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Enron Attorney Says FBI Is Probing Shredding at Company's Headquarters
Dow Jones Business News, 01/22/2002

WSJ: Enron Says FBI Invited To Probe Document Shredding
Dow Jones News Service, 01/22/2002

Paper Trail:
Shredded Documents Taken to Court
ABC News.com, 01/22/2002

Paper Chase:
Congress to Probe Destruction of Enron Documents
ABC News.com, 01/22/2002

Judge to hear request to halt shredding
Associated Press Newswires, 01/22/2002

Lawyers Ask Houston Crt Order To Stop Enron `Tampering'
Dow Jones Energy Service, 01/22/2002

ENRON PROBES ALLEGED SHREDDING DOCUMENT DESTRUCTION REPORTEDLY CONTINUED TO=
AT LEAST START OF JAN.
The Boston Globe, 01/22/2002

REPORT: ENRON KEPT ON SHREDDING ; FORMER EXECUTIVE: SUBPOENAS IGNORED
Orlando Sentinel, 01/22/2002

Manager Says Enron Shredded Documents; Probe Allegedly Was Already Underway
The Washington Post, 01/22/2002

Enron Ex-Executive: Previous Warnings Fell On `Deaf Ears'
Dow Jones International News, 01/02/2002

New Accusations of Document Shredding at Enron
American Morning with Paula Zahn, 01/22/2002

USA: Enron says ordered staff to preserve all papers.
Reuters English News Service, 01/21/2002

Enron Notified Employees to Retain Documents
PR Newswire, 01/21/2002

Enron says it checking shredding report
The Globe and Mail, 01/22/2002

Enron Claims to Fire Andersen as Auditor.
The Oil Daily, 01/22/2002

SMARTMONEY.COM: Special Report: The Enron Papers
Dow Jones News Service, 01/21/2002

SMARTMONEY.COM: The Spreading Enron Stain
Dow Jones News Service, 01/21/2002

Worker's concerns about Enron accounting brushed aside
Associated Press Newswires, 01/21/2002

Enron Raised Funds In Private Offering; Shareholders in Dark, Documents Sho=
w The Washington Post, 01/22/2002

Jesse Jackson to hold rally for laid off Enron workers
Associated Press Newswires, 01/21/2002

USA: Profiles of major figures in Enron saga.
Reuters English News Service, 01/21/2002

The Fall of Ken Lay
CNN: The Point with Greta Van Susteren, 01/21/2002

Role of Andersen lawyer probed.
Financial Times - FT.com, 01/22/2002

Enron's Law Firm Is in the Crosshairs; Vinson & Elkins' heavy reliance on t=
he work it did for the energy giant is now a potential liability for the la=
w firm
BusinessWeek Online, 01/22/2002

Enron a Boon to Short-Sellers / Skeptics correctly read signs of sudden col=
lapse
Newsday, 01/22/2002

Andersen says Enron failed on business merits.
The Saigon Times Daily, 01/22/2002

ENRON SPURS TEXAS-SIZE LEGAL QUAGMIRE ; MORE THAN 150 LAWSUITS HAVE ALREADY=
BEEN FILED IN HOUSTON AGAINST THREE OF THE COMPANY'S TOP EXECUTIVES.
Orlando Sentinel, 01/22/2002

Federal Judge Approves Sale Of Enron's Energy Trading Ops
Dow Jones News Service, 01/22/2002

UBS Pumps Life Into New Enron Unit
Newsday, 01/22/2002

Enron Creditors Express Skepticism About Proposed Sale of Trading Arm to UB=
S.
The Oil Daily, 01/22/2002

Enron To Pay GE Capital $138,474/Mo For Furniture Leases
Dow Jones News Service, 01/22/2002
Enron Trying To Keep $7.92M In Funds From Some Creditors
Dow Jones International News, 01/22/2002

USA: Lawmaker says set to subpeona Andersen in Enron case.
Reuters English News Service, 01/22/2002

Enron auditor says Andersen shares blame Congressional subcommittee rejects=
bid to delay public testimony set for Thursday
The Globe and Mail, 01/22/2002

New US Judge In Enron Cases No Stranger To Controversy
Dow Jones Energy Service, 01/22/2002

UK: UPDATE 1-Enron Europe creditors face $900 mln trading loss.
Reuters English News Service, 01/22/2002

Two More Enron Units File Chapter 11, Total Reaches 37
Dow Jones Energy Service, 01/22/2002

Dark humour and a line in T-shirts from Enron victim - Ex-employees' websit=
e reveals the real losses.
The Guardian, 01/22/2002

US Treasury Responds To Waxman Request For Enron Info
Dow Jones Capital Markets Report, 01/22/2002

SMARTMONEY.COM: Special Report: Enron Vs. Investors
Dow Jones News Service, 01/22/2002

Tractebel bids for Enron's SKorean assets - report
AFX News, 01/22/2002

Electrabel In Talks With Enron Over Spanish Power Plant
Dow Jones International News, 01/21/2002

New BG Bid Soon For Enron's India Pete Fields' Stake -PTI
Dow Jones Energy Service, 01/21/2002

Gov't hopes to close Enron deal this month.
BusinessWorld (Philippines), 01/22/2002

INDIA PRESS: Dabhol May Be Sold In Two Parts
Dow Jones International News, 01/21/2002

INDIA'S TROUBLED DPC READY TO HAND OVER EVIDENCE TO HIGH COURT
Asia Pulse, 01/22/2002

Enron points to need for independent analysts
The Globe and Mail, 01/22/2002

Where are market cops when we need them?
The Globe and Mail, 01/22/2002

U.S. push on for independent auditors: Enron fallout
National Post, 01/22/2002

Enron case steals Bush limelight
Belfast News Letter, 01/22/2002

Politically Sensitive Enron Items Pulled Off EBay Friday
Dow Jones News Service, 01/22/2002

ComPsych(R) Reports Rapidly Increasing Employee Stress Levels Caused by Rec=
ent Financial Events
PR Newswire, 01/21/2002

GETTING PERSONAL: 401(k) Woes? Might Be Your Own Fault
Dow Jones News Service, 01/22/2002

Enron: No Taxes . . .
The Washington Post, 01/22/2002

GEORGE W. CLINTON? IT SOUNDS CRAZY, BUT BUSH'S ENRON DEFENSE IS `BILL DID I=
T, TOO'
Pittsburgh Post-Gazette, 01/22/2002

Corruption festered in the dark
Kitchener-Waterloo Record, 01/22/2002

Putting the `public' back in CPA
Chicago Tribune, 01/22/2002

Bush Better See Enron Case as a Threat
Newsday, 01/22/2002

WHITE HOUSE NOTEBOOK Dana Milbank
Wrapping Up Tough Questions With Foil
The Washington Post, 01/22/2002

Enron's Fatal Arrogance
Australian Financial Review, 01/22/2002

Get Tough On Corporate Crime
The Washington Post, 01/22/2002

...Poisonous Enron
The News & Observer Raleigh, NC, 01/22/2002

What a fall!
Business Standard, 01/22/2002

____________________________________________________________________

Enron Attorney Says FBI Is Probing Shredding at Company's Headquarters
By John R. Emshwiller

01/22/2002
Dow Jones Business News
(Copyright (c) 2002, Dow Jones & Company, Inc.)

Staff Reporter of The Wall Street Journal=20
HOUSTON-- An attorney for Enron Corp. says Federal Bureau of Investigation =
agents have been dispatched to the company's Houston headquarters to begin =
interviews Tuesday about possible document shredding.
The attorney said that following news reports of document shredding on the =
19th floor of the building, where some of the accounting operations are, En=
ron (ENRNQ) contacted the Justice Department and Securities and Exchange Co=
mmission and invited them to investigate what happened.=20
He added that Enron officials last night went to the 19th floor to look for=
any evidence of shredding and located a "single trash can with shredded ma=
terial." He said the material was secured and bagged. Security guards have =
now been placed on the 19th and 20th floor of the building.=20
Three former Enron employees said Monday that they'd seen shredded document=
s in the accounting department after federal investigators had begun a prob=
e into possible illegalities at the energy giant.=20
Write to John R. Emshwiller at john.emshwiller@wsj.com=20
Copyright (c) 2002 Dow Jones & Company, Inc.=20
All Rights Reserved.

WSJ: Enron Says FBI Invited To Probe Document Shredding
By John R. Emshwiller

01/22/2002
Dow Jones News Service
(Copyright (c) 2002, Dow Jones & Company, Inc.)

Of The Wall Street Journal=20

HOUSTON -(Dow Jones)- An attorney for Enron Corp. (ENRNQ) says Federal Bure=
au of Investigation agents have been dispatched to the company's Houston he=
adquarters to begin interviews Tuesday about possible document shredding.
The attorney said that following news reports of document shredding on the =
19th floor of the building, where some of the accounting operations are loc=
ated, Enron contacted the Justice Department and Securities and Exchange Co=
mmission and invited them to investigate what happened.=20
(This report and related background will be available at the Journal's Web =
site, WSJ.com.)=20
He added that Enron officials last night went to the 19th floor to look for=
any evidence of shredding and located a "single trash can with shredded ma=
terial." He said the material was secured and bagged. Security guards have =
now been placed on the 19th and 20th floor of the building.=20
Three former Enron employees said yesterday that they'd seen shredded docum=
ents in the accounting department after federal investigators had begun a p=
robe into possible illegalities at the energy giant. -Jonathan Friedland; T=
he Wall Street Journal; 323-658-3820

Paper Trail
Shredded Documents Taken to Court
=20

Jan. 22 - An attorney handed over shredded Enron documents to a federal cou=
rt in Houston today, claiming they were important papers company workers ha=
d attempted to destroy as recently as last week.=20

The attorney, William Lerach, who has filed a class-action suit against the=
failed energy firm on behalf of employees and stockholders, said he though=
t the court should begin to take physical possession of evidence from the f=
irm and its now-fired auditor Arthur Andersen, and appoint independent expe=
rts to try to restore deleted e-mail.=20
"It may be necessary that we put a U.S. marshal or someone on the premises =
there at Enron to make sure these people behave themselves," argued Lerach =
on ABCNEWS' Good Morning America today.=20
Shredders Were 'Working Overtime'=20
Document-shredding continued at Enron's headquarters up until at least last=
week, former Enron executive Maureen Castaneda told ABCNEWS, despite feder=
al subpoenas and court orders since last October forbidding the destruction=
of documents.=20
Castaneda, the former director of Enron's foreign investments section, said=
the shredding was done in an accounting office on the 19th floor of the co=
mpany's Houston headquarters.=20
"I left the second week of January and the shredding was going on until the=
day I left, and I have no idea if it continues," said Castaneda, who worke=
d across the hall from the accounting office.=20
"After Thanksgiving, there was great interest in the accounting documents s=
tored," she said. "They pulled out all the boxes and people had to go throu=
gh every box."=20
Castaneda added in a Good Morning America interview this morning: "I think =
the accountants were probably working a lot of overtime. You could tell by =
the pizza boxes and trash cans."=20
The former executive says she had no idea what was going on - even used the=
shreddings to pack up her belongings - until she received an e-mail from t=
he corporate attorney reiterating company policy forbidding document shredd=
ing.=20
"That's when the light bulb went on," recalled Castaneda, "And I said, 'Wel=
l, wait a minute, if they're not supposed to destroy them, why are they des=
troyed?' "=20
'It Will Not Be Tolerated'=20
Enron attorney Bob Bennett said that all employees had been forbidden to sh=
red any documents as of Oct. 25.=20
"At a very early time, the legal team made all employees aware of the pendi=
ng litigation and that all documents should be retained," Bennett told ABCN=
EWS. "If anyone has disobeyed that policy or if anyone is discovered to hav=
e shredded documents, it will not be tolerated and severe action will be ta=
ken."=20
He also said the company was investigating the reports.=20
Castaneda said she discovered the shredded documents when she was cleaning =
out her office and looking for packing material. She showed ABCNEWS boxes f=
ull of shredded documents dated from November and December, which she found=
in the hallway.=20
"I got these when I was leaving work, to basically use for packing material=
," she said. "I only took one box."=20
The word "confidential" can be seen on the shredded papers, which were dens=
ely packed into the box she showed ABCNEWS.=20
"A lot are accounting documents," said Castaneda. "You can tell because of =
the colors yellow and pink."=20
Also, she said she found shreds with references to some of Enron's off-the-=
books partnerships, which the company used to mask its financial problems. =
Lawyers in the case regard this as likely evidence of a criminal act: Destr=
oying documents in the middle of a federal investigation is potential obstr=
uction of justice.=20
Enron's accounting practices have come under heightened scrutiny since the =
company's stunning October announcement that it lost $638 million in the th=
ird quarter of 2001 and was worth $1.2 billion less than it had previously =
claimed.=20
ABCNEWS' Brian Ross contributed to this report.

