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For a while there, it looked as though Vinson & Elkins was en route to big trouble. The firm’s publicity was unremittingly bad, as V&E’s close ties to the disgraced Enron Corp., its onetime biggest client, were reported and rehashed. A special committee of Enron’s board faulted V&E for failing to bring “a stronger, more objective, and more critical voice” to Enron’s public disclosures about the company’s shady partnerships. Congressional and SEC investigators squinted suspiciously at the firm. Clients were watching developments anxiously. Associates who checked Internet message boards were reading a prediction that 50 to 75 V&E associates would be laid off. Headhunters circled so greedily that even Harry Reasoner, the renowned litigator and former managing partner of Vinson & Elkins, got a call asking if he was interested in leaving the firm. Reasoner wasn’t interested — and indications from clients, V&E associates, and Houston legal market cognoscenti show that, so far, Reasoner’s loyalty to Vinson & Elkins is the rule, not the exception. Reasoner, now the firm’s designated Enron spokesman, insists that, horrible publicity aside, Vinson & Elkins is doing just fine. Revenue in January and February of this year was $52.4 million, up $1.2 million from the first two months of last year, despite the loss of Enron’s $35 million in annual billings. Associate attrition rates have held steady, and only one partner has left in the last few months, to go to a plaintiffs firm. Three lateral partners, meanwhile, have joined the New York office. The recruiting season was already over when the Enron scandal hit V&E, but, so far, no incoming first-year associates have told the firm that they’ve changed their minds about starting in the fall. “By all accounts the firm is doing perfectly well,” says legal recruiter Lee Allbritton. “No one, other than the press, perceives that they may encounter difficulties related to the Enron debacle.” Of course, V&E hasn’t exactly put the Enron scandal behind it. In addition to Reasoner — who runs interference with the press for his successor as chairman, Joseph Dilg, who was Enron’s principal V&E contact — the firm has two litigators spending most of their time marshalling papers to comply with government document requests. The firm’s outside counsel, John Villa of Washington, D.C.’s Williams & Connolly, has assured V&E that “there’s no legitimate basis for suing us or blaming us,” Reasoner says, but the firm has not met with Enron’s bankruptcy lawyers or creditors committee lawyers to see if they share that rosy view of V&E’s Enron work. Unintentionally or not, Enron cleared the way to sue V&E on February 12 when it withdrew an application to have V&E serve as special counsel in its bankruptcy. After the February 2 release of the report of Enron’s special committee, which questioned V&E’s review of Enron’s public disclosures, the firm did send out a letter to its clients, “explaining the situation to the extent we could,” says Reasoner. Clients, for the most part, say that they didn’t even need the reassurance. “They’ve always been, and continue to be, an ‘A’ firm,” says Donald de Brier, general counsel of Occidental Petroleum Corporation. “A law firm can only look at the facts you give them, the context you give them.” Adds Newton “Trey” Wilson, general counsel of Forest Oil Corporation: “I’ve not seen anything yet that suggests to me that Vinson & Elkins did anything unethical or illegal, and I’ll be shocked if it’s determined that they did.” V&E is in nothing like the straits of Enron’s former accountants at Arthur Andersen LLP, where the threat of criminal prosecution and dissolution of the firm sent major clients fleeing. V&E’s clients, in fact, have been vocal in the firm’s defense. In-house lawyers for both Duke Energy Corporation and Dynegy Inc. (Enron’s erstwhile merger partner) spoke out in support of their V&E lawyers at a well-attended conference for energy lawyers in Houston on February 25. “It’s not a lot of fun to read about the firm,” says Dynegy’s Keith Fullenweider, who is a former V&E partner. “[But] we believe very much in V&E and the work they’ve done for us.” One client, British Gas Services, Inc., did “look closely at V&E when Enron came up,” says vice president and corporate counsel Cynthia Masters. “We started closely monitoring [V&E's performance], as with all external counsel.” Masters says, however, that British Gas concluded that Vinson & Elkins was “making the marks,” and has decided to continue using the firm for regulatory work. All of which makes it easier to believe assurances not only from management but from associates at the 855-lawyer firm that morale is surprisingly high. “Amazingly, the firm is doing well,” says one. “Most people are relatively busy.” V&E’s Reasoner likes to look at the examples set by other firms that have survived associations with such radioactive clients as Drexel Burnham Lambert Group, Inc. (New York’s Cahill Gordon & Reindel and Los Angeles’s Latham & Watkins) and Charles Keating, Jr. (New York’s Kaye Scholer). “It’s not fun,” Reasoner says, “but we have great confidence we won’t have trouble weathering the storm.” For now, anyway. V&E’s clients say that they’re still monitoring Enron developments, waiting for the whole story of V&E’s role to come out. “Anything can happen,” concedes one V&E associate. “Six months ago, everyone thought Enron was a great company.”

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