the company was reeli= ng?''=20 In response to the collapse of Enron, an administration task force is prepa= ring recommendations to revise securities and corporate laws. Administratio= n officials said that they were debating proposals to make it more likely t= hat corporate executives and boards face personal liability for violating t= he law.=20 Officials in Connecticut, one of several states considering whether to susp= end or revoke the license of Arthur Andersen, Enron's accounting firm, said= they had subpoenaed Andersen records.=20 Richard Blumenthal, the attorney general in Connecticut, said he was examin= ing a state agency's decision last year to pay Enron $220 million for an en= ergy contract that might never be fulfilled.=20 At a House committee hearing, Joseph F. Berardino, Andersen's chief executi= ve, repeated earlier statements that important information about Enron's fi= nances had been withheld from his firm.=20 Democrats and Republicans repeatedly complained that Mr. Berardino was evad= ing the committee's questions about Andersen's involvement in Enron's colla= pse.=20 ''Maybe it's better to be dumb than culpable, but we want some answers,'' s= aid Representative Gary L. Ackerman, Democrat of New York. ''Your not knowi= ng what was going on, if that's the case, is basically saying that you have= squandered the integrity of your company.''=20 Mr. Berardino said Andersen would establish new offices of audit quality an= d ethics and compliance.=20 Before approving the subpoena of Mr. Lay, members of the Senate Commerce Co= mmittee said that they had begun investigating losses that state pension fu= nds sustained from the decline in Enron stock.=20 Senator Bill Nelson, Democrat of Florida, said it was suspicious that an in= vestment manager for the Florida retirement system bought millions of dolla= rs in shares last fall, at prices ranging from $22.82 to $9.02, even after = Enron had announced that it was being investigated by the Securities and Ex= change Commission.=20 A few days before Enron filed for bankruptcy, the fund sold more than seven= million shares at 28 cents each.=20 The investment management firm that bought the Enron stock for Florida's re= tirement funds is Alliance Capital. Frank Savage, a recently retired senior= executive at Alliance, sits on Enron's board.=20 Mr. Nelson said that if Mr. Lay had agreed to testify, he would be asked, '= 'Were they told to buy the stock to prop it up?''=20 John Meyers, a spokesman at Alliance Capital, said that the investments wer= e reasonable at the time and that Mr. Savage ''had no involvement in the bu= ying, holding or selling of Enron'' stock.=20 At the Senate governmental affairs hearing, Cindy Olson, Enron's executive = vice president for human resources, said there had been a debate on the day= before the trading moratorium about whether the company should postpone th= e blackout, which was needed for a change in plan administrators.=20 But executives said they decided against delaying after concluding that it = would be too hard to notify the participants in Enron's 401(k) plan immedia= tely. The executives said they feared that if they delayed this blackout pe= riod, they would open themselves to lawsuits by participants who were notif= ied later than others for reasons like mail delays.=20 Though the company says the blackout began Oct. 26, it sent out conflicting= bulletins. The confusion led many employees to think that the blackout beg= an Oct. 19, when Enron stock traded at $26.05. By the time employees were a= ble to sell shares on Nov. 13, the shares had plunged, closing at $9.98 tha= t day.=20 Deborah G. Perrotta, a former senior administrative assistant, told the com= mittee that the blackout hurt. ''A delay would have saved a lot of people,'= ' she said.=20 Several senators said it was unconscionable for Mr. Lay and other Enron off= icials to tell employees that the stock price would continue to rise while = some officials were raising tough questions about the stability of the comp= any's finances.=20 Ms. Olson, who served as a trustee of Enron's retirement plan, testified th= at in August, Sherron S. Watkins, an Enron vice president, had told her of = concerns she had about whether Enron executives had engaged in some chicane= ry that undermined the company's finances. Ms. Watkins raised many of those= questions in a letter last summer to Mr. Lay.=20 Saying she was not convinced that Ms. Watkins's assertions were accurate, M= s. Olson said that she, as a plan fiduciary, did not deem it necessary to i= nform plan participants of the questions about Enron. Photo: Joseph F. Berardino, chief executive of Arthur Andersen, the former = Enron auditor, testifying yesterday before a House committee. Both Democrat= s and Republicans complained that he evaded the panel's questions. (Paul Ho= sefros/The New York Times)(pg. C8) Chart: ''Buying as the Ship Went Down'' = On the advice of Alliance Capital Management, one of its investment manager= s, the Florida state pension fund bought Enron stock even as the company's = troubles became known. A former Alliance executive, Frank Savage, is also a= member of Enron's board. Enron's daily closing stock price PURCHASES OF EN= RON STOCK SINCE OCT. 17 DATE: OCT. 22 NUMBER OF SHARES: 311,200 SHARE PRICE= : $22.82 PRICE PAID (MILLIONS): $7.1 DATE: OCT. 24 NUMBER OF SHARES: 302,50= 0 SHARE PRICE: 16.30 PRICE PAID (MILLIONS): 4.9 DATE: OCT. 25 NUMBER OF SHA= RES: 124,600 SHARE PRICE: 15.47 PRICE PAID (MILLIONS): 1.9 DATE: OCT. 29 NU= MBER OF SHARES: 373,900 SHARE PRICE: 14.51 PRICE PAID (MILLIONS): 5.4 DATE:= OCT. 30 NUMBER OF SHARES: 317,800 SHARE PRICE: 12.23 PRICE PAID (MILLIONS)= : 3.9 DATE: NOV. 13 NUMBER OF SHARES: 581,900 SHARE PRICE: 9.37 PRICE PAID = (MILLIONS): 5.5 DATE: NOV. 14 NUMBER OF SHARES: 478,600 SHARE PRICE: 9.84 P= RICE PAID (MILLIONS): 4.7 DATE: NOV. 16 NUMBER OF SHARES: 209,500 SHARE PRI= CE: 9.02 PRICE PAID (MILLIONS): 1.9 OCT. 17 -- Enron reduces shareholder eq= uity by $1.2 billion to account for transactions involving certain partners= hips. OCT. 22 -- Enron discloses that the Securities and Exchange Commissio= n has opened an inquiry into the partnerships. NOV. 8 -- Enron says it over= stated profits for the previous five years by $586 million. NOV. 30 -- Pens= ion fund sells its entire Enron holdings, 7.6 million shares, at 28 cents a= share. DEC. 2 -- Enron files for bankruptcy protection. (Sources: Dow Jone= s Interactive [stock price]; Office of Senator Bill Nelson) (pg. C8)=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Financial Rich Employee, Poor Employee; Senate Panel Looking at Pensions Shown Both S= ides of the Enron Coin Albert B. Crenshaw Washington Post Staff Writer 02/06/2002 The Washington Post FINAL E01 Copyright 2002, The Washington Post Co. All Rights Reserved Two Enron employees told a Senate committee yesterday what happened to them= before and immediately after the collapse of the giant Texas energy-tradin= g company.=20 Their stories were very different. Deborah G. Perrotta, an administrative assistant, broke down in tears as sh= e described losing her job, $40,000 in retirement savings and all but a fra= ction of her severance pay.=20 The other, Cindy Olson, executive vice president of Enron's human resources= department and one of the people in charge of the company's ill-fated 401(= k) plan, still works for Enron. She matter-of-factly described how a year a= go, when Enron stock was near its peak, she cashed in options on 83,000 sha= res, netting about $3 million.=20 Their testimony again highlighted the devastation that can befall employees= who tie their jobs and their retirement security to a single company. But = it also showed how much difference professional advice and investment insti= ncts can make for workers in a situation like Enron's, and how workers caug= ht up in a company's collapse can be affected very differently.=20 Perrotta and Olson testified before the Senate Governmental Affairs Committ= ee, which is trying to determine what changes might be needed in federal pe= nsion and employment laws to improve worker protections should their employ= er fail.=20 The hearing highlighted several issues that are common in 401(k) and other = retirement savings plans known as defined-contribution plans, which, unlike= old-fashioned defined-benefit pensions, place the market risk and reward o= n employees.=20 * Fiduciary responsibility. Who is responsible for sharing information with= employees and retirees, and how and when?=20 Former Enron Chairman Kenneth L. Lay encouraged workers to keep their retir= ement money in company stock. Perrotta recalled that in August she was awar= ded a block of shares, and an accompanying e-mail from Lay said that "one o= f my highest priorities is to restore investor confidence in Enron. This sh= ould result in a significantly higher stock price. I hope this grant lets y= ou know how valued you are to Enron."=20 Olson, however, had a higher position at the company and access to more inf= ormation than Perrotta. Indeed, Olson actually spoke with whistle-blower Sh= erron Watkins before Watkins sent her anonymous letter to Lay, in which she= said she worried that the company's accounting practices could lead to a m= ajor scandal. Olson said Watkins was fearful that she was overlooking somet= hing or that there was some other reason her conclusions might be incorrect= . Olson took no action to inform other employees about the concerns, howeve= r. "She went to speak to Mr. Lay, and Mr. Lay kicked off an investigation,"= Olson said. ". . . I felt like it was in good hands."=20 * How tough it is to separate loyalty from investment decisions.=20 Enron's restrictions on employees selling stock they received as matching c= ontributions to their 401(k) plans have been well chronicled. But, by some = accounts, 89 percent of the Enron stock in the plan was there because worke= rs invested in it voluntarily.=20 Olson, however, had been granted options that did not have the same restric= tions against selling as the Enron stock matches in the 401(k) plan. Olson = said she cashed in her options only because she had a run-in with then-chie= f executive Jeffrey Skilling that motivated her to seek professional invest= ment advice. The adviser told her she was too emotionally involved with the= stock, and she agreed to sell.=20 Olson said she held on to another 3,000 shares in her retirement account un= til two days before the company went into bankruptcy.=20 The panel is looking at proposals to limit the percentage of company stock = permitted in a 401(k) account. But employer groups argue that retirement pl= ans are often designed to align the interests of workers and companies, and= they are urging Congress to be careful not to discourage companies from of= fering retirement plans or matching worker contributions to plans.=20 * Investment advice. Most companies are reluctant to provide it for fear of= exposing themselves to liability if the advice doesn't work out.=20 Pending legislation would permit them to provide advice or to pay for it fr= om third parties.=20 The potential benefits for employees seem clear in retrospect. Olson went t= o an adviser while Perrotta did not. "When it started to fall apart, we jus= t sat there -- watched it," Perrotta said.=20 But critics say that the issue is more complex than it seems and that any l= egislation should be careful to eliminate conflicts of interest among advis= ers and employers.=20 * "Lockdowns" of 401(k) plans. These freezes on account activity occur when= a company changes plan administrators, and can last up to several months. = Enron changed administrators last fall and employee accounts were frozen fo= r several weeks. The exact duration is in dispute.=20 * Severance in bankruptcy. Laid-off workers are generally limited to paymen= ts of about $4,500. Severance owed beyond that is usually treated as a gene= ral unsecured debt, though some courts have been more lenient.=20 It has become routine, however, for companies entering bankruptcy to pay la= rge "retention bonuses" to keep certain workers while the newly unemployed = get little. Enron paid out $55 million in such bonuses.=20 Enron benefits manager Mikie Rath, who testified with Olson, drew snickers = in the crowded hearing room when she said she had gotten a retention bonus = but could not remember exactly how much it was. Pressed, she said it was "a= bout" $20,000.=20 Enron workers who were laid off would have been entitled to about $150 mill= ion total, and Olson said "we thought we could give employees the full seve= rance" but "at the 11th hour we found we could only give $4,500." Company l= awyers said the limit was set by law, she said. http://www.washingtonpost.com=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Execs say they tried to protect workers' money=20 By PATTY REINERT=20 Copyright 2002 Houston Chronicle Washington Bureau=20 Feb. 5, 2002, 9:17PM WASHINGTON -- Two Enron executives told a Senate panel Tuesday that they sc= rambled to protect employees' retirement savings and severance pay as soon = as they realized the company was collapsing last year.=20 "We did the best we could with a difficult situation," said Cindy Olson, ex= ecutive vice president for human resources for the Houston energy trader.= =20 Olson and Enron benefits manager Mikie Rath told members of the Senate Gove= rnmental Affairs Committee that they had considered, then rejected, putting= off a planned change in the company's investment administrator last fall w= hen they realized the transition would take place as Enron's stock was fall= ing. Employees were prevented from selling the stock in their 401(k) retire= ment accounts during the transition.=20 Later, as the company was headed for bankruptcy, Olson said she had several= conversations with then-Chairman Ken Lay to try to salvage employees' seve= rance pay. She quickly concluded, she said, that employees would get only a= nominal payment of $4,500 each if Enron declared bankruptcy. The realizati= on was devastating, she said.=20 Several former Enron workers, who are suing Olson and other top executives,= criticized the executives' testimony.=20 Debbie Perrotta, a laid-off senior administrative assistant who had worked = at Enron for five years, testified Tuesday that 4,500 Houston Enron employe= es lost their jobs, their retirement savings and an estimated $150 million = in severance and vacation pay after the company filed for bankruptcy on Dec= . 2.=20 But two days before that filing, Perrotta said, "Enron cut $105 million in = retention bonuses for a small number of executives."=20 Sen. Joseph Lieberman, D-Conn., who heads the Senate committee, said he wou= ld subpoena records on the retention bonuses.=20 Perrotta broke down and cried several times as she told of losing $40,000 i= n retirement money and struggling to pay for her family's health care and h= er daughter's wedding. She said she and other laid-off employees now must w= ait in line behind Enron's creditors in bankruptcy court to recover whateve= r they can.=20 "It may be the law," she said, "but it's wrong."=20 Lieberman asked Olson to explain why she failed to warn employees to sell t= heir Enron stock as the price was sliding.=20 "We didn't have a crystal ball," Olson said. "We didn't know where the stoc= k was going to go."=20 She added that federal law limits what investment advice employers can give= their employees. Besides, she said, the company's top executives put their= faith in Lay and hoped he could save the company.=20 But Lieberman pointed out that something must have motivated Olson to sell = $6.5 million of her own Enron stock months earlier.=20 Olson -- who served on Enron's executive committee from 1999 until she and = then-Chief Executive Officer Jeff Skilling had a falling out and he removed= her in early 2001 -- said she sold most of her company stock in late 2000 = and early 2001.=20 Olson said she was thinking of leaving Enron after Skilling demoted her fro= m the executive committee and took away some of her human resources duties.= She said she and Skilling "did not see eye to eye" about how employees sho= uld be treated.=20 Olson said she and her husband hired their own financial adviser, who urged= her to diversify her stock portfolio so she would not be so reliant on her= company's stock.=20 Olson also testified that Sherron Watkins, a former Enron executive, had co= me to her last summer, asking Olson's advice on whether she should approach= Lay with concerns about accounting problems she believed threatened to bri= ng down the company.=20 Olson said Watkins was unsure whether a memo she had written to Lay on Aug.= 15 was technically or legally accurate. Olson said she encouraged Watkins = to talk to Lay.=20 Even after her conversation with Watkins, however, Olson said she did not w= arn her colleagues. Her talk with Watkins had been confidential, she said, = and she trusted Lay to act if Watkins' fears were on target.=20 Both Olson and Rath told lawmakers that they had considered halting the tra= nsition to a new retirement fund administrator last fall, but concluded tha= t it would take longer to stop the process than to go through with it.=20 In the midst of last fall's anthrax scares and the resulting delays in mail= service, they said, it would have been impossible to notify the 11,000 ret= irees invested in Enron's retirement plan if the company had decided to cha= nge the schedule for the transition. Notifying current Enron employees via = e-mail would have treated current and former Enron employees differently an= d that would have been unfair, they said.=20 Instead, they decided to speed up the transition process and were able to s= have one week off of the lockdown period so that employees would have acces= s to their accounts sooner, they said.=20 At the time, Rath testified, she was still hoping the stock price would go = back up.=20 In the hallway outside the hearing later, several laid-off workers criticiz= ed the two executives' testimony.=20 "She cashed out six and a half million dollars in her own Enron stock," Gwe= n Gray said of Olson. "She knew (the company was failing)."=20 Gray, who also worked in Enron's human resources department before she was = laid off, said she was disturbed by Rath's remark that she couldn't remembe= r the amount of her own retention bonus.=20 When Rath's former colleagues in the audience laughed at her statement, sen= ators pressured Rath. She said the bonus was "in excess of $20,000." (Olson= testified that she had received nothing to stay with the company.)=20 A Section Enron CEO Felt 'Betrayed,' Panel Told; Head of Internal Probe Testifies on = the Hill Jackie Spinner and David S. Hilzenrath Washington Post Staff Writers 02/06/2002 The Washington Post FINAL A01 Copyright 2002, The Washington Post Co. All Rights Reserved Former Enron Corp. chairman Kenneth L. Lay told investigators for the Enron= board that he should have paid more attention to his company's bookkeeping= but felt "betrayed" by others at the company who kept information from him= , the board's lead investigator testified yesterday.