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Before taking questions from analysts during Dynegy Inc.’s conference call on Nov. 19, the troubled Houston energy company’s new chief executive officer, Bruce Williamson, stalled for a moment to introduce his general counsel. “I want to also let you know I am joined by … Ken Randolph,” Williamson told the Wall Street analysts before they hammered him with questions about the company’s finances and how he intended to “clean away the clouds” of all the regulatory investigations hanging over Dynegy. By breaking briefly to make the introduction, the CEO, who moved to Dynegy from Duke Energy Corp. in October, dispelled any doubts about the general counsel’s status at the company. Kenneth Randolph — despite recent staff cuts and a dramatic restructuring of his department — is firmly in charge of all legal affairs, two of the company’s outside lawyers say. Many of the top executives with whom Randolph worked to establish the company have exited recently as Dynegy’s troubles mount. “We have had a fair amount of management turnover,” concedes one Dynegy executive, who requests anonymity. Most significantly, Chuck Watson, the founder and former CEO of Dynegy, stepped down in May, shortly before the company’s chief financial officer Rob Doty turned in his resignation. Watson previously led a doomed attempt to buy Enron Corp. as it was collapsing. That failed merger attempt in November 2001 was among the first in a series of events that battered Dynegy’s stock, which has been trading often below $1 per share since Oct. 15. The New York Stock Exchange told the company in the second week of November that it may delist Dynegy because of its below-dollar price ranges. With the numerous questions from government regulators and plaintiffs lawyers that Dynegy must answer, the company has an authoritative top lawyer in Randolph, three lawyers say. “They’ve got a lot to do right now,” Robin Harrison says about Dynegy’s 45-lawyer legal department. Harrison, a partner in Houston’s Campbell, Harrison & Dagley, represents plaintiffs who sued the company in the U.S. District Court for the Southern District of Texas. In the case Harrison’s clients are pursuing, Constance K. Schied, et al. v. Dynegy, et al., the plaintiffs allege the company mishandled employees’ 401k investments. Dynegy denies the allegations. Under Randolph’s direction, the Dynegy legal department has stepped up to the challenge, say three outside lawyers. “I think [Randolph is] doing a fine job as general counsel,” says Joseph A. Cialone II, a partner in Houston’s Baker Botts who represents Dynegy. Even a government lawyer who investigated the company has kudos to pass along to Dynegy’s legal department under Randolph’s leadership. “We had no problems with them. They were extremely cooperative,” says Spencer Barasch, the associate district administrator in charge of the Securities & Exchange Commission’s enforcement regional office headquartered in Fort Worth. In September, the company reached a $3 million settlement with the SEC after the agency investigated allegations of fraud involving a natural gas deal that allegedly improperly increased Dynegy’s reported cash flow and cut taxes. The company subsequently restated its earnings. Dynegy announced in September that the SEC had entered a cease and desist order against the company after an investigation of some of the company’s accounting procedures and round-trip electric trades. The company said it paid a $3 million fine and consented to the terms of the SEC settlement without admitting or denying the SEC’s findings or allegations. Randolph tapped Cialone to handle the SEC investigation and then later to oversee the coordination of the company’s response to subsequent questions from other government regulators. Historically, Houston’s Vinson & Elkins served as Dynegy’s regular outside counsel and continues in that role, says Keith Fullenweider, the company’s deputy GC and senior vice president. Dynegy first turned to Baker Botts when the merger with Enron was being discussed. V&E represented Enron and therefore was conflicted out of representing Dynegy in those discussions. Fullenweider says the company enlisted for its merger talks Baker Botts, which had historically represented the company’s underwriters. Fullenweider, however, stresses that V&E continues to serve as regular outside counsel on all matters other than the regulatory investigations. “Our work with them is way up this year,” says Fullenweider. ASSIGNMENT BROADENS Now, as other government regulators and federal prosecutors begin making inquiries of the company, Cialone’s assignment is broadening. Cialone says he is coordinating the other outside lawyers who are working on the company’s response to the Commodities Future Trading Commission’s and the Federal Energy Regulatory Commission’s investigations of Dynegy’s practices related to gas-price indexes and other trading practices. Randolph hired outside lawyers to respond to subpoenas issued to the company by the U.S. Attorney’s Offices in San Francisco and Houston. Randolph asked Larry Finder, a partner in the Houston office of Haynes and Boone and a former U.S. Attorney, to respond to questions about allegedly erroneous data that Dynegy conceded its employees gave to trade publications. In San Francisco, Pillsbury Winthrop was retained to respond to broad-ranging questions about the energy company’s practices in that state. The company retained Ken Rosenzweig, a partner in Mayer, Brown, Rowe & Maw in Chicago. Rosenzweig says outside counsel and in-house lawyers “are all cooperating fully.” Dynegy also has retained Skadden, Arps, Slate, Meagher & Flom in Washington, D.C., to help with the FERC investigation. The company has maintained its relationship with V&E, Houston partner Mark Kelly says. Although V&E is not representing Dynegy in any of the litigation or inquiries, the firm’s lawyers continue to do transactional and restructuring work for Dynegy, Kelly says. Internally, Randolph says, changes have been made to his department. “We have had some reductions in the legal department,” Randolph says. “We’ve gone to a more decentralized system, with direct reporting lines from the operating units to the CEO.” In addition, about one-third of the company’s legal and regulatory staff has been cut in the past month, Randolph says. He had 78 employees in his department and now has 52. But only a handful of those who have left, Randolph says, were lawyers. The majority of those departing were professionals who worked with the marketing and trading of third-party energy transactions, an industry the company is in the process of leaving. With the long list of legal tasks and the reduced staff, Randolph says, “We clearly have to do more with less people. We’re leaning pretty heavily on outside counsel.” Many of the government regulators’ and plaintiffs’ questions, Randolph says, are overlapping. Therefore, the various outside lawyers can borrow from each other’s work to save time and money. But Randolph says the company spends significant sums to defend itself on the various fronts. “We’ve incurred additional costs. I’m not gonna say how much.” As one of the top-paid lawyers in the state (in 2001 he earned $4.65 million, including the present value of his stock options), the Dynegy general counsel has been a fixture at the Houston company for 17 years. “He has an institutional memory,” Cialone says about Randolph, “… and he has done a good job representing the company through all this.”

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