Creditors Group Seeks Right to Probe Enron Partnerships

A group of Enron Corp. creditors is seeking the right to conduct an official probe of the murky partnerships that helped plunge the company into its Chapter 11 bankruptcy filing.

The creditors committee asked a federal judge late Thursday for permission to issue subpoenas to some of the former Enron employees and outside consulting firms that helped to set up and run the partnerships.

U.S. Bankruptcy Court Judge Arthur J. Gonzalez granted a similar request Tuesday when he gave the creditors permission to subpoena records from the Andersen accounting firm, Enron’s former auditor, and to interview Andersen executives.

The 15-member Enron creditor committee, which primarily comprises large banks and other institutions, is paving the way for potential lawsuits against third parties that did business with Enron, experts said.

Given that they expect to recover from Enron only a portion of what is owed them, the creditors may fare better in targeting deep-pocketed law firms, consultants and others that advised the company on its deals.

“They’re going to try to unravel these transactions and find out who knew what,” said Richard Tilton, a New York bankruptcy attorney who is not involved in the case. “The ultimate goal is to find somebody who is responsible for damages because they didn’t advise Enron properly.”

The ability to conduct its own investigation also would help the committee determine whether the partnerships still are causing a financial drain on the company, experts said. Some of the partnerships paid out millions of dollars to Enron officers in recent years.

The committee, led by such lenders as Citigroup Inc. and J.P. Morgan Chase & Co., is seeking records of about 50 Enron partnerships, including the controversial LJM, Raptor and Chewco entities.

The partnerships, which engaged in various transactions with Enron, were used by the energy trader to inflate profits and hide much of the mountain of debt the company was taking on, a report issued last weekend by a panel of Enron directors concluded.

“The committee unquestionably needs discovery regarding the business purpose, organization and financial structure, legal obligations, valuations and other critical data regarding those entities,” the committee said in its court filing.

Attorneys for the committee did not return calls seeking comment.

The creditors seek information from three law firms--Vinson & Elkins; Fried, Frank, Harris, Shriver & Jacobson; and Kirkland & Ellis--management consultant McKinsey & Co. and accounting firm PricewaterhouseCoopers.

Creditors also want to question seven former Enron executives. They include Jeffrey K. Skilling, the former chief executive; Andrew S. Fastow, the onetime chief financial officer who was deeply involved in the partnerships; and Michael Kopper, a managing director who reported to Fastow.

But the paper records involved in the transactions may be more important, some experts said.

“You absolutely want the documents because you’ll probably learn more from the documents than from the people themselves,” said Tilton, the bankruptcy lawyer.

The committee request follows the release a week ago of the internal Enron report detailing extensive problems with several partnerships and outlining the questionable roles of several company executives in structuring and operating them. Fastow earned at least $30 million from the partnerships, and Kopper pocketed more than $10 million, the report said.