Ex-Enron Executive Related A Dispute
Baxter Gave Account Before His Suicide
By Peter Behr and April Witt
Washington Post Staff Writers
Tuesday, March 19, 2002; Page A01
Two weeks before his suicide in January, former Enron Corp.
executive J. Clifford Baxter told investigators about conflicts with the
company's then-president, Jeffrey K. Skilling, that Baxter said
marred his final years at the company, according to a memo on the
interview.
The memo, which summarizes Baxter's Jan. 10 interview with
lawyers from a special investigating committee of Enron's board of directors,
describes "a major dispute" with Skilling in 2000. It was over an episode
that Baxter felt undermined his authority as head of Enron North
America -- the company's primary energy-trading unit.
The dispute came to a head at a staff meeting that year when
Skilling embarrassed Baxter in front of two dozen executives by questioning
the accuracy of a comment Baxter had made. Baxter almost resigned,
was talked out of it by Skilling and then took a new job at Enron with
a large pay cut, the memo said.
Despite their differences, Baxter regarded Skilling as a man
of "high integrity," the notes say.
This account presents a picture of the two executives' relationship
different from the one Skilling described during testimony before a
House committee last month, when he referred to Baxter as "his best friend."
During that testimony, Skilling became angry, recalling his final conversation
with Baxter, who was found dead from a bullet wound on
Jan. 25, in what authorities have ruled a suicide.
Skilling told Congress that Baxter, 43, was "heartbroken by what
had happened" to Enron and felt victimized by attorneys suing Enron and
by the intense media coverage of the company's failure.
Skilling spokeswoman Judy Leon said Skilling and Baxter
spent a lot of time together and confided in each other after they had both left
Enron . "Jeff Skilling was one of the last people Cliff Baxter saw
before he died," she said.
The summaries of dozens of other interviews by the attorneys
give more details of events that the special board committee cited in a report
last month that concluded Enron was using off-the-books partnerships
run by its own executives to hide losses and pump up profits.
For example, Vince Kaminski, whose research group evaluated
the risk of company investments, told the board attorneys that his concerns
about those partnerships changed as he learned more about them. He first
felt they were "so stupid only Andrew Fastow [Enron's chief
financial officer] could have come up with it." He later concluded
that they were both "stupid and illegal."
In another interview summary, a senior Enron accountant indicated
that the now-discredited Raptor investments in one of the partnerships
were Skilling's idea. Wes Colwell said that in 1999 his boss,
Richard A. Causey, told him "Jeff Skilling wanted to create a vehicle to hedge
Enron holdings in technology stocks." That vehicle ultimately became Raptor, the memo said.
Congressional questioning of Skilling focused on efforts to restructure
the Raptor vehicles last year, not on setting them up. He testified
that he thought the structures were sound hedges, but didn't mention
coming up with the idea.
In his interview with the Enron board attorney, Baxter said he left
the company as vice chairman last May "because he was tired and
burned out. In light of what had happened since his dispute with Skilling
in 2000, he believes he could have left Enron for good back then."
Baxter also told the lawyers he raised concerns with Skilling
last March or April about an off-the-books partnership Fastow was running
called LJM that did deals with the company.
Baxter said that because he regarded Skilling highly, he could
not believe that the Enron president could accept the conflicts of interest
posed by the LJM deals. Fastow was forced from his Enron position last
October after acknowledging that he had received more than $30
million in fees and profits from LJM.
Skilling acknowledged in his congressional testimony
that Baxter had raised the LJM issues with him, but Skilling said
the problem was a personal animosity between Baxter and Fastow.
Skilling also was interviewed by attorneys from the
Wilmer, Cutler & Pickering law firm, who represented the special board committee
headed by William C. Powers Jr., head of the University of Texas law school.
Skilling said Baxter "was concerned about the optics of the conflict,
but not about the ethics or propriety of the transactions," according to
interview memos.
While Skilling had conflicts with Baxter, he was grooming
Fastow to take on new responsibilities at the company last spring. That was
shortly before Skilling suddenly resigned on Aug. 14 as chief executive.
"In the Spring of 2001, Skilling was considering leaving Enron, and he
knew that someone would need to be in a position to take over many
of his responsibilities," such as "dealing with analysts," according
to a memo of his interview with board attorneys last November. "Skilling
wanted to get Fastow involved before he left."
Skilling's desire to give Fastow more responsibility at Enron -- not
concerns about conflicts of interest -- prompted Fastow to sell his interest
in LJM, Skilling told the board lawyers.
"Skilling asked Fastow whether he was prepared to take on more
responsibilities, which would not be possible if Fastow remained involved
with LJM," the memo said. "The next day, Fastow said he wanted
to remain with Enron and agreed to withdraw from LJM.
"Skilling knew of no other reason for Fastow's withdrawal from LJM.
He and Fastow did not discuss discomfort with Fastow's dual roles, and
in Skilling's view that was not a factor in their decision, although the
external world was becoming more sensitive to the issue."
Kaminski's interview notes, which were first reported Monday
by the Wall Street Journal, are echoed in key places by the conclusions of the
special board committee report on Enron's dealings with Fastow's partnerships.
When Kaminski was asked to review the first hedging transaction
in 1999, he recommended against it, even though he said Skilling came
by his office to explain it. The idea was to lock in stock market
gains from Enron investments in a start-up companies whose stocks had
become high-priced and was in danger of falling.
Kaminski said this protection, called an investment hedge, was invalid
because Enron had pledged its stock to protect its investments in the
start-up companies.
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