=20 Lay, in four hours of interviews with the special board committee investiga= ting the company's collapse, indicated that he knew the company was using E= nron stock to protect investors in its off-the-books partnerships, said Wil= liam C. Powers Jr., chairman of the committee, which issued its report Satu= rday. That unusual strategy helped Enron hide large debts and losses.=20 "When we interviewed Mr. Lay . . . he didn't understand or appreciate there= was anything wrong with it," Powers, dean of the University of Texas Law S= chool, told the House Government Reform subcommittee on oversight and inves= tigations. Lay's story was that "the accountants had signed off on it," Pow= ers said. "It was a credible device."=20 Powers also disclosed that the Enron board's investigative committee spent = "a couple of hours" interviewing former Enron vice chairman J. Clifford Bax= ter, who was found dead on Jan. 25 of a self-inflicted gunshot wound. Power= s said Baxter gave no hint that he was "a person . . . in danger."=20 House members asked Powers for notes or recordings from that interview. Pow= ers said he could not turn the records over without permission from the com= pany, but he said he would support their release. Enron attorney Robert Ben= nett later said the company "certainly will provide the materials requested= ."=20 Committees in the Senate and House yesterday subpoenaed Lay to appear on Ca= pitol Hill on Feb. 12 and 14. Lay, who withdrew from a scheduled appearance= Monday, is expected to invoke his constitutional right against self-incrim= ination and refuse to testify, but the subpoenas mean he will have to do so= in person in the full glare of publicity.=20 Meanwhile, members of a Financial Services subcommittee unleashed their wra= th on Arthur Andersen chief executive Joseph F. Berardino, blasting the big= accounting firm's audits of Enron and voicing exasperation when Berardino = said he didn't know the answers to many of their questions about Andersen's= conduct.=20 "Maybe it's better to be dumb than culpable, but we want some answers," sai= d Rep. Gary L. Ackerman (D-N.Y.).=20 "I mean, your ship is going to go down and you're going to be lashed to the= mast unless you start talking to us about what happened."=20 Berardino, who headed Andersen's audit practice before becoming its chief e= xecutive about a year ago, said Andersen was still trying to gather the fac= ts.=20 "I don't know, with authority, what we knew and when we knew it," he told t= he Financial Services subcommittee on capital markets, one of several congr= essional panels investigating Enron's collapse.=20 Separately, a spokesman for Andersen said yesterday that its auditors went = to Enron's board earlier than was previously known with concerns about poss= ible illegal activity.=20 The first approach was in August, after the emergence of a letter from exec= utive Sherron Watkins to Lay warning of widespread accounting irregularitie= s, spokesman Charlie Leonard said.=20 Federal law requires auditors to alert the SEC when they suspect illegality= and the board or management does not address it. In this case, Andersen pe= rsonnel went to the board but not to the SEC because they were assured the = board was investigating the matter, Leonard said.=20 Andersen previously said it had alerted the board to possible illegal activ= ities last fall as Enron unraveled.=20 As lawmakers search for ways to prevent future Enrons, Rep. Richard H. Bake= r (R-La.), chairman of the House subcommittee, floated what would be a fund= amental change in the auditing business -- having stock exchanges hire the = auditors. Currently, auditors are hired by the companies they are responsib= le for auditing -- an arrangement that some lawmakers say deters them from = challenging dubious corporate accounting.=20 In other developments yesterday, President Bush rejected a call by Sen. Ern= est F. Hollings (D-S.C.) for a special prosecutor to investigate Enron, say= ing his Justice Department could do the job. Enron was a major contributor = to the Bush presidential campaign and has ties to a number of administratio= n officials.=20 The House Energy and Commerce Committee yesterday subpoenaed former Enron c= hief financial officer Andrew S. Fastow to appear at a hearing tomorrow. Fa= stow's attorneys originally told the committee he would appear voluntarily,= but they later informed the committee he had "a change of heart," committe= e spokesman Ken Johnson said. Fastow, who organized some of Enron's largest= partnerships and earned at least $30 million from running them, intends to= assert his Fifth Amendment right against self-incrimination, Johnson said,= but he will be required to do that in front of the committee.=20 Fastow has hired criminal lawyer John Keker of San Francisco, who prosecute= d Oliver L. North in the Iran-contra affair, to represent him in the Justic= e Department's criminal investigation.=20 Andersen's chief executive yesterday made his second voluntary appearance b= efore the capital markets subcommittee, and lawmakers praised him for testi= fying. But that was one of the few things they gave him credit for during a= bout four hours of stern questioning and speechifying. It was a much more s= keptical reception than Berardino received from the same lawmakers in Decem= ber, when he faced few if any probing questions. That appearance, however, = took place before Andersen acknowledged that it had destroyed numerous docu= ments pertaining to its work at Enron, and before the Powers report said it= "did not fulfill its professional responsibilities" in its Enron work.=20 Berardino said auditing is "a hard job" and Andersen personnel "are trained= to do the right thing."=20 "But we are human beings, and we may not get it right every time. I'm not a= pologizing for that," he said.=20 Rep. Max Sandlin (D-Tex.) asked Berardino to consider "the people whose liv= es . . . you helped destroy," a reference to Enron employees who lost their= jobs and the bulk of their retirement savings when Enron collapsed. Rep. M= ichael E. Capuano (D-Mass.) said Andersen "blew it so badly."=20 The report commissioned by Enron directors accused Andersen of failing in i= ts responsibilities and helping Enron create a web of transactions designed= to hide debts and losses. In the process, the report said, Andersen accoun= tants "had to surmount numerous obstacles presented by pertinent accounting= rules."=20 For example, the report said Andersen advised Enron each step of the way ab= out transactions with a group of off-the-books partnerships known as the Ra= ptors, which "had little economic substance."=20 The Raptor transactions accounted for about $1.1 billion of the $1.5 billio= n of pretax income Enron reported during the five quarters that preceded En= ron's December bankruptcy filing.=20 Berardino said Andersen approved deals involving the partnerships but didn'= t come up with the ideas for them. The accounting firm was reacting to plan= s developed by Enron personnel, investment bankers and others, he said.=20 "Suffice it to say that we were very much involved, as the company was, set= ting up these transactions, giving our advice on whether they would pass th= e rules," Berardino said. That was part of Andersen's job as auditor, he sa= id.=20 "The point I would like to emphasize is, at the end of the day, these are t= he company's financial statements," Berardino told the committee. "We canno= t make a company report any more than what the rules require," he said.=20 Berardino called for a major overhaul of accounting and auditing, saying th= at simply tinkering with the system would fail to prevent further financial= debacles. He said stronger discipline is needed because today "punishment = is not sufficiently certain to promote confidence in the profession."=20 The Andersen chief said auditors should rate the quality of a company's acc= ounting instead of just issuing a pass or fail grade, as they now do. He to= ld lawmakers that Andersen will no longer serve as both internal and outsid= e auditor for the same company -- as it did at Enron -- and will stop consu= lting to audit clients on the design and implementation of their financial = information systems.=20 Berardino said such activities accounted for "very, very little" of the $52= million Andersen received from Enron in 2000.=20 Some lawmakers called on Berardino to stop consulting to audit clients alto= gether.=20 Meanwhile, Deloitte Touche Tohmatsu, the global parent of accounting firm D= eloitte & Touche, said it will announce today that it intends to split off = its $3.5 billion management-consulting business, following a similar announ= cement last week by fellow Big Five accounting firm PricewaterhouseCoopers.= =20 Staff writer Susan Schmidt contributed to this report. http://www.washingtonpost.com=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron Officials Sought Lawyer's Dismissal Over Negotiations With Outside Pa= rtnership By Tom Hamburger and John Emshwiller Staff Reporters of The Wall Street Journal 02/06/2002 The Wall Street Journal A3 (Copyright (c) 2002, Dow Jones & Company, Inc.) WASHINGTON -- Enron Corp. executives tried to get one of the company's in-h= ouse lawyers fired in 2000 after their boss expressed unhappiness with the = way the lawyer was negotiating with a partnership in which the boss had an = interest, congressional investigators said.=20 The disclosure underlined the conflicts of interest that apparently existed= with outside partnerships set up and run by some Enron executives. For Enr= on, which is now in bankruptcy proceedings, the partnerships allowed the Ho= uston energy-trading company to enhance its profits and to move debt off it= s books. But the partnerships also were used by some senior Enron executive= s to enrich themselves, according to an internal company report released th= is weekend. The investigators' statements came as several congressional committees push= ed forward with probes into Enron's collapse. A House and Senate panel each= voted to issue subpoenas to force appearances by Kenneth Lay, Enron's form= er chairman and chief executive. Meanwhile, the head of Arthur Andersen, En= ron's former auditor, was aggressively questioned before a House panel and = outlined additional steps the accounting firm is taking to restore its repu= tation.=20 At issue in the case involving the Enron lawyer was one of the outside part= nerships known as LJM2. Enron attorney Joel Ephros was negotiating with att= orneys for LJM2 from the law firm of Kirkland & Ellis in 2000, when he rece= ived an expletive-laced angry voice mail about his handling of the negotiat= ion from Enron's Chief Financial Officer, Andrew Fastow, according to an ac= count given to congressional investigators. Mr. Fastow at the time ran and = had an ownership interest in LJM2, which eventually earned him substantial = profits.=20 Later, in the fall of 2000, two of Mr. Fastow's subordinates, Ben Glisan Jr= . and Michael Kopper, approached Mr. Ephros's boss to accuse the lawyer of = being unresponsive and incompetent and to urge his dismissal. The boss, Jor= dan Mintz, general counsel of Enron Global Finance, had just started his ne= w job and said he wasn't prepared to make any personnel moves, so he declin= ed. Informed of the decision, Mr. Fastow didn't object. Mr. Mintz later dec= ided to keep Mr. Ephros on staff and praised his performance.=20 The attempt to fire Mr. Ephros will be aired at a hearing tomorrow before t= he House Energy and Commerce Committee's oversight panel, Billy Tauzin, cha= irman of the full committee, said in an interview. The Louisiana Republican= offered the episode as an example of what he called a corrupt culture with= in Enron as it sought to inflate revenue and conceal losses using entities = such as LJM2.=20 "They literally became sham operations," said Mr. Tauzin, who is leading th= e most aggressive probe of nearly a dozen now being conducted on Capitol Hi= ll into Enron. "One purpose was to fool investors into believing that debt = had moved, that risk had moved. And the other purpose was to create phony i= ncome. This is an old game. This is nothing new. This is insider theft."=20 Mr. Mintz will be a chief witness at tomorrow's hearing and is expected to = detail his recollections about the effort made to muzzle Mr. Ephros. A spok= esman for Mr. Fastow declined to comment. A lawyer for Mr. Glisan didn't re= turn a call for comment. Mr. Ephros and Mr. Kopper couldn't be reached. Mr.= Tauzin said he expects Messrs. Fastow and Kopper to invoke their Fifth Ame= ndment rights against possible self-incrimination to avoid testifying at to= morrow's hearing.=20 The Ephros episode is an example of a problem addressed cryptically in the = internal report by a special committee of Enron's board that was released l= ast weekend. Mr. Fastow "was in a position to exert great pressure and infl= uence. . . . We have been told of instances in which he used that pressure = to try to obtain better terms for LJM," the report said. "Simply put, there= was little of the separation and independence required to enable Enron emp= loyees to negotiate effectively against LJM2."=20 Mr. Tauzin said that tomorrow's hearing will also feature details of what h= e called "literally a sweetheart deal" involving another partnership. Accor= ding to Mr. Tauzin and his investigators, one of the partnership deals was = cut by two Enron employees who were engaged to be married, one representing= Enron and one representing LJM2.=20 Congressional investigators said that the agreement netted huge profits for= the couple, Trushar Patel, an Enron attorney, and his fiancee, Anne C. Yae= ger, who worked with Mr. Fastow and later left Enron. Ms. Yaeger signed a $= 30 million agreement on behalf of LJM2, listing herself as an "authorized p= erson," documents shows. Her husband signed representing Enron.=20 Committee spokesman Ken Johnson said investigators have learned Ms. Yaeger = entered into the transaction by initially providing just $10 as a down paym= ent, later kicking in an additional $2,913. "We believe she walked away fro= m the deal with a profit of half a million dollars," Mr. Johnson said. "Tha= t's not a bad return for a $10 initial investment."=20 Messages left at the home of the couple weren't returned.=20 In other action, the Senate Commerce Committee and the House Financial Serv= ices Committee approved subpoenas for Mr. Lay to appear before their panels= on Feb. 12 and 14, respectively. Mr. Lay had agreed to appear at hearings = this week, but backed out in response to scathing criticism from Capitol Hi= ll prompted by revelations in the Enron board's internal report. Though he = will be forced to appear, he can refuse to testify by invoking the Fifth Am= endment, and several senators and House members predicted he would do so. K= elly Kimberly, Mr. Lay's spokeswoman, said he and his lawyers haven't yet d= ecided whether he will testify.=20 In his second appearance before the House Financial Services panel, Anderse= n CEO Joseph Berardino outlined new steps the accounting firm will take to = restore confidence in its work, including creating offices for audit qualit= y, ethics and compliance. Mr. Berardino came under heavy criticism from pan= el members for Andersen's role in the Enron affair, including a document-de= struction effort undertaken by Houston-based employees, one of whom was sub= sequently fired. He said he was "embarrassed" by the shredding. On Andersen= 's role in reviewing questionable partnership transactions, which later led= to Enron's collapse, he reiterated his assertion that "information was wit= hheld" by Enron as Andersen was reviewing them.=20 The difficulty Mr. Berardino faces in restoring confidence in his company w= as made clear in Connecticut yesterday as the state's Board of Accountancy = escalated its investigation of the firm, issuing a subpoena for Enron-relat= ed documents. The state could revoke Andersen's license to practice in Conn= ecticut and levy a fine. State Attorney General Richard Blumenthal says his= staff is searching for common policies between Andersen's activities in Ho= uston and Hartford. He added that other state attorneys general have been i= n contact with him and could pursue similar actions.=20 ---=20 Judith Miller and Russell Gold contributed to this article. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business/Financial Desk; Section A ENRON'S MANY STRANDS: THE TRANSACTIONS The Financial Wizard Tied to Enron's Fall By DAVID BARBOZA and JOHN SCHWARTZ 02/06/2002 The New York Times Page 1, Column 2 c. 2002 New York Times Company HOUSTON, Feb. 5 -- Before the financial shell games; before Chewco, Raptor = and LJM; before the partnerships that earned him $30 million, Andrew S. Fas= tow had his first setback at the Enron Corporation.=20 The setback came in 1996, when Mr. Fastow, a rising young star in corporate= finance, was nearly fired for the poor job he did running a retail unit th= at aimed to put Enron into competition with local utilities around the coun= try. Mr. Fastow, whose surname rhymes with how, was simply out of his element am= ong the intricacies of the retail market, colleagues said and his spokesman= , Gordon Andrew, acknowledged. Yet while Enron was notorious for its cutthr= oat corporate culture, its succeed-or-leave ethic, Mr. Fastow had enough in= fluence to return to his old department, finance.=20 ''What the guy knew was numbers and finance,'' a longtime colleague said. '= 'He knew how to close a deal. No one did that better than Andy.''=20 Today, investigators think that Mr. Fastow's financial wizardry, his abilit= y to wrap the company's assets and debts into complicated off-balance-sheet= deals, was a central cause of Enron's undoing. What Mr. Fastow presented a= s an arrangement intended to benefit Enron, according to a report released = on Saturday by a special committee of the board, ''became, over time, a mea= ns of enriching himself personally, and facilitating manipulation of Enron'= s financial statements.''=20 No one yet knows how much of the blame for Enron's collapse should fall upo= n Mr. Fastow. On Thursday, Mr. Fastow, 40, a father of two who was Enron's = chief financial officer until he was forced to resign in October, is expect= ed to invoke his Fifth Amendment right rather than give potentially self-in= criminating answers to questions from members of Congress.=20 The crucial question is whether Mr. Fastow was the mastermind behind Enron'= s most suspect financing deals. Or was he, as Mr. Fastow has maintained thr= ough a spokesman, merely doing, with the board's knowledge, the bidding of = his superiors at Enron, the former chief executives, Kenneth L. Lay and Jef= frey K. Skilling?