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Sifting through the wreckage of Enron Corp. will no doubt require dozens of lawsuits, a government investigation or two, and a best-seller from at least one intrepid financial journalist. But the outcome for one key player in what has become the largest corporate bankruptcy has already been determined. Yes, Enron’s unwinding will be very, very good for some lawyers, but not so good for a handful of firms that have counted the Houston company as a good client over the years. One firm in particular, though, stands to lose the most from Enron’s collapse: Houston’s Vinson & Elkins. The V&E-Enron connection dates back more than two decades, to the firm’s representation of Houston Natural Gas Corp., which merged with InterNorth Inc. in 1985 to form Enron. Over time, more than a dozen Vinson & Elkins lawyers went in-house at Enron, most notably in June 1991, when Vinson & Elkins corporate partner James Derrick Jr. was named Enron’s general counsel, a position he holds today. Before leaving Vinson & Elkins, Derrick tapped Joseph Dilg, a young partner, to take over management of the Enron account and, in Dilg’s words, “make sure things got done the right way.” As Enron transformed itself from a regional pipeline company to the world’s foremost energy broker, Vinson & Elkins handled an ever-greater volume of transactional work for the company. By 2000, according to Dilg and managing partner Harry Reasoner, Enron accounted for about 7 percent of Vinson & Elkins’ gross revenue — or just over $27 million, based on Vinson & Elkins’ reported gross revenue of $386.5 million. “They might well have been our biggest client,” allows a cryptic Reasoner, “though that might vary from year to year.” Both Reasoner and Dilg strive mightily to downplay the impact that Enron’s demise will have on firm fortunes. Although about 100 Vinson & Elkins lawyers have billed time to Enron, Dilg says, only five or six partners, including Dilg, have spent 75 percent or more of their time on Enron-related matters. Losing major clients, Reasoner notes, is a fact of life: “I’m confident in our ability to compete and replace the business lost.” Law firm consultant Bradford Hildebrandt agrees that a firm of Vinson & Elkins’ size should be able to weather the blow. “That’s a pretty good chunk of business but not irreplaceable,” says Hildebrandt. “We get concerned when we see firms with 15 or 20 percent with one client.” (Hildebrandt says he has consulted with Vinson & Elkins “off and on over the years.”) Vinson & Elkins faces Enron-related complications beyond lost billables. When the company filed for Chapter 11 protection, Vinson & Elkins was owed about $5 million in outstanding fees. But, says Dilg, some of that amount is owed by nondebtor subsidiaries that should be able to pay up. Perversely, the firm’s close relationship with Enron means that it will score little or no work from its massive bankruptcy and related litigation. Vinson & Elkins played a lead role in the attempted sale of Enron to another firm client, Enron’s crosstown rival Dynegy Inc. But that ended abruptly when the deal fell apart. Vinson & Elkins had obtained a limited waiver from Dynegy to work for Enron on the merger but had to step aside when hostilities commenced with Enron’s $10 billion breach of contract claim. Vinson & Elkins was also defending Enron against shareholder suits, but had to drop out when the firm itself was named as a defendant in two such actions. After Vinson & Elkins was sued, Reasoner turned to Houston trial lawyer Joseph Jamail of Jamail & Kolius for help. Jamail’s career of jousting with defense firms and their corporate clients has not precluded him from teaming up with his old friend Reasoner on occasion. In fact, one such prior pairing was a very successful representation of Pennzoil Co., against Texaco Inc., in 1986. The $11 billion verdict they won in that case forced Texaco into Chapter 11 — the largest corporate bankruptcy, until now. As the Enron debacle started to unfold, Jamail worked a little early magic for Vinson & Elkins. In November he invited the team of trial lawyers suing the firm, led by Houston’s Jeffrey Kaiser of Kaiser & May and Robert Fritz of The Fritz Law Firm, to his office for a face-to-face with Vinson & Elkins partners. Though the participants remain tight-lipped about what exactly transpired at the meeting, Kaiser and Fritz agreed to drop the claims against Vinson & Elkins. “They thought Vinson & Elkins were the primary lawyers on these matters they’re suing over,” says Jamail. “We showed that they were not at the meetings, they did not advise the board. So [the plaintiffs] had the courage to say, ‘OK, you’re out.’ “ Fritz and Kaiser do not dispute Jamail’s account, but Fritz cautions against reading too much into their decision: “You take things on good faith, but in something this large it’s too early to tell who is out of the woods and who is not.” Their suit still targets the accounting firm Arthur Andersen L.L.P. but, for now at least, none of Enron’s law firms. Though Dilg and Reasoner say they don’t anticipate the firm being named in future litigation, Vinson & Elkins has retained John Villa of Washington’s Williams & Connolly, perhaps the premier malpractice defense lawyer in the nation. The Enron mess comes at a delicate time for Vinson & Elkins. In January Reasoner steps down after 10 years as managing partner. His replacement is none other than Joe Dilg. Amid all the potential litigation and probes by both the Securities and Exchange Commission and the Justice Department — not to mention the possibility of internal strife as Vinson & Elkins partners adjust to a post-Enron practice — will Dilg’s Enron connection taint his reign? Dilg says it’s not an issue for his partners: “I don’t think my election was due to my Enron relationship.” He’d better hope not.

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