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In October, when Enron Corp. found itself facing a mounting crisis that threatened its very existence, it sought to save itself through two bold moves. It approached Dynegy Inc., a much smaller cross-town rival, and proposed a merger. And it chose to hire not only law firms it had come to know and trust over many years, but one firm with which it had little previous contact — a firm now entrusted with the company’s fate. That firm is New York’s Weil, Gotshal & Manges, which is in the spotlight because it represents Enron in bankruptcy court. It is by no means alone, however, in defending the company. In the last few weeks, Enron has assembled high-powered firms to handle the onslaught of litigation that has already begun but has been stayed, for the time being, by the bankruptcy proceeding. When Enron hired Weil Gotshal, no one knew it would soon be embroiled in the largest bankruptcy in history. Weil was brought in on the Dynegy deal as second chair to Houston’s Vinson & Elkins, Enron’s longtime hometown counsel. “We had not worked with them much, maybe a little bit out of Houston,” Mark Haedicke says of Weil Gotshal. Haedicke, managing director and general counsel of Enron Wholesale Services, helped hire the law firms and coordinate their activities. “When you’re working on a large transaction like that,” he says, “you want to have probably two law firms with diverse skills.” Haedicke chose Weil for its skill in mergers and acquisitions but was aware of other talents it brought to the table. “I certainly was aware of their expertise in bankruptcy,” he says. “At that point, I didn’t think we were going into bankruptcy, but I was aware of that.” A QUICK TRIP TO SMU Thomas Roberts wasn’t thinking of bankruptcy either when he flew to Dallas on Oct. 19. The chairman of Weil Gotshal’s corporate department in New York, Roberts has played a leading role in high-profile cases like General Electric’s just-completed acquisition of Heller Financial and the acquisition of TWA by AMR Corp., parent of American Airlines. On this occasion, however, he was accompanying his daughter on a visit to Southern Methodist University, which was recruiting her to play soccer. He’d been told that Enron wanted to hire his firm to work on debt restructuring, so he arranged a quick stop in Houston the next day. It wasn’t as quick as he’d planned. He brought along Mary Korby, a partner in his firm’s Dallas office, and they quickly learned that debt restructuring was only one option. Private equity firms had approached Enron about investing, but discussions with Dynegy had already begun. The chat that began in the morning extended well into the night. Roberts stopped at a Target store for underwear and toiletries and didn’t return to Dallas till the next day. He was the lucky one. Mary Korby didn’t make it back home until the merger agreement was signed on Nov. 9. The next day more people from Weil Gotshal’s Dallas office flew down. Partners Glenn West and Jay Tabor were soon immersed, as were associates from the firm’s Dallas and Houston offices. Enron’s key lawyers were Richard Sanders, Lance Schuler, Julia Murray, Lisa Mellencamp and Jordan Mintz. Haedicke says Weil Gotshal’s lawyers blended smoothly with Vinson & Elkins’. He particularly praises Roberts and West along with Vinson & Elkins’ incoming chairman, Joseph Dilg, and William Joor, who were joined by Scott Wulfe. “I think the two firms worked well together,” Haedicke says. Vinson & Elkins lawyers didn’t respond to requests for comment. Meanwhile, the company had mounting problems on several fronts. As its fortunes faltered and the stock price tanked, shareholder suits piled up in Texas and Oregon, where the company is incorporated, claiming the company and its directors had breached their duties to shareholders. Enron tapped Houston’s Susman Godfrey to defend them. Stephen Susman, who heads a team of four of his partners, says there are now about 60 such suits. Susman is better known for his work as a plaintiff’s lawyer. “If I didn’t represent Enron,” he says, “I’d probably be in the thick of things on the other side.” But he has litigated for Enron for years. It’s the one large company he regularly represents. The reason is Enron general counsel James Derrick Jr., with whom he’s been close for more for than 20 years. Though he’s not sure how he was chosen for this assignment, he stays in close contact with Robert Williams, an Enron vice president and assistant general counsel. Susman was supposed to work on these cases with Vinson & Elkins, but there was a complication. Vinson & Elkins, which has been Enron’s primary counsel since 1991, when Derrick left the firm to take the Enron job, was itself sued by shareholders. The firm brought in Joe Jamail of Houston’s Jamail & Kolius, who convinced the plaintiffs to drop the suit against Vinson, but the firm remains sidelined. SUITS OVER 401(K)S Another battlefront was the company’s pension plan. About half a dozen cases brought by employees claim the company breached its duty by offering, as part of its 401(k) plan, company stock whose value it knew was inflated. One of the suits names as defendants not only Enron and the special committee that administered its plan, but the individuals on the committee and Enron’s accounting firm, Andersen, which has been