Diva of the Deal

How Enron's high temptress turned massive projects into a $2 billion wet dream for the company -- and an estimated $100 million profit for herself

But even if the Buenos Aires debacle wasn't going to kill Azurix, Rebecca Mark's free-spending ways were. "Azurix operated as if it were a Fortune 500 company from the beginning," said Colin Skellett, the CEO of Wessex. "The water business is pretty much a nickel-and-dime business. Your whole focus is on driving out every bit of cost. To them, expenses didn't seem to matter. In the first year, we were bemused. We thought they knew what they were doing."

Ah, but that's just it. Graduates of the Harvard Business School act like they know what they're doing. They went to Harvard, didn't they? But when it came to managing cash and cash flow, Rebecca Mark was just as clueless as her fellow Harvard Business School graduate: Jeff Skilling. Like Skilling, Mark spent cash as though she owned a currency printer.

Mark decided that Azurix, which had offices in Houston's Three Allen Center, needed a new stairway between the ninth and tenth floors. So the company installed a beautiful, curved stairway with glass panels under the banisters. Insiders say it cost $1 million. The company spent $5.5 million building a swank new office in London, a few blocks from Big Ben. Azurix signed a 15-year lease on the 23,000-square-foot office that was going to cost the firm about $130,000 a month. "It was meant to be the European headquarters for Azurix, so it was definitely top-of-the-line space," commented a source who managed the company's facilities. Azurix never moved in.

Azurix also planned to spend tens of millions of dollars buying Synagro Technologies, a Houston company that processes sewage sludge. Synagro was going to be an integral part of Azurix's growth plan. But in late October 1999, Azurix suddenly called the deal off, apparently after company officials realized they couldn't afford to buy Synagro. That story played out with Enron later paying Synagro $6 million to settle lawsuits related to Azurix's actions.

The company took another big hit in November 1999, when Britain's director general of water services announced a 12 percent rate cut for all of Azurix's customers in southern England. The rate cut had been rumored for a long time and it quickly began hamstringing the company's cash flow.

On November 4, 1999, Azurix's stock dropped by 40 percent after the company warned that it would miss its fourth-quarter profit targets. The company blamed the shortfall on high start-up costs. Indeed, in a little more than six months, Azurix had burned through nearly all of the $695 million it had raised in its initial public offering. The cash shortage was so bad, there were questions about whether the company would even have enough money to make payroll.

Nevertheless, Mark didn't spare expenses when it came to her salary. Azurix paid her $710,000 a year to head a company that was losing money hand over fist. The company also made sure she didn't have to fly with commoners. In 1999 alone, the company gave Mark an additional $101,146 to cover her personal use of the company's aircraft.

In early 2000, the Azurix board authorized Mark's plan to save the company by getting another capital infusion from Wall Street. The company floated $599.8 million in junk bonds, one-third of which paid 10.75 percent interest, in an effort to stabilize the business and continue buying new utilities around the world.

It didn't work. By the summer of 2000, Azurix was drowning in red ink. A few months earlier, an algae bloom in one of the company's water treatment plants had fouled Buenos Aires's drinking water. The entire city was in an uproar. Revenues from Argentina, once a sporadic stream, were now a bare trickle.

The handwriting was on the wall. And on August 25, 2000, Mark resigned as chairman and CEO of Azurix and gave up her seat on Enron's board of directors. But Mark's arrogance didn't subside with the failure of Azurix. Nor did her belief in her ability to spin the facts. In early 2002, she told Vanity Fair that the water company "wasn't a disaster. We couldn't survive as a public company because we didn't have earnings sufficient to support the growth of the stock."

Oh.

So Azurix wasn't a disaster. It just didn't have "earnings sufficient to support the growth of the stock." That's a beautifully crafted phrase to describe a dog of a company that should never have gone public in the first place. In the end, Mark's vision -- the commodification of water, water trading, yet more fawning profiles of her in the business press -- landed with a stinging belly flop. And Azurix, the company that was to "become a major global water company," lasted as a publicly traded entity for just 21 months.

By December 2, 2001, when Enron filed for bankruptcy, Rebecca Mark was long gone. And big rich. Three months before she quit Azurix, she sold 104,240 Enron shares, a move that brought her total stock-sale proceeds at Enron to $82.5 million. (That figure does include the cost of the stock to Mark, therefore the amount Mark realized from the sales is likely somewhat lower.) Counting all the salary, stock options and loans, Mark probably banked somewhere in the neighborhood of $100 million. That's a truly staggering sum when you consider that her misguided deals in India, Britain, Argentina and elsewhere cost investors at least $2 billion.

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