Paper Chase
Congress to Probe Destruction of Enron Documents

By Pete Yost
The Associated Press

W A S H I N G T O N, Jan. 21 - A House panel plans to issue subpoenas if ne=
cessary to compel testimony from Enron's accounting firm and the auditor it=
fired for the destruction of thousands of documents.

Arthur Andersen LLP chief executive Joseph Berardino criticized his firm's =
lead auditor on the Enron account, David Duncan, saying he displayed "at th=
e least ... extremely poor judgment" for his part in discarding documents i=
n October and November. Enron filed for bankruptcy Dec. 2.=20
Duncan has told investigators he was simply following the advice of Anderse=
n's legal department when he directed the shredding. The House Energy and C=
ommerce subcommittee on oversight and investigations has scheduled a hearin=
g for Thursday.=20
The tentative witness list includes Duncan, Andersen attorney Nancy Temple =
and Berardino or another top-ranking Andersen official.=20
It was uncertain whether Duncan would appear voluntarily.=20
"We have made it clear that we'll be prepared to subpoena any reluctant wit=
nesses," said committee spokesman Ken Johnson.=20
Johnson said "a number of people have approached the committee about immuni=
ty" from prosecution, "but we have not offered it to anyone, nor have we se=
riously considered it up to this point."=20
"We're very interested in finding out where Andersen is, in its internal in=
vestigation" of the Enron controversy, "and we want to examine administrati=
ve and disciplinary actions taken in the wake of the disclosure that docume=
nts were destroyed," Johnson said.=20
Focus on Stock Sales=20
A variety of federal law enforcement agencies and congressional investigato=
rs are looking into Enron's sudden collapse, the largest bankruptcy in U.S.=
history and one that cost many employees their retirement savings.=20
Among the avenues of interest: actions taken by Enron managers to sell some=
of their own stock in the company even as employees were encouraged to con=
tinue investing.=20
A lawyer for Kenneth L. Lay, Enron's chairman and chief executive, said Lay=
disposed of millions of dollars in Enron stock because he needed to raise =
cash to repay loans, not because of concerns about the health of his compan=
y, The New York Times reported today.=20
Attorney Earl J. Silbert said Lay had put up shares of his Enron stock as c=
ollateral for other investments. On at least 15 occasions between February =
and October of last year, Silbert told the Times, Lay returned shares in En=
ron to the company to repay $4 million he had received through a credit lin=
e.=20
The House panel meeting Thursday hoped to get to the bottom of Andersen's s=
hredding of the documents.=20
Temple, a lawyer at Andersen headquarters in Chicago, e-mailed a copy of th=
e firm's document destruction policy to the Houston office where Duncan and=
other accountants worked on the Enron account.=20
Temple sent the e-mail just four days before Enron announced more than $600=
million in third-quarter losses. At the same time, the energy company took=
the first step to fully disclose details of partnerships that had kept hun=
dreds of millions of dollars in Enron debt off the company's balance sheet.=
=20
E-mail Defended=20
Appearing Sunday on NBC's "Meet the Press," Berardino defended Temple's sen=
ding of the e-mail, saying "Nancy just told people to use their judgment. S=
he did not instruct them to do anything, to my knowledge."=20
According to congressional investigators, Duncan said last week that genera=
l discussions began at Andersen in September about what Enron-related docum=
ents to discard.=20
"It was unusual" to emphasize the document-destruction policy, Duncan told =
the investigators, according to congressional sources familiar with what he=
said. The sources spoke on condition of anonymity.=20
Asked why Temple reminded the Houston office of the policy to do away with =
some documents, Berardino replied, "Because accountants are pack rats ... W=
e save lots of stuff that's not relevant."=20
Asked about the timing of Temple's e-mail, Berardino said "we were in the p=
rocess of putting our files together to make sure that all of the third-qua=
rter events were properly documented in our work papers."
Copyright 2002 The Associated Press. All rights reserved. This material may=
not be published, broadcast, rewritten or redistributed.=20

Judge to hear request to halt shredding
By KRISTEN HAYS
Associated Press Writer

01/22/2002
Associated Press Newswires
Copyright 2002. The Associated Press. All Rights Reserved.

HOUSTON (AP) - An attorney representing shareholders suing 29 current and f=
ormer Enron Corp. executives and directors carried a box of shredded docume=
nts into federal court Tuesday, claiming employees of the fallen energy tra=
ding giant were destroying records through at least mid-January.=20
"This is the shredded evidence that we got out of Enron," attorney William =
Lerach said as he hurried into the downtown Houston courthouse, where he wa=
s prepared to ask a judge to ban any shredding by Enron or its former audit=
or, Arthur Andersen.
A state judge's order already prohibits Andersen's Houston office from shre=
dding Enron-related documents. Chicago-based Andersen acknowledged earlier =
this month its Houston office had destroyed a significant but undetermined =
amount of audit-related work.=20
Lerach's law partner, Paul Howes, released a court brief late Monday in whi=
ch a former Enron executive saw staffers in the accounting and finance depa=
rtment review and shred thousands of documents.=20
Maureen Raymond Castaneda, who was laid off as Enron's director of foreign =
exchange and sovereign risk, told Howes the "gather-review-shred" process s=
tarted Oct. 31, when the Securities and Exchange Commission announced a for=
mal investigation into Enron finances, and continued through at least Jan. =
14.=20
In a statement released Monday, Enron reiterated that it has had a strict a=
nti-shredding policy in place since last autumn.=20
"Since Oct. 25, Enron has notified employees in no uncertain terms that the=
y are to preserve all documents and materials. The company has sent out fou=
r e-mails to that effect from Oct. 25, 2001, through Jan. 14, 2002," said t=
he statement.=20
Castaneda confirmed she saw at least two such e-mails from Enron general co=
unsel James Derrick.=20
Houston-based Enron cited Andersen's shredding issues when it fired the ven=
erable accounting firm last week.=20
Neil Rothstein, attorney for another plaintiff, the Archdiocese of Milwauke=
e Support Fund, said Tuesday morning that justice can be served only with i=
ntact evidence.=20
"We are entitled to see what they have," Rothstein said, referring to anyon=
e with pertinent Enron documentation. "No one should have destroyed documen=
ts."=20
Lerach said Castaneda took some boxes of shredded documents home, intending=
to use them as packing material in a move to a more affordable house. She =
gave Lerach's team the spindly documents, which Howes said were clearly mar=
ked as related to debt-laden partnerships that fueled the company's downfal=
l.=20
"Enron's communications with its employees were very clear on the destructi=
on of documents, and any breach of the company's policy will be dealt with =
swiftly and severely," the company said. "Enron has been cooperating fully =
with congressional investigators and handed over to various government inve=
stigators 41 boxes of documents and materials."=20
Drowning in a sea of exposed questionable accounting methods, massive third=
-quarter losses and elimination of millions in profits since 1997 with rest=
ated earnings, Enron on Dec. 2 filed the largest bankruptcy in history.=20
Lerach's firm last month sued current and former top Enron executives and b=
oard members who sold $1.1 billion in stock from October 1998 through Novem=
ber last year, just before the company imploded.=20
The lawsuit differs from more than 60 filed on behalf of shareholders and i=
nvestors across the country because it names only the individuals as defend=
ants, not Enron Corp. Suits targeting the company are on hold until the ban=
kruptcy is resolved in a Manhattan court.=20
The suit alleges the defendants, including Enron chairman Ken Lay and Texas=
Sen. Phil Gramm's wife, Enron board member Wendy Gramm, engaged in a three=
-year pattern of fraud and deception that caused Enron shares to fall from =
a high of about $80 a year ago to less than a dollar.=20
Amalgamated Bank, the lead plaintiff, claims it lost more than $10 million =
in the meltdown, and the suit is seeking $25 billion in damages. Pension fu=
nds for several states have joined the suit since it was filed.

Lawyers Ask Houston Crt Order To Stop Enron `Tampering'

01/22/2002
Dow Jones Energy Service
(Copyright (c) 2002, Dow Jones & Company, Inc.)

WASHINGTON (AP)--Lawyers suing Enron Corp. (ENRNQ) say a massive number of =
company documents were shredded in the face of a federal investigation and =
want a court to step in to prevent more tampering.=20
"It was a major accounting fraud and now they have been caught destroying t=
he evidence," attorney William Lerach said Tuesday on NBC's "Today." "I'd s=
ay they've got trouble on their hands."
Robert Bennett, a Washington lawyer representing Enron, said the company to=
ld employees after coming under investigation that they were not to destroy=
relevant documents. He said the company is looking into charges papers wer=
e destroyed despite that directive.=20
Lerach told the Associated Press the shredding was "open and notorious and =
widespread," consuming "hundreds of thousands of documents" and taking plac=
e even on Christmas Day.=20
Former Enron executive Maureen Castaneda said on morning talk shows Tuesday=
that the shredding began after Thanksgiving on the 19th floor accounting o=
ffice of the company's Houston headquarters and continued at least until th=
e middle of this month.=20
Lerach was bringing some of the shredded documents to federal court Tuesday=
to seek court custody of relevant Enron papers, as part of a class-action =
lawsuit against the company by aggrieved investors.=20
"We're going to ask the court to take extraordinary measures...to prevent a=
ny further tampering or destruction," he said on ABC's "Good Morning Americ=
a."=20
"It may be necessary that we put a U.S. marshal or someone on the premises.=
"=20
The reported shredding follows revelations over the past two weeks about do=
cument destruction at Arthur Andersen LLP, Enron's auditor.=20
Another attorney in the lawsuit, G. Paul Howes, said in court papers that s=
ome of papers destroyed at Enron headquarters were marked Jedi II and Chewc=
o - partnerships through which the energy giant concealed hundreds of milli=
ons of dollars in debts.=20
The partnerships, described by lawmakers as slick financial gimmicks, helpe=
d drive the company into the largest bankruptcy in U.S. history.=20
The Securities and Exchange Commission began looking into Enron's accountin=
g practices in mid-October, after the company reported more than $600 milli=
on in third-quarter losses, and a congressional committee began asking for =
documents in mid-December. The SEC opened a formal investigation at the end=
of October, including demands for financial documents from Enron and Ander=
sen.=20
Enron said in a statement late Monday that it had issued four e-mails from =
Oct. 25 to Jan. 14 warning employees against destroying documents, specific=
ally those related to Enron's complex web of partnerships.=20
"We are investigating the circumstances of the reported destruction of docu=
ments," Bennett said.=20
Bennett said anyone who violated directives against destroying documents "w=
ill be dealt with appropriately."=20
Castaneda, who was laid off last week, said she did not know who ordered em=
ployees to do the shredding. "I think they were just doing what they were t=
old," she said.=20
She said she brought shredded paper home to use as packing material.=20
The Justice Department announced on Jan. 9 that it was pursuing a criminal =
investigation of Enron, which entered the biggest bankruptcy in U.S. histor=
y on Dec. 2 following a six-week downward spiral.=20
Andersen last week fired its lead Enron auditor for destroying Enron-relate=
d documents. The auditor, David Duncan, has told congressional investigator=
s he was just following the advice of Andersen's legal department when he d=
irected the shredding.=20
Lawyers for Duncan have been seeking to delay his public testimony, schedul=
ed for Thursday before the investigative panel of the House Energy and Comm=
erce Committee, saying Duncan needs more time to prepare.=20
But Rep. Jim Greenwood, R-Pa., the subcommittee's chairman, rejected the re=
quest, arguing that Duncan "doesn't really need to recall every detail of w=
hat he did for Enron. We're focused on the destruction of documents. We'll =
subpoena him if we have to."=20
Said Ken Johnson, spokesman for the House Energy and Commerce Committee: "T=
his whole sorry affair keeps getting uglier by the minute, and we're determ=
ined to get to the bottom of it. ... Making bad business decisions is one t=
hing, but trying to cover up bad business decisions is another."

