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Kristina M. Mordaunt, a former Enron Corp. in-house lawyer who was fired after she revealed she made an exceedingly large and speedy profit off a small investment in an allegedly questionable side deal at Enron, is likely feeling heat from government prosecutors breathing down her neck. Former Enron Chief Financial Officer Andrew S. Fastow’s millions in profits from off-balance-sheet entities dwarf Mordaunt’s. But the $1 million allegedly scored in about three months by Mordaunt on a $5,800 investment in Southampton Place, a limited partnership set up to buy out a bank’s interest in one of Enron’s controversial special-purpose entities, has endlessly fascinated others. Enron lawyers and criminal defense lawyers remain mystified about how she allegedly could engage in such a dubious transaction. With the Enron Task Force’s detailed criminal complaint against Fastow filed on Oct. 2, those lawyers now wonder out loud what price Mordaunt, a glamorous woman who had convinced some she had legitimate aspirations to become Enron’s general counsel, will pay for her profits and once-close professional ties to Fastow. Mordaunt didn’t rank among the top executives at Enron, and she didn’t architect some of the company’s allegedly questionable off-balance-sheet financial structures. She made her huge profit from a small investment in Southampton Place. After she disclosed her investment in Southampton to former Enron General Counsel James V. Derrick Jr., the company fired Mordaunt in November 2001. While she’s stayed largely out of the public eye in 2002, Mordaunt drew attention in August when federal prosecutors filed an information against former Enron Managing Director Michael Kopper, who struck a plea bargain and agreed to testify for the government. Kopper agreed to give up a total of $12 million to the Department of Justice and the Securities and Exchange Commission, and he pleaded guilty to two counts of conspiracy to commit wire fraud and money laundering. But the government also indicated in Kopper’s information it would go after millions of Fastow’s assets and the assets of some others, including $1.67 million in two of Mordaunt’s bank accounts, her $356,000 house in the Afton Oaks subdivision in Houston and her husband’s 2000 Lexus. Because of her former position as a lawyer who worked on some Enron deals with Kopper and Fastow, and because of the approximately $1 million she was paid from her $5,800 investment in Southampton, prosecutors are likely looking closely at Mordaunt, say five defense attorneys in Texas, including some with Enron clients. “She would appear to be at the level where you would think they would be cutting deals,” says Daniel Hedges, a former U.S. Attorney for the Southern District of Texas and a partner in Porter & Hedges. She already may have a deal, speculates Christopher Bebel, a former SEC and DOJ prosecutor who has been closely following the work of the Enron Task Force. “She is the perfect candidate to be a government witness, and in all likelihood, because of her educational background and her familiarity with the underlying transactions, she would be a quintessential government witness,” says Bebel, a partner in Shepherd Smith & Bebel of Houston. Even though Mordaunt profited personally from one of the special-interest partnerships that prosecutors say helped Enron allegedly defraud shareholders by masking the company’s true financial condition, Bebel says she would be a sympathetic witness and would have a good chance at acquittal. “Therefore the government is going to make use of her by conferring immunity upon her and utilizing her testimony in securing Fastow,” he says. Andrew Weissmann, an Assistant U.S. Attorney in New York and a member of the Enron Task Force, declines to say who is talking to the task force. Mordaunt’s lawyer, R. Hayden Burns, a partner in trial firm Burns, Wooley, Marseglia & Zabel of Houston, did not, before presstime on Thursday, return three telephone messages seeking comment. Mordaunt did not return a message left at her home. But now may be the time for Mordaunt to strike a deal if she’s going to do it. Just as Kopper’s statements in court implicated Fastow, the highly detailed criminal complaint prosecutors filed against Fastow on Oct. 2 seems to target a number of former Enron executives by position, if not by name. The complaint against Fastow, United States of America v. Andrew S. Fastow, No. 02-889-M, details the former CFO’s role in many of the now-familiar special-purpose entities that Enron allegedly used to inflate its profits, such as Chewco and the LJM entities. The complaint alleges Fastow, Kopper and others devised a scheme to enrich themselves while enabling Enron to maintain secret control over assets it sold to allegedly independent SPEs. It also alleges that Enron’s board of directors relied on false representations when giving its approval to Fastow’s role as managing partner of two special-purpose entities, LJM1 and LJM2. He’s charged with mail and wire fraud, money laundering, conspiracy and aiding and abetting, and faces a maximum of 140 years in prison. The complaint is based in part on statements from 11 confidential sources, including two former Enron employees who were described as “nominee investors” for Fastow. Based on that description, Mordaunt could be one of those confidential sources. There is precedent. She gave at least two interviews to the Wilmer, Cutler & Pickering lawyers who assisted the special committee of the Enron board to prepare the Powers Report, which addressed transactions between Enron and the special-purpose entities allegedly created and managed by Fastow and other Enron employees. A GO-GETTER Before the downfall of the Houston energy company, Mordaunt inspired envy and admiration as she thrived and excelled in the now legendary rank-and-yank culture of Enron. A 1984 graduate of the University of Houston Law Center, Mordaunt joined Houston’s now-defunct