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Everybody wants a piece of Enron. A long list of creditors say the bankrupt Enron Corp. owes them billions. And an army of angry shareholders want compensation for the crippling losses they suffered, they say, because of the misdeeds of company insiders. And now those two sides are gearing up for combat over one murky, but potentially deep, pool of money in the Enron morass: hundreds of millions of dollars in assets still held by the company’s off-balance-sheet partnerships and other “special purpose entities.” It’s likely to be a zero-sum game, with the creditors and the shareholder-plaintiffs each grasping for whatever assets they can secure from the partnerships. The criminal travails of Arthur Andersen makes the focus on the partnerships more acute, since the accounting firm’s indictment and dwindling client list mean that it probably won’t be able to pay huge damages. “There’s going to be a strong interest in finding others who knew or should have known what was going on,” says a bankruptcy lawyer who is not involved in the case. “The bottom line is, you’ve got to find some deep pockets,” he says. Since December, when Enron filed for bankruptcy, at least 10 shareholder suits have named multiple Enron-spawned special-purpose ventures as defendants. Lawyers for those plaintiffs claim that the entities were used to deceive Enron investors, and ultimately contributed to the decimation in the value of their shares. But the company’s unsecured creditors, also eager to find sources of potential recovery, have begun to cast their own net over those entities. New York’s Milbank, Tweed, Hadley & McCloy, which represents Enron’s committee of unsecured creditors, has sent out nearly 63 subpoenas since Feb. 22, when U.S. Bankruptcy Judge Arthur Gonzalez of the Southern District of New York authorized the firm to dive for what may prove to be a trove of Enron assets. Milbank risk-management counsel Stephen Blauner confirms that his firm has issued subpoenas to dozens of Enron’s off-balance sheet creations. Milbank’s court filings reveal that the creditors are seeking documents and live testimony from entities such as Chewco, JEDI, LJM2, and the so-called Raptors, among many others. Milbank has also demanded records and testimony from law firms and other outside advisers: Vinson & Elkins; Fried, Frank, Harris, Shriver & Jacobson; Kirkland & Ellis; PricewaterhouseCoopers; and McKinsey & Co. have all been served, Blauner confirms. Subpoenas have also gone out to Jeffrey Skilling, Andrew Fastow, Michael Kopper, and several other former Enron executives. Enron was Vinson & Elkins’ largest client. Fried Frank provided the company with legal advice relating to some of its off-balance-sheet ventures. Kirkland & Ellis represented some of those ventures, including Chewco and the so-called LJM entities. Harry Reasoner, a Vinson & Elkins partner and spokesman, and Fried Frank managing partner Michael Rauch say that their firms will comply with the creditors’ subpoenas. A spokesman for Kirkland & Ellis declines comment. PricewaterhouseCoopers spokesman David Nestor says his firm provided Enron fairness opinions relating to two LJM entities, but never audited any Enron ventures. McKinsey spokesman Andrew Giangola says the consultancy was never retained to provide advice on Enron’s off-balance-sheet vehicles. FOLLOW THE MONEY Just how much the off-books enterprises are worth remains unclear — thanks in part to the complex ways that Enron structured some of them. Milbank’s Blauner says the creditors have not yet sent subpoenas to a few entities because Enron itself can’t figure out who controls them. But if LJM2 is any indication, the partnerships could harbor assets worth hundreds of millions of dollars. According to court records in a dispute over control of LJM2, which was originally formed by Enron’s ex-CFO Fastow and later run by another Enron officer, Kopper, the partnership attracted nearly $400 million from outside investors. The so-called Powers Report on Enron’s internal investigation indicates that LJM2 racked up phenomenal returns on deals with Enron. And in a Feb. 28 hearing in Delaware Chancery Court, Michael Goldman, who represents many of LJM2′s outside investors, told a judge that “hundreds of millions of dollars’ worth” of assets still remain in the partnership. King & Spalding partner Susan DiCicco, who represents LJM2′s current management, declines to comment on the value of its holdings. At the court hearing she said she was unsure of the value. LISTENING TO THE SHELLS Milbank’s Blauner says his partners and Enron’s lawyers have been sifting through records of the ventures, and he believes that while “a few may be shells,” most of them do in fact hold assets. He says he thinks the entities will prove to be “meaningful” sources of recovery for the creditors. Milbank’s subpoenas are aimed at discovering the assets and liabilities these ventures hold, and pinning down the nature of their relationships to Enron. Milbank also wants to know what roles lawyers, accountants, and consultants played in the entities’ creation and evolution. Ultimately, the creditors hope to persuade Judge Gonzalez to deem those assets part of Enron’s estate, rather than independently owned property, bankruptcy experts say. If the assets are corralled into Enron’s estate, they will in most cases be shielded from claims other than the creditors’. Since Enron’s creditors get first dibs on the company’s assets, and shareholders as a practical matter come last to the table in corporate bankruptcies, shareholder-plaintiffs hoping to wring cash from Enron’s partnerships would be unlikely to collect anything at all, says Arnold & Porter bankruptcy partner Michael Bernstein. But plaintiffs’ counsel say they plan to challenge any effort by Milbank to annex partnership assets. “We will be fighting it,” says Curtis Bowman, of Little Rock, Ark.-based Cauley Geller Bowman & Coates. Bowman, one of dozens of plaintiffs’ lawyers who represent investors with Enron-related losses, has already named Chewco, JEDI, Osprey, LJM and Raptor entities, and several other Enron ventures as defendants. Bowman says he’ll argue that while the ventures may have been controlled by Enron, and thus part of the “overall conspiracy” to rig its stock price, they were not in fact owned by Enron. And if they weren’t actually owned by Enron, he contends, they shouldn’t be deemed part of the company’s bankruptcy estate. Other Enron shareholders are taking a more cautious line. The University of California, the lead plaintiff in a shareholder class action against Enron, is expected to target several additional defendants, including some of the investment banks and lawyers who worked with the company. The university has already named Arthur Andersen. Milberg Weiss Bershad Hynes & Lerach, lead counsel in that action, is slated to file an amended complaint in Houston federal court on April 1. Trey Davis, a spokesman for the university, declines to identify the defendants who will be named. As for the Enron partnerships, he says only that “you would want to have access to the widest possible range of assets. We have been monitoring the activity in the bankruptcy court very closely and have, when appropriate, intervened there. We will continue that practice.” Beyond the off-balance-sheet entities themselves are their investors, another potential target for Enron’s creditors or shareholders. It is not clear who invested in many of the ventures, and some may not have any outside backers. But at least one of the entities, LJM2, won about $390 million in commitments from investors including major Wall Street banks and wealthy individuals, according to court records. Milbank’s Blauner says it is “premature to say whether we will ultimately pierce the corporate veil” and seek cash from any investors. “That’s why you have discovery.” The lawyers who advised Enron or its offshoot entities could be made targets as well, bankruptcy lawyers say, on malpractice or conspiracy-to-defraud grounds. While accounting firms are often forced to pay up in cases involving their failed corporate clients, law firms rarely do, notes Arnold & Porter’s Bernstein. “But where creditors are facing a dismal recovery,” he says, “they look outside the box, particularly where there are a lot of zeros involved.”

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