Judge signals approval for independent monitor for Enron investigation

NEW YORK (AP) _ A federal judge has approved a revised employment contract for Enron Corp.'s acting chief executive and tentatively agreed to let an independent examiner investigate the company's

Friday, April 5th 2002, 12:00 am

By: News On 6

NEW YORK (AP) _ A federal judge has approved a revised employment contract for Enron Corp.'s acting chief executive and tentatively agreed to let an independent examiner investigate the company's collapse.

The revised contract approved Thursday by Judge Arthur J. Gonzalez sets acting CEO Stephen Cooper's compensation at $1.32 million a year while he helps the energy company emerge from bankruptcy. The contract proposed by Enron in January was revised to satisfy concerns raised by the Securities and Exchange Commission and various creditors.

While an official ruling on the independent examiner is not expected until next week, Gonzalez agreed in principle with requests made by the SEC and lawyers representing pension funds that lost billions of dollars in Enron stock, a lawyer familiar with the situation said. In addition to probing the Enron meltdown, the examiner would protect shareholders' interests throughout the bankruptcy process.

The examiner's investigation will focus on Enron's questionable partnerships, its accounting and any companies involved in those transactions, said Andrew Entwistle of Entwistle & Cappucci LLP, the law firm representing the Florida State Board of Administration, which is seeking $334 million from Enron relating to investment losses.

``We're very pleased and so is the SEC,'' he said.

Entwistle and others had complained that members of the official creditors' committee had conflicts of interest that prevented them from serving the best interests of shareholders, who typically are the last ones to receive payments in bankruptcy cases.

Entwistle suggested some large banks might be reluctant to probe the company's collapse for fear of bringing attention to their own roles in financial dealings with Enron.

J.P. Morgan Chase, Citigroup and Credit Suisse First Boston _ all represented on the creditors' committee _ are among up to eight banks that will be named as defendants in a securities fraud class-action lawsuit filed by investors, according to people familiar with the situation.

Luc Despins of Milbank Tweed, Hadley and McCloy LLP, the head lawyer for the creditors' committee, denied Entwistle's allegations, but said he wanted to limit the ``scope'' of the examiner's role.

The tentative agreement appears to do that by forcing the examiner to return to the bankruptcy judge to expand the investigation.

The examiner, who will be chosen by the U.S. Trustee, will be accountable to the court, not to the creditors committee.

Last month, the SEC objected to many of the terms of Enron's original agreement with Cooper, who replaced former chief executive Kenneth Lay in late January. Cooper, 55, is managing partner of New York-based restructuring firm Zolfo Cooper LLC.