Business
ENRON PROBES ALLEGED SHREDDING DOCUMENT DESTRUCTION REPORTEDLY CONTINUED TO=
AT LEAST START OF JAN.
Pete Yost, Associated Press

01/22/2002
The Boston Globe
THIRD
F.1
(Copyright 2002)

WASHINGTON - Enron is looking into the reported destruction of documents th=
at allegedly took place at its Houston headquarters after the federal gover=
nment began investigating the company, an attorney for the bankrupt energy =
giant said last night.=20
In an on-air interview with ABC News, a former Enron executive, identified =
as Maureen Castaneda, said the shredding of documents took place in an acco=
unting office on the 19th floor.
Castaneda displayed one box of the shredded material which "I got . . . whe=
n I was leaving work to basically use . . . for packing material.=20
"There were . . . a lot more than this," she said, standing next to the box=
.=20
Castaneda said the destruction began after Thanksgiving. "I left the second=
week of January and the shredding was going on until I left. And I have no=
idea if it continues." Castaneda was identified as a director in the forei=
gn investments section at Enron's Houston headquarters.=20
"They even shredded on Christmas Day," Bill Lerach, an attorney who is suin=
g Enron's board and officers, said in an interview. He said he was taking s=
ome of the shredded documents to court today where he will demand court cus=
tody of all relevant Enron documents.=20
"From what we have learned, destruction of evidence at Enron was open and n=
otorious and widespread," Lerach said.=20
The Securities and Exchange Commission began looking into Enron in mid-Octo=
ber.=20
"We are investigating the circumstances of the reported destruction of docu=
ments," Washington attorney Robert Bennett, who is representing Enron, said=
in a statement.=20
"In October 2001 the company issued several directives to all Enron employe=
es worldwide that all relevant documents should be preserved in light of pe=
nding litigation," Bennett added. "If anyone violated those directives, the=
y will be dealt with appropriately."=20
The reported shredding at Enron follows revelations over the past week and =
a half about document destruction at Arthur Andersen, Enron's accounting fi=
rm.=20
Some of the shredded Enron paper displayed in the ABC story contained the w=
ord "Jedi," one of the entities involved in an array of off-the-books partn=
erships which kept millions of dollars in Enron debt off the firm's balance=
sheet for several years.=20
Enron's inquiry into shredding at its headquarters came as congressional in=
vestigators pressed for public testimony by an Andersen auditor fired over =
the destruction at the accounting firm.=20
"This whole sorry affair keeps getting uglier by the minute, and we're dete=
rmined to get to the bottom of it," said Ken Johnson, spokesman for the Hou=
se Energy and Commerce Committee, which has been investigating the destruct=
ion of papers at Andersen.=20
Fired Andersen auditor David Duncan told investigators that Andersen had am=
ple information when it evaluated the controversial partnership arrangement=
s at Enron that were a big factor in its bankruptcy.=20
Duncan's lawyers sought to delay his public testimony, scheduled for Thursd=
ay before the House Oversight and Investigations Subcommittee, arguing that=
Duncan needs more time to prepare.=20
But Representative Jim Greenwood, a Pennsylvanian Republican who chairs the=
subcommittee, rejected the request, saying Duncan "doesn't really need to =
recall every detail of what he did for Enron. We're focused on the destruct=
ion of documents."=20
In other developments:=20
Consumer advocate Ralph Nader said a special counsel should investigate Enr=
on rather than the Justice Department's criminal division. Nader also said =
Bush administration officials should have alerted the Justice Department an=
d the Securities and Exchange Commission last fall when contacted by Enron =
chairman Kenneth Lay about the company's growing problems.=20
The State Department disclosed that Secretary of State Colin Powell referre=
d to Enron's problems regarding a power plant in India in a discussion with=
India's foreign minister last April 6.

Caption: Ralph Nader said yesterday a special counsel should investigate En=
ron. / AP PHOTO=20
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09

A SECTION
REPORT: ENRON KEPT ON SHREDDING ; FORMER EXECUTIVE: SUBPOENAS IGNORED
William Neikirk, Washington Bureau

01/22/2002
Orlando Sentinel
METRO
A1
(Copyright 2002 by The Orlando Sentinel)

WASHINGTON -- A former Enron Corp. executive said Monday that company docum=
ents were destroyed at its Houston headquarters even after the federal gove=
rnment issued subpoenas for the bankrupt company's records last fall.=20
The startling accusation of document shredding prompted Enron's attorney, R=
obert Bennett, to say that the company would immediately look into the alle=
gation made by former executive Maureen Castaneda in an ABC News interview.
Displaying a box of shredded material, Castaneda, identified by ABC as the =
former director of Enron's foreign-investments section, said the document d=
estruction began after Thanksgiving and continued as late as last week in t=
he 19th-floor accounting office of the company's Houston headquarters.=20
She said she got the box of paper to use for packing material and that ther=
e were "a lot more" boxes like the one she showed on the air.=20
Federal authorities and congressional committees are already investigating =
the shredding of documents by Enron's auditor, Arthur Andersen LLP, in conn=
ection with Enron's failure. The revelations that Enron may have done the s=
ame thing added a new dimension to the burgeoning scandal.=20
"It's one thing to make bad business decisions; it's another thing to cover=
up bad business decisions," said Ken Johnson, spokesman for Rep. Billy Tau=
zin, R-La., chairman of the House Energy and Commerce Committee, one of the=
panels investigating the firm. "If it's true, this is an even bigger mess =
than we thought."=20
Johnson said the committee undoubtedly would look into the new allegation a=
nd probably call Castaneda to testify. Meanwhile, the panel will hold a ses=
sion Thursday to hear evidence on the shredding of documents at Andersen, a=
nd is threatening to force a former Andersen auditor, David Duncan, to test=
ify. Duncan has sought a postponement.=20
Castaneda told ABC she found shredded paper with references to some of Enro=
n's controversial businesses partnerships, such as "Jedi," which the firm u=
sed to hide millions of dollars in debt.=20
"A lot are accounting documents," she added. "You can tell because of the c=
olors yellow and pink."=20
"I left the second week of January, and the shredding was going on until th=
e day I left, and I have no idea if it continues," said Castaneda.=20
Bennett issued a statement after the broadcast, saying that "we are investi=
gating the circumstances of the reported destruction of documents. In Octob=
er, the company issued several directives to all Enron employees worldwide =
that all relevant documents should be preserved in light of pending litigat=
ion. If anyone violated these directives, they will be dealt with appropria=
tely."=20
The Securities and Exchange Commission began investigating Enron in mid-Oct=
ober and this month the Justice Department said it had opened a criminal in=
vestigation. Other federal agencies are looking into various aspects of Enr=
on's collapse.=20
The shredding of documents also is becoming a major issue in a suit against=
Enron's board and its officers. William Lerach, attorney for plaintiffs wh=
o have sued the firm's board and its officers, said he plans to take the bo=
x of shredded documents to federal court, according to The Associated Press=
.=20
"They even shredded on Christmas Day," Lerach said.

A Section
Manager Says Enron Shredded Documents; Probe Allegedly Was Already Underway
Peter Behr
Washington Post Staff Writer

01/22/2002
The Washington Post
FINAL
A01
Copyright 2002, The Washington Post Co. All Rights Reserved

An Enron project manager has told attorneys suing the company that she saw =
evidence of widespread shredding of documents at Enron Corp.'s Houston head=
quarters, beginning after the start of a former federal securities investig=
ation was announced Oct. 31 last year.=20
Maureen Castenada, a manager in Enron's foreign-investments section who was=
laid off in mid-January, said the names of outside partnerships that are a=
t the center of ongoing investigations of Enron are legible on scraps of sh=
redded paper. The shredding took place inside offices on the 19th floor of =
the headquarters building, where she worked, she said.
Castenada's allegations are contained in a sworn affidavit by attorney G. P=
aul Howes, whose firm is suing Enron's top officials and directors on behal=
f of Enron shareholders and investors whose retirement savings were devasta=
ted by the company collapse and bankruptcy filing in December. She repeated=
the allegations in an interview yesterday on ABC News.=20
Howes said that according to Castenada, boxes of documents from throughout =
Enron's headquarters were gathered on the 19th floor beginning about Thanks=
giving. She said she saw Enron employees going through the boxes' contents =
page by page and removing documents, Howes's account states.=20
At the end of the day, trash bags and boxes full of shredded documents were=
stacked up in the hallway, she said, adding that the shredding was continu=
ing as recently as the second week of January.=20
One scrap described a division of revenue between Enron and one of the off-=
balance-sheet entities the company created named Raptor, attorneys said.=20
"We are investigating the circumstances of the reported destruction of docu=
ments," Washington attorney Robert S. Bennett, who is representing Enron, s=
aid in a statement.=20
"In October 2001 the company issued several directives to all Enron employe=
es worldwide that all relevant documents should be preserved in light of pe=
nding litigation," Bennett added. "If anyone violated those directives, the=
y will be dealt with appropriately."=20
Enron reported on Oct. 22 that the Securities and Exchange Commission had b=
egun an inquiry into the company's financial dealings. A week later, the SE=
C upgraded the probe to a formal investigation.=20
The destruction of documents by Enron's outside accounting firm, Arthur And=
ersen, already is a key issue for investigators. Andersen fired David B. Du=
ncan, its top Houston auditor on the Enron account, last week after learnin=
g he ordered the shredding of documents related to the Enron audit.=20
Attorney William Lerach, a senior partner in Howes' firm, said last night t=
hat he will take a box of shredded material obtained by Castenada into fede=
ral court in Houston today to back up his demand that relevant Enron docume=
nts be put under the court's control.=20
"You just have to conclude, based on what we know to date, this was a delib=
erate, coordinated effort to destroy evidence," Lerach said.=20
Castenada told ABC News she could tell that a lot of the shredded papers we=
re once accounting documents. "You can tell because of the colors -- yellow=
and pink," she said. She took one box of shredded paper away with her to g=
ive to attorneys. "There were . . . a lot more than this," she said.=20
Congressional investigators said yesterday that they are still negotiating =
with Duncan's attorney to secure his testimony at a hearing on the document=
destruction at Andersen scheduled for Thursday before the House Energy and=
Commerce Committee's oversight and investigations subcommittee.=20
Duncan's lawyers sought to delay his public testimony, arguing that Duncan =
needs more time to prepare.=20
The subcommittee chairman, Rep. James C. Greenwood (R-Pa.), turned down tha=
t request. He said the committee will subpoena Duncan if necessary.=20
Andersen's chief executive, Joseph F. Berardino, appearing Sunday on NBC's =
"Meet the Press," criticized Duncan and defended Andersen attorney Nancy Te=
mple, who sent an Oct. 12 e-mail to Andersen's Houston office as a reminder=
of the firm's document-destruction policy.=20
Berardino said Duncan displayed "at the least . . . extremely poor judgment=
" for his part in destroying the documents in October and November. He said=
Temple sent the reminder "because accountants are pack rats. . . . We save=
lots of stuff that's not relevant."=20
Staff writer David S. Hilzenrath contributed to this report.

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

Enron Ex-Executive: Previous Warnings Fell On `Deaf Ears'

01/22/2002
Dow Jones International News
(Copyright (c) 2002, Dow Jones & Company, Inc.)

NEW YORK -(Dow Jones)- The former executive who first disclosed document-sh=
redding at Enron Corp. (ENRNQ) said Tuesday that she hadn't informed her su=
periors because her previous warnings about risky deals had fallen on "deaf=
ears."=20
Interviewed on ABC's "Good Morning America," Maureen Castaneda said she did=
n't know the names of those who had shredded the documents and didn't know =
who had ordered the shredding.
Castaneda, former Enron director for foreign exchange and risk management, =
said she wasn't surprised by the destruction of documents because she had "=
seen a lot" over the past three years - "things that weren't forthright."=
=20
She referred to deals that she called "incredibly risky," citing countries =
that she said "nobody in the world would lend capital to" but where Enron d=
evelopers wanted to go into.=20
Castaneda, who was separated from Enron earlier this month, said she had se=
en "accountants" looking through documents after Thanksgiving on her way to=
her office on the 19th floor, which housed the accounting and research dep=
artments.=20
Repeating remarks to ABC on Monday evening, Castaneda said she realized wha=
t had happened when she took home shredding to use as packing material afte=
r being separated.

