An assertion by a former UBS PaineWebber broker that he had been fired for advising clients to sell their Enron Corp. shares in August 2001 was verified Wednesday by Congressional investigators, who released a series of e-mail messages between the brokerage and the company. Broker Chung Wu, formerly in PaineWebber’s Houston office, said he suspected his dismissal followed pressure from Enron after he sent a message to clients early on Aug. 21 warning that Enron’s “financial situation is deteriorating” and that they should “take some money off the table.”
Hours later on Aug. 21, former Enron executive Aaron Brown, who was in charge of the company’s stock option program, sent an e-mail to PaineWebber executives, including Wu’s boss, saying, “Please handle this situation. This is extremely disturbing to me.” Wu was fired that afternoon. At the time of Wu’s dismissal, PaineWebber managed Enron’s employee stock option program and also handled brokerage accounts for some Enron executives.
By the evening of Aug. 21, PaineWebber had retracted Wu’s assessment of the stock, which then stood at about $36. It also sent Wu’s clients who received the e-mail a report that Enron stock was “likely heading higher than lower from here on out.” PaineWebber indicated that Wu had been fired for violating company policies by sending unauthorized e-mail messages to more than 10 clients and by failing to disclose that PaineWebber’s research analyst, Ronald Barone, had rated Enron a “strong buy.”
The e-mail messages from Enron were released last week by Rep. Henry A. Waxman (D-CA), of the House Government Reform Committee, who said, “Enron’s conduct regarding PaineWebber appears to be the latest in a series of indefensible actions.”
PaineWebber had sent a letter to Congress indicating that Wu had violated a rule of the National Association of Securities Dealers that requires sales literature to be reviewed by a supervisor before being sent to clients. The letter also indicated that Wu’s recommendation had been drafted quickly and raised “basic suitability concerns.” The letter indicated that Wu had acknowledged he had violated company policy and had recognized the seriousness of the situation.
The PaineWebber letter stated: “Any financial adviser who sends an e-mail in the middle of the night to dozens of firm clients urging them to take an action contrary to [affiliated firm UBS] Warburg’s research recommendation, without informing the clients of that recommendation or obtaining the necessary review and approval, would be treated the same as Mr. Wu.”
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