=20 Even before Mr. Fastow's appearance on Capitol Hill, Representative James C= . Greenwood, Republican of Pennsylvania, called him the ''Betty Crocker of = cooked books.'' And today, in one Congressional hearing, William C. Powers = Jr., an Enron director who led the committee that wrote the internal report= , said Mr. Fastow had been plagued by dual loyalties. ''Fastow couldn't min= d the store,'' Mr. Powers said, ''because he was involved in the transactio= ns.''=20 For now, Mr. Fastow is not telling his story. He declined to be interviewed= for this article, and he refused to cooperate with a special investigative= committee for Enron's board. He also invoked his right against self-incrim= ination at a meeting a few weeks ago with the Securities and Exchange Commi= ssion.=20 But the portrait that is emerging of Mr. Fastow, from interviews with forme= r colleagues and details from the Enron special report, is that of a brilli= ant, ambitious and hard-charging executive who, it appears, grew obsessed w= ith using complex financing techniques to supercharge Enron's earnings whil= e inflating his own paycheck.=20 Besides the $30 million he made in the LJM partnerships, Mr. Fastow earned = a hefty salary and stock options at Enron. In 1999 and 2000, he sold about = $23 million in Enron stock.=20 It was not as if he needed the money, his friends say; his wife, the former= Lea Weingarten, is the heiress to a Houston real estate fortune. But Mr. F= astow was adamant, friends say, in his belief that the amount of money a pe= rson made was the only meaningful measure of success in business.=20 Even after Mr. Fastow retreated into seclusion last fall, he continued buil= ding an 11,500-square-foot house in Houston's wealthy River Oaks neighborho= od. The Fastows also maintain an art collection, some of which has been dis= played at the Contemporary Arts Museum and at the Menil Collection, both in= Houston.=20 He also had a prominent role in Houston's Jewish community, taking charge o= f fund-raising for the city's new Holocaust museum.=20 ''The work was significantly greater than the reward,'' said Bobby Lapin, a= lawyer who has known Mr. Fastow for years. ''The person I know bears absol= utely no relation to the person who has been characterized, in some reports= , within the walls of Enron.''=20 But the focus on Capitol Hill is not on good deeds.=20 According to the internal report, Mr. Fastow and a group of other top execu= tives secretly invested in a series of partnerships that benefited from swa= pping assets with Enron. Mr. Fastow used some of those partnerships to conc= eal losses at Enron. He used others to inflate profits, by about $1 billion= in a 12-month period in 2000 and 2001. And in one instance, he invested $2= 5,000 in Southampton Place, a partnership that in a matter of two months ma= de $4.5 million from a deal with Enron, the special report said.=20 That transaction, and many others, were never disclosed to Enron's director= s, the report said. The $4.5 million would eventually reach Mr. Fastow thro= ugh a family foundation he had set up as a charity.=20 The collapse of Enron is a dramatic reversal of fortune for Mr. Fastow. Unt= il last August, when Mr. Skilling resigned as chief executive, Mr. Fastow w= as at his side constantly, a crucial player in winning Enron acclaim as one= of the world's most innovative companies.=20 He arrived at the company in 1990, at age 29, a handsome, talented and ambi= tious man who would eventually assume the job of chief financial officer in= 1998 at the age of 36.=20 A graduate of Tufts University and the Kellogg School of Management at Nort= hwestern, Mr. Fastow was helping to refashion a gas pipeline company into s= omething more akin to a Wall Street trading house.=20 Those who knew Mr. Fastow at Enron described a man with twin personalities.= They say he could be charming yet aggressive, quiet yet mercurial, and phi= lanthropic yet bent on accumulating the trappings of wealth.=20 ''He was very smart and very good at what he did,'' one former executive sa= id. ''He could be nice, but he could also be quite volatile and short-tempe= red. He didn't have a lot of patience with people who weren't as smart as h= im.''=20 Andrew Stuart Fastow was born in Washington but grew up in New Providence, = N.J., the son of a buyer for supermarkets and department stores. His career= started in Chicago in the 1980's, at Continental Bank, where he worked on = ''troubled loans,'' and more complicated deals, like leveraged buyouts.=20 At Enron, he started by trying to arrange financing for Mr. Skilling's inno= vative plan, the creation of a ''gas bank'' that would help struggling ener= gy companies by providing them with loans in exchange for their oil and gas= reserves, which Enron could hedge and trade against in its growing derivat= ives unit.=20 Enron later began supporting energy producers by creating partnerships that= allowed the company to keep the debt off the balance sheet. The first of t= hose partnerships was named Cactus.=20 By 1993, the partnerships Mr. Fastow helped set up were so successful that = Calpers, the California Public Employees' Retirement System, approached Enr= on about a joint venture. The partnership was called JEDI, or the Joint Ene= rgy Development Investments.=20 Later, there were hundreds of other partnerships, with names like Obi 1, Ch= ewco and Raptor.=20 In recent years, as Enron pushed to build power plants and to develop new m= arkets, the company needed huge amounts of capital, and partnerships were o= ne way to pay for the projects without having the debt accumulate on Enron'= s balance sheet.=20 In 1999, CFO magazine honored Mr. Fastow for creating an innovative financi= ng structure. In a rare interview, he told CFO that he would use off-balanc= e-sheet transactions to avoid weakening Enron's credit rating. And he would= do this while operating in the shadows.=20 ''This guy was never anything but low profile,'' said John E. Olson, an ene= rgy analyst at Sanders Morris Harris. ''He rarely, if ever, showed up at an= alyst meetings. He was a loan consolidator.''=20 By 1999, there were small fissures in Mr. Fastow's labyrinthine financing e= mpire. As early as 1997, Enron had difficulty finding a partner to buy out = Calpers's interest. So, apparently to skirt disclosure rules, Mr. Fastow pr= oposed listing his wife's family as outside investors. When he was rebuffed= , Michael Kopper, who worked under Mr. Fastow at Enron, was selected. Becau= se he was a lower-level employee, Enron would not have to disclose his inte= rest in S.E.C. filings. Mr. Kopper would eventually make at least $10 milli= on in profit from the venture.=20 Later, Mr. Fastow dealt with partnerships that involved at least four other= Enron employees.=20 Mr. Fastow, the board report said, often played dual roles as an Enron exec= utive and a partner of LJM. Once, he found himself at odds with Enron Broad= band Services. ''Fastow's involvement caused great distress for the E.B.S. = team,'' the special report said. ''They understood that their job was to ge= t the best deal possible for Enron but driving a hard bargain for Enron dre= w the ire of Enron's C.F.O.'=20 Others, who worked closely with Mr. Fastow, say he was not a rogue operator= . ''I think there's too much focus on Andy,'' one longtime colleague said. = Mr. Fastow, the colleague said, did not do anything on his own.=20 Other colleagues say it is quite possible Mr. Fastow took charge himself, t= hat he got wrapped up in a series of complex transactions that ultimately d= oomed him. And even when it was all falling apart, Mr. Fastow was reluctant= to acknowledge what was happening.=20 In October, after the company was forced to restate its earnings but before= he left, Mr. Fastow appeared at an employee meeting at the Hyatt Regency h= otel here. His remarks were brief and mysterious. ''The Enron Corporation's= balance sheet,'' one employee recalls him saying, ''has never been in bett= er health.'' Photos: Andrew S. Fastow, Enron's former chief financial officer, at his la= wyer's office last month in Houston. (James Estrin/The New York Times)(pg. = A1); Andrew S. Fastow is said to have been a hard-charging executive obsess= ed with using complex financial techniques to bolster profit. (F. Carter Sm= ith for The New York Times); After Andrew S. Fastow went into seclusion las= t fall, he continued work on his 11,500-square-foot new home in the River O= aks area of Houston. (James Estrin/The New York Times)(pg. C9)=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 A Section Enron CEO Felt 'Betrayed,' Panel Told; Head of Internal Probe Testifies on = the Hill Jackie Spinner and David S. Hilzenrath Washington Post Staff Writers 02/06/2002 The Washington Post FINAL A01 Copyright 2002, The Washington Post Co. All Rights Reserved Former Enron Corp. chairman Kenneth L. Lay told investigators for the Enron= board that he should have paid more attention to his company's bookkeeping= but felt "betrayed" by others at the company who kept information from him= , the board's lead investigator testified yesterday.=20 Lay, in four hours of interviews with the special board committee investiga= ting the company's collapse, indicated that he knew the company was using E= nron stock to protect investors in its off-the-books partnerships, said Wil= liam C. Powers Jr., chairman of the committee, which issued its report Satu= rday. That unusual strategy helped Enron hide large debts and losses.=20 "When we interviewed Mr. Lay . . . he didn't understand or appreciate there= was anything wrong with it," Powers, dean of the University of Texas Law S= chool, told the House Government Reform subcommittee on oversight and inves= tigations. Lay's story was that "the accountants had signed off on it," Pow= ers said. "It was a credible device."=20 Powers also disclosed that the Enron board's investigative committee spent = "a couple of hours" interviewing former Enron vice chairman J. Clifford Bax= ter, who was found dead on Jan. 25 of a self-inflicted gunshot wound. Power= s said Baxter gave no hint that he was "a person . . . in danger."=20 House members asked Powers for notes or recordings from that interview. Pow= ers said he could not turn the records over without permission from the com= pany, but he said he would support their release. Enron attorney Robert Ben= nett later said the company "certainly will provide the materials requested= ."=20 Committees in the Senate and House yesterday subpoenaed Lay to appear on Ca= pitol Hill on Feb. 12 and 14. Lay, who withdrew from a scheduled appearance= Monday, is expected to invoke his constitutional right against self-incrim= ination and refuse to testify, but the subpoenas mean he will have to do so= in person in the full glare of publicity.=20 Meanwhile, members of a Financial Services subcommittee unleashed their wra= th on Arthur Andersen chief executive Joseph F. Berardino, blasting the big= accounting firm's audits of Enron and voicing exasperation when Berardino = said he didn't know the answers to many of their questions about Andersen's= conduct.=20 "Maybe it's better to be dumb than culpable, but we want some answers," sai= d Rep. Gary L. Ackerman (D-N.Y.).=20 "I mean, your ship is going to go down and you're going to be lashed to the= mast unless you start talking to us about what happened."=20 Berardino, who headed Andersen's audit practice before becoming its chief e= xecutive about a year ago, said Andersen was still trying to gather the fac= ts.=20 "I don't know, with authority, what we knew and when we knew it," he told t= he Financial Services subcommittee on capital markets, one of several congr= essional panels investigating Enron's collapse.=20 Separately, a spokesman for Andersen said yesterday that its auditors went = to Enron's board earlier than was previously known with concerns about poss= ible illegal activity.=20 The first approach was in August, after the emergence of a letter from exec= utive Sherron Watkins to Lay warning of widespread accounting irregularitie= s, spokesman Charlie Leonard said.=20 Federal law requires auditors to alert the SEC when they suspect illegality= and the board or management does not address it. In this case, Andersen pe= rsonnel went to the board but not to the SEC because they were assured the = board was investigating the matter, Leonard said.=20 Andersen previously said it had alerted the board to possible illegal activ= ities last fall as Enron unraveled.=20 As lawmakers search for ways to prevent future Enrons, Rep. Richard H. Bake= r (R-La.), chairman of the House subcommittee, floated what would be a fund= amental change in the auditing business -- having stock exchanges hire the = auditors. Currently, auditors are hired by the companies they are responsib= le for auditing -- an arrangement that some lawmakers say deters them from = challenging dubious corporate accounting.=20 In other developments yesterday, President Bush rejected a call by Sen. Ern= est F. Hollings (D-S.C.) for a special prosecutor to investigate Enron, say= ing his Justice Department could do the job. Enron was a major contributor = to the Bush presidential campaign and has ties to a number of administratio= n officials.=20 The House Energy and Commerce Committee yesterday subpoenaed former Enron c= hief financial officer Andrew S. Fastow to appear at a hearing tomorrow. Fa= stow's attorneys originally told the committee he would appear voluntarily,= but they later informed the committee he had "a change of heart," committe= e spokesman Ken Johnson said. Fastow, who organized some of Enron's largest= partnerships and earned at least $30 million from running them, intends to= assert his Fifth Amendment right against self-incrimination, Johnson said,= but he will be required to do that in front of the committee.=20 Fastow has hired criminal lawyer John Keker of San Francisco, who prosecute= d Oliver L. North in the Iran-contra affair, to represent him in the Justic= e Department's criminal investigation.=20 Andersen's chief executive yesterday made his second voluntary appearance b= efore the capital markets subcommittee, and lawmakers praised him for testi= fying. But that was one of the few things they gave him credit for during a= bout four hours of stern questioning and speechifying. It was a much more s= keptical reception than Berardino received from the same lawmakers in Decem= ber, when he faced few if any probing questions. That appearance, however, = took place before Andersen acknowledged that it had destroyed numerous docu= ments pertaining to its work at Enron, and before the Powers report said it= "did not fulfill its professional responsibilities" in its Enron work.=20 Berardino said auditing is "a hard job" and Andersen personnel "are trained= to do the right thing."=20 "But we are human beings, and we may not get it right every time. I'm not a= pologizing for that," he said.=20 Rep. Max Sandlin (D-Tex.) asked Berardino to consider "the people whose liv= es . . . you helped destroy," a reference to Enron employees who lost their= jobs and the bulk of their retirement savings when Enron collapsed. Rep. M= ichael E. Capuano (D-Mass.) said Andersen "blew it so badly."=20 The report commissioned by Enron directors accused Andersen of failing in i= ts responsibilities and helping Enron create a web of transactions designed= to hide debts and losses. In the process, the report said, Andersen accoun= tants "had to surmount numerous obstacles presented by pertinent accounting= rules."=20 For example, the report said Andersen advised Enron each step of the way ab= out transactions with a group of off-the-books partnerships known as the Ra= ptors, which "had little economic substance."=20 The Raptor transactions accounted for about $1.1 billion of the $1.5 billio= n of pretax income Enron reported during the five quarters that preceded En= ron's December bankruptcy filing.=20 Berardino said Andersen approved deals involving the partnerships but didn'= t come up with the ideas for them. The accounting firm was reacting to plan= s developed by Enron personnel, investment bankers and others, he said.=20 "Suffice it to say that we were very much involved, as the company was, set= ting up these transactions, giving our advice on whether they would pass th= e rules," Berardino said. That was part of Andersen's job as auditor, he sa= id.=20 "The point I would like to emphasize is, at the end of the day, these are t= he company's financial statements," Berardino told the committee. "We canno= t make a company report any more than what the rules require," he said.=20 Berardino called for a major overhaul of accounting and auditing, saying th= at simply tinkering with the system would fail to prevent further financial= debacles. He said stronger discipline is needed because today "punishment = is not sufficiently certain to promote confidence in the profession."=20 The Andersen chief said auditors should rate the quality of a company's acc= ounting instead of just issuing a pass or fail grade, as they now do. He to= ld lawmakers that Andersen will no longer serve as both internal and outsid= e auditor for the same company -- as it did at Enron -- and will stop consu= lting to audit clients on the design and implementation of their financial = information systems.=20 Berardino said such activities accounted for "very, very little" of the $52= million Andersen received from Enron in 2000.=20 Some lawmakers called on Berardino to stop consulting to audit clients alto= gether.=20 Meanwhile, Deloitte Touche Tohmatsu, the global parent of accounting firm D= eloitte & Touche, said it will announce today that it intends to split off = its $3.5 billion management-consulting business, following a similar announ= cement last week by fellow Big Five accounting firm PricewaterhouseCoopers.= =20 Staff writer Susan Schmidt contributed to this report. http://www.washingtonpost.com=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 A Section $270 Million Man Stays in the Background Peter Behr and Robert O'Harrow Jr. Washington Post Staff Writers 02/06/2002 The Washington Post FINAL A01 Copyright 2002, The Washington Post Co. All Rights Reserved Lou Pai struck many colleagues as the brightest brain at Enron. Others say = he was notable for helping to produce some of the company's biggest busines= s disasters while head of Enron Energy Services, the Houston firm's effort = to sell electricity to retail customers.