Accounting Peer Review Gets More Scrutiny
The New York Times, 11/25/01
An Alternate Reality
The New York Times, 11/25/01
Will New York Be Told, Once Again, to Drop Dead?
The New York Times, 11/25/01
Dot-Com Is Dot-Gone, And the Dream With It
The New York Times, 11/25/01
California Wary of Dynegy Bid to Buy Out Enron Energy: Both companies are prominent players in the state's power market. The move to combine their strength is raising some concerns.
Los Angeles Times, 11/25/01
Enron's Troubles Could Spur Securities Reforms
Los Angeles Times, 11/25/01
Enron Says It's Still in Talks With Possible Investors for Cash
Bloomberg, 11/25/01

Enron Money Woes Raise Concerns
Los Angeles Times, 11/25/01
Hooked On a Fast- Growth Habit; CEOs Reach for Double-Digit Results Despite Downturn, and Some Are Making Costly Mistakes
The Washington Post, 11/25/01
USA: Enron employees sue as pension savings evaporate.
Reuters English News Service, 11/25/01
INDIA PRESS: Aditya Birla May Buy Enron's Dabhol Stake
Dow Jones International News, 11/25/01
COMPANIES & FINANCE UK - Enron seeks survival pact to aid Dynegy's $9bn rescue.
Financial Times, 11/24/01
EQUITY MARKETS - Power companies pack more punches - WALL STREET.
Financial Times, 11/24/01
WORLD STOCK MARKETS - Wall St loses shine off its blue chip rise.
Financial Times, 11/24/01
Wait Until Dark
The New York Times, 11/24/01
Heartened by Holiday Shopping, Shares Rise in Quiet Day
The New York Times, 11/24/01
Dynegy Scrambles to Save Enron Deal Energy: Shares of the acquisition target have fallen 45% since the merger was announced. Analysts say the companies might renegotiate.
Los Angeles Times, 11/24/01
Lawsuit Slows MSN Broadband Roll-Out Internet: The action by partner Enron hurts sales during important holiday season, analysts say. The service has reached only 33 of the 45 targeted markets.
Los Angeles Times, 11/24/01
Review could alter terms of Enron sale to Dynegy
Chicago Tribune, 11/24/01
Business & Finance: Enron's dizzy fall from grace threatens disruption in US energy markets - Shares in the US's biggest electricity trader, Enron, are down from dollars 90 to dollars 5 and it is under federal investigation. How did it all go so wrong? Co
Irish Times, 11/24/01
Enron price slides amid fear for rescue bid
The Times of London, 11/24/01
Market Report: Investors fret over Barclays' exposure to troubled Enron
The Independent - London, 11/24/01

Dynegy could renegotiate Enron bid --- Target stock sags to less than half of offer's value
The Toronto Star, 11/24/01
Enron's stock slump could mean deal is renegotiated: Shares off 45%
National Post, 11/24/01
Dynegy may renegotiate deal Firms to finish examining Enron's books
The Globe and Mail, 11/24/01
INVESTORS RETURN STUFFED AND READY TO BUY; BLUE CHIPS TURN IN A STRONG DAY, REVERSING PROFIT-TAKING SESSIONS
San Jose Mercury News, 11/24/01
DYNEGY, ADVISERS PORE OVER ENRON DETAILS; DEAL
San Jose Mercury News, 11/24/01
WORKERS, NEST EGGS DEVASTATED
Portland Oregonian, 11/24/01
Analysis: Travails of the Enron Corporation
NPR: Weekend Edition - Saturday, 11/24/01
Dynegy's Right to Enron Pipeline May Be Disputed, Barron's Says
Bloomberg, 11/24/01

Deal still on as Enron shares drop 6%
Houston Chronicle, 11/24/01

Money and Business/Financial Desk; Section 3
INVESTING: DIARY
Accounting Peer Review Gets More Scrutiny
Compiled by Jeff Sommer

11/25/2001
The New York Times
Page 8, Column 1
c. 2001 New York Times Company

The accounting industry's watchdog group is examining the industry's ''peer review'' process in light of enormous accounting problems at the Enron Corporation.
The group, called the Public Oversight Board, will meet next week to consider whether reviews of audits being conducted by accounting firms adequately safeguard the public interest, according to its chairman, Charles Bowsher. The session comes after revelations by Enron that it had overstated earnings by nearly $600 million over four years and that it had inflated shareholder equity by $1.2 billion because of ''an accounting error.''
Arthur Andersen has been Enron's outside auditor for more than a decade, and its work has been submitted periodically to Deloitte & Touche for ''peer reviewing.'' One such review is being conducted now.
Representative John Dingell, a Michigan Democrat, said in a letter to Mr. Bowsher that no Big Five accounting firm had ever issued a negative report after a peer review. Mr. Bowsher told Bloomberg News that the Oversight Board would ask: ''How can you have peer reviews and still have these kinds of failures?''

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Editorial Desk; Section 4
Reckonings
An Alternate Reality
By PAUL KRUGMAN

11/25/2001
The New York Times
Page 11, Column 1
c. 2001 New York Times Company

Most Americans get their news from TV. And what they see is heartwarming -- a picture of a nation behaving well in a time of crisis. Indeed, the vast majority of Americans have been both resolute and generous.
But that's not the whole story, and the images TV doesn't show are anything but heartwarming. A full picture would show politicians and businessmen behaving badly, with this bad behavior made possible -- and made worse -- by the fact that these days selfishness comes tightly wrapped in the flag. If you pay attention to the whole picture, you start to feel that you are living in a different reality from the one on TV.
The alternate reality isn't deeply hidden. It's available to anyone with a modem, and some of it makes it into quality newspapers. Often you can find the best reporting on what's really going on in the business section, because business reporters and commentators are not expected to view the world through rose-colored glasses.
From an economist's point of view, the most revealing indicator of what's really happening is the post-Sept. 11 fondness of politicians for ''lump-sum transfers.'' That's economese for payments that aren't contingent on the recipient's actions, and which therefore give no incentive for changed behavior. That's good if the transfer is meant to help someone in need, without reducing his motivation to work. It's bad if the alleged purpose of the transfer is to get the recipient to do something useful, like invest or hire more workers.
So it tells you something when Congress votes $15 billion in aid and loan guarantees for airline companies but not a penny for laid-off airline workers. It tells you even more when the House passes a ''stimulus'' bill that contains almost nothing for the unemployed but includes $25 billion in retroactive corporate tax cuts -- that is, pure lump-sum transfers to corporations, most of them highly profitable.
Most political reporting about the stimulus debate describes it as a conflict of ideologies. But ideology has nothing to do with it. No economic doctrine I'm aware of, right or left, says that an $800 million lump-sum transfer to General Motors will lead to more investment when the company is already sitting on $8 billion in cash.
As Jonathan Chait points out, there used to be some question about the true motives of people like Dick Armey and Tom DeLay. Did they really believe in free markets, or did they just want to take from the poor and give to the rich? Now we know.
Of course, it's not all about lump-sum transfers. Since Sept. 11 there has also been a sustained effort, under cover of the national emergency, to open public lands to oil companies and logging interests. Administration officials claim that it's all for the sake of national security, but when you discover that they also intend to reverse rules excluding snowmobiles from Yellowstone, the truth becomes clear.
So what's the real state of the nation? On TV this looks like World War II. But though our cause is just, for 99.9 percent of Americans this war, waged by a small cadre of highly trained professionals, is a spectator event. And the home front looks not like wartime but like a postwar aftermath, in which the normal instincts of a nation at war -- to rally round the flag and place trust in our leaders -- are all too easily exploited.
Indeed, current events bear an almost eerie resemblance to the period just after World War I. John Ashcroft is re-enacting the Palmer raids, which swept up thousands of immigrants suspected of radicalism; the vast majority turned out to be innocent of any wrongdoing, and some turned out to be U.S. citizens. Executives at Enron seem to have been channeling the spirit of Charles Ponzi. And the push to open public lands to private exploitation sounds like Teapot Dome, which also involved oil drilling on public land. Presumably this time there have been no outright bribes, but the giveaways to corporations are actually much larger.
What this country needs is a return to normalcy. And I don't mean the selective normalcy the Bush administration wants, in which everyone goes shopping but the media continue to report only inspiring stories and war news. It's time to give the American people the whole picture.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Money and Business/Financial Desk; Section 3
MARKET WATCH
Will New York Be Told, Once Again, to Drop Dead?
By ALEX BERENSON

