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James V. Derrick has announced he will retire from his position as general counsel of the embattled Enron Corp. effective March 1. His news has no relationship to revelations about his alleged role in the Houston-based company’s accounting-related scandals, according to J. Clifford Gunter III, a Bracewell & Patterson partner who is defending the in-house lawyer in class action shareholder claims. “There is no link. He decided he wanted to leave. No one rejected him at Enron,” Gunter says. In a press release issued by the company, Derrick states that “I am extremely pleased that Rob Walls [his hand-picked deputy general counsel] has been chosen to succeed me. … I look forward to working closely with him to effect a seamless transition.” Derrick’s departure, however, follows a trend among top executives of the troubled company. Leading the exodus are the company’s former chairman Ken Lay, CEO Jeff Skilling, CFO Andrew Fastow, and dozens of others whose names (like Derrick’s) have been batted by lawmakers who hold nearly weekly hearings to investigate the improprieties that allegedly took place at Enron. Derrick has received his share of slights as the Enron scandal has unfolded. At one Capitol Hill hearing earlier this month, Jordan Mintz, a subordinate to Derrick and vice president and general counsel of corporate development at Enron, told lawmakers that his boss was not aware of the level of “dysfunction” in the financial division led by Fastow. To that comment, one lawmaker told Mintz, sarcastically, he was being too kind. In-house lawyers, who ask that their names not be used, have consistently complained that Derrick failed to see the potential for a conflict when he tapped his old law firm, Vinson & Elkins, to review whistleblower Sherron Watkins’ complaints last fall. They also say that Derrick failed to show strong leadership in the ensuing crisis. “I think he is paralyzed. He is just never around,” alleges one lawyer who still works at the company. “I am not going to comment about what unnamed lawyers say,” responds Gunter when asked about those allegations. Derrick is also among the 29 current and former Enron executives and directors who were sued in federal court for more than $1 billion allegedly gained by sales of company stock. Derrick sold $12.6 million in shares during a time period when chairman and chief executive Ken Lay sold $101 million in Enron stock. Gunter says Derrick’s departure will have no impact on the litigation. CALL FOR SPECIAL PROSECUTOR The special task force of lawyers established by the U.S. Department of Justice to launch a criminal probe into the Enron debacle has run into difficulties in its search for Houston headquarters. “It’s apparently pretty difficult to obtain an office in that city,” says Bryan Sierra, a spokesman for the Justice Department. Until they lease their own space, the team of lawyers — led by Leslie Caldwell, a former Assistant U.S. Attorney from the Northern District of California — is sharing space temporarily with the Houston division of the Federal Bureau of Investigation. The eastside location puts the task force lawyers 15 minutes in drive time from the downtown Enron headquarters. The Justice Department is not releasing the number or names of the lawyers working on the investigation, with the exception of those at the top like Caldwell. Caldwell, director of the task force, had been in charge of the securities fraud division in her former San Francisco Assistant U.S. Attorney post. As soon as Caldwell’s task force cuts a deal for its own space, Sierra says, the federal government lawyers are going to move out on their own. The team did not want to share space with Michael Shelby, the U.S. Attorney in Houston, who earlier recused himself and his assistants from any Enron investigation because of a possible appearance of a conflict. If Sen. Ernest Hollings has anything to say about it, however, the Justice Department’s task force won’t need the Houston office space for long. At a press conference earlier this month, the Democratic senator from South Carolina called for a special prosecutor, outside of the Justice Department’s control, to investigate. Hollings cited Bush administration ties to the company, including Attorney General John Ashcroft’s acknowledgement and return of $50,000 in campaign contributions from Enron. But Sierra says, “We don’t see a need for a special prosecutor. “ BUILD THE BUSINESS Looking back on his years as a lawyer at Enron Corp., Mark Haedicke says he had the most fun when he helped set up the company’s trading operations more than a decade ago. Now he gets to do it again. But this time it’s for UBS Warburg, which bought the license to use Enron’s trading technology to run trading operations in North America. Haedicke and 15 other former in-house lawyers from Enron started new jobs Feb. 8 at UBS Warburg Energy after the investment bank received approval