=20 The 54-year-old Pai certainly stands out as the company's biggest winner am= id financial devastation -- he sold $270 million of Enron stock in the 16 m= onths before he resigned last July. Because of his stock sales, he, along with other senior Enron executives an= d board members, is being sued by shareholders. But so far he is one of the= second-tier players in the Enron drama. He was not named in the Enron boar= d's special report on the partnerships run by the company's chief financial= officers. He has not been called to testify by the myriad congressional co= mmittees probing Enron's collapse.=20 But Pai's role at Enron illustrates some central themes in the company's ri= se and fall, according to former executives and colleagues.=20 His windfall from Enron stock sales highlights a compensation strategy that= provided huge rewards to top executives who launched new business or creat= ed major new trading opportunities for the Houston company. Some company cr= itics say this reward structure led Enron to take greater and greater busin= ess risks that finally caught up with the company last year.=20 There are allegations that the retail energy business Pai headed until last= year racked up hundreds of millions of dollars in trading losses in 2000, = according to a memo written by former Enron manager Margaret Ceconi. She co= ntends that those losses were effectively hidden when the division was comb= ined with a much larger wholesale energy operation around March 2001.=20 An Enron spokesman has disputed that allegation.=20 Pai, who lives with his second wife in Houston's Sugar Land suburb, decline= d, through one of his attorneys, to be interviewed for this report.=20 A source close to Pai said Pai "doesn't know anything" about the alleged hi= dden losses. She called Pai "a consummate professional" who also knows noth= ing about the partnerships accused of hiding company losses and inflating e= arnings. "Lou was an operations guy" who had "nothing to do with accounting= ," she said.=20 Pai is "a very quiet guy," the source added. "If you walked into a room of = people, you would not pick him out as the guy with all the money," she said= .=20 There were signs Pai was willing to spend freely, however. He, and possibly= other partners, bought 77,000 acres of Colorado mountain land since 1999 f= or at least $23 million, according to press reports in that state.=20 In the spring of 2000, about the time he was going through a divorce, Pai w= as intent on buying a house. He told people he wanted to have a home for hi= s son to visit during a break from college.=20 The house he chose in the Tanglewood section of Houston had been on the mar= ket for only a day or two. He paid just over $900,000 in cash, according to= a person familiar with the deal. "There was hardly anybody ever at the hou= se. Within six months, the house was back on the market," the person said.= =20 The source close to Pai said he used tens of millions of dollars of the pro= ceeds from his Enron stock sales for his divorce settlement in 2000.=20 Pai is the son of a distinguished aeronautics engineering professor at the = University of Maryland, Shih-I Pai, who died in 1996. He himself earned an = undergraduate degree at Maryland in 1970 and a master's degree in economics= there three years later.=20 Pai worked at Conoco Inc., another energy company, before joining Enron in = 1987. Three years later he was part of a new group of executives forming ar= ound Jeffrey K. Skilling -- later the company's chief executive -- bent on = turning Enron from a dowdy natural gas pipeline company into a fast-paced e= nergy-trading firm.=20 Quiet-spoken and diminutive, Pai did not push his way into discussions, ass= ociates said. He did win notice for his ability to devise ingenious energy-= trading strategies that covered a variety of business risks, including shar= p swings in prices and changes in the weather, they added.=20 Working first for the corporate planning group, he helped set up one of the= company's first risk-management units. It used complex financial contracts= to help protect Enron's natural gas investments against sharp price swings= .=20 That became a model for Enron's wholesale electricity-trading business, Enr= on Capital & Trade Resources, which led in turn to the creation of the comp= any's retail energy unit.=20 Pai's expertise was strong enough to insulate him from the first of his set= backs as a manager, Enron's attempt to sell retail electricity to household= s and commercial customers in California and East Coast states as energy de= regulation began in those states in the mid-1990s.=20 In 1997, Pai became chairman of Enron Energy Services (EES), the company un= it handling retail energy marketing. Thomas E. White, now secretary of the = Army, was vice chairman of the unit from 1998 until last year.=20 A year later, however, after spending $15 million to promote the unit's ser= vices with Super Bowl ads and other promotions, Enron gave up in California= -- the costs of competing against the state's utilities were too high.=20 Outside California, the move toward electricity deregulation was halting, d= espite state-by-state lobbying by Enron's political teams.=20 But Pai wasn't through, and EES shifted its sights to large commercial and = industrial customers while spinning off its power-marketing operation for h= ouseholds to a new subsidiary called New Power Co.=20 In one interview in 2000, Skilling called Pai "my ICBM," an intellectual mi= ssile instantly launched at new ventures. "He can conceptualize it, bring i= n the right people, and get it up and running fast," Skilling said.=20 But the creation of New Power as a separate unit was an admission that EES = had failed at consumer retailing, said Marc E. Manly, a managing director o= f New Power, now a separate company.=20 "They didn't know how to do it," Manly said of Enron's efforts in the field= . "They failed miserably." While remaining at Enron and EES, Pai was given = the chairmanship of New Power when Enron spun it off as a publicly traded f= irm in 2000.=20 He showed his loyalty by investing $5 million in New Power. And Enron recip= rocated, giving Pai 2 million shares of New Power stock.=20 "That was an arrangement with Lou," Manly said. "He was in at the beginning= of this, the originator of the idea of the company, and Enron worked out a= compensation arrangement. . . . We had to abide by the commitment Enron ha= d made with Lou."=20 Pai is listed in the latest New Power company filings as its largest single= shareholder, with 3.4 million shares. While Pai's timing in his sales of E= nron shares was fortunate, that wasn't the case with New Power.=20 The stock went public in October 2000 at $21 a share. But the public's resi= stance to electricity deregulation after the California crisis and a steep = drop in electricity prices has battered New Power's operations. It's stock = closed yesterday at 36 cents a share.=20 While running EES in 1999, Pai began purchasing the Taylor Ranch in souther= n Colorado, on the west side of a mountain range that rises to 14,000 feet = and runs down almost to the New Mexico border.=20 Exactly how much Pai owns and controls isn't clear. Before Pai bought the l= and, the owner had tried to keep local residents off the sprawling site, ba= rring them from hunting and gathering wood. Pai has continued to oppose acc= ess and now is the target of a 20-year-old lawsuit over the issue.=20 Lawyer Jeff Goldstein, who has represented local residents suing the ranch,= said it's Pai's property. "There is no question that he is the principal. = He goes there and seems to be running the show," Goldstein said.=20 But as with Enron's entities, the exact ownership is murky, Goldstein said.= The listed owners are partnerships.=20 Researcher Lucy Shackelford contributed to this report. http://www.washingtonpost.com=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Financial Desk THE NATION Enron Execs Sold Stock as Losses Grew Probe: The $44-million sel= l-off came amid concern that problems at partnerships could become public. = The action raises questions of possible insider trading. JEFF LEEDS; THOMAS S. MULLIGAN TIMES STAFF WRITERS 02/06/2002 Los Angeles Times Home Edition A-1 Copyright 2002 / The Times Mirror Company HOUSTON -- A handful of senior Enron Corp. executives sold $44 million in c= ompany stock while concerns were growing inside the company that losses rac= ked up by a group of obscure partnerships could spill into public view, rec= ords show.=20 The huge investment losses by the four so-called Raptor partnerships were d= isclosed months later and played a key role in forcing Enron in October to = say it had overstated the value of the company by $1.2 billion, spurring th= e company's filing for Chapter 11 bankruptcy protection Dec. 2. Stock sales by Enron executives before the company's descent previously hav= e come under a spotlight, but the timing of the sales gained new significan= ce with the release Saturday of an internal Enron investigation that detail= ed the executives' knowledge of the Raptor problems.=20 Four Enron executives--including former President and Chief Executive Jeffr= ey K. Skilling and former Chief Financial Officer Andrew S. Fastow--sold ab= out $44 million in stock from Aug. 7, 2000, when the Raptor problems became= known internally, through March 26, 2001, when the partnerships were restr= uctured to prevent disclosure of losses, according to a review of stock sal= es Tuesday.=20 There is no evidence that the sales were directly related to knowledge of t= he problems facing the Raptors. But any stock sales by executives based on = information not available to the public could be construed as trading on in= side information, a federal crime, according to a Washington securities law= yer who declined to speak for attribution.=20 The executives--Skilling, Fastow and Chief Accounting Officer Richard A. Ca= usey and Chief Risk Officer Richard B. Buy--could not be reached for commen= t.=20 During the period Aug. 7, 2000, to March 26, 2001, Skilling had stock sales= totaling $28.2 million, and Fastow sales totaling $4.3 million, according = to data compiled by Thomson Financial, a securities research firm.=20 Causey's sales totaled $7.1 million and Buy's totaled $4.3 million, Thomson= said.=20 The sales came at a time when Enron executives were concerned that losses b= y the Raptors could force damaging public disclosure. The fear of disclosin= g those losses led Enron to expand and restructure the Raptors during an ei= ght-month period in 2000-01 to keep its losses off the corporate books, acc= ording to an Enron board committee's internal report issued Saturday.=20 Only an elaborate reorganization of the Raptors last March 26 saved Enron f= rom having to disclose a $504-million loss on its first-quarter financial s= tatements, according to Enron's internal report.=20 Starting April 18, 2000, Enron created the first of four Raptor entities so= that losses in its investment portfolio (including stocks) would not show = up on Enron's income statement, the internal report said. The Raptors, whic= h were little known beyond a small group of corporate insiders, allowed the= energy company to hedge, or shield itself from, future losses on its inves= tment portfolio by shifting some of the risk to the Raptors.=20 Enron provided the initial funding for three of the Raptors with shares of = its own stock. Each one also received a modest investment from a related pa= rtnership headed by Fastow.=20 In essence, the Raptors agreed to cover potential losses on certain Enron i= nvestments. As long as the value of the Enron shares backing the Raptors he= ld up, the entities would be able to pay their debts to the energy giant. E= nron counted the debts owed by the Raptors as income, offsetting losses fro= m its portfolio.=20 Soon after creating the Raptors, however, Enron executives learned how quic= kly they could slip into trouble.=20 According to the report, Skilling, Fastow, Causey and Buy attended an Aug. = 7, 2000, meeting of Enron's finance committee in which Treasurer Ben Glisan= noted that the credit capacity of Raptor I was "almost completely utilized= and that Raptor II would not be available" until months later. The committ= ee recommended creating a Raptor IV, but before that could be activated exe= cutives created, without board approval, Raptor III without informing the b= oard.=20 Unlike the other entities, Raptor III was not backed by Enron stock, making= it what the internal investigation called an "extraordinarily fragile stru= cture."=20 One day after Raptor III became active, on Sept. 28, 2000, Causey exercised= 61,097 stock options and sold an additional 19,536 shares, netting $5.4 mi= llion, according to the analysis by Thomson. That was one of only four days= Enron's chief accounting officer has traded shares, according to Thomson.= =20 By late 2000, two of the entities, Raptor I and Raptor III, were essentiall= y insolvent, lacking the credit to be able to pay back their debts, the rep= ort said.=20 Raptor III was in especially bad shape. Unlike the three other entities, Ra= ptor III was essentially backed by shares of New Power Co., an Enron spinof= f that quickly foundered after going public. But under the deal designed by= Enron accountants, the more that New Power shares fell, the more money Rap= tor III owed Enron.=20 New Power went public Oct. 5, 2000. By mid-November, the stock had lost 50%= of its value, threatening to wreak havoc with the Raptor structure and for= ce Enron to disclose huge losses, according to the internal report.=20 On Nov. 7, Fastow sold 52,080 shares at $83 each for a gross of $4.32 milli= on. Filings reviewed by Thomson did not indicate Fastow's cost, so his net = gain on the sales is unclear. Stock sales by Fastow earlier in the year--af= ter the Raptors had been devised but before they showed signs of serious tr= ouble--netted him an estimated $3.4 million.=20 To avoid having to disclose a huge loss, Enron executives on Dec. 22, 2000,= merged the credit of the four Raptors under a 45-day pact, allowing Enron = to avoid reporting a credit-reserve loss in its year-end financial statemen= ts.=20 In early January, Enron accountants began work to develop a more permanent = solution to replace the 45-day agreement, according to the internal report.= The accountants designed a complex restructuring that took effect March 26= , 2001.=20 "We were told that, during the first quarter of 2001, Skilling said that fi= xing the Raptors' credit capacity problems was one of the company's highest= priorities," the report said.=20 Skilling has disputed that account. He told the board investigation team, l= ed by Texas Law School dean William Powers, that he recalls being informed = of the Raptors' credit problems "in only general terms" and that he underst= ood the matter to be "an accounting issue."=20 The committee found that "either Skilling was not nearly as involved in Enr= on's business as his reputation--and his own description of his approach to= the job--would suggest, or he was deliberately kept in the dark by those i= nvolved in the restructuring."=20 By February 2001, Enron accountants were providing daily reports of the cre= dit status of at least two of the Raptors to Causey and Buy, according to t= he internal report.=20 Tension built through March 2001, according to the report, after executives= became aware that Enron would have to take a pretax charge against earning= s of about $504 million to reflect the shortfall in credit capacity of Rapt= ors I and III.=20 Buy, who had not traded any Enron shares since becoming Enron's chief risk = officer in mid-1999, began an intense sell-off Jan. 2, 2001. According to T= homson's analysis, the 54,874 shares he sold from that date through March 5= of that year are the only shares he has sold since taking that post. The s= ales netted him an estimated $2.8 million.=20 For his part, Enron's since-ousted chairman and chief executive, Kenneth L.= Lay, knew of the creation of the Raptors, the internal report said. But in= vestigators said they found no evidence that Lay, who stepped aside as CEO = in February 2001 in favor of Skilling, was aware of the entities' debts and= reorganization.=20 On Aug. 24, 2000, Lay exercised 140,230 options and sold 75,000 shares, net= ting a $4.09-million profit on the day. On Nov. 1, he settled into a patter= n, selling blocks of 1,000 to 4,000 shares almost every day until August 20= 01.=20 In hindsight, the committee said, Enron's top executives, as well as outsid= e advisors including accounting firm Andersen, should have kept closer over= sight ofthe Raptors and other partnerships.=20 "The creation, and especially the subsequent restructuring, of the Raptors = was perceived by many within Enron as a triumph of accounting ingenuity by = a group of innovative accountants," the committee report said. "We believe = . . . especially after the restructuring, the Raptors were little more than= a highly complex accounting construct that was destined to collapse."=20 Leeds reported from Houston, Mulligan from New York.=20 *=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business/Financial Desk; Section C ENRON'S MANY STRANDS: THE MANAGEMENT 2 Officials Are Expected To Leave the Company By REED ABELSON 02/06/2002 The New York Times Page 9, Column 5 c. 2002 New York Times Company Two of the senior Enron executives who were sharply criticized in a report = by a special committee of the board are expected to leave the company.=20 Members of the senior staff at Enron have been told that Richard A. Causey,= the chief accounting officer, and Richard B. Buy, the chief risk officer, = are expected to leave the company and are currently negotiating the terms o= f their departures. The situation is in flux, according to people close to the board.=20 While the report examined the role of other executives who remain at Enron,= including Jeffrey McMahon, Enron's new president, and James V. Derrick Jr.= , the general counsel, it focused on the responsibilities of Mr. Causey and= Mr. Buy in providing accounting and risk-management controls at Enron.=20 An Enron spokesman and a lawyer for Mr. Causey and Mr. Buy did not return p= hone calls seeking comment.=20 None of the four executives had a direct role in the arrangement outlined i= n the report that used the partnerships to inflate profits and enrich some = employees. But none of the executives alerted the board to troubling signs = that these partnerships posed problems, according to the report.=20 Mr. Causey, Mr. Buy and Mr. Derrick were all broadly responsible for overse= eing what the company told investors about the partnerships, and they all p= layed a part in the general oversight of Enron's finances.=20 Mr. Derrick's lawyer, J. Clifford Gunter, said Mr. Derrick could not commen= t on the report.