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Non-Tech : The ENRON Scandal -- Ignore unavailable to you. Want to Upgrade?

To: Baldur Fjvlnisson who wrote (2596)	2/7/2002 4:51:38 PM
From: Mephisto	Read Replies (1) \| Respond to of 5185

Enron Traded Business for Investments With Merrill (Update2) By Russell Hubbard and Jeff Bliss Washington, Feb. 7 (Bloomberg) -- Enron Corp. promised to give bond underwriting business to Merrill Lynch & Co. and First Union Corp., now Wachovia Corp., in return for investments in some of the off-balance sheet partnerships set up by former Chief Financial Officer Andrew Fastow that led to Enron's bankruptcy. Energy and Commerce Committee Chairman Billy Tauzin, a Louisiana Republican, said Enron offered the business to the banks in exchange for investments because an outside investor was required by accounting rules to keep the partnerships from being consolidated on Enron's balance sheets. Tauzin's comments, at a hearing today, came as lawmakers are expanding their line of inquiry to at least look at the role that Wall Street firms played in financing Enron's rise. Enron employed more than a dozen banks and securities firms. Over the past 17 years, the company and its predecessors sold 138 bonds and over the past eight years were involved in 69 completed or attempted acquisitions with an announced value of almost $40 billion." Merrill executives invested their own money in LJM2, one of Enron's limited partnerships, after the firm helped raise $349 million for the partnership from pension funds and other institutional investors. In an internal e-mail, Merrill said that LJM2 was expected to return more than 30 percent a year. That's triple the average return on the Standard & Poor's 500 Index, the benchmark for U.S. stocks, over the past 75 years. Members of the investment banking executive committee were encouraged to invest by Daniel Bayly, then head of the group, said one investor familiar with the offer who spoke on condition of anonymity. Other Witnesses In addition to Fastow, Michael Kopper, who ran a partnership, and Richard Buy, who headed the company's risk assessment office, invoked their Fifth Amendment right to not answer questions. Chief Accountant Richard Causey also pleaded the Fifth, saying he recently hired new lawyers. Jeffrey Skilling, the former chief executive officer, was scheduled to testify later today. The executives join Kenneth Lay, who resigned as Enron's chairman this week, and David Duncan, the Arthur Andersen LLP official who audited the Houston-based company's finances, in declining to explain the biggest bankruptcy in U.S. history. Enron collapsed in December with the loss of 5,500 jobs and $78 billion in market value since August 2000. Skilling's Role Skilling, who served as Enron's chief executive officer from February 2001 to August 2001, quit four months before the Dec. 2 bankruptcy filing. He is the highest ranking current or former officer to agree to appear, and he plans to testify, Tauzin said. Lay, a friend of George W. Bush, was the president's biggest campaign contributor, while Enron was the biggest corporate contributor. Three of every four dollars the company gave to politicians went to Republicans to whom executives now are answering in congressional hearings, according to the Center for Responsive Politics, which tracks campaign finance. Enron, once the largest trader of natural gas and electricity, lost $78 billion in market value since August 2000. The company formed at least 3,000 affiliated partnerships where it hid debt and losses from shareholders, said William Powers Jr., the University of Texas Law School dean who investigated the matter for Enron's board. Fastow paid himself $30 million for managing one of the partnerships, which purported to shift investment risk from Enron to an independent outside firm, Powers said. Enron's collapse began when it reported third-quarter earnings in October. The company surprised investors with $1 billion in losses from the partnerships. Shares plunged and the company lost the credit rating it need to borrow money needed to support the $2.8 billion in trades it did each day. " Excerpt from Enron Traded Business for Investments With Merrill (Update2) By Russell Hubbard and Jeff Bliss ........................ ML Was in Enron Parternships. Even underwrote a few of them. I hope ML's shareholders sue ML JMOP