News; Domestic
New Accusations of Document Shredding at Enron
Jack Cafferty, Ed Lavandera

01/22/2002
American Morning with Paula Zahn
(c) Copyright eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House,=
Inc.). All Rights Reserved.

new accusations of document shredding at Enron have surfaced just as a fede=
ral judge in Houston is set to hold hearings this morning on an injunction =
to get accounting firm Arthur Andersen to stop destroying Enron related doc=
uments.=20
JACK CAFFERTY, CNN CORRESPONDENT: The other big story, of course, new accus=
ations of document shredding at Enron have surfaced just as a federal judge=
in Houston is set to hold hearings this morning on an injunction to get ac=
counting firm Arthur Andersen to stop destroying Enron related documents.
According to a former Enron employee, documents were being systematically s=
hredded at the company as late as last week. Maureen Castaneda, who's part =
of a shareholder lawsuit against Enron, told ABC News the shredding began i=
n late October after the SEC began their investigation into the company's a=
ccounting practices.=20
CNN's Ed Lavandera joins us now with more in a live report from Houston -- =
Ed.=20
ED LAVANDERA, CNN CORRESPONDENT: Good morning, Jack.=20
The attorneys in this case sat down with reporters late last night inside a=
19th floor posh downtown Houston hotel room, showing off what they say are=
those shredded documents that Maureen Castaneda witnessed being shredded i=
nside the Enron building. They say that over the last 12 weeks they've talk=
ed with several dozen witnesses here at Enron who say that they did witness=
this shredding of documents in the finance and accounting department. Maur=
een Castaneda worked in an office just across the hallway from this departm=
ent.=20
They say the shredding started heavily after Thanksgiving and it continued =
in through Christmas and into, as you said, last week. And this, of course,=
if this indeed is true, happened well after the federal investigators star=
ted taking over in this case and issued subpoenas in efforts to claim much =
of these documents.=20
Enron spokespeople say that they have issued several e-mails telling all em=
ployees not to tamper with any documents whatsoever and to preserve every m=
aterial that they can get their hands on, as well. But the attorneys in thi=
s case aren't convinced by what Enron is saying.=20
(BEGIN VIDEO CLIP)=20
UNIDENTIFIED MALE: It is an absolute smoking gun. You've got, the auditor s=
aid we destroyed thousands of pages of documents. They've admitted that. Th=
e company now can't get around the fact that in the face of three directive=
s not to do it, personnel were directed to do it because the personnel that=
were doing this clearly wouldn't have acted unilaterally.=20
(END VIDEO CLIP)=20
LAVANDERA: We spent some time last night looking at some of those shredded =
documents and trying to find any kind of evidence ourselves. The attorneys =
say that in many of these slices of paper that you can see the names of Rap=
tor and Jedi, which, of course, are the names of these partnerships that ha=
ve become infamous for bringing down Enron.=20
We were only able to find one slip of paper that had Raptor on it, but they=
, indeed, say that this is the only box that they do have but that they do =
fear that hundreds of thousands of documents, there are witnesses that say =
that they saw this as a systematic shredding of documents over the course o=
f the last month and a half and they say that they're, even though this is =
the only box that they do have, that there is much more out there that has =
been shredded -- Jack, back to you.=20
CAFFERTY: Ed, thank you.=20
Ed Lavandera live in Houston this morning.=20
Coming up in the next hour of AMERICAN MORNING, the woman who blew the whis=
tle on Enron. Maureen Castaneda says the company was shredding documents ri=
ght up until last week. Also, a family struggling to survive after Enron le=
ft them out in the cold.=20
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SE=
CURE ONLINE ORDER FORM LOCATED AT www.fdch.com=20
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY B=
E UPDATED.=20
Content and programming copyright 2002 Cable News Network, Inc. ALL RIGHTS =
RESERVED. Prepared by eMediaMillWorks, Inc. (f/k/a Federal Document Clearin=
g House, Inc.) No license is granted to the user of this material other tha=
n for research. User may not reproduce or redistribute the material except =
for user's personal or internal use and, in such case, only one copy may be=
printed, nor shall user use any material for commercial purposes or in any=
fashion that may infringe upon Cable News Network, Inc.'s copyright or oth=
er proprietary rights or interests in the material; provided, however, that=
members of the news media may redistribute limited portions (less than 250=
words) of this material without a specific license from CNN so long as the=
y provide conspicuous attribution to CNN as the originator and copyright ho=
lder of such material. This is not a legal transcript for purposes of litig=
ation.

USA: Enron says ordered staff to preserve all papers.

01/21/2002
Reuters English News Service
(C) Reuters Limited 2002.

NEW YORK, Jan 21 (Reuters) - Bankrupt energy trader Enron Corporation said =
on Monday it had repeatedly ordered all its employees since October 25, 200=
1 to refrain from destruction of any official documents.=20
The company said this after a Monday news report on ABC Television quoted a=
former employee as saying that she saw shredded documents in an accounts o=
ffice at the company's Houston headquarters.
A company spokesman said Enron, which is facing a string of investigations =
into its demise, would probe into the interview given by the former employe=
e identified as Maureen Castaneda.=20
Enron, which has already handed over 41 boxes of documents and materials to=
federal investigators said it had sent four emails to all employees betwee=
n October 25 and January 14 asking them to preserve all documents regarding=
Enron's activities and also with regard to the partnerships which Enron ha=
d set up outside the company's main operations.

Enron Notified Employees to Retain Documents

01/21/2002
PR Newswire
(Copyright (c) 2002, PR Newswire)

HOUSTON, Jan. 21 /PRNewswire-FirstCall/ -- Enron Corp. released the followi=
ng statement in response to an ABC News story broadcast today:=20
Since October 25th Enron has notified employees in no uncertain terms that =
they are to preserve all documents and materials. The company has sent out =
four emails to that effect from Oct. 25, 2001 through January 14, 2002.
Specifically, Enron employees were warned on October 25th to "Please retain=
all documents (which include handwritten notes, recordings, emails, and an=
y other method of information recording) that in any way relate to the Comp=
any's related party transactions with LJM1 and LJM2 ... You should know tha=
t this document preservation requirement is a requirement of Federal law an=
d you could be individually liable for civil and criminal penalties if you =
fail to follow these instructions."=20
In subsequent messages sent on October 26 and October 31, 2001, employees w=
ere specifically instructed that the requirement to preserve and retain all=
documents extended not only to LJM documents but included all documents re=
lating to: the Broadband Services Division, Chewco, Azurix, New Power, the =
accounting for any Enron investments, and Enron public statements to invest=
ors, the Securities and Exchange Commission or other regulatory bodies.=20
Enron's communications with its employees were very clear on the destructio=
n of documents, and any breach of the company's policy will be dealt with s=
wiftly and severely. Enron has been cooperating fully with congressional in=
vestigators and handed over to various government investigators 41 boxes of=
documents and materials.=20
MAKE YOUR OPINION COUNT - Click Here=20
http://tbutton.prnewswire.com/prn/11690X24687138

International News
Briefing
Enron says it checking shredding report
Associated Press

Washington -- Enron is looking into the reported destruction of documents t=
hat allegedly took place at its Houston headquarters after the federal gove=
rnment began investigating the company, a lawyer for the bankrupt energy gi=
ant said last night.=20
In an on-air interview with ABC News, a former Enron executive identified a=
s Maureen Castaneda said the shredding of documents took place in an accoun=
ting office on the 19th floor.
"We are investigating the circumstances of the reported destruction of docu=
ments," Washington lawyer Robert Bennett, who is representing Enron, said i=
n a statement. AP

Enron Claims to Fire Andersen as Auditor.

Enron tried to restore some of its badly tarnished image late last week by =
claiming to fire outside auditor Andersen for destroying Enron financial do=
cuments.=20
The firing, however, is about as credible as Capt. Louis Renault's statemen=
t in the classic movie Casablanca that he was "shocked" to learn that gambl=
ing was taking place in Rick's Cafe Americain, just as he was handed his ev=
ening's winnings.
In fact, the relationship with Andersen terminated last month after Enron m=
ade its Chapter 11 filing in the US Bankruptcy Court (OD Dec.4,p1). Bankrup=
tcy rules require that a new auditor be named, so Andersen has been out for=
more than a month.=20
Still, Enron Chairman and Chief Executive Kenneth Lay indicated that the pr=
oblems at Andersen were news to him and that action on the matter couldn't =
await the outcome of an internal investigation the company initiated in lat=
e October.=20
"While we had been willing to give Andersen the benefit of the doubt until =
the completion of that investigation, we can't afford to wait any longer in=
light of recent events," he said in a statement.=20
Andersen disclosed on Tuesday that employees had shredded some paper docume=
nts and deleted electronic files after it was aware of a Securities and Exc=
hange Commission investigation of Enron (OD Jan.16,p1). The company fired t=
he head of the Enron account in its Houston office, put three others on adm=
inistrative leave, and demoted another four executives.=20
The fired auditor, David Duncan, apparently doesn't plan to fall on his swo=
rd to protect others. He was already talking to the US House Committee on E=
nergy and Commerce before his termination by Andersen and continued his tes=
timony in what a committee spokesman described as a cooperative manner.=20
Enron's shares continue to be traded actively in the over-the-counter marke=
t since going off the New York Stock Exchange last week. Shares now are lis=
ted in the National Quotation Bureau "Pink Sheets." The price has ranged be=
tween 22? and 57.5? since making the move.=20
"This is purely a penny stock now," said analyst John Olson of Sanders, Mor=
ris, Harris in Houston. He said he is becoming less confident that UBS Warb=
urg can resurrect the company's trading business soon enough to satisfy Enr=
on's multitude of creditors and salvage any vestige of the company.=20
Olson noted that Enron owes about $15 billion just to banks and has another=
$19 billion in derivative exposure - and creditors will want whatever they=
can get as soon as possible.=20
Another regulatory figure walked the plank last Friday after admitting to a=
n Enron taint. Max Yzaguirre, who once headed Enron's operations in Mexico =
and served in other Enron jobs, resigned as chair of the Texas Public Utili=
ty Commission.=20
Yzaguirre succeeded Pat Wood, now chair of the Federal Energy Regulatory Co=
mmission, last summer.=20
Barbara Shook.=20
(c) Copyright 2002. The Oil Daily Co.=20
For more infomation, call 800-999-2718 (in U.S.) or=20
202-662-0700 (outside U.S.).

SMARTMONEY.COM: Special Report: The Enron Papers
By Matthew Goldstein

01/21/2002
Dow Jones News Service
(Copyright (c) 2002, Dow Jones & Company, Inc.)

Of SMARTMONEY.COM=20
(This report was first published late Friday.)=20

MANY VOICES on Wall Street have professed bafflement at the sudden collapse=
of Enron (ENRNQ). According to the many investment bankers and trading par=
tners who did business with the company, the commercial banks that lent it =
money, and the securities analysts who followed it, the accounting maneuver=
s Enron allegedly used to inflate its profits and hide its debts were so co=
mplex and so hidden from view that no one could have foreseen the outcome.
It turns out, however, that some of the biggest names in American finance w=
ere active participants in Enron's strategy. SmartMoney.com has obtained a =
number of financial documents and partnership records related to LJM2 Co-In=
vestment partnership, one of the key entities relied on by Enron. The docum=
ents - four books altogether measuring more than two inches high - reveal t=
hat a virtual Who's Who of financial institutions invested in the $394 mill=
ion fund established in 1999 by former Enron Chief Financial Officer Andrew=
Fastow. The documents provide a breakout of the estimated rates of return =
on the more than a dozen investments made by LJM2. They even offer an expla=
nation for how those mysterious Raptors worked - the subsidiaries LJM2 esta=
blished to carry on hedging activities with Enron. We're making selections =
from the documents available for download in PDF format.=20
The documents make one thing clear: LJM2 was anything but an arm's-length e=
ntity for Enron - as it would've had to be for Enron's accounting treatment=
of it to have been legitimate. "The Partnership expects that Enron will be=
the Partnership's primary source of investment opportunities and that the =
Partnership will co-invest with Enron," according to one document. As the d=
ocuments state, the partnership was created and managed by then-CFO Fastow =
and was "focused on acquiring energy and communications assets primarily ow=
ned by Enron." And while Jeffrey Skilling, Enron's former chief executive w=
ho suddenly resigned last August, told the New York Times in December that =
he didn't have many details about partnerships like LJM2, the records show =
Skilling was a guest speaker at LJM2's annual partnership meeting on Oct. 2=
6, 2000.=20
Some highlights from the documents:=20
"LJM Rationale": LJM2 was formed in October 1999 with the stated goal of ac=
quiring assets primarily owned by Enron and generating a 30% average annual=
return for its limited-partner investors. Why focus on Enron assets? The d=
ocuments explain that some of those assets were diluting Enron's earnings a=
nd harming the ratios on which its credit ratings were based. It wanted to =
"deconsolidate" those assets and "create structures which accelerate projec=
ted earnings and cash flows."=20
A selling point to potential investors in LJM2: "The Partnership expects to=
benefit from having the opportunity to invest in Enron-generated investmen=
t opportunities that would not be available otherwise to outside investors.=
"=20
Investors: The papers contain a partial list of the biggest companies and f=
inancial institutions that are known to have invested in LJM2, either direc=
tly, through subsidiaries or on behalf of third parties: American Internati=
onal Group (AIG), AON (AOC), Citigroup (C), CIBC, Credit Suisse First Bosto=
n, Dresdner Bank, General Electric (GE), J.P. Morgan Chase (JPM), Lehman Br=
others (LEH), Morgan Stanley (MWD), Merrill Lynch (MER) and Wachovia Bank (=
WB).=20
Smaller institutional investors were also involved, including pension funds=
and private equity funds. These included Aero Capital, Alpine Investment P=
artners, C&I Partners, Cramer Rosenthal McGlynn, Fort Washington Private Eq=
uity, Freidenrich Family Trust (associated with Bay Partners, a big Califor=
nia venture-capital firm), Lakeview Capital Management, Mousse Partners, Rh=
o Management, the State of Arkansas Teachers Retirement Fund, Ulysses Partn=
ers and Weyerhaeuser Employee Retirement Trust (WY).=20
LJM2 Key Employees: As of early 2000, LJM2 was being managed by Fastow; Mic=
hael Kopper, former managing director of Enron's Global Equity Markets Grou=
p; and Kathy Lynn, a former Enron vice president. Fastow, during his tenure=
at LJM2, earned roughly $30 million in management fees.=20
Advisers: The partnership employed Big Five accounting firm Pricewaterhouse=
Coopers and Chicago-based law firm Kirkland & Ellis, where Whitewater prose=
cutor Kenneth Starr is a partner.=20
Bankers: Two banks were LJM2's main lenders: Chase Manhattan Bank, part of =
J.P. Morgan Chase, and Germany's Dresdner Bank, a division of Dresdner Klei=
nwort Wasserstein. On Nov. 30, 2001, just days before Enron would file for =
bankruptcy, Dresdner Bank sent LJM2 a letter informing it that it had defau=
lted on a provision of its loan agreement.=20
Working Capital: As of April 2000, LJM2 had raised $394 million. Of that am=
ount, 42% came from top-rated financial institutions and insurance companie=
s, 36% was invested by individuals and private equity funds and the remaini=
ng 22% came from employee pension funds. The value of the assets held by th=
e partnership as of Sept. 30, was $156 million, down 39% from Dec. 31, 2000=
.=20
Investments: LJM2 invested in a total of 23 investments - most of them invo=
lving Enron-related entities - with odd-sounding names like Bobcat, Osprey =
Trust, Apex, Rawhide and Talon. The five biggest investments were: NewPower=
Holdings (NPW), $50 million; Bobcat I, $30 million; Osprey Trust, $26 mill=
ion; Apex, $25 million and Zenith Telecom Trust, $21 million.=20
NewPower is a deregulated electrical power company that Enron spun off in O=
ctober 2000. Bobcat is a so-called special entity, like the Raptors that En=
ron and LJM2 used to hedge investments. Osprey Trust is an investment vehic=
le set up by Enron and another limited partnership, Whitewing, which sold $=
1.4 billion in corporate bonds. Apex is a collaterized loan obligation - a =
derivative security whose underlying instrument is a commercial loan - that=
LJM2 has with First Union, which since has been acquired by Wachovia Bank.=
Zenith is one of the few non-Enron investments made by LJM2. It was an inv=
estment in an off-balance-sheet partnership established by TXU (TXU) called=
Pinnacle One Partners.=20
The Raptors: These are a structured finance vehicle - usually capitalized w=
ith Enron stock and an investment from LJM2 - that enters into derivative, =
or hedging, transactions all designed to reduce the risk associated with En=
ron's own investment portfolio. There were at least six Raptors created by =
LJM2. The Raptors helped manage the impact of price volatility of Enron's s=
tock investments by purchasing put and call options on those shares. (A cal=
l option is a bet a stock will rise in price, while a put option is a bet i=
t will fall.) But the Raptors posed a problem if Enron's stock dropped belo=
w $48 a share - something that first occurred in early August, around the t=
ime Skilling suddenly resigned. In the event of such a drop, Enron would ha=
ve to give the Raptors more of its stock in an attempt to keep them solvent=
, and this would be potentially dilutive to the stock.=20
For more information and analysis of companies and mutual funds, visit Smar=
tMoney.com at http://www.smartmoney.com/