=20 But the two executives with explicit duties to oversee the partnerships, re= viewing transactions between the partnerships and the company, were Mr. Cau= sey and Mr. Buy. While the report says they did not ignore their duties, ''= they interpreted their roles very narrowly and did not give the transaction= s the degree of review the board believed was occurring.'' As the most seni= or accounting officer, Mr. Causey was ultimately responsible for Enron's fi= nancial reporting, according to the report. ''He presided over and particip= ated in a series of accounting judgments that, based on the accounting advi= ce we have received, went well beyond the aggressive,'' said the report.=20 Mr. Causey also had a significant role in the decisions surrounding what En= ron would make public, according to the report. Although the report depicte= d him as relying on the advice of the company's outside accountant, Arthur = Andersen, he was described as ''the final arbiter of unresolved differences= among the various contributors to the financial reporting process.''=20 The report concluded that Enron's disclosures, involving the compensation o= f the former chief financial officer involved in the partnerships and a var= iety of transactions between the partnerships and the company, ''were funda= mentally inadequate.''=20 Because of Mr. Causey's specific responsibility ''with reviewing Enron's tr= ansactions with the LJM partnerships,'' he should have been in a position t= o provide advice concerning the disclosures, according to the report. ''The= evidence we have seen suggests he did not.''=20 The report criticized Mr. Buy for neglecting his role in reviewing and appr= oving all of the transactions between the partnerships and Enron. Mr. Buy n= ever followed a procedure to identify all the transactions and did not, in = the report's words, ''affirmatively'' carry out his responsibility for care= fully reviewing the economic terms of all of the transactions.=20 The Wall Street Journal reported yesterday that both Mr. Causey and Mr. Buy= were being placed on leave.=20 The board's report provides less detail on the role of Mr. Derrick, Enron's= general counsel, who oversaw the dozens of in-house lawyers involved. The = report does, however, suggest that Mr. Derrick and Enron's in-house legal s= taff played some role in determining what Enron told the public, in conjunc= tion with the company's outside accountants and lawyers.=20 Mr. Derrick was also at the center of Enron's investigation of the concerns= raised by Sherron S. Watkins, an Enron executive, last August, according t= o the report. In consultation with Kenneth L. Lay, Enron's chairman, he sel= ected Vinson & Elkins, despite potential conflicts, as the law firm to cond= uct the preliminary inquiry and severely limited its range. ''The scope and= process of the investigation appear to have been structured with less skep= ticism than was needed to see through these particularly complex transactio= ns,'' the report said.=20 Even Mr. McMahon, who was named Enron's president last month as part of the= team now leading Enron's restructuring, appears to be among the many execu= tives who failed to speak up, according to the report. While Mr. McMahon ra= ised doubts about the partnerships as early as March 2000, according to the= report, he appears never to have voiced them to Mr. Lay or the board.=20 All four executives were named in a lawsuit concerning possible insider tra= ding because of their sales of Enron stock in recent years. According to th= e lawsuit, Mr. Causey sold $13.3 million in stock, Mr. Derrick sold $12.7 m= illion, Mr. Buy sold $4.3 million and Mr. McMahon sold $2.7 million. Mr. De= rrick never exercised a single option that was not about to expire, accordi= ng to his lawyer.=20 In the end, the report highlights what appear to be a series of failures of= the various checks in place that led to $1 billion in false profits and th= e crisis in confidence that culminated in Enron's filing for bankruptcy las= t fall. At any point, concerns raised by the legal, accounting or risk-mana= gement executives involved might have prevented the company's collapse, acc= ording to Robert Mittelstaedt Jr., a professor at the Wharton School of the= University of Pennsylvania.=20 ''It takes a whole series of mistakes to go so very badly,'' he said. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business/Financial Desk; Section C ENRON'S MANY STRANDS: CONGRESSIONAL MEMO Investigators Buying Time For Inquiry By DON VAN NATTA Jr. 02/06/2002 The New York Times Page 1, Column 2 c. 2002 New York Times Company WASHINGTON, Feb. 5 -- Kenneth L. Lay backed out of his date with Congress t= his week, but his refusal to testify voluntarily only served to increase th= e resolve of politicians to get the truth about the fall of the Enron Corpo= ration, even if they never get the opportunity to hear the former Enron cha= irman's side of the story.=20 Two panels sent subpoenas today to Mr. Lay, but lawmakers said they were al= most certain Mr. Lay would refuse to answer their questions and would inste= ad invoke his Fifth Amendment right against self-incrimination. Two other f= ormer Enron executives, Andrew S. Fastow and Jeffrey K. Skilling, are also = expected by lawmakers to decline to testify. Yet in the end, the former Enron executives' refusal to cooperate may repre= sent little more than a speed bump to the 11 Congressional inquiries focusi= ng on the many strands of the largest bankruptcy case in American history, = Congressional leaders and staff members said today.=20 The extension of the Congressional inquiries is a mixed blessing for the Wh= ite House because the Enron examination on Capitol Hill will continue to be= a distraction from the Bush administration's war on terrorism and its effo= rts to invigorate the economy.=20 Congressional staff members say the Enron executives' refusal to testify no= w will allow staff members more time to comb through more than two million = Enron documents and assemble the many pieces of a very complex corporate pu= zzle.=20 ''It helps us more than it hurts us,'' Ken Johnson, spokesman for the House= Committee on Energy and Commerce, said of the delay in hearing from the fo= rmer executives. ''The game plan was always to bring in the underlings firs= t and set the stage for an appearance by Mr. Lay and the other senior execu= tives when we have more evidence.''=20 In 1994, as a House panel inquiry on the tobacco industry was just beginnin= g, seven tobacco executives voluntarily testified and swore under oath that= nicotine was not addictive and they did not market cigarettes to children.= Later in the inquiry, the panel obtained a slew of documents that undercut= many of the statements made by the tobacco executives. But when Republican= s seized the leadership of the House in 1995, the executives were not requi= red to testify again after the Republicans closed the inquiry.=20 Mr. Lay's refusal to testify served as a reminder on Capitol Hill that the = Bush administration has refused to cooperate with a related Congressional i= nquiry. Several Democratic leaders on Capitol Hill aimed their anger over M= r. Lay's refusal to cooperate squarely at the White House.=20 The Bush administration has rejected a request by the General Accounting Of= fice, the investigative arm of Congress, for a list of energy industry exec= utives, including some from Enron, who met with Vice President Dick Cheney'= s energy task force last year. The accounting office is expected to file a = lawsuit against Mr. Cheney and the administration.=20 ''The appearance is awful,'' said Philip M. Schiliro, the chief of staff fo= r Representative Henry A. Waxman, Democrat of California. ''Lay is reversin= g himself and refusing to voluntarily testify, and at the same time the adm= inistration is continuing to refuse to cooperate with the Congress. It's ha= rd to believe that's a combination the administration wants.''=20 Mary Matalin, counselor to the vice president, portrayed some Democrats' an= ger at the White House as ''playing politics with Enron.''=20 ''As we've been saying from the beginning, we are greatly saddened by the D= emocrats who prefer to play politics with this difficult issue as opposed t= o joining the president to form policies that will ensure this will never h= appen again,'' Ms. Matalin said.=20 Another senior administration official scoffed at the idea that the Enron c= ollapse was anything but a corporate scandal. ''People think Ken Lay is Sat= an,'' the official said. ''They don't think we are and they don't think som= e G.A.O. process story is the equivalent of lying and robbing people.''=20 Mr. Lay had agreed in December to appear on Feb. 4 before the Senate Commer= ce Committee. But his offer occurred before many of the most damning revela= tions about Enron, which was capped over the weekend by a highly critical r= eport by a committee of Enron's board. Photos: Senator Ernest F. Hollings, left, listened as Senator Byron L. Dorg= an, in glasses at right, said he favored issuing a subpoena to Kenneth L. L= ay. At right, a copy of the subpoena issued by a House committee. (Paul Hos= efros/The New York Times)=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business; Business Desk Enron Team Says Lay Took Some Blame Hearings: Former chief admits lapse in = oversight, according to internal investigator questioned by lawmakers. RICHARD SIMON and EDMUND SANDERS TIMES STAFF WRITERS 02/06/2002 Los Angeles Times Home Edition C-1 Copyright 2002 / The Times Mirror Company WASHINGTON -- Former Enron Corp. Chairman Kenneth L. Lay acknowledged to co= mpany investigators that he should have kept a closer eye on the energy tra= der's financial operations, but he also pointed the finger at subordinates,= the head of the company's internal investigation told Congress on Tuesday.= =20 "I think he felt he had not been watching carefully enough, but he certainl= y felt he had been betrayed," said William C. Powers, whose team interviewe= d Lay as part of a recently released report examining the company's collaps= e. Meanwhile, lawmakers grilled Joseph F. Berardino, the head of Enron's forme= r outside auditor, Andersen, for destroying thousands of documents related = to Enron and for helping to create some of the off-the-books partnerships t= hat led to Enron's demise.=20 "Your company helped set these up," said Rep. Paul E. Kanjorski (D-Pa.). "Y= ou're not some innocent coming in here as an auditor and having all these t= ransactions that are out there and you're just looking at them. You went th= rough the intellectual analysis of how to do these things."=20 House and Senate committees still want to hear directly from Lay, issuing s= ubpoenas Tuesday for him to appear next week. He and another star witness--= former Chief Financial Officer Andrew S. Fastow, who has been asked to appe= ar on Thursday--are expected to invoke their 5th Amendment right against se= lf-incrimination.=20 Lay was summoned to appear Feb. 12 before the Senate Commerce Committee and= Feb. 14 before the House Financial Services subcommittee on capital market= s.=20 Lay spokeswoman Kelly Kimberly, asked about whether Lay would invoke the 5t= h, said, "He is still determining his strategy for how to handle the hearin= gs."=20 Unable to hear from Lay, members of the House Energy and Commerce subcommit= tee on oversight and investigations sought to find out from Powers, dean of= the University of Texas law school who joined Enron's board last fall, exa= ctly what the former Enron chief knew and when he knew it.=20 The Houston-based energy company--once one of the nation's largest and best= -connected corporations--sought bankruptcy protection Dec. 2 amid questions= about its accounting practices. Less than a month before filing for Chapte= r 11, Enron revealed previously unreported losses of $586 million over the = previous 4 1/2 years.=20 Powers, whose team spent four hours interviewing Lay during its internal pr= obe, said Lay was aware Enron was using company stock to hedge against inve= stment losses.=20 "He didn't understand or appreciate that there was anything wrong with that= ," Powers told the committee. "I don't know whether that's credible. That's= his story." Lawmakers said they hope to secure notes of Powers' interviews= of Lay and other senior officials.=20 Powers' 203-page report, released late Saturday, concluded that accounting = abuses masked more than $1 billion in losses in a one-year period and assig= ned widespread blame to Enron management, accounting firm Andersen, company= lawyers and Enron's board for creating--and then failing to oversee--a ser= ies of partnerships that sparked the company's bankruptcy filing. The repor= t noted that Lay, a major fund-raiser for President Bush, was "captain of t= he ship" for most of the time that abuses were occurring and "bears signifi= cant responsibility for ... flawed decisions" of subordinates.=20 Powers said the Enron investigating team also met briefly with Fastow, but = "very little information was forthcoming"--a sign of the challenge before C= ongress in grilling the man who is regarded as the expert on the partnershi= ps.=20 Powers told the committee that Andersen stopped cooperating with Enron's in= ternal investigation once the company fired the accounting firm, saying the= auditors had destroyed documents sought by government investigators.=20 But Andersen's chairman, Berardino, said the firm offered to assist Powers = but was not contacted by his team after the Jan. 17 firing.=20 At his second appearance before a House Financial Services subcommittee, Be= rardino offered few new details about why Andersen destroyed documents and = failed to warn investors about Enron's questionable accounting practices.= =20 Asked about the shredding, Berardino said, "I'm embarrassed by what happene= d at my firm."=20 But Berardino repeatedly said he did not know the details of Andersen's bus= iness dealings with Enron, whether Andersen employees knew about problems o= r what documents were destroyed. "How could you not know?" asked Rep. Richa= rd H. Baker (R-La.).=20 "Maybe it's better to be dumb than culpable, but we want some answers," sai= d Rep. Gary L. Ackerman (D-N.Y.).=20 Andersen has not completed its own internal investigation into the Enron ma= tter. Berardino disputed allegations in the Powers report that the firm was= instrumental in creating some of the questionable partnerships. "It's not = like we were running around town shopping these things," he said. He said A= ndersen merely reviewed proposals made by Enron managers.=20 At a separate House hearing, Rep. W.J. "Billy" Tauzin (R-La.), chairman of = the House Energy and Commerce Committee, said that congressional investigat= ors were finding that "there was no legitimate purpose in the construction = of some of these deals except in the defrauding of investors."=20 Investigators also have found that "some [investment] banks were told they'= d get special bond deals if they would put the money up for some of the par= tnerships," Tauzin said.=20 A Tauzin spokesman declined to elaborate. PHOTO: Enron director William C. Powers testifies before the House.; ; PHOT= OGRAPHER: Agence France-Presse=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Astros want out of naming-rights deal=20 By ERIC BERGER=20 Copyright 2002 Houston Chronicle=20 Feb. 6, 2002, 1:55AM Saying Enron's collapse has "tarnished the reputation of the Houston Astros= ," the club sought a court order Tuesday to get out of its naming-rights ag= reement with the company.=20 With the 2002 season looming, lawyers for the team asked U.S. Bankruptcy Ju= dge Arthur Gonzalez to force Enron to accept or reject the agreement that h= as kept the company's name on the ballpark and virtually all related materi= als since it opened.=20 Enron almost certainly couldn't make another payment on the 30-year, $100 m= illion contract, so it would have to relinquish the Enron Field name and al= low the Astros to sell the rights to another bidder.=20 "We felt like we needed to take an aggressive stance," said Astros owner Dr= ayton McLane. "We just find it kind of embarrassing that we're tangled up i= n all of this."=20 Since Enron filed for bankruptcy Dec. 2, McLane said, the team has tried to= renegotiate the agreement, which also requires the company to lease a larg= e luxury suite and buy 35 season tickets for box seats.=20 McLane said he and his assistants have had one meeting with the company's t= hen-chairman, Ken Lay, and more talks with other executives, including Cind= y Olson, an Enron executive vice president.=20 "Ken said he was going to follow through, but it just never unfolded," McLa= ne said.=20 Enron officials responded that their main concern is trying to recover some= or all of the $3.4 million they paid the Astros last August. The next annu= al payment, for $3.65 million, is due Aug. 31.=20 Company spokesman Mark Palmer said Enron is acting on behalf of its credito= rs. To comply with the terms of the contract, the company paid $108,000 for= a 14-person luxury suite on Jan. 22, and nearly $90,000 for the 35 season = box seats on Monday.=20 "Let me get this right," Palmer said, "they're upset that we're living up t= o our contractual obligations?"=20 With opening day less than two months away, the club faces the embarrassing= possibility of having the Astros continually linked to a disgraced and ban= krupt company.=20 Palmer said Enron is ready to talk buyout.=20 Because Enron has not defaulted on its payments, there is no way for the As= tros to rename Enron field until at least Aug. 31 without negotiating an en= d to the contract or the judge compelling Enron to accept or reject it. A h= earing has been set on the Astros' motion for Feb. 27 in the New York court= .=20 In a Chapter 11 bankruptcy the debtor, Enron in this case, does not have to= accept or reject a contract until it files a reorganization plan, which li= kely won't happen until this summer, or later.=20 In arguing their case, the Astros maintain the association with Enron has h= urt their business. McLane said many people believe Enron owns a piece of t= he club.=20 "One thing is clear: The Astros are being perceived in the public and cast = in the national media as an affiliate (and even an ally) of Enron even thou= gh the Astros have done nothing wrong," Astros attorney Paul K. Ferdinands = argues in the legal motion.=20 "The court should not allow this irreparable harm to continue."=20 In the motion, the Astros say the team has had to devote substantial resour= ces to respond to a "deluge of daily inquiries" about the Astros' relations= hip with Enron. Also, fans and corporate sponsors may seek to distance them= selves from the team because of the association with Enron.=20 And the financial uncertainty of whether the company will make its $3.7 mil= lion payment this August affects the Astros' ability to field the best team= possible, the motion states.=20 Judge Gonzalez may well buy none of those arguments, said Nancy Rapoport, d= ean of the University of Houston Law Center and a bankruptcy law expert.