11/25/2001
The New York Times
Page 1, Column 2
c. 2001 New York Times Company

NEARLY 11 weeks after the worst terrorist attack in history, New York is discovering just how much the rest of the United States cares about the nation's business and financial center.
Not much.
Early hopes that the nation would rally to help the city overcome the devastating economic impact of Sept. 11 appear to have been misplaced. Not only is Gov. George E. Pataki's ill-advised pitch for $54 billion in federal aid all but dead, apparently the city will struggle to get the $20 billion that President Bush promised.
Yes, many of the city's economic problems are self-inflicted. With a municipal work force of 250,000, New York employs one-seventh as many people as the federal government, excluding the armed forces. To support that bureaucracy, the city has the highest taxes of any local government in America. Development is absurdly difficult, even outside Manhattan. Roads and bridges are a mess.
But all of that was true before Sept. 11, and New York somehow made do. In fact, a record number of new jobs were created here in 2000, according to Steven Malanga, senior fellow at the Manhattan Institute, a conservative policy group. ''In the last seven or eight years, the city's economy has rebounded in a way that's very encouraging,'' he said.
The attacks changed all that. By discouraging people from coming to crowded places like Times Square, terrorism strikes at the heart of New York, said Mitchell Moss, director of the Taub Urban Research Center at New York University. ''New York's economy is built on interaction,'' he said. The industries that have suffered most severely are New York's most important employers: tourism, media, advertising and financial services, which was due for cuts even before the attacks.
Last month, the city lost 79,000 jobs, a record. The slowdown has blown a hole in city and state budgets, which are precariously balanced at the best of times. The Citizens Budget Commission, a nonpartisan fiscal watchdog organization, predicts that the city will face a budget deficit of $4 billion next year.
Mayor Rudolph W. Giuliani has asked city agencies to cut their budgets by 15 percent. More cuts are coming. Libraries will close earlier. Parks will be dirtier. And city workers, who had been asking for big raises, will have to accept layoffs or pay cuts.
Even so, the city cannot get out of this hole alone. With taxes already too high, it cannot reach much deeper into its citizens' pockets. And there are limits to how much it can cut services. A little federal help would go a long way toward righting the city's budget gap and restoring confidence in New York.
Mr. Moss suggests the federal government take two steps to show its commitment to the city. First, it should help create a hub in Lower Manhattan that would connect transit lines from New Jersey and Long Island with the subway. Second, it should support ''security zones'' where high-profile securities firms and media companies could congregate if they wished.
For now, at least, it appears that Washington will let New York sink or swim on its own. That decision is foolish for both economic and symbolic reasons.
If New York cannot right itself, the securities firms that are among its most important employers are as likely to move jobs to London or Hong Kong as Chicago or Atlanta. And if New York's streets grow dirty and its crime rate soars, other countries may question Washington's promises of aid to those that try to deter terrorism. Will a government that does not bother to aid its largest city in the wake of the worst terror attack in history really do much for Islamabad or Cairo?
''What do we have a federal government for if it's not to give aid to state and local governments, at the level people live and get most of their government services?'' asks James A. Parrot, an economist at the Fiscal Policy Institute, a labor-backed research organization.
It is worse than unseemly that lawmakers are offering to pass a tax bill that will give billions of dollars to companies like Enron and I.B.M. while refusing to send New York money that that city has already been promised. It is (whisper this word) unpatriotic.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Style Desk; Section 9
Dot-Com Is Dot-Gone, And the Dream With It
By JOHN SCHWARTZ

11/25/2001
The New York Times
Page 1, Column 2
c. 2001 New York Times Company

MARK LEIBOVICH recalled the day in 1999 when he showed up early for an appointment at a Washington dot-com. Mr. Leibovich, a reporter for The Washington Post, was there to interview the company's executives. ''I got there just in time to see the C.E.O. himself wheeling a foosball table into the lobby'' to give the impression that the high-tech firm possessed the desired quantum of wackiness that its Silicon Valley counterparts are famous for.
That is so over, and so much more over, even, than before. The popular obsession with the dot-com revolution, fading for more than a year, seems to have simply winked out since mid-September, as firemen and warriors have become the new heroes, and e-commerce's whiz kids are consigned to the cultural boneyard.
Not much more than a year ago, boosters of the New Economy and their true believers in the press were claiming to have changed all the rules. Not just in tech-fetish magazines like Wired, but in self-styled cultural arbiters like New York magazine, which declared the 1990's the ''e-Decade.'' In a 1999 cover story, the essayist Michael Wolff -- himself a failed dot-com executive -- announced a brave new world. ''There is, at the elusive center of the e-experience, the fantasy that we might become free of economic laws,'' he wrote. ''All it takes to make otherworldly riches is the will and desire.'' It wasn't enough to make money. They had to make history.
Now they themselves are history. Each day, the old idols seem to fade further into the dim past, barely recollected in a country where the languages of ''revolution'' and ''warfare'' are no longer just business metaphors. This is the next step after the bursting of the dot-com economic bubble -- the bursting of the cultural bubble, the end of the nerd as a crossover hit, of the I.P.O. zillionaire as role model to college students.
The changing of the guard can be seen in little things. Like Henry Blodget, the industry analyst who became famous for predicting early that Amazon.com would reach $400 a share, announcing that he is taking a buyout and leaving Merrill Lynch at the grand old age of 35.
Like the growing wave of books that focus not on the dot-com path to riches but on the wild plunge into the abyss. Having failed to sell their dreams, they are now attempting to sell their failure. A documentary of the rise and fall of a Silicon Alley company was chronicled in ''Startup.Com'' by Sebastian Nokes, released last winter. Books by former dot-com executives are arriving in stores. Two of the first are ''A Very Public Offering: A Rebel's Story of Business Excess, Success, and Reckoning'' by Stephan Paternot, founder of Theglobe.com, and ''Dot.bomb: My Days and Nights at an Internet Goliath,'' by J. David Kuo. Another is coming soon: ''Boo Hoo,'' the chronicle of the spectacular failure of Boo.com, the luxury fashion site that burned through $185 million of its investors' cash and had an online life of just six months, told by its profligate founders.
Did we mention that Mr. Blodget is writing a book?
For the most part, however, the flood of dot-com failure stories is being met with a national yawn. The tell-all books have bounced around the Amazon.com rankings without making inroads into best-seller territory. And why not? Because former idols have feet of clay. In ''A Very Public Offering,'' a book written as amateurishly as the company was run, did we need the image of Mr. Paternot dancing the night away in plastic pants?
Ellen DeGeneres's new sitcom, ''The Ellen Show,'' is built around the notion of an executive returning to her hometown after the collapse of her dot-com, but the show sits at the miserable ranking of 93rd for the season -- behind ''Emeril,'' the celebrity chef comedy -- despite Ms. DeGeneres's own considerable appeal.
To Amitai Etzioni, a sociologist at George Washington University, the country is experiencing an abrupt cultural shift away from the libertarian, individualistic values that were expressed in the celebration of the New Economy and toward more old-fashioned values in the wake of the terrorist attacks, when government is not The Problem and people are not The Market. ''There's been a sea change,'' he said. The surge in charitable giving and blood donations after Sept. 11, he said, underscores ''the sense that you're willing to give priority to the common good, to public safety and public health.''
Paulina Borsook, the author of ''Cyberselfish,'' a critical look at dot-com values published last year, said: ''People really crave a reminder of human bonds that have to do with sacrifice and fellowship and getting to know each other over time. It's not about changing jobs every six months and getting stock options.''
In the 90's, college students hoping to emulate Marc Andreessen of Netscape and other geek stars migrated to Silicon Valley or New York's Silicon Alley with thin resumes and visions of Testarossas dancing in their heads. That's all changing, said Thomas T. Field, director of the Center for the Humanities at the University of Maryland, Baltimore County. ''Many of the young adults that I see coming to campus now say they want fulfilling jobs, not just ways of earning money,'' he said. ''Sounds awfully familiar, when you come from the 60's generation.''
Professor Field suggested that protests over globalism, and the sense of security that flourished during the boom, made young people more willing to question the status quo and to take chances. During the I.P.O. frenzy, he said, students could not wait to get out of school and begin earning. This year, many of his students have chosen to study abroad in China, Nepal, India and Egypt.
The country is in dot-com denial, Ms. Borsook said, adding, ''No one wants to admit that they were caught up in it,'' an attitude she calls ''I don't want to think that I drank the Kool-Aid.''
Good riddance, said Thomas Frank, the author of ''One Market Under God: Extreme Capitalism, Market Populism and the End of Economic Democracy.'' The book is a withering attack on the ideas underlying the selling of the New Economy, which he says co-opted hipness and the language of populism to serve greed and gain. The book has come out in paperback with a new afterword. ''It's going to take some time for it to sink in,'' Mr. Frank said. ''The Dow isn't going to go to 36,000, and the dot-coms aren't going to come back -- and a lot of people lost a lot of money.''
Though dot-com executives might seem irrelevant these days, the technologies they sold, by and large, are not, pointed out Paul Saffo, an analyst at the Institute for the Future in Menlo Park, Calif. ''People haven't stopped using the Internet,'' he said. ''The fact is that it is changing the world, and it has changed the world.'' People now expect to be able to buy a book or make an airline reservation in the middle of the night, ''and it's washed into the rest of their lives.''
Kevin Kelly, who as a longtime editor of Wired magazine helped create the heroic ethos surrounding dot-com entrepreneurs, acknowledged ''it came tumbling down with the towers.'' But Mr. Kelly insisted that these people would rise again. The generation of tyro executives who crashed and burned ''got better business education than they could if they had gotten a Harvard M.B.A.,'' he said. ''They didn't set out to learn, but, boy, they are much smarter now.'' He predicts that the last decade has been the ''layup'' for a true cultural revolution to come -- he could not be specific, and his words may strike many as more dot-com hyperbole.
It takes a special kind of gall for the same people who argued that the ''long boom'' suspended the laws of economics, and even unraveled the cycles of history, to fall back now on analysis of historical cycles to support their arguments.
But to believe any less goes against the American grain, argued Jason McCabe Calacanis, the editor of the now-defunct Silicon Alley Reporter. The dot-commer, seen today as a scam artist, will be reborn, he said, smarter and tougher, because he represents optimism itself. ''It's the belief that the future -- the individual's future and the future of the economy -- are going to be better in five years than they are today.''
But still. Take a look at the book ''Radical E'' by Glenn Rifkin and Joel Kurtzman, which offers ''Lessons on How to Rule the Web'' after the bust. It extols companies that truly understand how to marry the World Wide Web to business. ''After five tumultuous years of hype and hysteria,'' the authors promise, ''the real advent of the Web and e-business is now.''
One of the book's chief examples of a company that does it right, Enron, has been in the news a lot lately, though not because of astute exploitation of e-commerce. No, Enron -- which trades energy via the Web -- has seen its stock collapse 90 percent.