SMARTMONEY.COM: The Spreading Enron Stain
By Robert Hunter

01/21/2002
Dow Jones News Service
(Copyright (c) 2002, Dow Jones & Company, Inc.)

Of SMARTMONEY.COM=20
(This report was first published late Friday.)=20

ON WEDNESDAY AFTERNOON, my editor and I got together to think of a fresh wa=
y to approach the Enron (ENRNQ) scandal for my column this week. We wanted =
to try to offer investors some guidance as the sordid details of Enron's of=
f-balance-sheet activities continue to unfold.
I decided that I would argue that while the Enron blowup is a shocking exam=
ple of greed, cunning and guile, it was an isolated incident. The underpinn=
ings of our financial system are still fundamentally sound.=20
Now, I'm not so sure.=20
It's true that Enron was unlike any company that makes its living - or a bi=
g chunk of it - in the derivatives markets. Derivatives? Wasn't Enron prima=
rily an energy trader? Yes, but many energy trades involve forward sales (a=
kin to futures) and options. And Enron dealt in dozens of other, more exoti=
c derivatives markets, from credit to weather to advertising. Derivatives w=
ere a bigger part of Enron's revenue stream than they are at any other publ=
icly traded company that deals in them, even powerhouses like Goldman Sachs=
(GS), Lehman Brothers (LEH) and Morgan Stanley (MWD).=20
Yet Enron didn't resemble other derivatives dealers in the least. Wall Stre=
et firms that are active in these highly sophisticated, highly lucrative an=
d highly risky markets have elaborate risk-management systems in place to p=
revent Enron-like disasters from happening. Ever notice that most of the de=
rivatives blowups you've heard about in the past - from Orange County to Pr=
octer & Gamble (PG) to Gibson Greetings - involved relatively unsophisticat=
ed investors being burned by Wall Street bandits? (The delicate term for th=
at on the Street is ripping someone's face off.) Yes, Barings Bank and Kidd=
er Peabody were brought down by derivatives - but those cases involved rogu=
e traders circumventing their company's risk-management systems for fun and=
profit. Because derivatives can blow up in their faces, dealers pay slavis=
h attention to the risk they undertake. Risk managers are some of the best-=
paid people on Wall Street. Their job is to keep their companies from going=
boom - and by and large, they succeed.=20
Some years ago, as scandals started becoming more common, derivatives becam=
e something of a four-letter word. Wall Street came up with an ingenious fi=
x, one that just happened to add some safety to the derivatives world: In t=
he early 1990s, dealers began creating AAA-rated offshore subsidiaries that=
do some of their bidding for them. (No big investment bank carries that ra=
ting, or anything close.) To get those ratings, the subs had to be incredib=
ly well capitalized and maintain impeccable books. That helped allay certai=
n nervous counterparties, as well as institutional investors permitted to d=
eal only with triple-A-rated entities. Even in the unlikely event that, say=
, Goldman Sachs imploded, its triple-A sub would still have the cash on han=
d to settle its bets, which often mature far into the future. Nowadays, big=
banks and insurers often have several of these entities. And that helps th=
em lower their overall risk profiles. Everyone wins: The corporate trader g=
ets to deal with a safer partner, while the bank's positions, on an aggrega=
te level, are less risky. In the derivatives world, subsidiaries exist sole=
ly in the service of the corporate parent.=20
Enron was an entirely different story. While many of the infamous LJM partn=
erships engineered and managed by Andrew Fastow, Enron's then-chief financi=
al officer, were set up to help Enron manage its risk, they were woefully u=
ndercapitalized, and ended up adding to Enron's aggregate risk rather than =
mitigating it. Many of the special-purpose vehicles Enron created were capi=
talized largely through Enron's own equity. When Enron's stock price fell b=
elow certain levels, that triggered huge equity payments to the private ent=
ities. The result: The entities that were set up to help Enron manage its r=
isk exposed Enron's shareholders to even more risk because of the trigger m=
echanisms. Rather than serving the company proper, they ultimately destroye=
d it. Credit-rating agency Standard & Poor's calls such trigger deals "insi=
dious."=20
The question is, was Enron so unique? On Dec. 20, S&P said that four energy=
traders in particular - NRG Energy (NRG), PG&E National Energy Group (PCG)=
, TXU (TXU) and Williams (WMB) - faced the possibility of damaging trigger =
deals. Dynegy (DYN) and Calpine (CPN) decided to raise cash to shore up the=
ir balance sheets after Enron blew up. Were they frightened by what newly s=
keptical investors might find in their income statements? While there's no =
evidence of Enron-like shenanigans at any of these companies, the existence=
of equity-diluting trigger deals is troubling.=20
Before Friday, I thought it unfair to tar other companies because of what h=
appened at Enron. Then I saw a document obtained by Staff Editor Matthew Go=
ldstein that undermined many of my assumptions about the case. When Enron w=
as unraveling, the story being told on Wall Street was that no one knew wha=
t was going on, and that, in any event, Enron's depravity existed in a vacu=
um. Now I know that isn't true.=20
According to LJM2 partnership documents from 2000, the cast of characters i=
nvolved in Enron's off-balance-sheet activities is much bigger than previou=
sly thought. Limited partners included Chase Capital, G.E. Capital, J.P. Mo=
rgan Capital, Merrill Lynch (MER), Dresdner Bank, AON, Credit Suisse First =
Boston, Morgan Stanley and First Union Investors, an all-star list of Wall =
Street insiders. Given the porous walls separating equity research from inv=
estment-banking operations, the suggestion that analysts at these firms kne=
w nothing about the LJM partnerships before they blew up simply isn't credi=
ble. On Oct. 22, the day Enron announced that the Securities and Exchange C=
ommission was inquiring about its third-party transactions, CSFB maintained=
its Strong Buy rating. Were analysts trying to keep Enron's stock high eno=
ugh to prevent other trigger events?=20
Equally troubling, those documents revealed that LJM2's auditor was Pricewa=
terhouseCoopers. That means that at least two of the Big Five accounting fi=
rms had intimate knowledge of the goings on inside Enron or its outside par=
tnerships. (Arthur Andersen was Enron's auditor.) The implications of all o=
f this for the U.S. accounting system are staggering. Enron's off-balance-s=
heet activities weren't the mystery they've been portrayed to be.=20
And that, unfortunately, leads me to wonder how many other Enron-like disas=
ters are lurking in the shadows of corporate America. What's striking is ho=
w long Enron was able to get away with these transgressions without someone=
blowing the whistle. People at Wall Street's biggest firms had intimate kn=
owledge of these dealings, yet no one said a word. When Jeffrey Skilling, E=
nron's then-CEO, resigned in early August once Enron's stock fell below the=
trigger level for at least two LJM2 entities - Raptor and Osprey - no one =
said a word. When Enron wrote down shareholder equity by $1.2 billion in Oc=
tober, no one said a word. Wall Street can keep a secret far better than an=
yone could have imagined.=20
How many other secrets is it keeping?=20
For more information and analysis of companies and mutual funds, visit Smar=
tMoney.com at http://www.smartmoney.com/

Worker's concerns about Enron accounting brushed aside
By KRISTEN HAYS
Associated Press Writer

HOUSTON (AP) - A former Enron Corp. manager fired for using a company compu=
ter to post negative messages about his employer on the Internet believed h=
e and his colleagues were misled when Chairman Kenneth Lay touted the stock=
three weeks before the company began to implode, an attorney representing =
laid off workers said.=20
Eli Gottesdiener, a Washington attorney who is representing employees in a =
class-action lawsuit against Enron, said the former manager, Clayton Vernon=
of Houston, "deeply regrets the circumstances of his departure from Enron.
"He was a loyal employee who believed he and his fellow employees were misl=
ed by the company's top executives and its outside accountants and outside =
legal counsel," Gottesdiener said Monday.=20
Vernon joined Enron in 1999 as a designer of computer-based models to help =
gauge value of Enron's energy trades. During an in-house online chat on Sep=
t. 26 last year, Lay brushed aside Vernon's question about the company's ag=
gressive accounting practices.=20
Vernon inquired about partnerships that allowed Enron to keep millions of d=
ollars in debt off its books while paying millions in fees to executives wh=
o ran them.=20
Lay assured employees participating in the electronic discussion that he or=
Enron's board of directors wouldn't approve such partnerships or other fin=
ancial vehicles unless convinced by internal officers and then-outside audi=
tor, Arthur Andersen, that they were legal and appropriate.=20
Lay encouraged employees to buy Enron stock and assured them that the compa=
ny's finances and books were in solid shape.=20
"The third quarter is looking great," Lay said. Three weeks later, Enron an=
nounced a $618 million third-quarter loss and a $1.2 billion reduction in s=
hareholder equity.=20
Vernon told the New York Times in Monday's editions that he was fired Nov. =
20, the day after posting a message on a Yahoo! message board that criticiz=
ed Lay, calling the chairman "the sorriest sack of garbage I have ever been=
associated with." He was at work and posted the message using an Enron com=
puter.=20
Vernon told the Times that he had no argument over his termination because =
it violated company policy.=20
Vernon, through Gottesdiener, declined to talk to The Associated Press on M=
onday. The attorney said Vernon had a positive annual evaluation last Octob=
er in which his supervisors called him a dedicated employee who was serious=
about making Enron a successful company.=20
"Clayton Vernon strove to be a model employee," Gottesdiener said.=20
Enron spokesman Mark Palmer declined comment on Vernon's firing because it =
was a personnel issue. He said Enron "absolutely" has a strict policy prohi=
biting personal use of company computers.=20
Palmer said Enron hasn't held any similar internal online discussions since=
4,500 of 7,500 employees were laid off from the company's Houston headquar=
ters on Dec. 3, the day after Enron filed the largest bankruptcy in history=
. No one among the remaining 3,000 workers is available to operate the elec=
tronic platform used for those chats, Palmer said.=20
"We've also been very busy trying to bring the company out of bankruptcy," =
he said.