widely criticized for its audits of the company’s finances. Not even Haedicke seems to know much about the teams picked to defend these suits. Repeated attempts to reach Derrick and company executives were unsuccessful. Eli Gottesdiener, who heads a class action boutique in Washington, D.C., that represents plaintiffs in one case, says he understands J. Cal Courtney of Houston’s Courtney & Associates is defending Enron’s administrative committee. Courtney did not return calls for comment. Enron and, in some instances, its executives or former executives, are being investigated by the Securities and Exchange Commission, the Labor Department and various congressional committees. The Justice Department has also launched a criminal investigation. The company’s board of directors established two special committees to conduct internal investigations. William Powers Jr., dean of the University of Texas School of Law (where Derrick earned his law degree and later taught), was recently elected to the board and immediately appointed to head one committee. Joined by three fellow outside directors, Powers’ mandate is to examine the allegedly questionable partnerships and accounting practices that the SEC is investigating. As counsel, the committee hired William McLucas, former head of the SEC’s enforcement division and now a partner at Washington, D.C.’s Wilmer, Cutler & Pickering. Raymond Troubh, a former general partner at Lazard Freres and a self-described “professional director,” was elected to the board and appointed to chair the second committee, on which he is joined by Powers. Troubh, who also sits on the boards of Starwood Hotels & Resorts, HealthNet Inc. and Diamond Offshore Drilling, among others, is a lawyer who says he hasn’t practiced in 40 years. His committee’s mission is to investigate the shareholder lawsuits, and he is currently interviewing firms to hire counsel, he says. Finally, the independent directors hired their own lawyers to defend about 50 suits in which they’re named. Their lead firm is Houston’s Gibbs & Bruns, a litigation firm that has worked for Enron for years, according to lead lawyer Robin Gibbs. He has about six lawyers working on the cases, which involve shareholder suits, employee suits and suits over the company’s restatement of its earnings. Gibbs is working with lawyers from New York’s Skadden, Arps, Slate, Meagher & Flom who function as advisors. Led by Peter Atkins, they too have a long history working for the company. CRISIS MANAGEMENT Enron’s legal team has experienced lawyers with long relationships with the company — some have even longer ones with Derrick. The exception is Weil Gotshal, chosen for three strengths: M&A, bankruptcy and crisis management. Haedicke was impressed by the first, is dependent on the second, but reserves his highest praise for the third. “The thing that distinguishes Weil Gotshal,” he says, “is they are excellent at giving advice in a crisis situation…. Most of the corporate legal principles that would apply to the various situations are the same. It’s the experience of having been in a crisis situation that I think helps them give advice more quickly and efficiently.” Now that Enron is in bankruptcy, the lawsuits are effectively frozen. In fact, as Susman points out, only the bankruptcy lawyers are technically on retainer. The others can’t be hired without the judge’s order. Though the case was filed in New York, where Weil Gotshal partner Martin Bienenstock is the lead lawyer, most of Weil Gotshal’s lawyers working on the bankruptcy are hunkered down in Houston. They include 25 associates and five partners who flew in from New York, including Brian Rosen, who directs the effort, according to David Wolnerman, one of the junior associates. They’re within walking distance from Enron’s headquarters, he says, which facilitates communication. Despite its connotations of disaster, bankruptcy court is in many ways the “safe haven” that follows a crisis, says David Bernick, a partner at Chicago’s Kirkland & Ellis who is not involved in the Enron case. Everything slows down, says Bernick, who has experience defending high-profile clients in crises, including W.R. Grace & Co., which is in Chapter 11 as a result of asbestos litigation. The purpose of bankruptcy in the early days, he continues, is to protect the company. The onslaught of litigation abates, giving the company a chance to “catch its breath” and to gather information. This is one purpose, he says, of appointing litigation committees, as Enron has done. They are a way not only to uncover problems, but to explain that, while you don’t have all the answers, you’ve established a credible inquiry. And that can be critical, he adds, to a company’s recovery. Information that emerges from a bankruptcy proceeding will be evaluated by courts, creditors, government agencies and the public, including shareholders, he observes. But a courtroom isn’t the only arena in which the company will be judged. Kenneth Lay, Enron’s chief executive, has been invited to testify before the House Financial Services Committee on Dec. 12. “I would advise him to show up,” says Bernick. It’s part of the process, he says, of rebuilding a company’s credibility. Enron spokespeople didn’t respond to inquiries as to whether Lay intended to testify.

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