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To: Jim Willie CB who wrote (47499)	2/6/2002 3:11:44 PM
From: stockman_scott	Respond to of 65232

$270 Million Man Stays in the Background By Peter Behr and Robert O'Harrow Jr. Washington Post Staff Writers Wednesday, February 6, 2002; Page A01 Lou Pai struck many colleagues as the brightest brain at Enron. Others say he was notable for helping to produce some of the company's biggest business disasters while head of Enron Energy Services, the Houston firm's effort to sell electricity to retail customers. The 54-year-old Pai certainly stands out as the company's biggest winner amid financial devastation -- he sold $270 million of Enron stock in the 16 months before he resigned last July. Because of his stock sales, he, along with other senior Enron executives and board members, is being sued by shareholders. But so far he is one of the second-tier players in the Enron drama. He was not named in the Enron board's special report on the partnerships run by the company's chief financial officers. He has not been called to testify by the myriad congressional committees probing Enron's collapse. But Pai's role at Enron illustrates some central themes in the company's rise and fall, according to former executives and colleagues. His windfall from Enron stock sales highlights a compensation strategy that provided huge rewards to top executives who launched new business or created major new trading opportunities for the Houston company. Some company critics say this reward structure led Enron to take greater and greater business risks that finally caught up with the company last year. There are allegations that the retail energy business Pai headed until last year racked up hundreds of millions of dollars in trading losses in 2000, according to a memo written by former Enron manager Margaret Ceconi. She contends that those losses were effectively hidden when the division was combined with a much larger wholesale energy operation around March 2001. An Enron spokesman has disputed that allegation. Pai, who lives with his second wife in Houston's Sugar Land suburb, declined, through one of his attorneys, to be interviewed for this report. A source close to Pai said Pai "doesn't know anything" about the alleged hidden losses. She called Pai "a consummate professional" who also knows nothing about the partnerships accused of hiding company losses and inflating earnings. "Lou was an operations guy" who had "nothing to do with accounting," she said. Pai is "a very quiet guy," the source added. "If you walked into a room of people, you would not pick him out as the guy with all the money," she said. There were signs Pai was willing to spend freely, however. He, and possibly other partners, bought 77,000 acres of Colorado mountain land since 1999 forat least $23 million, according to press reports in that state. In the spring of 2000, about the time he was going through a divorce, Pai was intent on buying a house. He told people he wanted to have a home for his son to visit during a break from college. The house he chose in the Tanglewood section of Houston had been on the market for only a day or two. He paid just over $900,000 in cash, according to a person familiar with the deal. "There was hardly anybody ever at the house. Within six months, the house was back on the market," the person said. The source close to Pai said he used tens of millions of dollars of the proceeds from his Enron stock sales for his divorce settlement in 2000. Pai is the son of a distinguished aeronautics engineering professor at the University of Maryland, Shih-I Pai, who died in 1996. He himself earned an undergraduate degree at Maryland in 1970 and a master's degree in economics there three years later. Pai worked at Conoco Inc., another energy company, before joining Enron in 1987. Three years later he was part of a new group of executives forming around Jeffrey K. Skilling -- later the company's chief executive -- bent on turning Enron from a dowdy natural gas pipeline company into a fast-paced energy-trading firm. Quiet-spoken and diminutive, Pai did not push his way into discussions, associates said. He did win notice for his ability to devise ingenious energy-trading strategies that covered a variety of business risks, including sharp swings in prices and changes in the weather, they added. Working first for the corporate planning group, he helped set up one of the company's first risk-management units. It used complex financial contracts to help protect Enron's natural gas investments against sharp price swings. That became a model for Enron's wholesale electricity-trading business, Enron Capital & Trade Resources, which led in turn to the creation of the company's retail energy unit. Pai's expertise was strong enough to insulate him from the first of his setbacks as a manager, Enron's attempt to sell retail electricity to households and commercial customers in California and East Coast states as energy deregulation began in those states in the mid-1990s. In 1997, Pai became chairman of Enron Energy Services (EES), the company unit handling retail energy marketing. Thomas E. White, now secretary of the Army, was vice chairman of the unit from 1998 until last year. A year later, however, after spending $15 million to promote the unit's services with Super Bowl ads and other promotions, Enron gave up in California -- the costs of competing against the state's utilities were too high. Outside California, the move toward