A Section
Enron Raised Funds In Private Offering; Shareholders in Dark, Documents Sho=
w Peter Behr
Washington Post Staff Writer

Attorneys for Enron Corp. shareholders and workers, who lost billions of do=
llars when the company collapsed late last year, allege that Enron created =
complex, largely hidden financing structures to inflate its revenue and pro=
fit, hide debt from view, delay reporting losses and enrich some executives=
who ran them.=20
Documents describing one of the largest such structures -- a partnership ca=
lled Whitewing, established by Enron and a still-unidentified party -- illu=
strate how Enron favored outside investors while not fully informing shareh=
olders of billions of dollars of potential liabilities.
The Whitewing arrangement is disclosed in a confidential, 100-page offering=
to private investors in September 2000 obtained by The Washington Post. Th=
e document describes a process that Enron regularly used to finance growth =
without adding directly to the corporate debt shown on its books. In Novemb=
er, Enron valued Whitewing's assets at $4.7 billion, but some Enron officia=
ls say that figure is significantly exaggerated.=20
Off-balance-sheet transactions are used by many companies. Federal and cong=
ressional investigations into Enron's collapse are trying to determine whet=
her Enron used its labyrinth of partnership structures to hide key informat=
ion about its financial condition.=20
Whitewing's role was to buy an assortment of power plants, pipelines and wa=
ter projects in India, Turkey, Spain and Latin America that Enron had snapp=
ed up through the mid-1990s, when the Houston company was set on becoming a=
global energy supplier.=20
By 1999, Enron President Jeffrey K. Skilling was refocusing the company as =
a global broker of energy, a trader of financial contracts rather than an o=
perator of energy facilities.=20
Whitewing was responsible for reselling the assets. But Enron also guarante=
ed Whitewing's investors that if the power plants and other assets were sol=
d at a loss, Enron would make up the difference with shares of its common s=
tock, or cash if necessary. As of November, that requirement stood at more =
than $2 billion -- a $2 billion obligation that shareholders didn't know ab=
out.=20
A part of that hidden guarantee to Whitewing investors surfaced suddenly in=
October, after Enron's credit rating was dropped to near junk-bond level b=
y rating agencies. That triggered a requirement that Enron immediately pay =
$690 million of its obligations to Whitewing. Enron was able to delay the p=
ayment but had to disclose the problem, stunning investors and feeding the =
loss of confidence that led to the company's bankruptcy filing.=20
Such arrangements were "designed to give the safer return to the outside in=
vestors and put substantially more risk on the [Enron] shareholders," said =
Clayton Vernon, an economist and manager at Enron who was fired by Enron af=
ter he wrote an e-mail criticizing Enron Chairman Kenneth L. Lay in October=
.=20
From an accounting and a public-disclosure standpoint, the arrangement was =
"indefensible," said Vernon, who is among the former employees suing Enron.=
=20
Whitewing was the center of an aviary of entities with bird names -- Osprey=
, Condor, Egret, Peregrine and Blue Heron were all linked to Whitewing.=20
Many of the hundreds of other Enron-related partnerships were clustered tog=
ether to carry out different parts of billion-dollar financing deals and gi=
ven colorful but unrevealing names. Jedi, Chewco, Obi and Kenobi Inc. follo=
wed a Star Wars theme. Rawhide, Cactus, Sundance, Ponderosa and Mojave had =
a Western flavor.=20
Whitewing was formed in 1997 as an Enron subsidiary. In 1999 Enron decided =
to move Whitewing off its books, which it accomplished by giving half of th=
e partnership's control to an unnamed investor.=20
The arrangement allowed Enron to escape reporting losses on some assets tha=
t were no longer worth what Enron had originally paid for them, according t=
o some company officials. Such losses would have hurt Enron's stock price, =
which soared to as high as $90 a share when investors believed Enron was su=
cceeding in its shift to becoming a trading firm.=20
In her August letter warning Lay about "accounting scandals," Enron Vice Pr=
esident Sherron Watkins cited "valuation issues with our international asse=
ts" that could be written down in future financial reports.=20
Enron will have to "pony up stock" to Whitewing in 2003, she said, "and tha=
t won't go unnoticed."=20
Chuck Watson, chairman and chief executive of Dynegy Inc., whose executives=
had a brief inside view of Enron during the time his company was consideri=
ng purchasing its Houston rival in November, said in an interview, "All the=
ir trouble was on [the] assets they had gotten into. There were 11 major bu=
sinesses or assets around the world, none of which were performing at the l=
evel that they bought the asset [for].=20
"Then trying to finance those, get them off the balance sheet with some cre=
ative financial tools -- that's come into question."=20
The benefits Enron officials sometimes received from the outside entities d=
isturbed Watson. "You have individuals [at Enron] who actually profit from =
doing these things. That's another level of being out of bounds," Watson sa=
id.=20
Enron officials have declined to discuss specifics about Whitewing beyond w=
hat was disclosed in a filing to regulators in November.=20
The September 2000 partnership document was distributed to U.S. and foreign=
investors to raise an additional $1.1 billion for Whitewing.=20
The outline of the structure was this:=20
Whitewing was owned jointly by Enron and an unnamed partner. Whitewing borr=
owed the $1.1 billion from private investors in the United States and Europ=
e. The investors received interest-bearing notes from a trust named Osprey,=
controlled by Whitewing.=20
Whitewing split its revenue between Enron and the other unnamed Whitewing p=
artner. Enron received revenue of $632 million in 2000 and $192 million in =
1999 from Whitewing, Enron's recent filings show.=20
To protect the Osprey investors, whose notes had to be repaid in 2003, the =
offering memo said Enron would contribute shares of common stock to make up=
a shortfall if Whitewing assets dropped in value.=20
If the Enron shares could not be sold because of stock market conditions or=
regulatory delays, Enron promised to cover the investors' losses with cash=
.=20
Adding another layer of complexity, Enron created an entity called Condor, =
under Whitewing, to hold a special kind of Enron security that would be con=
verted into shares of Enron common stock if needed to cover the obligation =
to Osprey investors.=20
The most Enron disclosed about Whitewing was in a footnote in its 1999 annu=
al report. It said Enron "could be obligated" to issue shares of common sto=
ck under certain circumstances, which it did not explain.=20
The private-offering memo "prohibits" prospective investors from copying th=
e document or disclosing its terms. The offering was managed by the New Yor=
k firm Donaldson, Lufkin & Jenrette Securities -- now part of Credit Suisse=
First Boston -- Lehman Brothers, Deutsche Bank and UBS Warburg LLC as co-m=
anagers.=20
Credit Suisse spokesman Pen Pendleton said he could not comment on the tran=
saction because of confidentiality commitments to clients. "This transactio=
n was a private placement," he said. The other three institutions also decl=
ined comment.=20
Investment officials of these firms could not share the offering contents w=
ith analysts at their firms who were advising the public on whether to buy =
or sell Enron stock.=20
Enron advised the Osprey investors -- but not its public shareholders -- th=
at Enron indirectly controlled Whitewing and thus its executives had "signi=
ficant influence" over Whitewing, including decisions on which projects to =
buy from Enron and how much Whitewing would pay.=20
Some of Enron's directors and officers may serve as directors of Whitewing =
Management LLC, the private corporation that controlled Whitewing, the docu=
ment said, and these individuals, not identified in the document, may have =
a conflict of interest. "In addition, certain other conflicts of interest m=
ay exist and may arise" because of the linkages between Enron and Whitewing=
, the document said.=20
In one case, Enron acknowledged such a conflict of interest but said its bo=
ard had approved it. Enron's former chief financial officer, Andrew S. Fast=
ow, received $30 million in fees and profits from his participation in a gr=
oup of Enron-created outside entities known as LJM, which also invested in =
Osprey.=20
Now, Enron is reevaluating the fair value of Whitewing's assets, and the ou=
tcome of the transactions for shareholders and investors lies in bankruptcy=
court.

Jesse Jackson to hold rally for laid off Enron workers

HOUSTON (AP) - The Rev. Jesse Jackson says he will try to pump up laid of E=
nron Corp. employees at a church rally Friday across the street from the fo=
rmer energy giant's downtown Houston headquarters.=20
Jackson said he will gather ministers and members of his Rainbow Coalition =
at Antioch Missionary Baptist Church for a lunchtime rally to press for fin=
ancial help to employees left jobless with decimated 401(k) accounts loaded=
with company stock.
"What's happened at Enron is symptomatic of how vulnerable workers are ever=
ywhere," he said Monday.=20
Jackson said Enron reported inflated profits despite a system of checks and=
balances, including Securities and Exchange Commission oversight, that led=
to its demise and shares that dwindled to less than a dollar after trading=
near $80 a year ago.=20
Asked whether he, like many other politicians, had ever received campaign d=
onations from Enron, Jackson said, "to my knowledge, no. I have not and nei=
ther have any of our entities."=20
But if records show Jackson ever received money from Enron, it would not co=
mpromise his desire to help former workers, he said.

USA: Profiles of major figures in Enron saga.

01/21/2002
Reuters English News Service
(C) Reuters Limited 2002.