Photos: The giants of e-commerce, who walked among us, are culturally extinct now with a war on. (Reuters)(pg. 1); NO SURE THING -- Ellen DeGeneres, left, with Cloris Leachman, in a sitcom about a dot-commer who has moved back home. The show ranks 93rd. (Monty Brinton/CBS)(pg. 4)
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Business; Financial Desk
California Wary of Dynegy Bid to Buy Out Enron Energy: Both companies are prominent players in the state's power market. The move to combine their strength is raising some concerns.
NANCY RIVERA BROOKS
TIMES STAFF WRITER

11/25/2001
Los Angeles Times
Home Edition
C-1
Copyright 2001 / The Times Mirror Company

Dynegy Inc. of Houston has been hailed as a hero on Wall Street, as it rides to deliver cross-town rival Enron Corp. from its self-inflicted ills and save energy markets from serious distress through its proposed $9-billion buyout of the world's largest energy trader.
But in California, Dynegy has a different image.
Dynegy, co-owner of several Southern California power plants, has been the quietest member of the "Big Five" group of energy producers commonly portrayed as villains by California politicians and regulators. Gov. Gray Davis and others have called Dynegy and its fellow energy suppliers "gougers" and "pirates" who manipulated the market and charged too much for electricity, precipitating California's blackout-studded energy crisis.
Partly because of the heightened political sensitivities to all things surrounding California's energy problems, the state is expected to play a central role in the proposed merger between Dynegy and Enron, antitrust experts and others say. The state's Attorney General's office already has begun scrutinizing the proposed combination.
If it merges with Enron, another favorite Davis target, Dynegy would be a powerhouse in energy trading, electricity generation and natural gas transmission. And the combined firm would have a strong presence in California, which some find troubling.
"I would hope that the people who look at the antitrust implications would consider this one carefully," said state Sen. Steve Peace (D-El Cajon), one of the architects of California's failed foray into electricity deregulation, who became a fierce critic of power producers and resellers. "If anything, Dynegy would be in an even stronger position to be able to manipulate markets than it was before."
Dynegy agreed on Nov. 9 to buy Enron through a stock swap valued at about $9 billion and to inject $2.5 billion into crumbling Enron provided by cash-rich ChevronTexaco Corp., the San Francisco-based oil company that owns nearly 27% of Dynegy. But a continuing trickle of disturbing financial disclosures keep slamming Enron's stock price, indicating that investors have their doubts that the deal will be completed as negotiated.
The Enron purchase would hurl Dynegy, which is about a quarter of Enron's size, into the top ranks of energy merchants.
In California's energy world, Dynegy already is a key company. At every significant twist in the state energy crisis, Dynegy was there, although not as visibly as some of the other power-plant owners and electricity resellers.
Enron and Reliant Energy Inc., also of Houston, and Duke Energy Corp. of Charlotte, N.C., drew particular fire from politicians and consumer advocates during the last 18 months as energy leaped higher. But Dynegy also was accused by the state's grid operator of reaping excessive profit through its electricity bidding practices and, to a lesser extent, by holding back some electricity from its Southern California power plants.
In addition, Dynegy signed long-term electricity contracts with the state that have been singled out by critics for containing potentially lucrative clauses requiring that the state pay emissions costs and other costs.
The California Independent System Operator, which runs the long-distance power transmission grid serving much of the state, has asked federal regulators to ban Dynegy from selling power at market prices. Cal-ISO has made the same request concerning the other major power plant owners: Duke, Reliant, Atlanta-based Mirant Inc. and AES Corp. of Arlington, Va., which markets its power through an agreement with Williams Cos. of Tulsa, Okla.
"Dynegy has sort of slid by under the radar," said Doug Heller of the Foundation for Taxpayer & Consumer Rights, a consumer activist group.
"Not only did Dynegy do very well, but particularly its trading and marketing division did very well over the course of the last two years. It profited wildly."
For its part, Dynegy rejects accusations of market manipulation, saying it has played a constructive role in the California marketplace, stepping forward to be one of the first companies to sign long-term contracts with the state when its need was greatest despite an electricity debt of $300 million owed the company by the state and its utilities.
"Dynegy has acted ethically and responsibly in California," said Dynegy spokesman John Sousa. "The fundamental problem in California is that supply did not keep up with demand."
"Dynamic Energy"
Accused of Overcharging
Dynegy was created in 1984 as a natural gas trading operation known as Natural Gas Clearinghouse to take advantage of the deregulation of natural gas prices. Under Chief Executive Chuck Watson, the company has expanded into natural gas processing and distribution and electricity generation, changing its name along the way to Dynegy, a word created by combining "dynamic" and "energy."
In California, Dynegy owns power plants capable of generating 2,800 megawatts of electricity through a partnership with NRG Energy Inc. of Minneapolis. (A megawatt can supply about 750 average homes with electricity.)
The state's big investor-owned utilities were required to sell some of their power plants by the landmark 1996 deregulation legislation. By the end of 1998, the Dynegy/NRG partnership had purchased three large power plants in Long Beach, El Segundo and San Diego and a collection of 17 small "peaker" plants from Southern California Edison Co. and San Diego Gas & Electric Co.
Under the arrangement between the partnership, NRG operates the power plants and Dynegy markets the electricity from them. It is Dynegy's bidding practices in selling that power into state markets that put it, along with other energy producers, on the wrong side of the state grid operator and federal energy regulators.
Among the allegations:
* In a report released in March, Cal-ISO accused energy producers and resellers, including Dynegy, of overcharging Californians by $6.7 billion between May 2000 and March 2001. Power suppliers have denied the allegations. The report also found that Dynegy reaped about $32 million in "monopoly rents" between May and November of last year, or profits beyond what a competitive market would bear. That was the fourth-highest total for any company noted in the report. Enron was ranked sixth, taking $27.9 million in such profits.
* Cal-ISO said Dynegy maximized profits primarily through a practice known as "economic withholding," or bidding electricity at prices so high that they would be rejected, thereby pushing up the price charged for the remaining generation sold into the market. Dynegy also did some "physical withholding," Cal-ISO said, meaning that the company withheld electricity supplies to drive up the price.
* Dynegy was accused last April in hearings before state legislators of hoarding space on a key natural gas pipeline into California in 1998 and 1999, causing natural gas prices to soar. Dynegy executives testified that the charge was untrue.
* When federal regulators ordered $125 million in potential refunds for the first four months of the year, Dynegy's portion was the largest among the power sellers named, representing slightly more than one third. Dynegy said its prices were justified by high natural gas prices, emissions costs and other factors.
Dynegy President Stephen Bergstrom said in April that the company was "unfairly and inaccurately accused of withholding power from the California market."
"As we have repeatedly communicated to California policymakers and regulators and to industry officials, we remain ready and willing to generate and sell power to any and all buyers at fair and reasonable prices when they are able to provide appropriate assurances that they will fulfill their obligation to pay for those purchases."
A recent report by the state Department of Water Resources backs up Dynegy's assertions that its prices have been in line with the rest of the market.
During the first three months of this year, after sky-high prices pushed Edison and PG&E so close to insolvency that the state had to step in and buy power for their customers, Dynegy sold power to the DWR at an average price of $239.63 per megawatt-hour for electricity. That was slightly below the average of $268.90 per megawatt-hour charged by all sellers.
Dynegy portrays itself as a minor player in the California market, representing about 4% of the state's generation.
But Cal-ISO, in asking federal regulators to revoke Dynegy's authority to sell power at market rates, said "Dynegy has profited systematically from the exercise of market power to the significant harm of California's electric consumers and economy." A decision is pending.
Officials reviewing the Dynegy-Enron merger will closely review the companies' operations in California.
Although Enron owns no power plants in California, it is believed to have long-term contracts with some generators, although spokesman Eric Thode refused to detail them.
In addition, Enron has a hand in 25% of the energy trades around the nation, with a significant portion of that in California. Thode would not detail California operations, citing company policy.
Finally, Enron controls an undetermined amount of natural gas, which is used to generate about one-third of the state's electricity, through its transwestern pipeline, which crosses into California, and through natural gas marketing and trading arrangements.
It is those largely unregulated energy trading operations that have many energy watchdogs worried. They say that middlemen such as Enron and Dynegy can drive up the price of power by reselling it at higher prices each time.
A lawsuit filed in May against the Big Five generators by Lt. Gov. Cruz Bustamante, acting as a private citizen, described it this way: "The Dynegy trading floor, working with the trading floors operated by Williams, Mirant, Reliant and Duke Energy is one of the principal tools the defendants used to inflate the price of electricity within their respective markets, as well as throughout the state of California."
"These defendants engaged in trading of electricity futures, forwards, options and other risk products that had the effect of manipulating and inflating the price of electricity within their respective markets," the suit charged.
"These defendants engaged in 'megawatt laundering,' in which they made trades with the primary purpose of inflating the costs of electricity within their respective markets."
State Is Examining Proposed Merger
California Atty. Gen. Bill Lockyer has begun examining what effects such a merger would have on California, spokeswoman Sandra Michioku said. The Federal Trade Commission and the Federal Energy Regulatory Commission also will scrutinize the merger in a process that Dynegy and Enron expect will take no more than nine months.
Senate Energy Committee Chairwoman Debra Bowen (D-Marina del Rey) said she plans to urge FERC to look beyond traditional measurements of how much the companies own in the market to examine "inputs" into the market such as gas pipeline capacity controlled by the companies and gas trading by Dynegy and Enron.
"It really raises many questions about how the market works," Bowen said.
Opposition by California could be a severe hindrance to the merger, said Garret Rasmussen, a lawyer with Patton Boggs in Washington, D.C., and formerly a Federal Trade Commission antitrust investigator.
The state, if it chooses, could play as pivotal a role as it has in negotiations over the antitrust settlement between the federal government and Microsoft Corp., he said.
"While this administration has been quite tolerant of mergers ... an action by the California attorney general could have a significant chance of success," Rasmussen said.
Merger Might Reopen Contract Negotiation
The proposed merger might give California leverage to renegotiate its power contract with Dynegy, which contains the unusual provision that the state would pay for any emission costs that the company incurred, said V. John White, director of the Center for Energy Efficiency & Renewable Technologies in Sacramento. Dynegy's large San Diego plant lacks crucial pollution control equipment, he said.
"The California attorney general needs to carefully examine Dynegy's environmental stewardship activities and renegotiate that provision in the long-term contract," White said. "Dynegy has a Texas, the-least-we-can-do attitude as far as the environment is concerned."
David Freemen, the former Los Angeles Department of Water & Power general manager who helped negotiate Dynegy's and other long-term contracts, said that while opportunities to renegotiate may present themselves, the agreements, now maligned as too expensive, were key to stabilizing the electricity market. Freeman praised Dynegy for its part in that process.
"There's a difference between companies that bargained hard with us and reached agreement--like Dynegy, Calpine and Williams--and those that were reaching for the moon and we didn't reach agreement," Freeman said. "Dynegy knew that they wanted to do business in California, and do it in a businesslike manner."