from U.S. Bankruptcy Judge Arthur Gonzalez to acquire the rights to Enron’s trading business. UBS Warburg Energy, operating as UBSWenergy.com, began to trade Feb. 11. It’s a big job for lawyers, he says, to build the business from ground zero. “It’s just a tremendous amount of work. Literally we expect to have thousands and thousands of agreements, and we are starting from scratch [with] our master agreements for financial trading, physical power trading [and] physical gas trading,” says Haedicke, former managing director and general counsel of Enron subsidiary Enron North America. He’s now managing director and general counsel of UBS Warburg Energy, which has operations across the street from Enron’s corporate headquarters, in Portland, Ore., and in Calgary. About 650 employees moved from Enron to the new trading company. The lawyers include Mark Taylor, Jeffrey Hodge, Elizabeth Sager, Michelle Cash and Peter Keohane, Haedicke says. He declines to name the other in-house lawyers. Haedicke says the lawyers have been preparing master agreements for the relationships between the new trading company and its customers. He declines to name any of UBS Warburg Energy’s customers, but says the new company’s traders are doing mostly gas and power trading right now. UBS Warburg will pay Enron 33 percent of its pretax profits from the trading business during the first two years of operation. Haedicke declines to discuss his role during his final weeks at Enron. LEAD PLAINTIFF At the Bob Casey Federal Courthouse located a few blocks away from UBS Warburg Energy’s trading floor, some other lawyers got some good news Feb. 15 from U.S. District Judge Melinda Harmon of the Southern District of Texas. Harmon selected the Regents of the University of California as lead plaintiff in shareholder securities litigation filed in the wake of Enron’s collapse. That gives nationally recognized shareholder securities firm Milberg Weiss Bershad Hynes & Lerach the sought-after — and potentially lucrative — job as lead firm in the litigation. Milberg Weiss’ California client beat out two other main groups for the role as lead plaintiff in the litigation, which includes more than 70 suits consolidated in federal court in Houston. The litigation includes shareholder securities fraud suits, suits filed by participants in Enron’s 401(k) plan who lost money as Enron’s stock dropped from the $90 range to pennies on the dollar, and shareholder derivative claims. In an order signed Feb. 15, Harmon says Milberg Weiss partner William Lerach “justifiably ‘beat his own drum’ in demonstrating the role his firm has played thus far in zealously prosecuting this litigation on plaintiffs’ behalf.” Back in December 2001, the firm sought an order to freeze about $1.2 billion in assets it alleges 29 current and former officers and directors of Enron reaped in insider trading proceeds during a time the company filed financial reports it later acknowledged were wildly inflated. Lerach also, with great fanfare, spiced up a hearing in January when he brought into the courtroom a box stuffed with papers that apparently had been shredded at Enron offices well after Derrick, Enron’s general counsel, had allegedly warned employees against it. Harmon appointed Milberg Weiss’ client as lead plaintiff while acknowledging in her order “the highly publicized criticism of Bill Lerach, which includes thus far unproven allegations of solicitation of clients by payment and higher fees.” The firm is reportedly under investigation by a grand jury in Los Angeles. Lerach did not return two telephone messages left at his office in San Diego. But Texas lawyers aren’t totally closed out of the high-stakes litigation. Roger Greenberg, a partner in Houston’s Schwartz, Junell, Campbell & Oathout, is local counsel for Milberg Weiss in Mark Newby, et al. v. Enron Corp., et al. He says Thomas Bilek, a partner in Hoeffner, Bilek & Eidman of Houston, is another member of the team. NO NEW LITIGATION On the same day Harmon gave the nod to Milberg Weiss, she handed Houston plaintiffs’ firm Fleming & Associates a big disappointment. Harmon signed an order barring the firm from filing any new Enron-related litigation without her permission. She also ordered the firm to dissolve a temporary restraining order obtained from 57th District Judge Pat Boone of San Antonio preventing former Enron executives Skilling, Fastow and Lay, and former Arthur Andersen partner David Duncan from transferring any property, funds or assets to third parties. “The harassing actions of Fleming’s law firm has necessitated the waste of substantial defense resources addressing their duplicative and uncalled for TROs,” Harmon wrote. G. Sean Jez, an associate at the firm, says they plan to file a mandamus with the 5th U.S. Circuit Court of Appeals to vacate Harmon’s order. Says Jez, “What they are forcing us to do is basically be part of the federal action.”

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