Enron Lawyer’s Qualms Detailed in New Memos

Congressional investigators Wednesday released memos by Enron Corp. legal counsel Jordan Mintz citing concerns over the company’s controversial partnerships dating back more than a year--again raising questions about why company executives ignored early warnings.

Mintz’s concerns about the off-the-books partnerships were reported last week, but the memos released Wednesday provide new details about specific issues he raised.

In a Jan. 4, 2001, memo, for example, Mintz pointed to the need to develop measures to ensure that deals between Enron and the LJM partnership led by then-Enron Chief Financial Officer Andrew S. Fastow were conducted at “arms-length,” given the potential for “sweetheart” deals.

Similar themes were sounded in follow-up memos March 8 and May 22, months before problems with the partnerships spilled into public view and corporate officers acknowledged problems.

In the March 8 memo to Richard A. Causey, Enron’s chief accounting officer, and Richard B. Buy, Enron’s chief risk officer, Mintz called for a new deal approval process to “impose a more rigorous testing of the fairness and benefits realized by Enron in transacting with LJM.”

Rep. James C. Greenwood (R-Pa.), chairman of the House Energy and Commerce subcommittee on oversight and investigation, said the memos detail the “incestuous connections between the LJM entities and Enron.”

“It’s pretty blanket evidence that well-placed people in the company knew that Fastow was the architect of deals that were questionable at best and may be illegal,” Greenwood said.

Enron representatives did not return calls seeking comment.

Investigators said that Mintz told them he took his concerns to Causey and Buy but that they took no action.

Mintz also talked directly to Jeffrey K. Skilling, at the time Enron’s president, according to investigators, reminding him that he needed to sign an approval sheet for Enron transactions with the LJM partnership.

“Everyone signed off but Skilling. Not only did he not sign, but he repeatedly refused to,” Greenwood said. “Mintz tried to set up a meeting with Skilling three times to get him to sign.”

Said Ken Johnson, a spokesman for the House Energy and Commerce Committee: “Skilling never signed off on any of the partnership papers that we have in our possession. It appears to us that he tried to keep his fingerprints off these transactions.”

“It’s clear to us that he was very concerned about the impact the partnerships were having on Enron’s financial stability,” Johnson said. “He was sending up red flags and nobody seemed to be listening.”

Enron filed for the largest bankruptcy in U.S. corporate history Dec. 2, after questions about its underlying financial health and accounting practices sent its stock plunging. The off-the-books partnerships have received special attention in the various investigations into the company’s collapse.

At hearings today in Washington, lawmakers are expected to turn up the heat on some of the company’s mid-level executives and the friends and family members of top officers, who are believed to have reaped rich profits from the off-the-books partnerships.

Some of the relationships are detailed in the 203-page report by a special Enron board investigating committee released Saturday.

In one cited example of conflicts of interest, Anne Yaeger and Trushar Patel--Enron employees engaged to be married--represented opposite sides in a deal between Enron and one of the so-called Raptor partnerships. According to the internal report, Yaeger was one of those who earned a windfall profit by receiving shares in another partnership, Southampton Place.

An attorney for the couple said Yaeger’s shares in Southampton were part of a promised bonus, not part of her work on the Raptor deal.

“These were junior people in a finance function,” said Bruce Baird, their attorney. “They took instructions from their superiors.”

Another Enron employee, Michael Kopper, who worked in the global finance group, had roles in several partnerships, including one called Chewco Investments, the report said.

Fastow originally planned to run Chewco himself but decided against it after being told that he would have to disclose his participation to shareholders, according to the report. Fastow also planned for his wife’s family to invest in Chewco until Skilling nixed the idea.

Fastow then tapped Kopper to run Chewco because that could be kept hidden, even from Enron’s board of directors, the report said.

The report indicates that Kopper also took steps to conceal his role. At one point, he transferred a Chewco ownership interest to William D. Dodson, whom the report called Kopper’s domestic partner.

Chewco was extremely lucrative for Kopper. Though he invested only $125,000, Kopper was paid $10.5 million when Enron bought out Chewco in March 2001. He was paid $1.6 million in management fees even though Chewco “apparently required little management,” the report said.

A spokesman for Fastow declined to comment. Kopper could not be reached for comment.

In addition to Mintz, today’s hearing before Greenwood’s subcommittee will feature several key players in the Enron saga, including Skilling, Fastow, Kopper and Robert K. Jaedicke, an Enron board member and chairman of the board’s audit committee.

Also scheduled to testify are Causey, Buy and Jeffrey McMahon, the former Enron treasurer and current chief operating officer.

Several of the participants, including Fastow, Kopper, Causey and Buy, are expected to invoke their 5th Amendment right against self-incrimination.

By increasing scrutiny of the subordinates of former Chairman Kenneth L. Lay, Skilling and particularly Fastow, congressional investigators also may be attempting to pressure the mid-level workers to begin cooperating in the inquiry by testifying against their former bosses, one former congressional investigator said.

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Times staff writers Liz Pulliam Weston in Los Angeles and Thomas S. Mulligan in New York contributed to this report.