PHOTO: Enron chairman and chief executive Kenneth Lay, left, and to Chuck Watson, chairman and chief executive of Dynegy, announce the companies' proposed merger during a news conference in Houston.; ; PHOTOGRAPHER: Associated Press
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Business; Financial Desk
JAMES FLANAGAN
Enron's Troubles Could Spur Securities Reforms
James Flanigan

11/25/2001
Los Angeles Times
Home Edition
C-1
Copyright 2001 / The Times Mirror Company

Ultimately, the fall of Enron Corp., the onetime rising star of the energy industry, may be remembered as a landmark in the annals of securities law and shareholder rights.
The firm's practices are under investigation by the Securities and Exchange Commission. Enron is the focus of numerous shareholder lawsuits that seek to recover damages from the $60-billion plunge in the company's value in the last year.
The Enron case could result in new securities laws, experts say. It also could result in massive damage awards because of the extent of stockholder losses. Shares sold at more than $84 apiece a year ago, and at $36 a month ago before the emergence of hidden losses sent the price reeling downward to current levels below $5 a share. (The stock closed Friday at $4.71 on the New York Stock Exchange.)
Significantly, two suits against Enron charge that the firm's top executives breached their fiduciary duty of loyalty and prudence by failing to inform Enron employees of dangers to the company's finances while those employees held Enron stock in their 401(k) retirement plans.
The firm's troubles raise fundamental questions of what a company owes shareholders in the management and understandable disclosure of its accounts.
But Enron's predicament also goes to the heart of the U.S. financial system, says former SEC Chairman Arthur Levitt. Enron "represents a lack of the kind of disclosure that is fundamental to maintaining confidence in U.S. public markets," Levitt says.
Enron, technically speaking, disclosed in annual reports and proxy statements for 1999 and 2000 the existence of partnerships that in some cases "acquired debt and certain equity securities of certain Enron subsidiaries." But it did not disclose the significance of the partnerships, nor did it consolidate their transactions in its reports to shareholders and the SEC.
Its references to the partnerships were in footnotes to financial statements, written in the arcane legal language typical of such documents. For example, disclosure of one partnership, LJM Cayman, read in part: "LJM received 6.8 million shares of Enron common stock, subject to certain restrictions and Enron received a note receivable and certain financial instruments hedging an investment held by Enron."
Enron entered into at least 33 partnerships, attracting investments from pension funds and other investors in return for pledges of Enron stock at a guaranteed value. One partnership held 12 million Enron shares, which at one point were worth more than $1 billion.
Yet until this year, Enron treated the partnerships as insignificant to its overall business, and so they were not required to be included in its overall accounts.
By treating its partnerships as non-consolidated subsidiaries, Enron could report lower debt burdens than it actually had, thus strengthening its credit and enabling itself to grow into the largest energy trader in the world.
Enron became a pioneer of energy trading, a way of using financial techniques of trading forward commitments in natural gas and electricity to establish future prices on long-term supply contracts. As the business boomed, Enron's revenue soared, from $20 billion in 1997 to $100 billion in 2000. Through three quarters of this year, the firm was on course to exceed $200 billion in revenue.
But in October, Enron announced that it had lost more than $600 million in the third quarter and that it needed to reduce shareholder equity by more than $1 billion due to transactions with one of its partnerships.
Then on Nov. 8, Enron restated its accounts back to 1997, acknowledging that some of its partnerships should have been included in company accounts all along. The restatement resulted in a reduction of reported profit by more than $500 million. Enron's board of directors and auditors had ordered the restatement, the firm said.
The stock price fell further, lawsuits ensued and Enron sought refuge in a merger with Dynegy Inc. Enron's financial position and stock price have weakened since the merger announcement Nov. 9., so the Dynegy deal may go through at a reduced price, says analyst Stanley Foster Reed, who runs MergerCentral.com, an online information service.
But the question remains of how such a large, significant company could collapse with so little advance notice.
Enron was a prominent company, not least because of Chairman Kenneth Lay's connections to the White House as formal energy advisor to the first Bush administration and as informal advisor to the current Bush administration.
The firm had more than 20,000 employees before recent layoffs, and it had millions of investors through the holdings of pension funds such as the California Public Employees' Retirement System, the college teachers retirement plan TIAA-CREF and major mutual funds. Yet for all its prominence, Enron's disclosures about its business were inadequate. "Disclosure" sounds like a technical term, but it is the principle behind the laws passed in 1933 and subsequent years to regulate securities markets and protect the public.
Companies issuing stock to raise financing from public investors are required to disclose accurate and complete information about their business and to have accounts certified by independent public accounting firms. The SEC, created in 1933, could not stop a company from issuing stock, but it could make it disclose all relevant facts about risks in its business.
The laws were written in the midst of the Great Depression, which followed the 1929 stock market crash. They were designed to remedy abuses such as the case of Charles Mitchell, head of City National Bank (a predecessor firm of today's Citgroup), who sold his own company's shares short--that is, he bet on their price declining--just before the crash, without informing other shareholders. Before securities laws, Mitchell had no legal requirement to disclose his activities; once the laws were passed, all top managers and directors of public companies had such legal, fiduciary duty.
The Enron case probably will lead to new laws regulating investments in subsidiaries, experts say. The SEC staff has contemplated such regulations in the past but never made them law.
And the fallout from Enron could lead to tighter restrictions on firms putting their stock in employee retirement accounts. Also, it could lead to tighter regulations on statements by top managers on the condition of the business.
"This will be a case, with major issues of concealment from shareholders," says San Francisco attorney Steven Siderman, who is preparing a class-action lawsuit against Enron and Arthur Andersen, Enron's accounting firm.
Enron executives gave no indication of the company's troubles as late as August, when Jeffrey Skilling, president and chief executive for only six months, abruptly resigned. In response to questions of trouble in the company, Skilling said, "There's nothing to disclose. The company's in great shape."
Lay, who stepped back into the top post, told employees in August that Enron's business was strong. "We've got a lot of great stuff going on and we're not getting credit for it in the marketplace, but we will," Lay said.
However, both Lay and Skilling had been selling Enron stock for more than a year at that point, Lay cashing out more than $140 million in stock options and Skilling more than $60 million in options.
Meanwhile, employee 401(k) accounts, heavily laden with Enron stock, were frozen this year because the firm changed account managers. Employees were stuck as the stock plummeted.
The principle behind securities laws is that management of a public company, with so many employees, pensioners and other institutions depending on it, is a public trust.
The charge in the lawsuits being filed against Enron is that the firm, its executives and directors betrayed that trust.
Everyone is entitled to a fair trial, and Enron and its executives will surely have many days in court in the months and years to come in which to defend against the charge of betrayal of shareholders and employees.
The Enron case will be a landmark.
*
James Flanigan can be reached at jim.flanigan@latimes.com.

GRAPHIC: Restated and Mostly Reduced, Los Angeles Times;
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Enron Says It's Still in Talks With Possible Investors for Cash
2001-11-25 17:36 (New York)

Enron Says It's Still in Talks With Possible Investors for Cash

     Houston, Nov. 25 (Bloomberg) -- Enron Corp. said talks are
continuing with potential investors for an infusion of as much as
$1 billion, as the biggest energy trader tries to avoid a collapse
of its planned purchase by Dynegy Inc.