=20 "The judge is most likely to say, `Thank you for your motion,' " she said. = "There's no rush and there may be more pressing executory contracts."=20 At the heart of the dispute is whether Enron could re-license the ballpark'= s name to another company. In theory, they might be able to profit by selli= ng the name for more than the annual payment to the Astros.=20 The team says flatly that Enron cannot, and there are clauses in the contra= ct prohibiting a re-licensing of the name. However, Rapoport said, in bankr= uptcy court such assignment clauses may not be enforced if they would be to= the advantage of the debtor and its creditors.=20 Beyond the assignment clauses, however, there is language in the naming rig= hts contract that prevents the ballpark's name from being changed before 20= 09 without the club's consent, said Pam Gardner, president of business oper= ations for the Astros.=20 Even Gardner acknowledged, however, that all bets on even this type of lang= uage may be off in bankruptcy court. Either way, the team just wants Enron = to be forced to accept or reject the contract, so the matter can be put to = rest, she said.=20 Despite the negative association with Enron, and a glum economy, there's a = good chance the ballpark's name could be resold for $3.3 million annually, = possibly even more, said Dean Bonham, of the Bonham Group, a Denver sports = marketing firm.=20 "I'm very bullish on the Astros eventually coming out on top in this financ= ially," he said. "Part of it is it's quite likely there would be a good bit= of public rejoicing for the company that comes in and removes the Enron na= me."=20 McLane said three or four local companies have contacted him about the nami= ng rights, though there have been no negotiations. Bonham said he, too, kno= ws of several interested Houston companies.=20 A Section For Houston Astros, a Sponsorship Turns Sour Paul Duggan Washington Post Staff Writer 02/06/2002 The Washington Post FINAL A10 Copyright 2002, The Washington Post Co. All Rights Reserved At the start of the 2000 baseball season, when the gates opened at Enron Fi= eld, the Houston Astros' new, $250 million, state-of-the-art ballpark, "we = just could not have been prouder to see that name up there," recalls Pam Ga= rdner, the team's president of business operations. After all, Enron Corp. = stood for vibrancy, for innovation, for success.=20 "Unfortunately," Gardner noted yesterday, "things have changed." Oh, have they ever.=20 There's nothing proud about Houston-based Enron anymore. And the Astros, as= Gardner politely put it, "would like to move in another direction" with th= e ballpark name. Worried about "the negative public perception" of the bank= rupt, scandal-tainted energy trader, Gardner said, the team wants out of it= s 30-year, $100 million-plus naming rights contract with the company. But E= nron won't play ball.=20 The dispute, which surfaced yesterday, seems a mere sideshow to this week's= congressional hearings on Enron's questionable financial practices. But as= Astros officials see it -- staring up at that name, writ bright and huge o= n a facade high above the right field seats, among other places -- their lo= vely, 42,000-seat stadium might as well be called "Bankruptcy Ballpark."=20 "It's a perception issue," Gardner said.=20 The problem for the Astros is that Enron, despite its financial problems, h= as been making its annual payments under the contract, and its next install= ment, $3.7 million, isn't due until August. Enron also has held up its cont= ract obligations on leasing a luxury box and buying season tickets, Gardner= said.=20 "We are continuing to honor our agreement," Enron spokeswoman Karen Denne s= aid, adding that the naming rights "are a valuable asset, and it is our res= ponsibility to preserve that asset for [Enron's] creditors." She said lawye= rs for Enron are reviewing the contract to determine whether the rights cou= ld be sold, to help satisfy Enron's creditors.=20 Astros lawyers say the contract does not allow such a sale, Gardner said.= =20 Denne suggested that Enron would agree to give up the naming rights for a p= rice. "We've had some discussions, but they haven't offered to do that," sh= e said of a potential buyout.=20 Gardner said Astros officials have scoffed at the idea.=20 It remains to be seen whether the bankruptcy court in New York that is hand= ling Enron's case will let the company retain the naming rights when the ne= xt contract payment comes due in August. The Astros this week asked the cou= rt to decide the issue now, rather than wait until summer.=20 "The allegations against Enron have been overwhelming," Gardner said. "Fan = response has intensified in the last several weeks. A lot of people think t= he relationship between Enron and the Astros is stronger and closer than ju= st a sponsorship agreement."=20 The team and company used to have a strong and close relationship.=20 Enron's then-chairman, Kenneth L. Lay, "did a whole lot of work to get this= [stadium] built downtown," Gardner said. "He was instrumental in the proce= ss, talking to a lot of people, convincing a lot of people that it was the = right thing to do."=20 The ballpark, with its natural grass and nostalgic design, is owned by the = Harris County-Houston Sports Authority and leased to the Astros for $7 mill= ion a year. It replaced the Astrodome as the team's home.=20 Opening day is less than two months away.=20 And the Astros are anxious. "When you're a baseball team, you're viewed as = a public trust," Gardner said. "We don't want everybody focusing on the nam= e of our field." http://www.washingtonpost.com=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business/Financial Desk; Section C ENRON'S MANY STRANDS: A SPORTS CONNECTION Astros Cry Foul and Try for an Enron Pickoff Play By JONATHAN D. GLATER 02/06/2002 The New York Times Page 9, Column 3 c. 2002 New York Times Company It is not often that a Major League Baseball team wants to prevent a corpor= ation from buying box seats and other stadium goodies, but then, it is not = often that a big company loses billions of dollars in shareholder equity be= fore going spectacularly bankrupt in an exploding accounting scandal.=20 That company, of course, is Enron, and the baseball team is the Houston Ast= ros, which barring some change will start the season playing at Enron Field= . Yesterday, the Astros asked a federal bankruptcy court to force Enron eithe= r to pledge to honor its obligations under a contract that gives the stadiu= m its name or to reject the contract and free the Astros to negotiate a nam= ing deal with somebody else. The Astros say that for Enron to continue to m= ake payments under the name contract costs its creditors money and will ear= n them nothing; Enron says it can sell the right to name the stadium to ano= ther company.=20 So far, Enron has complied with its obligations to the Astros, and lawyers = say its contract can be sold to a third party with the blessing of the bank= ruptcy court. Enron has paid $75,890 for 35 box seats, said Karen Denne, a = spokeswoman for the company; the next payment is not due until August.=20 ''That naming rights agreement is a valuable asset and the creditors view i= t as a valuable asset,'' Ms. Denne said. ''It was our responsibility to pre= serve the value, and we're doing that.''=20 The Astros say that Enron cannot comply with the terms of the agreement and= that they want to be able to resell the lucrative naming right to another = company.=20 ''This was not our preferred way to go about this,'' said Pam Gardner, pres= ident of business operations for the Astros. ''Since this started a few mon= ths ago, we've been trying to work in a new direction'' through negotiation= s with Enron, she said, but those negotiations did not resolve the dispute.= =20 Sandra Mayerson, a lawyer representing several creditors in Enron's bankrup= tcy proceedings, said it was possible that the bankruptcy court could overr= ide terms of the the Astros agreement with Enron to allow the company to se= ll the naming rights. And it is in everyone's interest to rename the field,= she added. ''Wouldn't you be kind of anxious to go ahead and have it renam= ed?'' Photo: Barring a change, the Astros will play at Enron Field this season. (= Bloomberg News)=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Questioning the Books: Enron's Fall Spurs Desire to Revisit Laws By Greg Hitt Staff Reporter of The Wall Street Journal 02/06/2002 The Wall Street Journal A8 (Copyright (c) 2002, Dow Jones & Company, Inc.) WASHINGTON -- The chairman of one of the leading congressional committees i= nvestigating the collapse of Enron Corp. says he expects to make a major le= gislative push this year to address problems arising from the debacle.=20 Republican Rep. W.J. "Billy" Tauzin of Louisiana said he wants his House En= ergy and Commerce Committee to tighten the rules governing investments in t= he sort of off-balance-sheet partnerships Enron used to hide debt. He also = is calling for pension reforms, citing concern about Enron workers who lost= their retirement savings. And he voiced support for greater scrutiny -- wh= ile not ruling out complete elimination -- of the common corporate practice= of having one accounting firm audit the books as well as consult on busine= ss practices, as was the case with Enron and its accounting firm, Arthur An= dersen LLP. "We can see several things emerging" from the congressional hearings, Mr. T= auzin said.=20 At the same time, though, he warned against legislative overreach, suggesti= ng too-aggressive action "could create incredible problems for the stock ma= rket and for investors." He also voiced misgivings about efforts by some on= Capitol Hill to turn Enron's collapse into an overtly political matter.=20 "My concern is that -- because Democrats have decided to `Enronize' Republi= cans on this issue -- that the thing gets bogged down politically, and to m= e that's terrible," Mr. Tauzin said in an interview. "We owe a bigger oblig= ation to the country than an election in November."=20 Mr. Tauzin's comments provided the clearest indication yet that lawmakers, = despite the distractions of the unfolding election year, won't be content t= o simply probe Enron's failure.=20 In the Senate, key members of the Banking Committee, having lost faith in t= he accounting industry in the wake of Enron, signaled support for direct fe= deral oversight. Sens. Richard Shelby (R., Ala.) and Christopher Dodd (D., = Conn.) said the privately funded accounting group that regulates the indust= ry, the Financial Accounting Standards Board, should be brought under the g= overnment control.=20 "Can the accounting profession police themselves?" Mr. Shelby asked. "I don= 't think they can."=20 In an appearance before the Senate panel, Federal Reserve Chairman Alan Gre= enspan agreed changes are needed but cautioned prudence. "It's important to= ask what are the consequences," he said.=20 Mr. Tauzin, whose panel has sweeping jurisdiction over business regulation = in the U.S., is seen as a good barometer of the legislative outlook in the = GOP-controlled House.=20 As with Mr. Greenspan, Mr. Tauzin, too, counseled some caution. He describe= d the problems at Enron as an "aberration," not necessarily an indication o= f systemic problems in the business community. And he urged regulators -- s= uch as the Securities and Exchange Commission and the FASB, which has quasi= -government status -- to begin moving ahead of Congress to respond to perce= ived problems.=20 But he also made clear his intention to act. "Our obligation to supervise t= he operation of FASB is real, and I'm going to exercise it," he said.=20 Mr. Tauzin cited specific concern with existing accounting rules that allow= ed Enron to create off-book partnerships with outside investments of as lit= tle as 3% and the balance of funding coming from the company.=20 "It's a surprise to a lot of people that such a rule exists," he said, sugg= esting he "thought it was always 50%." He added, "I should think we ought t= o have a better rule than that."=20 Describing the current situation as "not adequate," Mr. Tauzin also indicat= ed his intention to wade into the debate over whether to separate the bookk= eeping and consulting services offered by accounting firms. "We have to exa= mine that now in light of Enron," he said. He suggested he is "ready to con= clude that we need stronger" oversight of those two accounting roles, but h= e hasn't yet determined where to draw the line legislatively.=20 ---=20 Dawn Kopecki of Dow Jones Newswires contributed to this article. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Former chairman of Enron to face lawmakers next week=20 By JULIE MASON=20 Copyright 2002 Houston Chronicle Washington Bureau=20 Feb. 6, 2002, 12:21AM WASHINGTON -- After abruptly canceling on lawmakers Sunday, former Enron Co= rp. Chairman Ken Lay will answer next week two congressional subpoenas issu= ed Tuesday on Capitol Hill.=20 It was unclear whether Lay would answer questions or refuse to testify.=20 "I'll bet you a dollar to a doughnut that he doesn't testify and invokes hi= s right under the Fifth Amendment," said Sen. John Breaux, D-La. The amendm= ent guarantees protection against self-incrimination.=20 The Senate Commerce Committee is requiring Lay to appear Tuesday, while the= House Financial Services Committee has ordered that he appear on Feb. 14, = Valentine's Day. Lawmakers said Tuesday the more they learn about the colla= pse of Enron, the greater the urgency to hear from the former chairman.=20 "Any of Enron's officers who claim they didn't know isn't telling the truth= ," said Rep. Peter Deutsch, D-Fla., "No one has ever accused these people o= f being stupid."=20 Lay for months has remained silent on his role in the complicated outside p= artnerships and other factors being blamed for the company's stunning finan= cial free-fall.=20 In testimony Tuesday, an in-house Enron investigator told lawmakers that La= y failed to closely monitor events leading up to Enron's collapse, and now = feels betrayed by other executives.=20 Enron attorney Bob Bennett declined to comment on Lay's plans for answering= the subpoenas, while Lay spokeswoman Kelly Kimberly confirmed he would app= ear, but said strategy was still under discussion.=20 Lay's attorney Earl Silbert did not return calls. Lay was to have testified= before lawmakers this week, but declined to do so less than 24 hours befor= e he was to appear.=20 "It's unfortunate that Mr. Lay didn't appear voluntarily as he promised," R= ep. Michael Oxley, R-Ohio, and committee chairman, said as he signed the su= bpoena. "We thought we were dealing in good faith with Mr. Lay and his atto= rney."=20 Lawmakers are not inclined to barter immunity for Lay's testimony, although= several expressed continued frustration at his unwillingness to answer que= stions.=20 "Mr. Lay, wherever you are," said Rep. W.J. "Billy" Tauzin, R-La., "Get you= rself some new lawyers, sir."=20 Tauzin was among a number of lawmakers blamed by Silbert over the weekend f= or creating a "prosecutorial" atmosphere that forced Lay to cancel his cong= ressional testimony.=20 What Lay knew and when he knew it are key pursuits for congressional invest= igators, as more than 10 different committees have launched probes of the c= ompany's downfall.=20 On Capitol Hill, the oversight and investigations subcommittee of the House= Energy and Finance Committee closely questioned William Powers, dean of th= e University of Texas law school, about his own probe of Lay and other Enro= n executives.=20 Powers, a specially appointed board member named to conduct the internal in= vestigation, on Saturday released a report criticizing company executives, = auditors, lawyers and board members for allowing improperly created partner= ships to inflate Enron's earnings, hide its debt and wrongfully enrich a ha= ndful of insiders.=20 "I think he felt that he had not been watching carefully enough," Powers sa= id of Lay. "He felt he had been betrayed."=20 Powers said that in four hours of interviews with internal investigators, L= ay expressed a lack of familiarity with some of the issues now under scruti= ny in the probe of Enron's collapse.=20 For example, Lay was at an executive committee meeting where one of the com= plicated outside partnerships was approved, but he told Powers' internal co= mmittee that he did not recall the name of that entity.=20 There were other matters that Lay knew about, but didn't perceive as proble= matic, Powers said.=20 "Mr. Lay fully understood they were using their own stock to offset their l= osses," Powers said. "He didn't understand or appreciate that there was any= thing wrong with that."=20 Rep. James Greenwood, R-Pa., chairman of the subcommittee, noted the partne= rships set up by Enron executives used names from the Star Wars movies, suc= h as Jedi and Chewco, for Chewbacca.=20 With reference to the hero and the villain of Star Wars, Greenwood asked Po= wers of Lay, "Is he Luke Skywalker or is he Darth Vader?"=20 Powers replied, "He is not Luke Skywalker. He certainly is responsible for = letting this happen, and there certainly were red flags that he chose to ig= nore."=20 While congressional rhetoric increasingly targets Lay and his oversight of = Enron, other executives scheduled to testify are coming under added scrutin= y as well.=20 In the House subcommittee hearing, one lawmaker referred to former Enron Ch= ief Financial Officer Andrew Fastow as "Fast Andy Fastow," while another ca= lled him "the Betty Crocker of cooked books."=20 Fastow is scheduled to appear before the House Energy and Commerce Committe= e Thursday, but is expected to invoke the Fifth Amendment.=20 Also slated to appear is former Enron CEO Jeff Skilling, who is expected to= testify Thursday.=20 As congressional probes continue, lawmakers also want to hear from members = of the Bush administration about its dealings with Enron executives.=20 Rep. John Conyers, D-Mich, ranking member of the House Judiciary Committee,= on Tuesday called on White House political adviser Karl Rove to disclose h= is efforts securing an Enron job for Ralph Reed, the former executive direc= tor of the Christian Coalition.=20 According to the White House, Rove recommended Reed to Enron for a job in 1= 997. Reed was hired by Enron in September, shortly after he resigned from t= he Christian Coalition.=20 Bush, who was considering a presidential run at the time, wanted Reed to he= lp him court conservative voters for the 2000 election.=20 Reed, now chairman of the Georgia Republican Party, says he did not know of= Rove's recommendation.=20 Bush, meanwhile, rejected a suggestion from Capitol Hill that a special pro= secutor be appointed for the Enron investigation under way at the Justice D= epartment.