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Enron Creditors Get Approval To Sue Former Executives

Oct 2, 2002 | The Wall Street Journal

As prosecutors prepared to file a criminal complaint against Enron Corp.'s former chief financial officer, Andrew Fastow, today, the company's creditors secured permission to sue Mr. Fastow and a slew of other senior executives, including former Chairman Kenneth Lay and former Chief Executive Jeffrey Skilling, The Wall Street Journal reported.

A federal bankruptcy judge in Manhattan authorized Enron's creditors to begin litigation in Texas state court against certain former Enron officers, directors and employees for breach of fiduciary duty, fraud and gross negligence, among other things.

"This is just the beginning of the lawsuits," said Martin Bienenstock of New York's Weil Gotshal & Manges, Enron's lead bankruptcy lawyer. "The ones who will be gone after are the ones who harmed Enron. They should have to pay back some of the harm they did."

Earlier this year, Enron's committee of unsecured creditors issued more than 70 subpoenas to individuals and companies as part of its investigation into claims Enron and its creditors may bring. The committee determined certain directors, officers and employees "engaged in wrongdoing and misconduct." The committee has commenced litigation against Arthur Andersen LLP, Enron's auditor.

Separately, Enron's shareholders and employees have brought securities-fraud litigation against Andersen, as well as Enron's bankers and law firms.

The other people named in Tuesday's motion include Michael Kopper, a former associate of Mr. Fastow who pleaded guilty to money laundering and conspiracy to commit wire fraud in connection with three off-the-books partnerships run by Mr. Fastow. The motion also named: Ben Glisan Jr., Enron's former treasurer; Richard B. Buy, the company's former chief risk officer; Richard A. Causey, former chief accounting officer; Kristina M. Mordaunt, who was general counsel to Mr. Fastow's finance unit; Kathy Lynn, who worked for Mr. Fastow; and Anne Yaeger- Patel, a financial executive who worked with Mr. Fastow.

The motion didn't offer specifics about allegations that may be included in the lawsuit, but cited previously released reports on Enron's downfall by a special committee of Enron's board and a congressional report on the role of Enron's board.

Of those listed, Ms. Mordaunt, Ms. Lynn, Ms. Yaeger-Patel and Mr. Glisan were among the small circle of Mr. Fastow's colleagues who were allowed to invest in an off-balance-sheet partnership called Southampton, named after the neighborhood where Mr. Fastow lives. Federal prosecutors are seeking to seize assets of Ms. Mordaunt, Mr. Glisan, Ms. Yaeger-Patel, Ms. Lynn, Mr. Kopper and Mr. Fastow, which they claim were illegally obtained.

Mr. Fastow's spokesman, Gordon Andrew, declined to comment. Kelly Kimberly, Mr. Lay's spokeswoman, said Mr. Lay and his attorneys declined to comment. Bruce Baird, a lawyer for Ms. Yaeger-Patel, declined to comment. Lawyers for the other people named as potential targets didn't return calls for comment.

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