     An investment would ease concern that Enron's weakened
finances may prompt Dynegy to pull out of or renegotiate the terms
of the transaction, which is valued at $23 billion in stock and
assumed debt.

     Enron is seeking an additional $500 million to $1 billion in
cash but wouldn't divulge details. ``We are not going to discuss
the particulars of who we are talking to,'' said Enron spokeswoman
Karen Denne.

     Shares of the Houston company fell by 48 percent in the past
three trading sessions. At Friday's closing price of $4.71, the
stock sells for less than half the $10.85 that Dynegy is slated to
pay in the acquisition. That's a sign investors are skeptical the
transaction will go through as planned.

     Enron is likely to have approached Kohlberg, Kravis Roberts &
Co., the Blackstone Group and the Carlyle Group for a private
equity investment, said industry analyst David Snow of
PrivateEquityCentral.Net. The firms have declined to comment.

     On a conference call Nov. 14 Enron Chief Financial Officer
Jeffrey McMahon said the company is in talks with several private
investors and expects to receive $500 million to $1 billion from
these sources.

     On Wednesday, Enron got a three-week reprieve from lenders on
a $690 million note due this week, giving the company more time to
restructure its finances. Dynegy Chief Executive Chuck Watson said
he was ``encouraged'' by the commitment to extend the note
payment, as well as the closing of a $450 million credit facility.
He said Dynegy remained committed to the purchase.

     Enron already received $1.5 billion in cash Nov. 13 from
ChevronTexaco Inc. as part of the Dynegy buyout agreement. In
return, Dynegy will acquire preferred stock and other rights in an
Enron unit that owns the Northern Natural Gas pipeline.

     Barron's reported over the weekend that Dynegy may have a
difficult time walking away from the deal because its right to the
pipeline might be challenged by J.P. Morgan Chase & Co. and
Salomon Smith Barney Inc., who accepted the asset as collateral
for $1 billion in loans to Enron.

     Dynegy spokesman John Sousa declined to comment on Enron's
attempts to secure financing or whether more cash for Enron is a
condition of keeping the merger alive.

     Enron's dealings with affiliated partnerships have led to a
federal investigation of the company, which restated its earnings
and saw its credit ratings cut.

     The company said in a Securities and Exchange filing a week
ago that it has less than $2 billion in cash and credit lines
left.

--Mark Johnson in the Princeton newsroom (609) 750-4662

Business; Financial Desk
Enron Money Woes Raise Concerns

11/25/2001
Los Angeles Times
Home Edition
C-5
Copyright 2001 / The Times Mirror Company

How fitting that the sanctimonious Kenneth Lay, who arrogantly lectured California's electricity consumers this past spring on the "realities" of the deregulated 21st-century energy environment, has seen his company fall prey to that very same arrogance ["A Visionary Fallen From Grace," James Flanigan, Nov. 10].
While Californians allow themselves a wry smile over such news, the U.S. Justice Department should be building a case to "escort" Lay and his cohort Jeffrey Skilling to a prison cell for pocketing some $200 million from converting stock options at prices vastly over-inflated by their "cooking the books" at Enron over the last five years.
Noel Johnson
Glendale
*
California taxpayers are out of billions of dollars due to a failed concept that deregulating the electric industry would save us money by bringing us the "benefits" of a free market managed by private enterprise.
Enron, one of the free market energy companies which we were supposed to depend on to give us electricity at a reasonable cost, has apparently just "lost" $1.2 billion in equity along with an "unexpected" loss of $618 million ["Enron in Takeover Talks With Dynegy," Nov. 8]. The implications are clear--Californians have been gouged and one of the companies receiving the new found wealth has amazingly "lost" it.
Clearly, private industry is not the panacea. How about going back to a regulated monopoly?
Stephen Rynas
Duarte

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Financial
Hooked On a Fast- Growth Habit; CEOs Reach for Double-Digit Results Despite Downturn, and Some Are Making Costly Mistakes
Steven Pearlstein
Washington Post Staff Writer

11/25/2001
The Washington Post
FINAL
H01
Copyright 2001, The Washington Post Co. All Rights Reserved

