America's New War Against Enron

Lawyers go gunning for corporate terrorists

Its former leaders are in seclusion, protected by elite bodyguards and high-tech security systems. Only a hard-core band of followers continues to staff its shattered shell, as a chorus of condemnation around the world denounces unethical strategies that wreaked havoc on tens of thousands of unsuspecting citizens. Any day now, the Bush administration will be adding another name -- Enron -- to the list of corporate states sponsoring economic terrorism.

Al Qaeda killed more than 3,000 U.S. civilians in minutes. Enron's energy traitors were a bit more humane and self-serving. Not having the stuff of suicide bombers, Enron's executive pilots took full advantage of golden parachutes to bail out of their high-flying corporate jet after setting the craft on a course to financial oblivion. In a business time frame, Enron pancaked faster than the twin towers.

CEO Ken Lay and former top execs Jeff Skilling and Andrew Fastow landed safely at their River Oaks redoubts equipped to hold out indefinitely and in high style. Employees and shareholders found themselves grasping retirement accounts and portfolios stuffed with near worthless stock.

Berg was among the first to detect cracks in the Enron facade.
Deron Neblett
Berg was among the first to detect cracks in the Enron facade.

The provisional leadership running the now bankrupt corporation then put less valuable workers out on the streets with no severance, three weeks before Christmas. Those needed to staff the gutted enterprise got enough C rations -- cash bonuses -- to stay fed and at their posts for a while longer. They had to promise to hunker down for 90 days, no matter how bad things get.

But the victims aren't taking it lying down. Since September 11, America's mind-set of "don't get mad, get even" applies to the home front as well as Afghanistan. And a whole army of well-trained court warriors in Houston is just itching to try its hand at smoking the Enron villains out of their comfy financial caves and tunnels. These moolah-hideen are more commonly known as plaintiff's lawyers.

Formerly the object of Republican scorn as tort tarts sucking the blood of big business, attorneys are suddenly right up there with firefighters as heroes, protecting the common man from Lay and company. Their motto: "Betcha can't eat just one."

The Houston law firm of Pearson & Pearson knew just how to go about recruiting troops with the right stuff. It issued communiqués on country-tough KIKK radio, soliciting victims for lawsuits. The response was immediate and overwhelming.

"I just got off the phone with one of the company's pilots," reports Jim Pearson, a partner in the firm. "Those guys had their own air force. He told me, 'If you send me a packet out today, this is where I live, but I don't know how long I'll be here.' " The pilot's life savings had evaporated over the last six months.

"They've been hit on all fronts," says the attorney. "If it was just getting fired, that would be one thing. And if it was just losing money in the stock market like a bunch of people have done this year, that would be another thing. It's like getting cut off at the head and feet at the same time. You're just left with the torso."

Pearson's firm is working with mega-plaintiff's attorney George Fleming to structure mass tort cases against Enron and its leadership. Those differ from class-action lawsuits in that they seek individual awards for clients, rather than a lump sum settlement to be divvied up equally among participants. (What's also interesting, the Fleming team includes George Bishop, freshly released from prison for tax evasion, now knocked down from influential lawyer to paralegal.)

After taking the temperature of Enron's victims, Pearson says the Enron executives are wise to take security precautions.

"I don't want to see these men hurt, but put yourself in these employees' place… Their entire life has just vaporized, and I don't know what happens when your life vaporizes. Each person reacts differently, and that's a lot of people to anticipate a lot of reactions about."

One of the first Houston attorneys to hoist a red flag at Enron was veteran litigator David Berg, Mayor Lee Brown's appointee who chaired the Houston Area Water Corporation. Berg came under intense pressure last winter from city officials and lobbyists to award Enron subsidiary Azurix a water purification plant contract potentially valued in the multibillions. Berg dug in his heels and with the support of other board members successfully opposed Azurix.

Berg says he detected disturbing cracks in the corporation's financial facade during negotiations. He recalls Enron chairman Lay balking when Berg demanded that the company guarantee Azurix's billion-dollar debt.

"What that said to me was, here's a company with a $90 billion cap that can't figure out a way to consolidate that loss onto their financial statement and cover it, and then get a job that would have been worth $3 billion ultimately."

Berg had just finished negotiating a legal settlement in which Marriott absorbed a $425 million payout without any effect on its stock value. Berg reasoned that Enron -- if its financial statement was accurate about assets -- shouldn't have hesitated to cover Azurix's debt. He concluded that company officials were hiding something.

Since Enron's collapse, the lawyer says, several former Azurix supporters have now issued apologies to him. Perhaps the most graphic occurred two weeks ago outside La Griglia restaurant. There Berg happened to encounter City Attorney Anthony Hall and former Azurix lobbyist Dave Walden. While Hall made bowing gestures, Walden actually stooped over and feigned kissing the attorney's buttocks.

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