=20 "Listen, this is a business problem, and my Justice Department is going to = investigate," Bush said. "And if there is wrongdoing, we'll hold them accou= ntable for mistreatment of employees and shareholders."=20 Lay and Enron have been major contributors to Bush campaigns, dating back t= o his first run for Texas governor.=20 Chronicle reporters Laura Goldberg in Houston and David Ivanovich in Washin= gton contributed to this story.=20 COMPANIES & FINANCE THE ENRON COLLAPSE - Creditors' committee can quiz audi= tor - COURT RULING. By ANDREW HILL. 02/06/2002 Financial Times (c) 2002 Financial Times Limited . All Rights Reserved Enron creditors were granted permission yesterday to demand paperwork from = Andersen about its audit of the energy trader and the firm's involvement in= the establishment of off-balance-sheet partnerships.=20 A New York bankruptcy judge also said the official creditors' committee cou= ld quiz Andersen executives, including David Duncan, the lead partner invol= ved in the Enron audit. The committee, which acts on behalf of all Enron's creditors, sought the ru= ling last month after Andersen said it had destroyed Enron-related document= s and sacked a number of employees, including Mr Duncan.=20 The creditors said in a court filing that "a thorough examination" of Enron= deals carried out prior to its bankruptcy filing in December was crucial t= o their attempt to discover Enron's true financial condition.=20 The revelation that Andersen and Enron shredded documents has prompted othe= r creditors to demand the appointment of an examiner at Enron, who would in= vestigate allegations of wrongdoing at the company. Some have even asked fo= r a court-appointed trustee to run the company.=20 The publication of a damning internal report on Enron's deals with partners= hips at the weekend could add to the pressure for such an appointment. But = legal experts say the judge is unlikely to approve a trustee at this stage,= as it would be disruptive.=20 The Enron creditors' committee wants all documents relating to Andersen's a= udits from 1996 to 2000. The firm was fired as Enron's auditor last month.= =20 The committee will also seek documents about special purpose entities (SPEs= ) set up by Enron, including partnerships such as LJM Cayman and LJM2 Co-In= vestment run by Andrew Fastow, former chief financial officer, and Michael = Kopper, another former Enron employee.=20 The internal report concluded that a number of Enron deals with such partne= rships were intended to flatter Enron's figures and enrich employees involv= ed in running the SPEs.=20 (c) Copyright Financial Times Ltd. All rights reserved.=20 http://www.ft.com. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 COMPANIES & FINANCE THE ENRON COLLAPSE - Andersen chief urges change in acc= ounting rules. By PETER SPIEGEL. 02/06/2002 Financial Times (c) 2002 Financial Times Limited . All Rights Reserved COMPANIES & FINANCE THE ENRON COLLAPSE - Andersen chief urges change in acc= ounting rules ENERGY TRADER'S FAILURE BERARDINO SAYS FIRM BARRED FROM RAISI= NG ALARM - * DISCREPANCY OVER 401(k) PENSION PLAN ADVICE - * AUDITOR WEIGHS= UP THE AFTER-SHOCKS.=20 Joseph Berardino, Andersen chief executive, yesterday blamed the structure = of the accounting industry for contributing to the collapse of Enron, sayin= g that audit rules barred Andersen accountants from warning the public abou= t the energy trader's financial condition. Mr Berardino urged lawmakers to change accounting regulations to allow audi= tors to grade the quality and risk of a company's financial statements. Fir= ms can give only a "pass" or "fail" to financial data submitted by a compan= y.=20 "Some companies do the bare minimum to meet (accounting) requirements, whil= e others are much more prudent in their accounting decisions and disclosure= s," Mr Berardino told a hearing of the House financial services committee.= =20 "There are some companies that are pushing the envelope and investors don't= know which one is which."=20 The hearing was one of four held yesterday on Enron's collapse. The Senate = commerce committee voted unanimously to subpoena Kenneth Lay, Enron's forme= r chief executive, who pulled out of a hearing before the panel on Monday a= t the eleventh hour. Mr Lay is likely to be forced to appear on February 12= , although senators said they expected him to invoke his Fifth Amendment ri= ght to silence.=20 Michael Oxley, chairman of the House financial services committee, which wa= s also to have heard from Mr Lay yesterday, also issued a subpoena, saying = he would compel the former Enron chief to appear on February 14.=20 In his testimony before the panel, Mr Berardino said his company repeatedly= questioned Enron's accounting practices, pointing to a widely reported mee= ting of Andersen auditors in which some of Enron's practices were labelled = "intelligent gambling". However, while accounting rules allowed auditors to= raise their concerns with Enron's board - which Mr Berardino said they did= regularly - they prevented any public disclosure unless there were clear v= iolations of accepted accounting principles.=20 "Our only option is to resign the engagement (but) resigning an engagement = may destroy a company that is fundamentally sound," he said. "So those are = our choices when faced with a client whose accounting treatments are risky:= give it a pass or give it the death penalty."=20 Mr Berardino's recommendations were largely ignored by committee investigat= ors, who repeatedly questioned the Andersen chief on the auditor's role in = Enron's questionable financial reporting.=20 Mr Berardino declined to answer most of the questions, insisting he had no = direct knowledge of how the Enron audit was conducted - a response that enr= aged some committee members.=20 "You're captain of the ship," said Democrat Gary Ackerman.=20 "If they came to you and said: we want to rob a bank and here's who's going= to drive the getaway car, and this is what we're going to pay for the gun,= you don't feel you have a duty to blow the whistle?"=20 Mr Berardino said Andersen was aware of Enron's now infamous private partne= rships, which enabled the company to take debts off its balance sheets, but= insisted they were set up by Enron executives and investment bankers, with= Andersen only giving passive judgments as to whether they passed accepted = accounting principles.=20 He added that Andersen would set up a new ethics office which would investi= gate questionable audit reviews when concerns were raised about the integri= ty or independence of an accountant.=20 (c) Copyright Financial Times Ltd. All rights reserved.=20 http://www.ft.com. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 A Section Populist Pitch -- Without the Punch; Both Parties Claim Title, but Neither = Makes Full-Scale Attack on Moneyed Interests Juliet Eilperin Washington Post Staff Writer 02/06/2002 The Washington Post FINAL A06 Copyright 2002, The Washington Post Co. All Rights Reserved As the Enron scandal pumps new life into the old caricature of corporate ex= ecutives as greedy and shady, politicians in both parties are stepping up e= fforts to claim the title "populist."=20 "President Bush is a populist," Bush senior adviser Karl Rove declared last= month. Other White House aides said the president's latest string of speec= hes had populist themes. House Democrats, meanwhile, have embraced "an econ= omically populist, fiscally conservative, socially moderate message" this y= ear, said their campaign group's executive director, Howard Wolfson. But neither Bush's late-January swing through the South, nor a recent serie= s of speeches by Democratic leaders, came close to the full-scale attack on= moneyed interests that defines true populism.=20 These rhetorical stabs acknowledged voters' anger over news that top execut= ives made tens of millions of dollars while ordinary workers saw their jobs= and retirement funds vanish. But they did not propose significant legal or= regulatory changes that might rattle the nation's corporate hierarchy -- a= structure that pours millions of dollars into Republican and Democratic co= ffers alike.=20 "True economic populism, in the sense of William Jennings Bryan, would invo= lve a direct attack on corporate America," said Claremont McKenna College p= olitical science professor Jack Pitney. "You're not hearing anything like [= Bryan's 1896] 'Cross of Gold' speech."=20 Populist themes reemerge periodically in American politics, from the Whiske= y Rebellion to the Bull Moose movement to the presidential candidacies of R= oss Perot and John McCain. Even the self-described centrist Bill Clinton es= poused populist ideas in the 1992 election. He called for eliminating tax d= eductions "for excessive executive pay" and letting shareholders "determine= the compensation of top executives." But little came of it all, and execut= ive compensation packages skyrocketed in the 1990s.=20 The latest populist boomlet is fueled mainly by revelations about Enron Cor= p., where one executive collected $353 million in stock proceeds while thou= sands of workers and shareholders lost huge sums. Enron's saga could prove = politically troublesome for Bush, even if the scandal is never linked direc= tly to the White House. Voters tell pollsters they associate Bush more clos= ely with corporate influence than they do many other political figures.=20 The president combats this potential problem not so much by offering populi= st changes in government as by returning to his folksy campaign rhetoric. I= n speeches in battleground states or GOP-leaning regions, he portrays himse= lf as a fighter against Washington -- in other words, a populist, his aides= say.=20 "Thank goodness we cut taxes when we did," Bush told an applauding crowd in= Winston-Salem, N.C., last Wednesday. "The best way to help an economy reco= ver is to let hard-working people keep more of their money. When they get m= ore money in their pocket, they spend more money, and as they spend more mo= ney, it helps create jobs."=20 Bush pivoted to the opposition. "And for those who want to do away with tax= relief -- you don't know what you're talking about," he said. "We've got t= o trust people with their own money. I'm not sure what textbook some of the= m are reading up there. But, obviously, it's not the same one we've been re= ading here in this room."=20 Numerous Democrats, meanwhile, are claiming the populist label for themselv= es, hoping it will undercut high approval ratings for the president in part= icular, and for Republicans in general.=20 "Enron reinforces, very dramatically, the image of the Republican Party as = being too beholden to special interests," said Democratic pollster Mark Mel= lman.=20 Reporting on a poll it conducted recently about the Enron collapse, Democra= cy Corps -- a group founded by Democratic consultants Stan Greenberg, James= Carville and Robert Shrum -- urged Democrats to seize upon the Enron issue= to contrast themselves with Republicans. "Enron has the potential to shape= the entire political environment for 2002, impact other issues and reduce = confidence in the Bush administration and Republicans," the report said.=20 But the poll raises doubts about the political benefit Democrats might reap= from the issue. Respondents agreed 57 percent to 34 percent with the state= ment, "What happened at Enron is indicative of a larger pattern of abuses b= y big corporations that have too much influence over what happens in Washin= gton." But they agreed, 46 percent to 35 percent, that the Bush administrat= ion "is not part of the Enron mess."=20 Pushing the populist refrain could reignite an old debate between Democrati= c progressives and centrists. Many remain divided over the wisdom of Vice P= resident Al Gore's emphasis on populist themes in the 2000 election. At his= convention speech, Gore promised voters he was "on your side" and vowed to= protect "the people" over "the powerful."=20 After the election, several influential Democrats concluded the strategy ha= d backfired. "Economic populism as a message for Democrats has failed," pol= lster Mark Penn said in a recent interview. Penn has worked extensively for= Clinton and the centrist Democratic Leadership Council.=20 Liberals including Greenberg and union leaders disagreed. They said Gore's = attack on entrenched interests gave him the biggest lead of his campaign. T= his advantage evaporated, they said, when subsequent campaign events made i= t harder for voters to distinguish between Gore and Bush.=20 Such debates may explain why Florida Democrats have been cautious in tying = Gov. Jeb Bush (R) to Enron. The president's brother recently attended a fun= draiser at the home of a former Enron executive, despite Florida's pension = plan losing $335 million in Enron stock. Jeb Bush's reelection campaign see= ms little troubled by the news.=20 Even Greenberg said it is unreasonable to expect Democrats to take a hard-l= ine populist stand. "I don't think either party centers their policies on g= oing after corporations or going after CEOs," he said.=20 Indeed, at the national level, Democrats are pushing the tamer goals of gre= ater government oversight and more job creation. In his response to Bush's = State of the Union speech, House Minority Leader Richard A. Gephardt (D-Mo.= ) called for tighter financial regulations, targeted tax cuts and fiscal re= straint.=20 That suits Simon Rosenberg, director of the centrist New Democrat Network, = just fine. Gephardt's list, he said, amounts to "a repudiation of populism = on its face. . . . The mainstream economic view is winning out in the Democ= ratic Party."=20 The mainstream view allows for modestly populist-sounding goals. Democrats,= for example, continue to challenge the House GOP's decision to provide tax= breaks in its economic stimulus plan for corporations such as Enron.=20 "Democrats in the House have a unique opportunity to take on the Washington= special interests," said Jenny Backus, spokeswoman for the Democrats' Hous= e campaign committee.=20 Staff writer Dana Milbank contributed to this report. http://www.washingtonpost.com=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business/Financial Desk; Section C ENRON'S MANY STRANDS: A CASE STUDY Enron Is Grist for Business School Courses By SANA SIWOLOP 02/06/2002 The New York Times Page 8, Column 1 c. 2002 New York Times Company Business school professors across the country say they are latching onto th= e Enron scandal as a way to make courses on everything from Accounting 101 = to crisis management come alive.=20 Some teachers are treading cautiously, partly because business-school case = studies usually focus on historical events, not unfolding dramas, and partl= y because the Enron collapse is so complicated. But the revelations about the maneuverings of Enron Corporation executives = and the actions of the company's auditor, Arthur Andersen, are too tempting= to pass up, professors say.=20 Roger D. Martin, an assistant accounting professor at the business school a= t Indiana University, says he introduced a graduate accounting class on the= company early in November, when Enron had to restate its earnings and ''th= ings started smoking.''=20 Professor Martin said he planned to use Enron's financial meltdown for year= s to come as a case study in his advanced accounting class. ''This is a cla= ssic case in almost everything related to accounting,'' he said. ''If anyth= ing, it might make it tough to keep the conversation going in just one dire= ction because there are so many angles.''=20 Other business school professors say they are eager to use Enron to enliven= business cases that too often focus on old examples like the Ford Pinto ga= s tank of the 1970's. ''Students now are largely unimpressed if something i= s more than four to five years old,'' said Al Hartgraves, an accounting pro= fessor at the Goizueta Business School at Emory University in Atlanta.=20 Before his students left for their Christmas break in the second week of De= cember, Professor Hartgraves promised to e-mail them a summary of the compa= ny's situation, and did so at the end of the month. Then a couple of weeks = ago, he created a computer bulletin board about Enron over the internal e-m= ail system that connects roughly 1,000 Emory business students. Within 24 h= ours, he said, more than 100 students had asked him for bulletin board acce= ss.=20 ''We've seen audit failures before with companies like Waste Management and= Sunbeam,'' Professor Hartgraves said, ''but never anything as big as this.= ''=20 At Brandeis University in Waltham, Mass., Alfonso F. Canella, an adjunct pr= ofessor who teaches a class in financial modeling, said he planned to use E= nron to illustrate the mechanics, as well as the riskiness, of putting toge= ther limited partnerships, especially when the deals were not listed on a c= ompany's balance sheet.=20 Not everyone is convinced that Enron's troubles belong in every classroom. = Jan Barton, an assistant accounting professor at Emory, thinks that it is a= ppropriate to use Enron in an introductory course on financial statement an= alysis, but that its accounting and energy-trading practices may be too com= plicated for most students.=20 Even when it comes to teaching more advanced students, Professor Barton sai= d, he preferred to focus on companies like Dell Computer, Sears Roebuck, Wa= l-Mart and Microsoft, whose financial statement practices and products are = easier to understand.=20 ''I don't want to talk about a company that operates in a funky industry, l= ike utilities, and whose transactions involved things like financial deriva= tive contracts,'' Mr. Barton said.=20 Still, Diana C. Robertson, an associate professor of organization and manag= ement at Goizueta, in time concluded that the Enron case could not be ignor= ed.=20 In December, she decided to stick to well-documented cases like the antitru= st charges against Microsoft and Nike's foreign labor practices for her bus= iness ethics classes. But as Enron unraveled, she decided that using a busi= ness story in the making, rather than one that is years or decades old, was= too ''wonderful'' to pass up.=20 Raymond D. Horton, chairman of the Columbia University Business School's ma= nagement division, said he would allocate plenty of time to the subject thi= s winter in his course on the modern political economy. ''We're all itching= to discuss it,'' he said, pointing to a pile of Enron news clippings on hi= s desk.=20 Robert Rupe, a second-year finance student at Columbia, said one lecture fo= r a course on corporate turnarounds he just signed up for is titled simply = ''Enron.''