At this point, they almost can't help themselves -- it's become an addiction for the top executives of Corporate America.
Delivering double-digit earnings growth year after year is no longer simply what corporate re-engineers call a "stretch goal" for an organization, or a rare achievement to be celebrated. It's become a mandate, a benchmark, a test of corporate manhood, an expectation hard-wired into the corporate culture -- a narcotic that company leaders reach for the way most people reach for an aspirin.
Never mind that the economy is contracting, or that prices are falling and profit margins are getting squeezed, or that most industries are unlikely to grow more than 5 percent a year even after the recovery is here. The name of the game these days is boosting the stock price, and the surest way to do that is to promise -- and deliver -- double-digit profit growth to Wall Street's cadre of analysts and money managers.
It's not just in the tech and telecom sectors, where the inflated growth expectations first took root. The addiction to double-digit growth has spread across the corporate landscape to firms in older, mature industries desperate for the "growth company" moniker that qualifies them for Wall Street's highest reward: a stock price equal to 20, 30, even 40 times their expected annual earnings.
In the 1990s, "we went through a period of extraordinary high growth in profitability, and both managers and stock analysts have unthinkingly come to the conclusion that that was the norm," said Michael Jensen, a professor of finance at the Harvard Business School. "Top-level management came to believe they could get a big company to grow 20, 30, 40 percent year after year -- it was insanity. And in the process of trying to make that real, rather than acknowledging it was a transitory phenomenon, more than a few wound up destroying shareholder value rather than enhancing it."
Jensen said that it is now common for Wall Street earnings expectations to be the starting point for corporate budgeting and strategy-setting rather than the result of it. "Nothing could be more irresponsible," he said.
James Paulsen, chief investment strategist at Wells Capital Management in Minneapolis, says this fascination with high growth rates peaked in 1999, at the height of the stock market boom, when only 50 stocks in the Standard & Poor's 500-stock index -- the hottest 50 growth companies -- actually went up in value. In fact, these nifty 50 went up so much so that they lifted the overall market indexes with them. The other 450 stocks declined.
"At that point, investors were only paying for growth," Paulsen said. "Dividends, good cash flow, reliability -- they all meant nothing."
"If you were just growing at a stodgy 8 or 9 percent a year, you were neglected, ignored," said Jeremy Siegel, finance professor at the Wharton School of Management at the University of Pennsylvania. "You couldn't get good valuations."
In desperation, boring old electric utilities refashioned themselves into "merchant energy companies," while highly profitable pork producers added new product lines in order to be viewed as ready-to-eat food companies. And perfectly good retail companies threw millions of dollars into misguided Web ventures.
With the dot-com bust and the broader stock market collapse over the past year, many executives, investors and analysts claim to have learned their lesson and reduced expectations for growth. But according to Siegel, Paulsen and other experts, expectations remain unreasonably high by historical standards. Many of those executives, investors and analysts believe business to be in a temporary lull before the "norm" of double-digit growth reasserts itself sometime next year.
"Most people's expectations are still way too optimistic," said Bill Miller, the legendary manager of Legg Mason's Value Trust, a $12 billion mutual fund.
David Nadler, chairman of Mercer Delta Consulting, says this "tyranny of growth" continues to lead too many companies to expand too quickly, make ill-advised acquisitions or diversify out of their areas of expertise. "The experience on that is that their shareholders wind up paying dearly for those mistakes," he said.
Indeed, many of the celebrated corporate crackups of the past year -- think of Conseco Inc.'s costly foray into manufactured-home financing, Providian Financial Corp.'s debacle with sub-prime credit card lending, Freightliner LLC's truck glut and the record $50 billion write-off of acquisition costs by JDS Uniphase Corp. -- came about as a result of companies trying to push earnings growth to the limit.
Corporate executives certainly have plenty of incentive to play the growth game, whether consciously or unconsciously. Most have multimillion-dollar compensation packages that include bonuses, stock and stock options, all tied directly to growth in earnings and share price. And a rising stock price gives them a valuable new currency -- currency that can be used to buy short-term earnings growth through mergers and acquisitions and to offer valuable stock options when recruiting top management and technical talent.
The stock option has a particularly pernicious impact, according to David Morrison, vice chairman of Mercer Management Consulting Inc. and co-author of "The Profit Zone." Options become more valuable as the price of the company stock rises above the point at which the options are issued. On the other hand, if things go bad, it doesn't matter how much the price of the stock goes below the "strike price" -- the value remains zero. As a result of this asymmetry between upside potential and downside risk, says Morrison, it is common for executives to take bigger risks with their companies than they otherwise would have.
Ego also plays a role. Chief executives who deliver year after year of double-digit earnings growth wind up being lionized in business books, on magazine covers and on cable-TV news shows. They are invited to serve on other corporate boards and to speak at investor conferences organized by celebrity analysts. Their boards of directors give them wide latitude in running the company.
By contrast, CEOs who don't have a good growth story to tell, or can't deliver on it, risk finding themselves in early retirement.
Jeff Garten, dean of the Yale School of Management, recently interviewed 40 of the leading corporate chief executives for a new book, "The Mind of the CEO." And more often than not, Garten said, the executives told him off the record that while they knew the expectations about earnings growth are often unreasonable and unsustainable, they had no choice but to participate, or risk being dismissed as someone who simply "doesn't get it."
"The system penalized anyone who didn't play the game," Garten said. As a result, executives find themselves on a treadmill -- always in a desperate search for ways to deliver the next increment of growth that will justify the unrealistic earnings expectations in which they themselves were complicit.
Analyst William Steele said he has seen it time and again in the consumer products sector that he follows for Bank of America Securities Inc., as companies that had always been "solid singles hitters" suddenly started swinging for the fences.
"What you've seen is companies making ill-advised acquisitions, abusing their balance sheets [by taking on too much debt or issuing too much stock] and under-investing in their brands," said Steele.
Take the case of Freeport, Ill.-based Newell Co., which for more than 30 years had enjoyed steady earnings growth by buying up underperforming housewares companies and "Newellizing" them -- bringing in new management, cutting costs, scrapping unprofitable products, consolidating distribution and winning more space on retail shelves. But by the late 1990s, after 75 acquisitions that included Calphalon cookware, Levelor window blinds and Rolodex card files, the number of good turnaround prospects had dwindled. And with growth in sales of consumer products slowing to single digits, Newell executives needed something that would keep them in double-digit territory.
That something, they thought, was Rubbermaid, for years one of the most respected companies among executives and investors, but one that had stumbled badly beginning in 1996. It was far and away Newell's biggest acquisition, bought with newly issued Newell stock valued at $5.8 billion, a 50 percent premium over Rubbermaid's market price at the time.
The Rubbermaid deal closed in the spring of 1999, and Newell Rubbermaid's financial performance has declined ever since, a reflection not only of the slowing economy but of problems within the company itself. Total profits for the combined firm are barely higher than they were before the acquisition, and because of the debt taken on and new shares issued to finance the purchase, the best measures of financial performance -- earnings per share and return on assets -- have both declined. After the company repeatedly failed to meet the quarterly sales and growth target it had promised Wall Street, chief executive John J. McDonough was fired in October of last year.
Given that history, the current economic uncertainty and continued weakness in quarterly earnings, one might think that Newell's new executive team would steer clear of making grand promises to Wall Street. But in June, after barely six months on the job, the new chief executive, Joseph Galli Jr., told Wall Street analysts that a restructuring program he had instituted would allow the company to post a 15 percent earnings increase in 2002. At $26, analysts say the stock price now reflects an expectation that Newell Rubbermaid will meet this double-digit growth target.
In an interview last week, William T. Alldredge, Newell's chief financial officer, explained that the 15 percent growth target for next year was reasonable because the company's profits this year, against which next year's will be compared, are so depressed. Going forward, however, he acknowledged that growth rates would be closer to 10 percent than 15 percent, and they would come from squeezing more profit out of existing brands rather than through acquisitions.
"I'm not sure we see the enormous upside potential that we once did," said Alldredge, who insisted, nonetheless, that Wall Street should continue to value Newell Rubbermaid as a "growth company."
To this day, "old-fashioned" chief executives such as Warren Buffett remain puzzled as to why executives still can't resist the urge to promise investors any particular level of earnings growth, given all the uncertainties of running a business. In the annual report to shareholders of his Berkshire Hathaway Inc. in February, he noted that only a handful of companies have ever been able to sustain 15 percent earnings growth for more than a decade. Such promises, he said, not only spread "unwarranted optimism" among investors, he said, but "corrode" behavior by top executives -- in some cases behavior so corrosive that it spills over into deceptive accounting. As it turns out, the chief executives of Sunbeam, Xerox, Waste Management and Enron all lost their jobs in recent years after major-league earnings overstatements were uncovered during their watch.
(Buffett's Berkshire Hathaway is a significant investor in The Washington Post Co., which, like Berkshire, provides no earnings guidance to Wall Street investors.)
James Johnson, the former chairman of Fannie Mae, has heard all these criticisms, and can even add a few of his own. But he said that for every company that overpromised and overreached, there were others where the focus on earnings growth has led to breakthrough innovations, successful new corporate strategies and big gains in productivity.
"It's what makes American capitalism so unique -- and so successful," said Johnson, whose ability to deliver on a promise of double-digit earnings growth in every year but one led to a dramatic increase in Fannie Mae's stock price during his tenure. It also made Johnson a very rich man.
"It's a tricky balance," said David Winters, president and chief investment officer of Mutual Series Fund Inc., a New Jersey-based mutual fund. "You don't want companies to be sleepy, or set the bar so low that they can easily step over it. But you don't want companies that overpromise and underdeliver."
Certainly no chief executive took the goal of posting double-digit earnings growth each year more seriously than John F. Welch Jr., who recently retired as chairman of General Electric Co. On Jack Welch's watch, division managers who failed to contribute to the corporate goal were routinely fired or had their divisions sold off. And critics have charged that the unrelenting pressure led, on occasion, to accounting gimmicks and questionable business practices -- a charge Welch repeatedly denied.
Yet according to Noel Tichy, a professor at the University of Michigan Business School, it was the demand for double-digit earnings growth year after year that forced managers of GE's old-line manufacturing divisions to get into the growing and profitable business of servicing and financing the turbines and medical equipment they made.
"I don't know when it would ever be the right decision not to try to grow fast," said Tichy, co-author of a book titled "Every Business Is a Growth Business." And even while acknowledging that companies have been known to do dumb things in the pursuit of earnings growth, the good ones don't.
"If you don't have goals that force executives to stretch themselves and their organization, you don't optimize performance," Tichy said.
Business guru James Collins disagrees. In a new book, "Good to Great," Collins argues that the companies that sustain really high growth rates over long periods of time are those that don't set growth as an explicit goal. Rather, Collins says, the best companies operate less out of some corporate bravado than a determination to understand their business and their success and to capitalize on that understanding.
"Great companies don't come about because the CEO wants to be a celebrity or please the share-flippers, and certainly not because he or she wants to hit the top targets on the compensation plan," Collins said last week. "The common thread among the CEOs of the truly great companies is that their ambition is to build something that can outlast themselves. The growth comes as a byproduct of that."
Harvard's Jensen said that the only way to lick Corporate America's growth addiction is for more executives to muster the courage to stand up to Wall Street and begin setting realistic expectations for their companies. Such a strategy might occasionally require a CEO to tell investors that his company's stock is overvalued -- a truly novel idea in today's environment, where executives almost reflexively complain that their share price is too low. And it might require executives at some companies to make clear that their stock may be inappropriate for growth funds and hedge-fund managers.
"Companies generally get the shareholders they deserve," said Miller, Legg Mason's money manager.
But Norman Augustine, the retired chairman of Lockheed Martin Corp., warns that "standing up to Wall Street" may not be as easy as it sounds.
"We all sit around complaining about the short-term mentality on Wall Street and the fund managers who say they'll dump our stocks if we don't show double-digit earnings growth every quarter," Augustine said. "And then the manager of our own corporate pension fund comes in and says, 'We have two funds that didn't do well for us this quarter, so I dumped them.'
"And there it is," Augustine said. "We have met the enemy, and it is us!"

http://www.washingtonpost.com
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

USA: Enron employees sue as pension savings evaporate.
By Andrew Kelly

11/25/2001
Reuters English News Service
(C) Reuters Limited 2001.

HOUSTON, Nov 25 (Reuters) - After climbing utility poles in all kinds of weather for 35 years, Roy Rinard was hoping to retire in a few years, but that was before the collapse in Enron Corp.'s stock price devoured his retirement savings.
"I'm basically wiped out," said Rinard, 54, who works for Portland General Electric, an Oregon utility company acquired by the Houston-based energy trading giant in 1997.
"I'm right back to ground zero and I'll have to go on working as long as I can," said Rinard, who suffers from arthritis and a lung condition that leaves him short of breath.
Encouraged by Enron's then-strong performance and the company's bullish view of its future prospects, Rinard moved all of the money invested in his 401(k) retirement account into Enron stock earlier this year.
But it proved to be a costly decision as the value of his account fell from $470,000 a year ago to around $40,000 today.
Rinard now hopes a lawsuit filed in U.S. District Court in Houston will recover at least some of his money.
The suit, filed on behalf of Enron employees by Seattle-based law firm Hagens Berman, alleges that Enron breached its fiduciary duty by encouraging its employees to invest heavily in Enron stock without warning them of the risks of doing so.
Enron's stock, which peaked at $90 in August 2000, closed at $4.74 on Friday, after falling sharply in recent weeks amid a series of damaging financial disclosures.
A broadly similar suit filed by the Keller Rohrback law firm, also Seattle based, alleges that another Enron employee, Pamela Tittle, lost $140,000 on Enron stock held in her retirement account.
According to that suit, the Enron retirement savings plan had assets worth $2.1 billion at the end of last year, including $1.3 billion, or 62 percent of the total, in Enron stock.
DOUBTS EMERGE ABOUT DYNEGY DEAL
Enron, a former Wall Street favorite, agreed to be bought out earlier this month by smaller energy trading rival Dynegy Inc., but continuing problems at Enron have caused some analysts to question whether the deal will be completed.
Doubts have also been expressed about a planned sale of Portland General to Northwest Natural Gas .
Hagens Berman plans to seek class-action status for its suit and says 21,000 Enron employees could be eligible to join it.
The suit alleges that Enron "locked down" 401(k) retirement accounts on Oct. 17, preventing employees from changing the investments they held in their accounts until Nov. 19.
During that period Enron reported its first quarterly loss in four years and took a charge of $1.2 billion against stockholders' equity as a result of off-balance-sheet deals that would later come under investigation by U.S. regulators.
In that time, Enron shares fell from $30.72 at the close of trading Oct. 16 to $11.69 on Nov. 19.
Enron spokeswoman Karen Denne said employees' access to the accounts was blocked as part of a previously planned change in the administration of the retirement plan and that the measure was in effect from Oct. 26. to Nov. 19.
Steve Lacey, a 45-year-old emergency repair dispatcher who has worked for Portland General Electric for 21 years, said the measure came at a time when bad news about Enron was flying thick and fast, driving the stock price down at a dizzying pace.
"We couldn't take our money out of Enron stock into another portfolio. Basically they had us locked down to where we had no say over our own future," he said.
Lacey declined to quantify his own losses but said he and many of his colleagues had invested most of their retirement funds in Enron stock because it had performed better in the past than the other investments available under the Enron plan.
Denne said Enron employees were normally able to choose among 18 different investment options, but Enron's matching contributions were always made in the form of its own stock.
Lacey said he felt sorry for older colleagues at Portland General who had suffered a heavy financial blow just before they were due to retire, adding that he was only beginning to realize how serious the consequences could be for himself.
"My goal was to have an extremely comfortable retirement and that may be a little clouded now," he said.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

