Executives from failed energy giant Enron say its total legal and accounting costs since declaring bankruptcy may top $1 billion by 2006, according to a newspaper report.
The company whose filing led a wave of corporate scandals has already exceeded $500 million in legal and accounting fees since the company filed for reorganization on Dec. 2, 2001.
Even after Enron gains approval for its reorganization plan, the company’s budget estimates more than $300 million will be spent — more than any company has ever spent confirming a Chapter 11 bankruptcy plan, the Houston Chronicle reported in Friday editions.
The bills come from more than three dozen law firms and a handful of accounting and consulting firms.
“It’s shocking,” said Lynn Lopucki, a law professor at the University of California at Los Angeles law school who studies bankruptcy professional fees.
The Luxembourg-based case of Saudi Arabian Bank of Credit and Commerce International, with $200 million in professional fees, has the largest amount on record, though WorldCom may meet or exceed that total.
Houston-based Enron’s budget estimate shows it will spend $156 million in the second half of 2003 on professional fees. It projects professional fees of $229 million in 2004, $112 million in 2005 and $68 million in 2006.
A lawyer for some creditors of Enron Corp.’s Enron North America unit said the future fee estimates are disturbing. “Obviously, that’s of concern to our constituency,” said Judith Ross of Thompson & Knight.
The estimate was included in more than 1,000 pages of amended documents Enron attorneys submitted to its bankruptcy court Thursday in support of the third version of its reorganization plan and disclosure statement.
The modifications came in advance of a hearing next Tuesday when Enron will ask Judge Arthur Gonzalez to approve the massive document, a step toward confirming the plan.
The company, its bankruptcy lawyers and some bankruptcy professors have defended the company’s expenditures by noting it is easily the most complex bankruptcy ever. The money in coming years will be spent to wind down outstanding issues and on litigation, said Enron spokeswoman Karen Denne.
Enron went bankrupt after devastating revelations of hidden debt, inflated profits and accounting tricks that made the company appear much more financially successful than it was. Thousands of employees lost their jobs and stock that once traded as high as $90 per share became worthless.
Shareholder lawsuits have piled up and creditors have jockeyed for their share of the dwindled estate. They have urged Enron to quickly develop a compromise reorganization plan, with legal fees exceeding $25 million per month.