WASHINGTON, Jan 21 (Reuters) - Following are profiles of some of the major =
figures involved in the growing political and financial saga revolving arou=
nd the collapse of energy trading giant Enron Corp., and ensuing criticism =
of its auditors, accounting giant Andersen.=20
ENRON
KENNETH LAY - Age 59. Chairman and chief executive officer of Enron since i=
ts creation from merger of Houston Natural Gas and Internorth in 1986, exce=
pt for six months when he turned CEO duties over to protege Jeffrey Skillin=
g. Credited, along with Skilling, with transforming Enron from pipeline com=
pany to world's dominant trader of gas and power. A Missouri native who hol=
ds a PhD in economics, Lay worked in Washington for the Federal Energy Regu=
latory Commission and was deputy undersecretary for energy at the Interior =
Department in the Nixon administration. He is a friend of President George =
W. Bush and advised the White House on its energy policy.=20
JEFFREY SKILLING - Age 48. Former CEO who resigned in August 2001, just six=
months after taking helm of the company he worked 14 years to build. Joine=
d Enron in 1990 after working alongside Lay for four years as a consultant =
from McKinsey and Co. A Harvard Business School graduate, Skilling worked a=
s a banker prior to joining McKinsey. Credited with creating first natural =
gas futures contracts, on which Enron built its empire in the deregulated e=
nergy markets. Long seen as heir apparent to Lay and power behind the thron=
e. His stated explanation for abrupt departure was personal reasons, but la=
ter acknowledged he felt pressure over stock price, which fell throughout h=
is tenure. Denies any wrongdoing and says he considered Enron to be in exce=
llent shape when he left.=20
ANDREW FASTOW - Age 39. Chief financial officer who was ousted in October a=
fter disclosures he had managed off-balance-sheet partnerships that led to =
a $1.2 billion reduction in shareholder equity. He earned about $30 million=
as managing partner, in addition to his Enron salary. His acumen at creati=
ng the off-book deals that kept debts off Enron's balance sheet won him awa=
rds and accolades in financial community but also the attention of SEC inve=
stigators looking at potential conflict-of-interest issues. Is also subject=
of Justice Department investigation.=20
JEFFREY MCMAHON - Age 41. Chief financial officer who replaced Fastow and h=
as since been Enron's main public face. A certified public accountant, he j=
oined Enron in 1994 as CFO of Enron's European operations. Returned to Unit=
ed States in 1997 and became treasurer under Fastow. Asked to be reassigned=
in 1999, after reportedly complaining to Skilling about Fastow's partnersh=
ip arrangements and being rebuffed. Headed Enron e-commerce business unit, =
then Industrial Markets unit until being named CFO. Started his career with=
Arthur Andersen & Co. in Houston, and worked at a midsized natural gas com=
pany before joining Enron.=20
WASHINGTON=20
JOSEPH LIEBERMAN - Sen. Joseph Lieberman has taken the lead in the Senate o=
n criticizing the Bush administration's links to Enron and is holding a hea=
ring on the energy company's collapse. The Democrat from Connecticut is bes=
t known for being chosen in 2000 election as Al Gore's running mate, becomi=
ng the first Jew nominated for vice president by a major party. With his re=
putation for sincerity and integrity, he quickly established himself as a k=
ey asset for Gore's Democratic presidential campaign. Before then, Lieberma=
n was perhaps best known for denouncing President Bill Clinton's affair wit=
h White House intern Monica Lewinsky as morally wrong.=20
HARVEY PITT - Former Wall Street lawyer Harvey Pitt is in charge of the Sec=
urities and Exchange Commission, which is Wall Street's top regulator and w=
hich has launched an investigation into Enron. Pitt is a controversial figu=
re because as a private lawyer he once represented major accounting firms, =
including former Enron auditor Arthur Andersen. Since taking the helm at th=
e SEC, critics have accused him of being less aggressive in regulating the =
financial services industry - a charge he denies. He previously had a host =
of high-powered Wall Street clients and once represented Ivan Boesky, who p=
aid a record $100 million settlement to the SEC in 1986 and later pleaded g=
uilty to criminal charges of insider trading.=20
HENRY WAXMAN - Rep. Henry Waxman has been the most active House of Represen=
tatives Democrat in attacking the Bush administration on the Enron case. Th=
e California lawmaker has accused the Enron chairman, Lay, of misleading em=
ployees by telling them he expected the company's stock price to go up just=
weeks before it started to collapse. Waxman has been a major figure in the=
House for more than 20 years. In 1981 and 1982, he helped stop the Reagan =
administration from revising the Clean Air Act. He also worked to expand Me=
dicaid for the poor and has been a vocal critic of the tobacco industry. Wa=
xman sits on the Commerce, Health and Environment, Oversight and Investigat=
ions and Government Reform committees.=20
BILLY TAUZIN - Rep. Billy Tauzin of Louisiana has been one of the most aggr=
essive Republicans in investigating the Enron case. He was first elected to=
Congress in 1980, as a Democrat, before switching sides in August 1995. Th=
roughout his career on Capitol Hill, Tauzin has been intensely involved in =
telecommunications issues. He strongly supported the Telecommunications Act=
of 1996, has criticized the government for blocking the regional Bells fro=
m the long-distance business and along with his Senate counterpart John McC=
ain wants to allow satellite TV to compete with cable. Tauzin chairs the Ho=
use Energy and Commerce Committee and the Trade and Consumer Protection Com=
mittee.=20
JOHN ASHCROFT - Attorney General John Ashcroft is in charge of the Departme=
nt of Justice, which has launched a criminal probe of Enron. But the conser=
vative Midwest Republican has recused himself from the investigation becaus=
e he received campaign money from the firm. Ashcroft, a former senator and =
a governor of Missouri, was the most controversial of President George W. B=
ush's appointments. He was fiercely criticized in his Senate nomination hea=
ring for his anti-abortion and pro-gun holders' rights views. Since the Sep=
t. 11 attacks, he has ordered the detention of thousands of terror suspects=
, which has brought complaints from civil rights advocates.=20
ROBERT BENNETT - Enron's main lawyer in Washington is Robert Bennett, best =
known for defending former President Bill Clinton in the Paula Jones sexual=
harassment lawsuit. A combative infighter, Bennett has combined formidable=
courtroom skills, considerable media savvy and finely honed political inst=
incts to become one of a handful of widely acknowledged Washington "superla=
wyers." A graduate of Georgetown University and Harvard law schools, he is =
also known for winning a controversial pardon from former President George =
Bush for former Defense Secretary Caspar Weinberger in the Iran-Contra affa=
ir.=20
PAUL SARBANES - Sen. Paul Sarbanes chairs the Senate Banking Committee, whi=
ch is probing Enron's collapse. Arguing that "in recent years costly accoun=
ting irregularities have proliferated," the Democrat from Maryland has aske=
d the General Accounting Office, Congress' investigative arm, to look into =
laws governing employee stock ownership in retirement funds such as 401k pl=
ans as well as how corporations report their finances. Sarbanes was first e=
lected to the House in 1970 and to the Senate in 1976. Despite liberal posi=
tions on the economy, he has worked on bipartisan financial services reform=
and on the housing reform legislation in 1998. He was often described by R=
epublicans as a "stealth senator," because he sponsors few bills and puts o=
ut few press releases. Sarbanes chairs the Senate Committee on Banking, Hou=
sing and Urban Affairs, and sits on the Joint Economic Committee, the Senat=
e Foreign Relations Committee and the Senate Committee on the Budget.=20
ANDERSEN=20
JOSEPH BERARDINO - Joseph Berardino was named the chief executive at Anders=
en in January 2001 soon after the firm completed a bitter separation from i=
ts consulting arm. He has been at the forefront of the accounting firm's at=
tempts to restore its battered credibility and testified before Congress in=
December. Recently, he has conveyed his message aimed at restoring confide=
nce among clients and observers in a letter that appears in Andersen's late=
st ad campaign. He has cast Enron's collapse as an economic debacle devoid =
of illegal practices.=20
DAVID DUNCAN - David Duncan was Andersen's lead partner on the Enron accoun=
t. The accounting firm said on Jan. 15 it was firing Duncan, alleging he or=
dered the rapid destruction of documents once he learned of a request by th=
e SEC for information on Enron's financial reporting. An attorney for Dunca=
n said Duncan did no wrong and was simply following the instructions of an =
Andersen lawyer.

News; Domestic
The Fall of Ken Lay
Keith Olbermann, Ed Lavandera

--excerpt only--
Enron workers saw CEO Kenneth Lay as a hero and corporate savior, but that =
has quickly changed during Enron's collapse. Keith Olberman interviews form=
er Enron employee Deborah Defforge. Julie Posey is a 37-year-old homemaker =
from Colorado, and she helps the FBI track down child predators on the Inte=
rnet.=20
ANNOUNCER: THE POINT with Keith Olbermann.
From hero to zero. He actually had the nerve to tell them to buy more stock=
. This was a buying opportunity he said. The stock was an incredible bargai=
n.=20
When Enron's big boss told his workers to keep buying the company stock, di=
d he know the meltdown was coming? Tonight, revealing details of what went =
on behind closed doors.=20
Is this the riskiest job in New York? Some insurance companies say yes, and=
they won't pay. Flash Point, high risk, no coverage.=20
Who is your child really chatting with on the Internet? We'll talk to a mom=
who could be a sex predator's worst nightmare.=20
THE POINT, now from New York, Keith Olbermann.=20
KEITH OLBERMANN, CNN ANCHOR: Good evening. You heard the phrase the fall gu=
y. Do you know where that comes from? It is the last message of the last gr=
eat American energy scandal, the one before Enron, Teapot Dome. The man who=
went to prison was President Harding's Secretary of the Interior, Albert J=
. Fall, the fall guy.=20
This brings us to Enron Chairman Ken Lay and whether he's one of those fall=
guys or if he made all of Enron's employees into them. Today's latest jaw-=
dropping developments from Houston, Ken Lay's personal magnetism may be why=
so many Enron employees believed things were OK when their own eyes told t=
hem otherwise. CNN's Ed Lavandera now, with the story of two meetings and t=
wo different Ken Lays.=20
(BEGIN VIDEOTAPE)=20
ED LAVANDERA, CNN CORRESPONDENT (voice over): When Ken Lay walked into a ro=
om, he was usually the center of attention. Many Enron workers saw him as a=
hero and corporate savior. But during a two-month stretch last year, Lay's=
popularity crumbled. In several dozen interviews with former and current E=
nron employees, we've learned how quickly public opinion turns.=20
In August, when Chief Financial Officer Jeff Skilling left Enron, Ken Lay c=
alled everyone into a hotel banquet hall to talk about the future. UNIDENTI=
FIED MALE: The minute he started walking up on the stage, everybody got up =
and applauded, because they already knew Skilling had resigned.=20
LAVANDERA: Most people thought that day would mark Enron's return to glory.=
=20
UNIDENTIFIED MALE: I'd have to say that when they did come out, they were v=
ery direct and very promising, tried to keep the spirits high, and in some =
cases probably even misleading.=20
LAVANDERA: One month later, as Federal investigators started asking more po=
inted questions and earnings reports hinted at bigger problems, Ken Lay cal=
led everyone together again, but this time there would be no standing ovati=
on.=20
UNIDENTIFIED MALE: People were just generally concerned about the status of=
the company, where it was going and what the management was basically goin=
g to do about it.=20
LAVANDERA: As the meeting dragged on, some Enron workers grew impatient and=
the meeting's tone changed.=20
UNIDENTIFIED MALE: We actually had one gentleman who was almost like a heck=
ler. I mean, he kept standing up and asking question after question.=20
LAVANDERA: Then Ken Lay read a question that had been submitted anonymously=
.=20
UNIDENTIFIED MALE: And I was surprised he actually read it, but he asked Ke=
n Lay literally, are you on crack.=20
UNIDENTIFIED MALE: I could see that he was getting rather irritated at the =
gentleman.=20
UNIDENTIFIED MALE: All of us standing around my computer were like going - =
our jaws just hit the floor, you know.=20
UNIDENTIFIED MALE: He read the question and said "no, I'm not" and he got s=
ome laughter.=20
UNIDENTIFIED MALE: Ken Lay replied, continued reading the card and said "do=
you think we'll ever trust you again?" And I thought that was - I couldn't=
believe a person would do that. I figured, oh good thing it's anonymous, y=
ou know, because he's going to be fired.=20
LAVANDERA: This tale of two meetings has created quite a buzz among Enron w=
orkers, as each person struggles to make sense of how one man, one company =
can go from hero to villain almost overnight.=20
UNIDENTIFIED MALE: The unfortunate thing is that everyone's looking for a s=
capegoat, and whether there is one or not, I don't know. The biggest or the=
saddest perspective on it is the loss of all the dollars. UNIDENTIFIED MAL=
E: If they're going to mess around with the company, you know, maybe we sho=
uld be there telling them, "I don't agree with what you're doing. Why are y=
ou doing that?" Or leave and go to another company.=20
(END VIDEOTAPE)=20
LAVANDERA (on camera): We've made several attempts to speak with Enron repr=
esentatives about these meetings, but they haven't responded to the calls. =
One employee also tells us that usually these meetings were taped for peopl=
e to watch later. But as almost everyone tells us, those tapes were never m=
ade available to everyone. Ed Lavanadera, CNN, Houston.=20
OLBERMANN: And another set of eyes and ears at the Enron employee meetings =
that Ed described, belonged to an ex-Enron employee. Of course, they're all=
ex-Enron employees now. Deborah Defforge, she has now lost her job and her=
stock option. She's working to get severance pay to laid off Enron workers=
and she joins us now from Houston. Thank you for your time this evening.=
=20
DEBORAH DEFFORGE, FORMER ENRON EMPLOYEE: Thank you, Keith. It's good to be =
here.=20
OLBERMANN: Is the story that Ed Lavandera just reported, correct? Were you =
at these two separate meetings? At the first of them, was the entire compan=
y convinced that Ken Lay was Enron's savior?=20
DEFFORGE: Absolutely.=20
OLBERMANN: And what happened by the time of the second one? How much time i=
ntervened between these two meetings?=20
DEFFORGE: The first meeting in August, when Jeff Skilling announced that he=
was resigning. We did a total standing ovation when Ken Lay came back on b=
oard. The next meeting happened in last September, and at that point everyt=
hing was falling apart.=20
OLBERMANN: So, Ms. Defforge, I guess the thing that makes the headlines out=
of that story was the report that Mr. Lay actually read this anonymous que=
stion, are you on crack? That actually happened?=20
DEFFORGE: That actually happened.=20
OLBERMANN: What was the response within the company, within the room? I mea=
n, I would imagine that there must have been some emotional visceral respon=
se to that?=20
DEFFORGE: I think a few people pretty much applauded it. A lot of other peo=
ple were taken aback, and he handled it quite well. He made a joke of it an=
d said "maybe I should be" and kind of went on to respond to the question.=
=20
OLBERMANN: This question came in the environment of what we're reading in a=
couple of newspapers, particularly the New York Times today, that at basic=
ally the same moment that that question would have been asked, there were E=
nron employees being dismissed for negative postings on Internet chat room =
sites about the company. Was a sense of bravery required to make any kind o=
f criticism of Enron during the time we're talking about?=20
DEFFORGE: I'm not sure that anyone knew about those people being let go. I =
know that there were some comments earlier, prior to that, early in the yea=
r that people posting jobs on monster.com or hotjobs.com were being let go =
because of that. So perhaps, that had some tie in to that.=20
OLBERMANN: You have used a horrifying but perfectly accurate word I guess, =
to describe how all of you behaved within the company, lemmings. Were you a=
ll led off the cliff because you believed in Ken Lay? I mean, was it that m=
uch? It sounds like a borderline apple white heavens gate off the cliff, yo=
u know here comes the Haley's Comet, we're all going to get on board kind o=
f thing. Was it that strong a belief in this man?=20
DEFFORGE: Absolutely. Absolutely. I don't know of any other cult that had t=
hat kind of following, maybe Jim Jones or Reverend Moon. But absolutely, we=
thought he was the best thing there was.=20
OLBERMANN: When did you know that was not the case? When did it really sink=
in? I mean, people were still buying the stock in the middle of November, =
so the public was certainly behind the curve. How far behind the curve were=
you personally?=20
DEFFORGE: Probably further than that. There were some questions, of course,=
and the people that stood up in the October meeting that heckled and they =
weren't really heckling. They were asking honest questions. He just wasn't =
answering them honestly. Probably there was some concern then. Unfortunatel=
y, that was about the same time we were locked out of our 401 (k), so we co=
uldn't do a whole lot beyond that.=20
OLBERMANN: You were in the 401 (k)?=20
DEFFORGE: Yes.=20
OLBERMANN: What are you left with?=20
DEFFORGE: Better than most. I have about 30 or 40 percent of mine still lef=
t.=20
OLBERMANN: And whose fault, in your opinion, is all this? I mean, Washingto=
n, the rest of the country seem to be in full-fledged blame assignment mode=
, people pointing at the SEC, the administration, Arthur Andersen accountin=
g. Where does that finger belong pointed in your opinion?=20
DEFFORGE: First of all, I think it should rest with the top people at Enron=
. I mean, they were the ones that were bilking and lying and cheating and t=
elling everyone, falsifying all the books. Secondly, I think Arthur Anderse=
n is a huge player in here. Vincent and Elkins (ph) is a huge player. The a=
nalysts, the SEC, I mean no one is without fault in this.=20
OLBERMANN: Do you blame yourself for being credulous, for going along with =
the dive off the cliff?=20
DEFFORGE: Absolutely. Absolutely.=20
OLBERMANN: Is that a sense that you have from other of your former co-emplo=
yees?=20
DEFFORGE: Yes I think so, Keith. But unfortunately the thing is that you wa=
nt to believe in the person you're working for. You don't want to have seco=
nd guesses about everything you do. You spend 14 hours of your day in this =
job. There's no reason why you should have to second-guess everything.=20
OLBERMANN: And now you have to go and sue them. How is that going?=20
DEFFORGE: That's worse. That's even worse. I feel horrible about it. The po=
int is that if they had given us what they promised us in terms of severanc=
e, I don't think any of this would be happening.=20
OLBERMANN: Deborah Defforge, all the best in your efforts.=20
DEFFORGE: Thank you.=20
OLBERMANN: Thank you for being with us and sharing this extraordinary trip =
in and out of a cult.=20
DEFFORGE: Thank you, Keith.=20
OLBERMANN: Thank you. Good night.=20
DEFFORGE: Good night.=20
OLBERMANN: Tomorrow night, please join CNN for a full hour look at the fina=
ncial, political, and legal aftershocks of Enron's fall. Watch Lou Dobbs "L=
IVE FROM HOUSTON" at 8:00 p.m. Eastern.=20
____