INDIA PRESS: Aditya Birla May Buy Enron's Dabhol Stake

11/25/2001
Dow Jones International News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW DELHI -(Dow Jones)- India's Aditya Birla group is considering acquiring Enron Corp.'s (ENE) stake in Dabhol Power Co., reports the Economic Times.
Dabhol is a 2,184-megawatt joint venture power plant located in the western Indian state of Maharashtra. It is a unit of U.S.-based energy company Enron.
The newspaper says the group is exploring the possibility of submitting an expression of interest with Indian financial institutions to buy Enron's stake in Dabhol.
Officials from Aditya Birla weren't available for comment, the report says.
Enron holds a controlling 65% stake in Dabhol. Costing $2.9 billion, the power project is the single largest foreign investment in India to date. Newspaper Web site: www.economictimes.com

-By Himendra Kumar; Dow Jones Newswires; 91-11-461-9426; himendra.kumar@dowjones.com

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

COMPANIES & FINANCE UK - Enron seeks survival pact to aid Dynegy's $9bn rescue.
By ANDREW HILL and SHEILA MCNULTY.

11/24/2001
Financial Times
(c) 2001 Financial Times Limited . All Rights Reserved

Crisis-hit Enron is seeking to extend its survival pact with its key lenders long enough to be rescued by Dynegy, the rival energy group.
Dynegy said it was "continuing with confirmatory due diligence" for its all-stock rescue bid. The offer is still worth $9.3bn ( #6.5m), even though Enron's market capitalisation has halved this week to $3.5bn.
Enron's survival is crucial to the smooth running of the electricity and power markets, where it claims to be the principal in 25 per cent of all transactions.
Enron sought to allay fears that Dynegy might change the terms of its offer, or withdraw.
Withdrawal of the rescue bid would call into question Enron's credit ratings, which remain one notch above "junk" status. Ratings agencies held off downgrading Enron two weeks ago, because such a decision would trigger repayment of debt issued by off-balance-sheet partnerships that Enron used to support its rapid expansion over the past two to three years.
Even so, the terms of recent credit lines extended to Enron suggest lenders already regard the company as a non-investment grade risk. The bonds are trading as though the company is heading for a Chapter 11 bankruptcy filing.
Glen Grabelsky of Fitch, the rating agency, said there were two possible outcomes for Enron: "One is that the transaction goes through; and the other is that the viability of this company is in question."
Enron's shares fell to $4.74, a further 5.4 per cent drop, in a shortened session of trading yesterday morning in New York, as investors continued to express concern about Dynegy's commitment to the deal.
John Olson, vice president of research at Sanders Morris Harris, the Houston-based investment banking and securities firm, said: "With Enron trading at 4 bucks and change it might make sense for them to go into bankruptcy and salvage this thing the right way."
Observers close to Enron say Wednesday's decision by JP Morgan Chase and Citigroup to finalise a $1bn secured credit line, and the deferral of a $690m repayment of notes due next Tuesday, have reduced the pressure on the group. If Dynegy were to renegotiate the terms of its deal - and that may depend on legal clauses within the original merger agreement - that would not affect Enron's financial situation, they say.
As well as negotiating with its lenders through the weekend, Enron is also seeking further investments from JP Morgan Chase, Citigroup and private equity firms in an attempt to shore up confidence. www.ft.com/enron.
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Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

EQUITY MARKETS - Power companies pack more punches - WALL STREET.
By ANDREW HILL.

11/24/2001
Financial Times
(c) 2001 Financial Times Limited . All Rights Reserved

EQUITY MARKETS - Power companies pack more punches - WALL STREET - Another mega-merger and Enron's sudden decline epitomise a volatile year, says Andrew Hill.
A short week on Wall Street appeared a very long week for the energy sector, an industry that has - in everything from oil to electricity - succeeded in delivering some stinging surprisesto the US economy this year.
Last Sunday, Conoco and Phillips Petroleum jolted merger and acquisition specialists out of their torpor with the year's biggest deal, a $35bn "merger of equals" to create the third largest integrated energy company in the US and the sixth largest in the world.
Coincidentally, on Monday, ChevronTexaco feted the consummation of its merger with a New York analysts' meeting at which David O'Reilly, the combined group's chief executive, promised annual savings of $1.8bn by 2003, greater than originally expected.
Whether the sector needs another clumsy baptism - the fruit of Sunday's announcement will, inevitably, be saddled with the name ConocoPhillips - is not really at issue. Consolidation that began in the 1990s has left medium-sized energy companies such as Conoco and Phillips with little option except to combine resources for exploration and production in order to compete with "super-majors" such as ExxonMobil.
Volatile oil prices - another story of the week - appear to add to the urgency of the combination, although James Mulva, Phillips' chairman and chief executive, denied that was a prime reason for consolidation. After all, the industry has learned to live with volatility.
These are companies that in the space of just three years have shrugged off concerns about what would happen if crude oil remained at $10 a barrel, and, at the other extreme, worries about the possibility of crude lingering above $30.
In the short term, the fate of stock prices in the sector may depend on Opec's ability to snatch victory from the jaws of defeat in its confrontation with Norway and, in particular, Russia over calls for a cut in oil output to underpin the world price. Oil stocks, as measured by the Philadelphia Oil Service index, have had a turbulent time since September 11, plummeting initially only to rally back to their levels before the terrorist attacks and then slump again as the wrangling between Opec and non-Opec oil producers burst into the open.
ChevronTexaco, for one, seemed unperturbed by the stand-off. "If you want a stable price environment, you don't want to be in this business," O'Reilly said on Monday. He was talking about the oil price but he might just as easily have been referring to energy stocks.
Energy-related industries - from utilities to pipelines - make up six of the 10 worst performing sectors over the past month, according to Dow Jones data analysed by CBS Marketwatch.
None, however, has fallen as pre-cipitously or as publicly as Enron, the energy trading company. Its share price at the close on Wednesday was $5.01, down 44 per cent on the week and 94 per cent below its 52-week high of nearly $85.
Remember that this was a company that outperformed the Nasdaq Composite Index even as the tech-heavy index rose to its March 2000 peak, and Enron stayed at stratospheric levels of price and valuation even after the dotcoms - whose magic dust its online trading operations borrowed - fell to earth. In the process, its ability to pioneer new trading markets, such as bandwidth, made it the envy of Wall Street's own broker-dealers, jealous both of its trading bravado and its share rating.
Two of Wall Street's giants - JP Morgan Chase and Citigroup - are helping to prop up the group, laid low by its failure to disclose adequately off-balance-sheet transactions that it carried out as part of its rapid expansion. The banks are advising Enron on a rescue bid from Dynegy, the smaller rival energy group part-owned by ChevronTexaco, and backing it with $1bn of credit, secured on pipeline assets.
The trigger for this week's sharp decline was Enron's regulatory filing late on Monday, which revealed for the first time to shaken shareholders and bondholders that the group would have to repay $690m of notes next Tuesday because of a downgrade 10 days ago by Standard & Poor's. Wednesday's announcement that Enron had managed to postpone that deadline until the middle of next month seemed to do little to allay the crisis of confidence about the group's ability to repay its heavy debts.
Ahead of the Thanksgiving holiday, few share traders seemed to want to hold the stock, which fell 28 per cent on Wednesday alone, and electricity and gas counterparties are also wary of entering long-term contracts in the very markets that Enron helped pioneer. The Enron debacle is a reminder of how quickly fortunes can change. Earlier this year, the well-connected and politically influential Houston-based group was powerful enough to be accused by Californians of playing a key role in provoking the electricity crisis on the west coast.
Now Enron's shares and bonds are trading as though it may go bust. If it does, it could drag down other, weaker energy companies, because of its role as a market-maker, supplying liquidity to the power and gas markets. If the worst fears of some Wall Street bankers are realised there may even be repercussions for the wider financial markets, where Enron lays off the risk of price fluctuations, using derivatives.
andrew.hillft.com.
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Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

WORLD STOCK MARKETS - Wall St loses shine off its blue chip rise.
By ANDREI POSTELNICU.