electricity deregulation was halting, despite state-by-state lobbying by Enron's political teams. But Pai wasn't through, and EES shifted its sights to large commercial and industrial customers while spinning off its power-marketing operation for households to a new subsidiary called New Power Co. In one interview in 2000, Skilling called Pai "my ICBM," an intellectual missile instantly launched at new ventures. "He can conceptualize it, bring in the right people, and get it up and running fast," Skilling said. But the creation of New Power as a separate unit was an admission that EES had failed at consumer retailing, said Marc E. Manly, a managing director of New Power, now a separate company. "They didn't know how to do it," Manly said of Enron's efforts in the field. "They failed miserably." While remaining at Enron and EES, Pai was given the chairmanship of New Power when Enron spun it off as a publicly traded firm in 2000. He showed his loyalty by investing $5 million in New Power. And Enron reciprocated, giving Pai 2 million shares of New Power stock. "That was an arrangement with Lou," Manly said. "He was in at the beginning of this, the originator of the idea of the company, and Enron worked out a compensation arrangement. . . . We had to abide by the commitment Enron had made with Lou." Pai is listed in the latest New Power company filings as its largest single shareholder, with 3.4 million shares. While Pai's timing in his sales of Enron shares was fortunate, that wasn't the case with New Power. The stock went public in October 2000 at $21 a share. But the public's resistance to electricity deregulation after the California crisis and a steep drop in electricity prices has battered New Power's operations. It's stock closed yesterday at 36 cents a share. While running EES in 1999, Pai began purchasing the Taylor Ranch in southern Colorado, on the west side of a mountain range that rises to 14,000 feet and runs down almost to the New Mexico border. Exactly how much Pai owns and controls isn't clear. Before Pai bought the land, the owner had tried to keep local residents off the sprawling site, barring them from hunting and gathering wood. Pai has continued to oppose access and now is the target of a 20-year-old lawsuit over the issue. Lawyer Jeff Goldstein, who has represented local residents suing the ranch, said it's Pai's property. "There is no question that he is the principal. He goes there and seems to be running the show," Goldstein said. But as with Enron's entities, the exact ownership is murky, Goldstein said. The listed owners are partnerships. Researcher Lucy Shackelford contributed to this report. © 2002 The Washington Post Company __________________________________________ ***I strongly believe The Justice Dept. should seize the ASSets of the top Enron Execs...Some of them made hundreds of millions off stock options (that only became valuable because the books were cooked and profits were fabricated)...Those illegal gains should be put into a trust until The Justice Dept. can determine what's appropriate...Btw, Mr. Pai worked directly for Skilling and he knows A LOT MORE than he's revealed...There's a reason he's trying to keep a low profile...Of course the story I posted above was on the front page of today's Washington Post --> I have a hunch he may be called to testify soon...stay tuned...=)

To: Jim Willie CB who wrote (47499)	2/6/2002 4:02:48 PM
From: stockman_scott	Read Replies (1) \| Respond to of 65232

Productivity Robust as Workers Feel Pinch Wednesday February 6, 1:15 pm Eastern Time By Mark Egan WASHINGTON (Reuters) - The productivity of U.S. workers grew at an unexpectedly brisk pace in the final three months of last year as companies cut the hours their employees worked at the fastest clip in more than a decade to try to regain footing amid a recession. High rates of productivity growth were a key reason the U.S. economy enjoyed its longest-ever expansion until the recession began last March, and economists said the strong showing augured well for a solid recovery even while increasing the pinch felt by American workers. The Labor Department said productivity, or worker output of goods and services per hour outside of the farm sector, grew at an annual rate of 3.5 percent in the October-to-December period after a revised 1.1 percent gain in the third quarter. The fourth-quarter rise was stronger than the 2.9 percent gain forecast by economists in a Reuters poll. Rick Egelton, deputy chief economist at Bank of Montreal/Harris Bank in Toronto, said the report showed ``a stunning performance'' on the productivity front. ``Typically when an economy is struggling, productivity growth tends to be weak,'' Egelton said. ``In contrast, we have recorded a very strong productivity number which suggests that over the long term, once the U.S. economy fully recovers from recession, we can look forward to a continued strong productivity performance.'' U.S. Treasury Secretary Paul O'Neill welcomed the data. ``The U.S. economy has demonstrated that we can achieve remarkable productivity under the most difficult circumstances,'' O'Neill told a congressional hearing. Usually productivity declines during an economic downturn as output usually falls faster than hours worked. But productivity has held up remarkably well during the latest recession, posting gains in every quarter of last year with the exception of the first three months, as firms adjusted to the weak economy by cutting hours. UNDERLYING STRENGTH In late