Four years after Enron Corp. collapsed, the Houston energy trader clings to life as "the financial equivalent of a Superfund site," its chairman said.
New managers are struggling to clean up after the firm's December 2001 bankruptcy -- a process they say is likely to run into 2008. Two operating divisions must be unloaded. Lawsuits against banks that helped the company hide debt must be settled or brought to trial. Leftover cash must be dispensed to creditors claiming some $60 billion.
As with everything else at Enron, a company that became a synonym for greed, a punch line for comedians and a curse word for thousands of workers who lost their retirement savings, closing shop hasn't been simple.
"Soup to nuts here, you've got a few years of hard duty," said Chairman John J. Ray III.
First on the agenda is selling what remains of a more than $4 billion trading portfolio, a reminder of the days when Enron leaders appeared on the cover of business magazines touting a bold new way to swap energy and other commodities. Soon Enron's former leaders will be in the news again. Former chairman Kenneth L. Lay and onetime chief executive Jeffrey K. Skilling face trial Jan. 17 on fraud and conspiracy charges.
Meantime, a five-member board of directors recruited to unwind what was once the nation's seventh-largest firm, has logged 100 meetings over the past year dealing with what was left behind.
"It probably ought to be called E-Liquidation Company," said Ray. "This company has no future life to it. We're just basically in a dismemberment sort of process."
They are guiding Portland General Electric Co., an Oregon utility that serves 750,000 customers, through the process of becoming a separate, publicly traded company as early as April 2006. Regulators blocked a proposed sale to the Texas Pacific Group earlier this year.
They're also ensuring that business plans and audits are in shape at Prisma Energy International Inc., a collection of energy assets around the globe that employs nearly 8,500 people, said board member James R. Latimer III. With gas pipelines in Bolivia, the Caribbean, Europe, and Turkey, Prisma has never operated as a stand-alone company, complicating the efforts to spin off or auction the unit.
From flashy to modest
Ultimately, the board members said, they hope that the process goes as smoothly as last year's sale of their prize asset, 9,700 miles of domestic pipeline in CrossCountry Energy LLC, for $2 billion to Southern Union Co. and a General Electric Co. finance unit.
In all, Enron now sits on about $12 billion in cash, generated through asset sales and recoveries from investment banks including J.P. Morgan Chase and the Royal Bank of Scotland. Litigation continues against five more banks, led by Citigroup and Credit Suisse First Boston, which Enron accuses of aiding and abetting fraud by its previous management team. Their civil trial is set for July 2007.
About 300 people continue to work at Enron's modest headquarters in Houston, a far cry from the gleaming downtown office towers it once occupied. The sculpted tilted-E logo, a one-ton beh-E-moth that stood in front of corporate headquarters, has been liquidated, too -- for $44,000.
The company also employs 30 more people at a warehouse on the outskirts of town, where they oversee document requests from lawyers and investigators. A federal grand jury continues to hear evidence about wrongdoing at Enron. Board members say it is impossible to predict how much Enron's 30,000 creditors will ultimately receive. They continue to sift through claims, which once reached $1 trillion. Eventually, they hope to return about 20 cents on the dollar to creditors whose claims they deem valid. Disbursals are planned twice a year.
Experts take home high fees
In the meantime, the lawyers, accountants and turnaround experts who guided the company through bankruptcy have collected or are seeking substantial amounts. Stephen F. Cooper, the corporate executive who served as Enron's interim chairman, wants a $25 million success fee -- besides his $1.3 million salary and extra consulting fees the company paid several of his associates at Kroll Zolfo Cooper LLC.
The law firm of R. Neal Batson, who prepared several reports as the company's court-appointed bankruptcy examiner over an 18-month period, took home $90 million.
Dozens of other professional advisers billed more than $1 billion, making the Enron bankruptcy the costliest ever, said University of California at Los Angeles law professor Lynn M. LoPucki.
Enron's current directors are well compensated for their work, which they say is more akin to a management role than a traditional corporate board position. Each was recruited to handle a specific issue. Ray, who negotiates with investment banks and others, makes $1.2 million per year. California investment banker and vice chairman Robert M. Deutschman, who helps with valuing and spinning off the assets, collects $420,000. Three other directors, including Latimer, earn $300,000. Stephen D. Bennett, who has a background in the steel industry, monitors costs and budgets. Rick A. Harrington, a former top lawyer at Conoco Phillips, reviews litigation and regulatory issues.
"The immediate cause of the high fees in Enron is the number of professional firms hired to work on the case," said LoPucki, author of a book on problems with the bankruptcy system.
Michael J. Missal, a legal adviser to the bankruptcy examiner in the WorldCom Inc. case, attributed some of the high fees to unwinding sophisticated business partnerships Enron used to conceal debt and pump up earnings.
Even so, Missal said, "I'm not sure that anyone knew it was going to be this large at the beginning."