Butler & Binion as an associate, where she did bond work and financings. She joined Enron in 1993 to work in Enron Gas Services, which later became Enron Capital & Trade, according to an account of an interview Mordaunt gave to Wilmer Cutler lawyers in January. Mordaunt worked for several years in the section of Enron’s legal department that handled financings, and in January 1999, Mordaunt became general counsel of structured finance at Enron. Later that year, she became general counsel at Enron Communications, which later became Enron Broadband Services. By August 2001, she accepted an offer to become general counsel for a corporate development group. In that job, Mordaunt told Wilmer Cutler lawyers during the interview in January, she reported to Derrick, the general counsel, and Fastow. A lawyer who knew Mordaunt at Butler & Binion says the job at Enron had a transforming effect on the lawyer who started her practice in the stodgy municipal bond area. “She looked more of the role of a New York-style general counsel, even though she was in Houston,” says the same lawyer who wishes to remain anonymous. An Enron lawyer, who also spoke on the condition of anonymity, describes Mordaunt as slender and striking and says she carries herself like a model. Mordaunt had a terrific reputation at Enron, according to an in-house lawyer at Enron who did not want to be identified. The in-house lawyer says Mordaunt was a go-getter who aspired to become Enron’s general counsel and knew how to work office politics to improve her standing at the company. Her standing, however, was directly tied to her close professional relationship with Fastow, one of the most powerful executives at the company, an in-house lawyer says. “I think Kristina was very committed to Andy, Kopper and [Enron] Global Finance guys,” the in-house lawyer says. “I don’t believe Kristina, however, did anything that in her estimation she thought was illegal.” Mordaunt told Wilmer Cutler lawyers that Fastow was not a friend but conceded she had worked closely with him. At one point, she described an occasion when Fastow screamed at her and suggested that wasn’t the only time. She told the Wilmer Cutler lawyers he was just venting, according to notes of her interview. Notably, when she accepted the broadband job in 1999, Mordaunt put distance between Fastow and herself. Her shift away, an in-house Enron lawyer says, allegedly disappointed Fastow, who wanted Mordaunt to stay with his finance group. “She wanted to go to Enron Broadband so she could round out her r�sum� on the way to become GC,” the in-house lawyer says. The in-house lawyer, who worked closely with Mordaunt, says he believes Mordaunt had reconciled in her mind she did nothing wrong by investing in Southampton and was simply being rewarded for her hard work. But he also is perplexed why Mordaunt didn’t raise questions after $1 million was wired to her account. “There should have been a pause. Maybe this isn’t kosher,” the in-house lawyer says. Mordaunt professed her naivety about Southampton during her interview in January with the Wilmer Cutler lawyers. She conceded during the interview she should have asked more questions about the Southampton deal before investing. She told the interviewers “hindsight was 20/20, and no one would make the same investment today.” Mordaunt told the Wilmer Cutler lawyers that Kopper approached her during a brief conversation in February or March of 2000 about investing in Southampton, telling her that he and Fastow were putting together a limited partnership to buy a portion of the interest in the LJM partnership from London’s NatWest bank (National Westminster Bank, now the Royal Bank of Scotland). She says she agreed to participate after finding out she would have to put in less than $10,000 and determining LJM was doing no new business with Enron, and the partnership was limited. Mordaunt told the Wilmer Cutler lawyers she only spoke with her husband about the deal. Mordaunt’s husband, R. Vance Ulsh Jr., is an administrator at a private school in Houston. She says she invested her money in March 2000, and she heard nothing from Kopper about the investment until May or June, when he called her for wire transfer instructions. She claimed to be surprised to learn from Kopper she would make so much money on the investment and told the Wilmer Cutler lawyers she realizes, in retrospect, that she didn’t ask enough questions about the deal and was too trusting. She said she didn’t know precisely why she was asked to invest, telling Wilmer Cutler lawyers she couldn’t get into Fastow’s head to understand why he had selected her to receive the lucrative investment offer. But she told the lawyers working on the Powers Report she never asked for, and never provided anything in return for, the Southampton investment and was not working on any LJM deal at the time. Mordaunt and her lawyer, Burns, practiced together at Butler & Binion in Houston. But Burns does civil litigation, and it’s unclear if Mordaunt has hired a criminal defense attorney. If she has, it’s not general knowledge in Houston criminal defense circles. She may not need one, though, if she’s already struck a deal with the federal prosecutors, contends Bebel. He says the prosecutors already may have a deal with Mordaunt and may have frozen her assets as a part of an agreement and to be able to prove to a jury they aren’t giving up the farm to secure her testimony. “She’s a bit player, but she profited,” he notes. But the Enron Task Force prosecution isn’t all Mordaunt has to worry about. Mordaunt is also a defendant in the shareholder securities class-action litigation pending in U.S. District Judge Melinda Harmon’s court in Houston. An Enron lawyer and another Houston lawyer who knows Mordaunt from their Butler & Binion days say they have had chance meetings with Mordaunt in the months since she left Enron and say she is not acting nervous about her situation.

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