Role of Andersen lawyer probed.
By PETER SPIEGEL IN WASHINGTON AND ADRIAN MICHAELS IN NEW YORK.

A senior lawyer from Andersen's Chicago headquarters was in the firm's Hous=
ton office at the same time that the company's auditors were shredding cruc=
ial Enron-related documents, an Andersen official has told congressional in=
vestigators.=20
The lawyer, Nancy Temple, has become a new focus for congressional investig=
ators probing the collapse of Enron, once the seventh largest company in th=
e US.
Andersen's corporate leadership has maintained that the two-week concerted =
shredding campaign in late October and early November, when thousands of do=
cuments and e-mails were destroyed or deleted, was limited to officials in =
the company's Houston office "without consultation with others in the firm"=
.=20
The investigators have now been told that Ms Temple, who is in charge of En=
ron-related litigation for Andersen, arrived in Houston on October 16, four=
days after she sent out an e-mail reminding Houston auditors of the compan=
y's document shredding policy. She sent a similar e-mail to other Chicago-b=
ased officials of Andersen on October 19, according to a copy of the e-mail=
obtained by the Financial Times.=20
Although congressional investigators do not know the exact dates of Ms Temp=
le's stay, they have been told she was in Andersen's Houston office "very r=
egularly" from October 23, when Enron lead auditor David Duncan called a me=
eting to begin the shredding campaign, to November 9, when the destruction =
stopped. Andersen received a subpoena from the Securities and Exchange Comm=
ission on November 8.=20
Congressional investigators do not know whether Ms Temple was directly invo=
lved in the document destruction. One Capitol Hill aide said "she appeared =
to be on a different floor but she was there [in Houston].=20
"That's why you don't see any more new e-mails" from Ms Temple in late Octo=
ber and early November, the aide said.=20
Andersen has disciplined eight Houston-based employees, including Mr Duncan=
, but to date no one from its Chicago office has been implicated by Anderse=
n, a move widely regarded as an attempt by the firm to limit the damage to =
Houston. Mr Duncan was fired last week.=20
Ms Temple was scheduled to give a deposition to lawyers from the House ener=
gy and commerce committee on Tuesday in her attorney's Washington office.=
=20
Andersen repeated on Tuesday that no one from its head office had given the=
go-ahead or helped Houston shred or delete thousands of Enron documents. "=
Based on what we have today, we have no evidence that anyone from Chicago a=
uthorised or was complicit in David Duncan's large document disposal effort=
," an Andersen official said.=20
The revelation of Ms Temple's stay in Houston came during questioning of Mi=
chael Odom, who was Andersen's head of risk management in Houston, by commi=
ttee lawyers on Friday. Mr Odom, who was one of the employees disciplined l=
ast week, had his management responsibilities stripped but remains with And=
ersen.=20
(c) Copyright Financial Times Group.=20
http://www.ft.com.

Investing
Enron's Law Firm Is in the Crosshairs; Vinson & Elkins' heavy reliance on t=
he work it did for the energy giant is now a potential liability for the la=
w firm
By Mike France in New York, with Wendy Zellner in Dallas and Christopher Pa=
lmeri in Los Angeles

01/22/2002
BusinessWeek Online
(Copyright 2002 McGraw-Hill, Inc.)

Aftershocks from the collapse of Enron (ENE) have rocked the energy giant's=
auditors, bankers -- and now its attorneys. Houston law firm Vinson & Elki=
ns was the latest to be hit when news broke that it had shrugged off allega=
tions of accounting fraud by whistle-blower Sherron S. Watkins.=20
That's an incendiary revelation, for certain. But it may not pose nearly as=
much of a threat to V&E as some of the other work the firm may have done f=
or Enron -- namely, helping to construct the web of partnerships the compan=
y used to move debt off the balance sheet and providing advice on what exec=
utives should disclose to the Securities & Exchange Commission.
Why are these activities such a big potential problem? Under the law, it is=
hard to pin the blame on lawyers for financial fiascos. They would have ha=
d to play a role nearly equal to that of the primary perpetrators.=20
Most experts agree that V&E's seemingly dismissive attitude about the Watki=
ns allegations -- months after the transactions she complained about took p=
lace -- probably does not meet the standard for either criminal or civil li=
ability. But that verdict might be different if it turns out that the firm'=
s attorneys also helped Enron devise some of the complex deals that wound u=
p sinking the company in the first place.=20
A CREATIVE ROLE. There are growing indications that may just be the case. I=
n her missive to Enron Chairman and CEO Kenneth L. Lay, Watkins suggested t=
he law firm wrote so-called opinion letters vouching for the legality of so=
me of the deals now under scrutiny. And according to two ex-Enron executive=
s contacted by BusinessWeek, Vinson & Elkins played a creative role in stru=
cturing and managing some of the company's controversial "special purpose" =
partnerships.=20
One former executive in the company's Houston office says employees would a=
pproach V&E lawyers "and say, 'this thing needs to work. How do we make it =
work?'" This source adds that the firm also gave Enron advice on how much i=
nformation it had to disclose about its financial machinations in its 10K a=
nd 10Q reports to the SEC.=20
Legally speaking, the key issue will be whether V&E blessed activities it k=
new to be fraudulent. If so, it could be in trouble, says University of Ill=
inois law professor Ronald D. Rotunda, an expert in legal ethics. "Under th=
ose fact scenarios, they could have real problems," he says.=20
"COMPLETELY PROFESSIONAL." The law firm denies it has done anything wrong. =
Because Vinson & Elkins' conduct is under federal scrutiny, Managing Partne=
r Joseph Dilg declined to discuss the firm's investigation of the letter wr=
itten by Watkins, citing attorney-client privilege, and was only willing to=
offer a few details about the firm's other work for Enron. He said V&E's p=
rofessional responsibility committee reviewed its work for Enron in October=
and November and found no improprieties. "Everything that the firm's lawye=
rs who have represented Enron have done has been [accomplished] in a comple=
tely professional, competent, and ethical manner," says Dilg, who is also a=
key contact for the Enron account.=20
He and fellow partners will undoubtedly find themselves called upon to prov=
e that point. Enron and V&E have enjoyed one of the closest lawyer-client r=
elationships in Corporate America. Both Enron's general counsel, James V. D=
errick Jr., and his top lieutenant, Deputy General Counsel Robert H. Walls =
Jr., are former partners at the law firm. An additional 20 or so V&E attorn=
eys have taken jobs at Enron's legal department over the past decade, Dilg =
estimates.=20
Enron is V&E's single largest customer. In 2001, Enron accounted for more t=
han 7% of V&E's $450 million in revenue. The law firm had several lawyers w=
orking virtually full-time on company business, including some permanently =
stationed in its offices. By contrast, Enron contributed less than 1% to au=
ditor Arthur Andersen's revenues.=20
TRUE SALE OPINIONS. The exact details of V&E's work for Enron are still ske=
tchy. In her letter, Watkins claimed the firm "provided some true sale opin=
ions on some of the deals" related to the so-called Condor and Raptor deals=
. She could not be reached for elaboration. According to one New York corpo=
rate finance attorney, true sale opinions are letters that law firms write =
vouching for the fact that business transactions meet particular legal requ=
irements.=20
So, for example, they might certify that title has passed in a particular d=
eal or that it was conducted between two legally independent parties. Such =
documents would have been important to Enron, since many of its deals took =
place with partnerships in which it held a large stake. V&E declined to dis=
cuss the opinion letters.=20
True sale opinions in the energy sector are always requested by auditors be=
fore they are willing to sign off on the accounting treatment for a particu=
lar deal, according to finance lawyers. They are also requested by rating a=
gencies, which need to assure lenders that both of the participants in a pa=
rticular related-party transaction would be treated independently in the ev=
ent one of them went bankrupt. Otherwise, one party could be left unfairly =
holding the bag for the failure of a company or partnership with which it h=
as no ties.=20
CRUCIAL WORK? According to one former Enron employee, the company might not=
have been able to pull off many of the transactions now under investigatio=
n without Vinson & Elkins' opinion letters. The company "opinion-shopped fo=
r what it needed," says this source. "If it hadn't gotten the opinion lette=
rs, it couldn't have done the deals."=20
Accusations by embittered ex-employees obviously have to be taken with a gr=
ain of salt. There's still little hard evidence about what V&E did or didn'=
t do for Enron. But if the firm turns out to have worked hand in hand with =
top management, it could be finding itself in the same hot water as the ene=
rgy giant's auditors and bankers.

BUSINESS & TECHNOLOGY
Enron a Boon to Short-Sellers / Skeptics correctly read signs of sudden col=
lapse
Tom Petruno. LOS ANGELES TIMES. The Los Angeles Times is a Tribune Co. news=
paper.

01/22/2002
Newsday
ALL EDITIONS
A41
(Copyright Newsday Inc., 2002)

Enron Corp. may be the best friend Wall Street's "short-sellers" ever had.=
=20
Some of these professional bears bet against the energy company's stock ear=
ly last year, smelling a fraud. Yet any monetary gain they reaped could be =
of modest value compared with the long-term benefit to their image thanks t=
o Enron's demise.
That's because the principal lessons Enron has taught investors are about t=
he need to question glowing corporate forecasts of sales and earnings, to d=
ig deeper into companies' financial statements, and to think twice before a=
ffording sky-high price-to-earnings ratios to stocks of businesses heavy on=
hype and light on specifics.=20
Those are the hallmarks of professional short-sellers. "Shorting" of stocks=
means borrowing and selling shares, hoping the price declines so the loane=
d shares can be replaced at lower cost in the future. Although often revile=
d for the end product of their work, short-sellers may be the last bastion =
of hard-nosed research left on Wall Street.=20
"It's a lot of work to short a stock," said Bill Fleckenstein, a veteran sh=
ort-seller who heads Fleckenstein Capital in Issaquah, Wash. "You have to b= <