January, Federal Reserve Chairman Alan Greenspan said U.S. productivity data was indicative of the underlying strength of the world's richest economy and he expressed optimism on the future. ``I think productivity gains will continue, certainly in excess of what they did in the quarter century prior to 1995.'' Those productivity gains in recent years, buoyed by massive investment in information technology in the 1990s, were in many respects what spurred the U.S. economy to outpace Europe and many other regions on the growth front. Strong productivity helped mute inflation since companies could produce more without substantial rises in costs even as wages rose. That in turn boosted corporate profits and attracted capital to U.S. markets. But with the economy in recession, the latest report showed that for the full year nonfarm productivity advanced just 1.8 percent, the weakest annual showing since a 0.9 percent rise in 1995. The reading was well below the 3.3 percent productivity gain enjoyed in 2000. In the final quarter of last year, the number of hours workers spent on the job fell 3.7 percent, the largest decline since the first quarter of 1991 when the economy was last in recession and hours worked fell 4.8 percent. The slide in the fourth quarter was the third consecutive quarterly drop in hours worked. Unit labor costs, a closely watched gauge of wage pressures, rose 3.9 percent last year, the biggest annual rise in labor costs since a 4.3 percent gain in 1990. While rising for the year, unit labor costs fell at a 1.1 percent annual rate in the fourth quarter, the largest decline since a 2.9 percent drop in the final quarter of 1999. Economists had expected unit labor costs to increase at a 0.7 percent pace in the October-to-December period. PROSPECTS FOR RECOVERY GOOD ``With productivity holding up and labor costs under control, the prospects for a recovery of both the economy and profits look good,'' said Joel Naroff of Naroff Economic Advisors in Holland, Pa. Last week, the Federal Reserve suspended one of the most aggressive easing campaigns in its history, in which it ratcheted the key lending rate down 11 times during 2001 for a total reduction of 4.75 percentage points. The powerful central bank said it was encouraged by the prospects for long-term productivity. Naroff said with productivity so strong, the Fed can concentrate on the prospect of recovery, giving it ``some extra freedom to wait a little longer before raising rates.'' __________________________________ Productivity Surges, No Thanks To Tech By Penelope Patsuris Forbes.com Wednesday February 6 Here's another blow to the technology industry's ego: Productivity surged to 3.5% in the fourth quarter of 2001, according to the numbers released this morning by the Department of Labor. The post-1995 boom in U.S. productivity had been attributed largely to advances in the high-tech sector, and, given the tech slump (to say nothing of the recession), might rightly have been expected to drop. Instead we have a result that puts the third quarter's 2.6% rate to shame. This morning's numbers from the Department of Labor don't tell us precisely who the country's hardest workers are--breaking the stats into only three broad categories: manufacturing, total nonfarm and business. But the business sector turned in a stunning 3.4% growth in productivity, up from 0.7% for the third quarter. "In 1995 through 2000, manufacturing was the leader in productivity, but now it seems to have spread more broadly," says Brookings Institute analyst Barry Bosworth. "So this is not a tech story anymore." Productivity for the manufacturing sector, which includes tech, grew just 1% in 2001, compared to 6.1% growth in 2000. The fact that productivity is up even when manufacturing is down may suggest that this productivity growth is not cyclical. Indeed, Bosworth argues that today's numbers suggest that the phenomenon could be more durable, reflecting a more rooted shift in the economy. "In the midst of a recession we expected to see slower productivity growth," he says. If these numbers do reflect a real change in the economy, continued consistent productivity growth will ultimately lead to an even higher standard of living for Americans. "On average people are already living in houses with more square footage than ever, with two or three bathrooms when one used to be standard and they're driving giant SUVs," says Bosworth. The government productivity numbers that promote this way of life simply measure economic output per worker. What's particularly remarkable about this quarter is that output decreased just 0.4% while worker hours dropped a whopping 3.7%. "Firms were clearly employing labor they didn't need," says Frank Lichtenberg, a professor of economics and finance at Columbia Business School. "Usually in a recession, output falls much more than employment, but companies don't hang onto workers when times are tough anymore. They're trigger-happy." Putting people out of work may sound counter to increasing America's overall standard of living. But Brookings Institute analyst Gary Burtless argues that workers are simply being allocated better. "They're gradually being shifted from companies with poor outlooks to companies with good ones," he says, even if workers aren't finding new jobs right away. And that's good news, says Burtless. "If you have more workers in companies that are seeing more demand for their products, that raises average productivity--and will raise our standard of living."