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Dozens of law firms have been roped into the ever-widening bankruptcy probe of the Enron Corp. as targets of an ambitious new discovery campaign launched by a court-appointed investigator. R. Neal Batson, who in May was tapped by the U.S. trustee overseeing Enron’s bankruptcy to unearth the roots of the company’s failure, revealed in an Aug. 1 court filing that he aims to subpoena Enron-related documents from 45 law firms. Among the firms tagged by Batson are sprawling multinationals such as London-based Clifford Chance, as well as much smaller firms such as Bailey & Glasser, a four-lawyer shop in Charleston, W.Va. Houston’s Vinson & Elkins and Chicago’s Kirkland & Ellis, the two law firms that already have been sued by Enron shareholders for their work for Enron or on Enron-related deals, are on Batson’s list of discovery targets. Both firms have denied wrongdoing, and Batson’s court filing does not accuse any law firm of malfeasance. But for many others, the filing marks the first time they have been publicly identified with the disgraced company. Batson wants virtually every scrap of information the firms harbor that touches on Enron and its infamous special purpose entities, or SPEs. Along with the law firms, Batson also named dozens of financial institutions, insurers, and Enron insiders. The court filings also signal an escalation in Batson’s work. As the examiner in Enron’s bankruptcy, the Alston & Bird partner is charged with finding any misappropriated assets that can be recouped by the company. Batson is slated to produce a report on his investigation later this month. At hearing on Thursday, Judge Arthur Gonzalez, who is presiding over Enron’s Chapter 11 proceeding in the U.S. Bankruptcy Court in the Southern District of New York, indicated he would grant Batson’s discovery request. That ruling is expected this week. For several years leading up to the company’s failure, Enron had been Vinson & Elkins’ largest client. Kirkland & Ellis did not represent Enron, but did advise its disgraced former chief financial officer, Andrew Fastow, and Fastow’s one-time deputy, Michael Kopper, on several of the partnerships they fashioned to do deals with Enron. Last month, Kopper pleaded guilty to fraud relating to these deals. Now Batson’s wide-ranging investigation could force these firms, along with the other 43 on his discovery list, to divulge a host of internal records. According to lawyers familiar with the matter, firms that knew or had strong reasons to suspect that any Enron-related deals were designed to mislead investors or unjustly enrich company insiders could face shareholder suits and government investigations, as well as malpractice claims by Enron’s creditors. “The examiner and the creditors are raking over the ashes, and I’m sure whatever there is to be found will be found,” says John Nolan, a partner at Day, Berry & Howard. The 220-lawyer Hartford, Conn.-based firm appears on Batson’s list. Nolan says Day Berry never represented Enron, but did advise primarily domestic banks that lent money to Enron-related entities. He notes that the deals his firm worked on were “the plainest of plain vanilla transactions.” RECEIVING END Batson’s motion asserts that each of the 45 firms “are or have been involved with various transactions with the debtors or the SPEs, based on information provided by the debtors to the examiner.” Batson declines comment, citing an April order from Judge Gonzalez that prohibits the examiner from discussing his investigation with the press. Lawyers from a few of the firms identified by Batson say their dealings with Enron were minor and totally legitimate. Several other firms declined comment, citing client confidentiality and attorney-client privilege. Twenty-one firms did not return phone calls. At New York-based Seward & Kissel, partner M. William Munno says his firm advised two banks that played a “ministerial” role in two securitization deals involving the controversial Enron SPEs known as Marlin and Osprey. Munno says he’s collecting documents on those deals in order to respond to an anticipated subpoena from Batson. C. Peck Hayne Jr., a partner at Gordon, Arata, McCollam, Duplantis & Eagan, in New Orleans, says he thinks his firm landed on Batson’s list as a result of some work the firm did for “Enron entities” as recently as last fall. In connection with certain mineral leases, he says, his firm provides advice on “esoteric questions of mineral law.” Hayne says he’s unsure how his firm’s work could help Batson’s cause. “I guess pretty soon we’ll get a subpoena, then we’ll give him some stuff and see if that’s what he wants,” Hayne says. Other firms are less amenable to Batson’s discovery effort. “We’re not in the business of turning our clients’ private matters over to anybody,” says James Paul, Clifford Chance’s New York-based general counsel. He predicts Batson’s subpoenas, when they do issue, will prompt “much more substantive, serious objections.” Batson’s Aug. 1 court filing singles out for particular scrutiny two law firms — Vinson & Elkins and Mourant du Feu & Jeune. In his lengthy request for documents from current and former Enron officers and directors, Batson specifically requests information about Vinson & Elkins’ handling of an internal investigation at the company. The law firm undertook that investigation last fall at Enron’s request after Sherron Watkins, a company employee, warned former Enron CEO Kenneth Lay that deceptive accounting and conflicts of interest could damage the company. Vinson & Elkins has been criticized for its handling of the investigation, which members of Congress have claimed was a whitewash. The firm has denied that characterization. Among other things, Batson’s Aug. 1 filing indicates that he plans to seek from the Enron insiders “[a]ll documents concerning any oral or written presentations by Vinson & Elkins regarding the Sherron Watkins allegations,” along with all documents relating to the firm’s presentations to Lay and to the company’s audit committee. “We are pleased to cooperate with the examiner,” says Harry Reasoner, a senior V&E partner who has been serving as the firm’s spokesman on Enron matters. “We want all the facts to come out.” Unlike Vinson & Elkins, Kirkland & Ellis is not named in any of Batson’s document requests, although he does seek “all documents concerning communications with any ‘personal counsel’ retained by any officer and director.” Laurence Urgenson, the Kirkland D.C. partner who has been speaking for the firm on Enron matters, declined to comment on Batson’s discovery push. Vinson & Elkins and Kirkland are waiting for the federal judge overseeing the Enron shareholder litigation in Houston to rule on their requests to be dismissed from the litigation. It’s not clear when the judge will rule on those motions. CROSSING BORDERS In questions to several insurance companies, Batson seeks details of the role played by Mourant du Feu & Jeune in the now infamous Enron SPE known as Mahonia. Mourant is a leading structured finance firm in Jersey, an offshore tax haven in the Channel Islands. According to court records, Mourant structured Mahonia in Jersey. Mahonia and the allegedly deceptive energy trades it conducted to benefit Enron have been the subject of criticism from congressional investigators and have contributed to the intense scrutiny of J.P. Morgan Chase, the bank that helped create the venture, along with other investment banks that advised Enron. Michael Oke, a London-based spokesman for Mourant, says the firm “will not be filing an objection [to Batson's discovery effort] and will continue to cooperate with all investigations.” Batson may face a hurdle in obtaining information from Mourant and other firms and businesses outside the jurisdiction of the U.S. bankruptcy court. In order to compel foreign businesses to comply with any subpoenas, lawyers close to the action say, Batson may have to persuade local authorities to enforce them. That could be a challenge in some parts of the world, these lawyers say, and may be particularly difficult in countries that attract business from companies seeking shelter from U.S. taxes. Batson may also face resistance from some non-U.S. firms because of their local rules regarding the attorney-client privilege. Lawyers at two non-U.S. firms say they’re concerned that if they comply with a subpoena from Batson seeking confidential information about a client, they may find themselves vulnerable to a malpractice claim or ethics complaint based on the rules in their own jurisdiction.

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