=20 A useful point in the Enron case, business professors say, is the light it = sheds on the evolution of the American corporation into unexpected forms. F= or example, Anne Carter, an economics professor at Brandeis, says it helps = illuminate the nature of the modern corporation, which often bears little r= esemblance to the ''mythical'' manufacturing and farming companies that app= ear in many textbooks. For one thing, she said, Enron is a good way to show= students just how much of an imbalance there is in the information investo= rs typically receive, and how a company can exploit that imbalance.=20 Professor Carter plans to devote three classes to Enron this semester in an= undergraduate course she teaches. ''I really think that Enron shows studen= ts that the market now is very different from the market that was shaped by= Adam Smith's invisible hand,'' she said. Photo: Al Hartgraves, an Emory University accounting professor, created an = Enron computer bulletin board. (Robin Nelson for The New York Times)=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 REVIEW & OUTLOOK (Editorial) Lerach's Enron Gambit 02/06/2002 The Wall Street Journal A18 (Copyright (c) 2002, Dow Jones & Company, Inc.) As with any dead carcass, Enron is attracting downstream scavengers. Of cou= rse this includes the lawyers, especially lawsuit king Bill Lerach, who rec= ently posed before TV cameras in Houston with a carton of what he claimed w= ere shredded Enron documents. But before he cashes in one more time, Mr. Le= rach's own legal practices deserve some greater public scrutiny.=20 For example, a Los Angeles grand jury is investigating whether the Lerach l= aw firm -- Milberg Weiss Bershad Hynes & Lerach -- paid plaintiffs to sign = onto class-action lawsuits. There's also the recent decision by a federal j= udge to give the lead counsel slot in a class-action suit to a lower-cost l= aw firm; the judge said that Milberg's stiff fees would have gobbled up too= much of any money its clients might recover. Milberg's appeal on the latte= r will be heard by the Ninth Circuit Court of Appeals on February 15. This all deserves more attention than it's received because Mr. Lerach is n= ot just any old tort warrior. The Milberg firm accounts for the lion's shar= e of all federal shareholders' suits, and in California Mr. Lerach is appro= aching Bill Gates levels of market share.=20 With Enron's failure, a movement is also afoot to make tort lawyers the big= beneficiaries. They're mobilizing to repeal a modest 1995 tort reform bill= that reined in the worst of the tort bar's securities lawsuits. Mr. Lerach= is himself now posing as a defender of Enron shareholders, and he's even b= een retained by Calpers, the big public pension fund that had invested in E= nron partnerships. Mark this down as wildebeest hiring hyenas as bodyguards= .=20 The Lerach methods have been challenged before. Three years ago he lost big= when the firm paid out $50 million to settle an abuse-of-process lawsuit b= rought against it by a Chicago-based consulting firm. According to Californ= ia press reports, today's grand jury investigation revolves around a Beverl= y Hills eye surgeon who is in prison for fraud and who has appeared as a pl= aintiff in a number of suits filed by Milberg. It certainly wouldn't be kos= her for a law firm to induce "victims" into filing contingency-fee claims.= =20 Mr. Lerach's standard defense is that his rough methods are the only way to= make big business accountable. But that's just what makes the issue of Mil= berg's attorneys fees now headed for the Ninth Circuit so juicy. No one in = this case is denying anyone her day in court. All the ruling by U.S. Distri= ct Court Judge Vaughn Walker did was ensure that if the plaintiffs win, the= y won't have to turn nearly all of their winnings over to the Milberg pluto= crats.=20 The story begins, as many Milberg stories do, with a drop in the share pric= e of a company, in this case Copper Mountain Networks. Milberg quickly move= d in. But Milberg's wasn't the only suit, so when it came time to choose a = lead counsel, Judge Walker asked for rival bids. When he looked at the pric= e sheets he found that another firm's lower fees served the interests of th= e shareholders better than Milberg's hefty ones.=20 This judgment is startling, because when it comes to fees lawyers nearly al= ways stick together. But recent fees have become so obscene (in the case of= tobacco and asbestos into the billions of dollars) that they may have open= ed up a new political and legal vulnerability for the tort bar.=20 Lawyers love to shout "price controls" when anyone talks about their fees, = but lawyers aren't normal businessmen. As Judge Walker noted in his opinion= , lawyers are not independent contractors but are "fiduciaries for absent c= lass members." They are officers of the court. This is the same understandi= ng embodied in the American Bar Association's Model Rules of Professional C= onduct, which forbids "unreasonable" fees on precisely these grounds.=20 That understanding is even more critical in class actions, because the clie= nt being represented is absent and thus has no real voice. While in a norma= l case the client contracts with a lawyer, in class actions the lawyer esse= ntially conscripts the clients. Then if the lawyer wins or settles the case= , he takes the bulk of the winnings as fees, often leaving a pittance for t= he actual plaintiffs. "I have the greatest practice of law in the world," M= r. Lerach once quipped to a group of corporate directors. "I have no client= s."=20 But it is about time he got some adult legal supervision. The tort bar has = become so rich, increasingly at the expense of its own clients, that its ab= uses need to be reined in for the good of the broader society. All the more= so now that it is lining up to ravage Enron one more time. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Questioning the Books: Panel, in Enron's Wake, to Review Lawsuit Curbs By Robert S. Greenberger Staff Reporter of The Wall Street Journal 02/06/2002 The Wall Street Journal A8 (Copyright (c) 2002, Dow Jones & Company, Inc.) WASHINGTON -- As federal investigators and Congress expand their probe into= the collapse of Enron Corp., lawmakers want to revisit a 1995 law limiting= lawsuits that will make it difficult for company shareholders to recoup th= eir losses.=20 The Senate Judiciary Committee today will hear testimony on the Private Sec= urities Litigation Reform Act and how its provisions shielding corporate ad= visers from shareholder lawsuits could block Enron employees and shareholde= rs from suing the accountants and lawyers who helped create the complicated= partnerships that contributed to the giant energy trader's demise. The law does nothing to inhibit the government from taking civil and crimin= al action against Enron, its lawyers and accountants.=20 Enron, once the seventh-largest company in the U.S. by revenues, saw its sh= are price implode last fall amid allegations of questionable accounting and= overstated earnings, and was forced to seek bankruptcy-court protection. I= ts employees, whose retirement savings accounts were tied to company stock,= and outside shareholders saw their investments evaporate.=20 The bill was part of the Republican Party's "Contract with America," a plat= form of 10 bills aimed at overhauling government programs and the legal sys= tem that the GOP used to win control of the House in the 1994 elections. Th= e securities-litigation bill was intended to curb a rash of lawsuits filed = by shareholders angry over company performance, particularly in the volatil= e high-technology industry. It had the strong backing of the accountants an= d high-tech executives who saw themselves increasingly vulnerable to frivol= ous class-action suits.=20 The committee will probe how the law tightens rules on bringing complaints = that initiate lawsuits and how it protects accountants and other profession= als from exposure to complete liability for corporate losses and from lawsu= its seeking triple damages. Overall, the law partly shields the accountants= , lawyers, bankers and other outsiders to whom victims might turn for redre= ss from wrongs by a company in bankruptcy court.=20 "By forcing through special exemptions for securities, Congress has contrib= uted to the `Wild West' mentality reflected in Enron's hidden partnerships,= " said the judiciary panel's chairman, Sen. Patrick Leahy (D., Vt.). Should= legislation to change the 1995 law come out of the hearings, however, it i= s unclear if it would be made retroactive and aid Enron shareholders.=20 Steven Schatz, a California attorney who was selected as a witness by Sen. = Orrin Hatch of Utah, the committee's ranking Republican, rejects the notion= that the law makes it difficult for plaintiffs to bring legitimate lawsuit= s. Overall, it has a positive effect, he said, because "it has caused the p= laintiffs' bar to be more circumspect with regard to whom they sue."=20 One example is that the 1995 law requires that a complaint in a securities-= fraud case must present details "giving rise to a strong inference" of frau= d. Previously, the complaint didn't have to be as detailed.=20 Meanwhile, the rules have also been changed to bar the beginning of discove= ry until after a court has decided whether to allow the case to go forward.= Previously, plaintiffs attorneys could begin to gather documents and inter= view witnesses when the complaint was filed.=20 Columbia University law professor Jack Coffee said that taken together, the= two rules are a Catch-22: "You can't get discovery unless you have strong = evidence of fraud, and you can't get strong evidence of fraud without disco= very."=20 The statute also substitutes proportionate liability for the old law under = which everyone involved in the financial scheme would be fully liable for a= ll the damages involved. So, in most circumstances under the new law, the a= mount for which an accounting or law firm could be held liable would be onl= y a fraction of the 100% for which it might previously have been sued. This= could be crucial for plaintiffs when a defendant company, such as Enron, i= s in bankruptcy court.=20 Finally, it limits the use of the Racketeer Influenced and Corrupt Organiza= tions Act, or RICO, in civil suits involving securities. The RICO law was v= ery unpopular with corporate defense attorneys, because among other provisi= ons it permits an award to plaintiffs of triple damages.=20 Although the examination of the 1995 law involves such arcane legal issues,= it is fueled by politics. Democrats are eager to pin the Enron debacle on = pro-business Republicans. Consumer groups also are weighing in.=20 The Consumer Federation of America, Consumers Union and U.S. Public Interes= t Research Group are among the groups pointing to a Dec. 12, 1995, letter t= hey wrote lawmakers opposing the bill. "This legislation will protect finan= cial swindlers from being held accountable to their victims," the letter sa= id. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 FRONT PAGE - FIRST SECTION - Post-Enron equity fears fuel 'flight from risk= '. By PHILIP COGGAN and PETER THAL LARSEN. 02/06/2002 Financial Times (c) 2002 Financial Times Limited . All Rights Reserved FRONT PAGE - FIRST SECTION - Post-Enron equity fears fuel 'flight from risk= ' WORRIED INVESTORS IN EUROPEAN AND US MARKETS SHUN STOCKS THAT FACE ACCOUN= TING OR FINANCIAL CONCERNS.=20 Equity markets in Europe and the US witnessed a "flight from risk" yesterda= y, with investors shunning any stocks that faced accounting or financial co= ncerns. Worries about the quality of corporate accounts in the wake of the collapse= of Enron were accompanied by fears that heavily indebted companies would e= ither collapse or be forced to raise large amounts of equity to restore the= ir balance sheets.=20 Investor concern was demonstrated when General Electric, the world's larges= t company, had to dismiss questions about the transparency of its accountin= g by reaffirming its earnings growth targets. Jeff Immelt, chairman and chi= ef executive, said: "We have tremendous financial strength and a system of = controllership that is second to none." GE shares recovered 3.5 per cent to= close at $36.21 yesterday.=20 European companies came under the spotlight. UK-based electronics group Inv= ensys was one of the biggest casualties, its shares falling 8 1/2p, or 8 pe= r cent, to 97 1/2p, the worst performance in the FTSE 100 index.=20 Credit Suisse First Boston reduced its earnings forecasts for the company a= nd said: "Market feedback on Invensys remains very discouraging." Dresdner = Kleinwort Wasserstein warned of the possibility of a rights issue to reduce= the company's debt.=20 Elan, the Irish pharmaceutical company, whose accounts have come under inte= nse scrutiny, saw its share price fall a further Euros 3.5, or 18 per cent,= to Euros 16 in the wake of Monday's profits warning.=20 Shares in Deutsche Bank, Germany's biggest bank, fell Euros 2.8, or 4 per c= ent, to Euros 67 on concern that corporate financial problems would prompt = a rise in its bad debt provisions.=20 European markets were pushed lower by the concerns and by Wall Street losse= s on Monday. In London, the FTSE 100 index fell 73.9, or 1.4 per cent, to 5= ,093.4.=20 In the US, the Dow Jones Industrial Average closed down 1.66 at 9685.43. Ty= co International shares continued to tumble after the beleaguered conglomer= ate on Monday drew down its credit lines, triggering a downgrade by Standar= d & Poor's, the credit rating agency. Even though Tyco's move has removed a= ny short-term questions about its stability, the shares closed down more th= an 22 per cent at $23.10.=20 Tyco has lost almost half its value since announcing plans for a four-way b= reak-up.=20 Companies adjusting earnings continued to suffer - even if reporting profit= s not previously disclosed. Reliant Resources shares fell fell more than 13= per cent to close at $11.95 yesterday after the energy group said it would= restate second-and third-quarter earnings to show additional profits of $1= 00m ( #70m) and $130m ( #90m) respectively.=20 The Enron fall-out has made investors far more cautious about the quality o= f corporate profits, particularly in the US, where accounting standards had= been assumed to be the best in the world.=20 (c) Copyright Financial Times Ltd. All rights reserved.=20 http://www.ft.com. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Editorial Desk; Section A Barbie Loves Math By MAUREEN DOWD 02/06/2002 The New York Times Page 21, Column 1 c. 2002 New York Times Company WASHINGTON -- Hollywood is trying to figure out how to turn Enron into a TV= movie.=20 How do they take all the stuff about ''the contingent nature of existing re= stricted forward contracts'' and ''share-settled costless collar arrangemen= ts,'' jettison it like the math in ''A Beautiful Mind,'' and juice it up? Enron is such a mind-numbing black hole, even for financial analysts, that = if you tried to explain all the perfidious permutations, you'd never come o= ut the other end.=20 A movie executive asked Lowell Bergman, the former ''60 Minutes'' producer = who is now an investigative reporter for The Times and ''Frontline,'' for t= he most cinematic way to frame the story. (Mr. Bergman had the ultimate Hol= lywood experience of being played by Al Pacino in another corporate greed-a= nd-corruption saga, ''The Insider.'')=20 ''It's about the women up against the men,'' he replied.=20 Before you know it, Enron will be Erined, as in Brockovich. Texas good ol' = girl, fast-talking, salt-of-the-earth whistle-blower Sherron Watkins will b= e Renee Zellweger in a Shoshanna Lonstein bustier. The adorable and intrepi= d Fortune reporter Bethany McLean, the first journalist to sound an alarm a= bout Enron's accounting practices, will be look-alike Alicia Silverstone. A= nd Loretta Lynch, the tough California utilities czarina and Yale-trained l= itigator who questioned a year ago what Enron did that was of any value to = consumers, will be look-nothing-alike Angelina Jolie, sporting power plant = tattoos.=20 ''From the beginning of the California energy meltdown, women were not afra= id to point a finger at the seventh-largest corporation in the U.S. and say= 'You can't do this,' '' Mr. Bergman told me. ''And the electric cowboys at= Enron, where the culture had a take-no-prisoners, get-rid-of-any-regulatio= n, macho perspective on the marketplace, was aggressive when it came to shu= tting them up.''=20 As a Texas writer says: ''This was Jeff Skilling's club and there weren't a= lot of women in his club.''=20 At first, the slicked-back Gordon Gekko C.E.O. and his arrogant coterie in = the Houston skyscraper -- where men were wont to mess around and leave wive= s for secretaries -- dismissed female critics.=20 Some privately trashed Ms. Lynch as ''an idiot'' and coveted Ms. McLean, ca= lling her ''a looker who doesn't know anything.'' But when they realized th= e women were on to them, the company that intimidated competitors, supplier= s and utilities tried to oust Ms. Lynch from her job and discredit Ms. McLe= an and kill her article.=20 When Ms. Watkins confronted Kenneth Lay with her fears last August, he knew= the cat was spilling out of the beans, as Carmen Miranda used to say. With= in two months he had to 'fess up to $600 million in spurious profits.=20 (In Houston's testosterone-fueled energy circles, many men watched Linda La= y crying on TV and muttered that in Texas, there is nothing lower than send= ing your wife out to fight your battle.)=20 As a feminine fillip, there's Maureen Castaneda, a former Enron executive w= ho revealed the shredding shindigs there. Ms. Castaneda realized something = was wrong when she took some shreds home to use as packing material and saw= they were marked with the galactic names Chewco and Jedi, which turned out= to be quasi-legal partnerships.=20 Only 10 years after Mattel put out Teen Talk Barbie whining ''Math class is= tough,'' we have women unearthing the Rosetta stone of this indecipherable= scandal.=20 What does this gender schism mean? That men care more about inflating their= assets? That women are more caring about colleagues getting shafted?=20 It is men's worst fear, personally and professionally, that women will pin = the sin on them, come ''out of the night like a missile and destroy a man,'= ' as Alan Simpson said during the Hill-Thomas hearings.=20 There has been speculation that women are more likely to be whistleblowers = -- or tattletales when they are little -- because they are less likely to b= e members of the club.=20 Some men suggest that women, with their vast experience with male blarney, = are experts at calling guys on it.=20 At Enron, it was men who came up with complex scams showing there was no li= mit to the question ''How much is enough?'' And it was women who raised the= simple question, ''Why?'' Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Sarah Palmer Internal Communications Manager Enron Public Relations (713) 853-9843