“This very short extension, if granted, will allow us to finalize an agreement we have reached in principle between the official representative of all our creditors and the court-appointed plan facilitator of the Enron North America estate,” said Stephen F. Cooper, Enron acting CEO and chief restructuring officer. “We believe that the extension will ultimately expedite our court proceedings, and we are hopeful that the court will approve our motion. We are very pleased with the prospect that the plan will have the support of both the Creditors’ Committee and the ENA Examiner.”

If the joint motion is granted by the court on June 30, the company said it would file its plan of reorganization and disclosure statement by July 11.

With the bankruptcy court’s approval, Enron Corp. announced last Wednesday that it plans to move forward with a new holding company to protect its interests in Transwestern Pipeline Co., Citrus Corp. and Northern Plains Natural Gas Co. Enron had proposed a separate company for its pipelines in March (see NGI, March 24).

However, as it attempts to move forward, Enron’s lawyers still will be spending a lot of time in court. Last week, the U.S. Department of Labor filed a lawsuit against the company and many of its ex-officers because of pension mismanagement. And, former executive Lea Fastow, the wife of former CFO Andrew Fastow, received a trial date of Jan. 27, 2004.

If it is able to form a new pipeline company, the newly named CrossCountry Energy Corp.’s shares would be distributed to creditors in connection with its Chapter 11 reorganization plan. Corbin A. McNeill Jr. and Raymond S. Troubh, existing board members, would anchor the new corporation’s board, and a search also is under way to identify three additional outside board members, Enron said.

Stephen F. Cooper, Enron’s interim CEO, said the willingness of McNeill and Troubh to join CrossCountry’s board was a “positive demonstration of our commitment to moving toward the independence of this business.” He said the pipelines’ “underlying businesses have been well run and are expected to continue to provide solid returns for the estate and ultimately our creditors.”

CrossCountry’s pipe holdings would include approximately 8.5 Bcf/d of capacity and 9,900 miles of pipeline. The 2,600-mile Transwestern extends from West Texas to the California border. Citrus, held jointly by Enron and Southern Natural, an El Paso affiliate, owns the 5,000-mile Florida Gas Transmission system running from South Texas to South Florida. The wholly owned Northern Plains is a general partner of Northern Border Partners LP, which holds ownership interests in Northern Border Pipeline Co., Midwestern Gas Transmission Co., Viking Gas Transmission Co. and Guardian Pipeline LLC.

The lawsuit, filed in Houston federal court, alleges that the defendants violated ERISA when they failed to consider the prudence of Enron stock as an appropriate investment for the retirement plans and did nothing to protect the workers and retirees from extensive losses. During the investigation, the Labor Department said it had reviewed more than two and a half million pages of documents, questioned 110 witnesses and issued 78 subpoenas.

According to the Labor Department, more than 20,000 participants in savings and employee stock ownership plans “experienced a substantial erosion of their retirement assets” as Enron imploded in late 2001. Now trading as an over-the-counter stock priced at 5 cents, Enron’s shares in their heyday were trading for more than $80.

Labor Secretary Elaine L. Chao repeated what she had said when the investigation began last year, that “Enron’s employees have gotten the short end of the stick.” She said, “this lawsuit keeps that commitment” to recover losses in Enron’s pension plans.

The lawsuit names as defendants former board of directors Lay, Skilling, Robert A. Belfer, Norman P. Blake Jr., Ronnie C. Chan, John H. Duncan, Wendy L. Gramm, Ken L. Harrison, Robert K. Jaedicke, Charles A. LeMaistre, John Mendelsohn, Paulo V. Ferraz Pereira, Frank Savage, John Wakeham and Herbert S. Winokur Jr. Also named were former administrative committee members James S. Prentice, Roderick J. Hayslett, Tod A. Hindholm, Cindy K Olson, Sheila D. Armsworth and Paula H. Rieker.

“Enron, Lay, Olson and Lindholm withheld information about Enron’s financial condition from other plan officials,” the lawsuit alleges. “The board of directors failed to properly appoint and monitor a trustee to oversee the Employee Stock Ownership Plan (ESOP), leaving the ESOP participants without this legally required fiduciary to protect them. The administrative committee members ignored the repeated warning signs of the corporation’s financial troubles, ignored the fact that the stock plummeted in value throughout 2001 and failed to consider reducing or eliminating the plan’s investments in Enron stock.” Lay also was charged with misrepresenting Enron’s financial condition to employees and plan officials.

In other court-related news, a Houston federal judge Tuesday reset the criminal trial of Lea Fastow to early next year. Her trial had been scheduled to begin July 8. Lea Fastow would be the first individual tried in a case related to Enron. Enron’s former auditor, Arthur Andersen LLP, was convicted a year ago of obstructing the case against Enron and is appealing (see NGI, June 24, 2002). However, several individuals involved in the case have pleaded guilty.

Lea Fastow had been an assistant treasurer at Enron, and was indicted in May on six counts for conspiracy to commit wire fraud, money laundering, conspiracy and filing false tax returns (see NGI, May 5).

Lea Fastow’s attorneys had argued that she be tried after her husband. However, in a 12-page opinion, U.S. District Judge David Hittner denied that request, writing that the delay would be unreasonable. Andrew Fastow is not expected to go to trial before mid-2004. The former CFO has been indicted on 109 charges related to fraud, embezzlement and tax evasion. He has pleaded not guilty to the charges and remains free on bond with his wife.

Hittner wrote that Andrew Fastow’s promises to testify for his wife after his own trial, but before any appeal, cannot serve as a binding agreement, and there is no assurance his testimony will be forthcoming. Also, if Andrew Fastow waited until after an appeal to testify for his wife, it could be years before he was available to testify, which would violate the defendant’s and the public’s rights to a speedy trial.

According to Lea Fastow’s attorneys, Andrew Fastow has information about his wife’s innocence and he will only be available after his criminal trial concludes. Their request to Hittner basically centered on asking the judge to not sacrifice Lea Fastow’s right to a defense nor Andrew Fastow’s rights against self-incrimination.

In his order, Hittner cited a federal circuit case brought forth by prosecutors, which cites a unanimous 1982 U.S. 5th Circuit Court of Appeals case. The case states a defendant waives Fifth Amendment rights when he states in an affidavit that he will testify for a co-defendant if the co-defendant’s case is tried second. Fastow has filed two sealed affidavits in his wife’s case. The prosecutors argued that by filing the affidavits for his wife, Andrew Fastow effectively waived his Fifth Amendment rights in her case and thus could be subpoenaed by his wife even if she is tried first.

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