Enron Puts Stock in Turnaround Specialist

Eight weeks after going broke, Enron Corp. selected management consultant Stephen Cooper as interim chief executive to steer the fallen energy giant through Bankruptcy Court, a battery of shareholder lawsuits and a criminal probe.

Board members tapped Cooper, a principal of New York-based turnaround firm Zolfo Cooper, less than a week after the resignation of Chairman and Chief Executive Kenneth L. Lay. The board has not named a new chairman.

Cooper, 55, said Tuesday that “Enron has real businesses with real value.” But whether he can restructure the firm and handle the complex legal issues to allow it to keep operating remained an open question, analysts said.

Enron already has sold a majority stake in its commodities trading business, which generated about 90% of the $100 billion in revenue it reported for 2000. The company also has handed control of its largest pipeline to Houston-based rival Dynegy Inc., and expects to sell its Portland General Electric division for an estimated $3 billion to Northwest Natural Gas Co. Enron’s remaining assets, including smaller pipelines and utilities outside the U.S., accounted for just a fraction of its revenue.

But Cooper, in a voicemail disseminated to Enron’s employees, offered an optimistic take on the company’s current divisions.

“The physical assets look to me to be of an enormous advantage here,” Cooper said. “The regulated assets--the pipelines and generating plants-- provide reliable, steady cash flow and returns. And they provide a very sound, fundamental base to restructure around.”

Many experts, however, expressed doubt Cooper will be able to do anything more than sell off Enron in pieces.

“I find it hard to envision a workable entity coming out of bankruptcy here,” said Andre Meade, a utilities analyst for Commerzbank Securities. “The only business that really makes sense is a smaller version of what Enron was in the first place--a small gas-pipeline company, but the demands of the industry over the last couple of years have basically eliminated all small-pipeline companies.”

Enron is still seeking a chairman, who must deal with the firm’s interests in Washington, where it is under attack on Capitol Hill.

Steven Panagos, a partner at Zolfo Cooper, said the firm believes Enron has enough cash to continue operations and emerge from bankruptcy. “It has a good customer base, it has a good supplier base and most importantly it has plenty of liquidity,” he said.

Cooper’s biggest asset, analysts said, is whatever goodwill he can generate from the creditors’ committee. Cooper comes to the company as an outsider--an attribute sought by committee members who pushed for Lay’s exit.

Cooper began studying company reorganizations while working as an accountant at Touche Ross, now known as Deloitte & Touche. In 1986, he joined a former colleague, Frank Zolfo, to form Zolfo Cooper. Cooper, a graduate of Occidental College in Los Angeles and the University of Pennsylvania’s Wharton School, declined interview requests Tuesday.

As part of the management shuffling announced Tuesday, Enron President and Chief Operating Officer Lawrence G. Whalley resigned to take a post at UBS Warburg, the Swiss bank that acquired Enron’s trading division this month. Enron also elevated Chief Financial Officer Jeff McMahon to succeed Whalley and named treasurer Ray Bowen as CFO.

Shannon Burchett, president of Dallas-based energy firm specialist Risk Limited Corp., noted that the promoted executives have not been implicated in the scandal, but “if I were a creditor, what I’d like to see is a whole new cast.”

When Cooper was hired to help rescue troubled Canadian transportation firm Laidlaw Inc. in mid-2000, he clearly identified the problem areas, Laidlaw Chairman Peter Widdrington said.

“He can get deadlines established which initially look unrealistic, but the more he sells the deadline to all involved, the more realistic they become,” he said.

Some analysts noted that Cooper, a veteran of the bankruptcies of Federated Department Stores and other firms, has little experience in the energy field.

But Widdrington, who has discussed the Enron debacle with Cooper, said, “Steve himself is not awed by the task. He thinks essentially the operational aspects of the company are still in decent shape.”

Cooper plans to continue as Laidlaw’s vice chairman and chief restructuring officer.

Cooper’s firm also has been consulting for Polaroid Corp. since last summer and assisted the firm as it prepared to file for Chapter 11 bankruptcy protection in October. Polaroid spokesman Skip Colcord said the company could not comment on Zolfo Cooper’s performance because Polaroid has not yet emerged from bankruptcy.

UCLA bankruptcy law professor Lynn LoPucki said Enron probably can emerge from Chapter 11, but it probably will do so as a shadow of its former self. “There will be a lot of pieces of things that survive from Enron, but they aren’t in any real sense Enron,” he said. “One might carry the Enron name, one might be the same legal entity, but they won’t be anything like the pre-bankruptcy Enron.”

Michael J. Miller, a former Enron employee and a member of the organization that sued Enron officials Monday for severance and other losses, said he remains hopeful that Cooper can squeeze cash flow from Enron’s shell.

“Certainly we’ll wish this guy well on his endeavors, but we’re also going to be watching what’s going on,” Miller said. “We have very high stakes.”

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Leeds reported from Houston and Romney from Los Angeles.

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