11/24/2001
Financial Times
(c) 2001 Financial Times Limited . All Rights Reserved

Low volumes took the shine of a blue chip rally on Wall Street in a shortened session during which children were allowed their annual visit to the trading floor of the New York Stock Exchange.
The Dow Jones Industrial Average put on 125.03 to 9,959.71 by the earlier close, while the S&P 500 index added 13.27 to 1,150.30. The tech-heavy Nasdaq Composite gained 27.96 to 1,903.01.
Leading gains in the Dow were Eastman Kodak, up 3.1 per cent at $29.91, General Motors, up 3.1 per cent at $47.70, and American Express, up 2.3 per cent at $34.29. Fractional losses for Philip Morris, Caterpillar and Home Depot bucked the positive trend on the benchmark average.
Oil stocks were higher despite disappointment over Russia's offer to cut daily production by only 50,000 barrels. The prospect of lower crude prices failed to depress the sector, with ChevronTexaco up fractionally to $86.66, Anadarko up 1.4 per cent at $54.14 and ExxonMobile also up 1.4 per cent to $38.42.
Enron, the bruised energy trading group, lost a further 5.1 per cent among mounting worries over Dynegy's $9bn agreement to take over the company.
Retailers saw some gains on what is known as "black Friday", the day Americans flock to malls and shops in search of holidays gifts. K-mart was up 3.3 per cent at $6.79, Dillard added 2.8 per cent to $15.48, while Federated Department Stores was up 3.6 per cent at $38.47 and Sears Roebuck gained 2.4 per cent to $45.34.
Ericsson, the Swedish mobile telecommunications group, saw its ADRs gain 5.75 per cent to $5.52 after its chief executive said the company was expecting fewer competitors in the third-generation mobile telecommunications market.
The ADRs of rival Nokia were among volume leaders on the NYSE, up 2.1 per cent to $24.15.
Amid scant corporate news, D&E Communications, a telecom services company, was down 11.2 per cent to $17.8 after it announced after the previous session's close that it would buy Conestoga Enterprises for $273.3m of cash, stock, or a combination of the two. Conestoga shares gained 22.79 per cent to $29.90.
Toronto edged lower in early trading as energy stocks ran into selling. The S&P 300 composite index was off per cent at at midsession.
The latest attack of nerves for crude oil prices sparked a bear run on energy stocks and Alberta Energy fell C$1.95 to C$58.55 and Talisman Energy C$1.05 to C$55.70.
Technology leaders were little changed in light trading. Nortel Networks hardened 2 cents to C$12.62.
Among Latin American markets, Sao Paulo continued to push higher in early trading, with the Bovespa index up 2.6 per cent at 13,355.37 at midsession.
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Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Editorial Desk; Section A
Journal
Wait Until Dark
By FRANK RICH

11/24/2001
The New York Times
Page 27, Column 1
c. 2001 New York Times Company

In the immediate aftermath of Sept. 11, the Arab world was riveted by the rumor that Israel was somehow behind the attack on the World Trade Center. Al Jazeera went so far as to report that 4,000 Jews had been given advance notice not to go to work at the towers that day. You'd think that no one in American officialdom would do anything to fan the flames of such noxious fictions, but if so, you'd be underestimating John Ashcroft. As part of his mass dragnet prompted by the attacks on America, our attorney general has rounded up about 50 Israeli Jews, some of whom have been detained for nearly a month on the pretext of minor offenses involving working papers.
Why hold Israelis when there is no evidence linking them to terrorist activity? ''We are taking every step we can to prevent future terrorist attacks,'' said a Justice Department spokesman when queried by Tamar Lewin and Alison Leigh Cowan, the Times reporters who broke the story of the Israeli detainees on Wednesday. ''We are leaving no stone unturned.'' Given that none of Mr. Ashcroft's 1,200 or so arrests to date, whether of Israeli Jews or anyone else, have produced a single charge in connection with the mass murders of Sept. 11, it doesn't seem as if he is even looking in the right quarry. But in his blundering, he has now handed radical Islam a propaganda coup in its war against Israel.
On this bittersweet Thanksgiving weekend, there are many reasons to feel thankful -- from the heroism of the Americans who sacrificed their lives for others to George W. Bush's nuanced and so far effective prosecution of the war. Though there have been boisterous nervous Nellies on the right attacking the president's strategy, many of them even angrier at Colin Powell than they are at Bill Maher, there are no gaping fissures in the country's unity. A Los Angeles Times poll last week shows that even Democrats support the president by four to one, no matter how you read the ballots in Florida. And yet on the domestic front, as exemplified by the actions of Mr. Ashcroft, the administration is acting as if America has no inner strength whatsoever. By working its various end runs around our laws, the fearful message is clear: American democracy is too weak to contend with terrorism, and two of the three branches of government, the judicial and the legislative, are not to be trusted.
Even as we track down a heinous enemy who operates out of a cave, we are getting ready to show the world that the American legal system must retreat to a cave to fight back. Our government refuses to identify its many detainees, or explain why they are held, or even give an accurate count. The next stop on the assembly line for these suspects could be a military tribunal, which, as decreed by President Bush in an executive order, is another secret proceeding in which neither the verdicts, evidence nor punishments ever have to be revealed to the public. Thus could those currently in captivity move from interment to execution without anyone ever learning why or where they disappeared. If this sounds like old-fashioned American justice, it is -- albeit of such Americas as Cuba and Chile.
If the administration were really proud of how it's grabbing ''emergency'' powers that skirt the law, it wouldn't do so in the dead of night. It wasn't enough for Congress to enhance Mr. Ashcroft's antiterrorist legal arsenal legitimately by passing the U.S.A.-Patriot Act before anyone could read it; now he rewrites more rules without consulting senators or congressmen of either party at all. He abridged by decree the Freedom of Information Act, an essential check on government malfeasance in peace and war alike, and discreetly slipped his new directive allowing eavesdropping on conversations between some lawyers and clients into the Federal Register. He has also refused repeated requests to explain himself before Congressional committees, finally relenting to a nominal appearance in December. At one House briefing, according to Time magazine, he told congressmen they could call an 800 number if they had any questions about what Justice is up to.
This kind of high-handedness and secrecy has been a hallmark of the administration beginning Jan. 20, not Sept. 11. The Cheney energy task force faced a lawsuit from the General Accounting Office rather than reveal its dealings with Bush-Cheney campaign contributors like those at the now imploding Enron Corporation. The president's commission on Social Security reform also bent the law to meet in secret. But since the war began, the administration has gone to unprecedented lengths to restrict news coverage of not only its own activities but also Osama bin Laden's. A Bush executive order diminishing access to presidential papers could restrict a future David McCullough or Michael Beschloss from reconstructing presidential histories. To consolidate his own power, Mr. Ashcroft even seized authority from Mary Jo White, the battle-proven U.S. attorney who successfully prosecuted both the 1993 World Trade Center terrorists and the bin Laden accomplices in the 1998 African embassy bombings. He has similarly shunted aside state and local law-enforcement officials by keeping them in the dark before issuing his vague warnings of imminent terrorist attacks.
Thanks to a journalist, Sara Rimer of The Times, we now know that one of the attorney general's secret detainees was in fact a local official: Dr. Irshad Shaikh, a Johns Hopkins-educated legal immigrant who serves as the city health commissioner of Chester, Pa. Dr. Shaikh's door was broken down by federal agents who suspected he might be an anthrax terrorist. It's all too easy to see why Mr. Ashcroft wants to hide embarrassing fiascoes like this. But it's also likely that the attorney general wants to hide the arrests he is not making along with the errant ones that he is.
As far as anthrax terrorism goes, evidence like the lethal letter to Senator Patrick Leahy increasingly suggests that the culprit is not a Muslim or Israeli immigrant but, as Mr. Ashcroft's fellow cabinet member Tommy Thompson put it this week, ''a disgruntled American'' piggybacking on Islamic terrorism. The obvious suspects include those on the Timothy McVeighesque fringes of the Second Amendment cult, who proudly trade in germ war ''cookbooks'' at gun shows, and those in the anti-abortion terrorist movement, who have a history of wielding anthrax scares as well as explosives in pursuit of their cause.
But is Mr. Ashcroft pulling in, say, any of America's own Talibans, like the Army of God, with his dragnet? It seems unlikely, given that these organizations, which are big on advertising their own self-martyrdom, haven't reported any such detentions. A cynic might think that domestic extremists who share the attorney general's antipathy to abortion and gun control -- and are opposed to the likes of Mr. Leahy and Tom Daschle -- receive a free pass denied to suspicious-looking immigrants. Yet that cynicism could be dispelled in a second if Mr. Ashcroft trusted the public, and for that matter his former colleagues in Congress, to carry out his brand of law enforcement in daylight.
While Mr. Ashcroft may abhor such openness because he's pursuing a political agenda of his own, it's also possible that less malevolently, he's just trying to hide his failure at getting the job done. There's nothing in the man's history as either a governor or senator to suggest that he's the Rudy Giuliani his assignment calls for, and despite his strong-arm policing since Sept. 11, he has no visible results. His latest scheme -- to spend 30 days interviewing 5,000 more immigrants who, he says, fit ''a set of generic parameters'' -- inspires so little confidence that some local police chiefs are in open revolt against it.
Mr. Ashcroft likens himself to Robert Kennedy, who also at times warped constitutional protections in ravenous pursuit of criminality. But among the many differences between the men is the fact that Kennedy actually busted criminals. If another 30 days and 5,000 interviews pass with no breakthroughs, who knows what grandiose new plot Mr. Ashcroft will devise, and at what civic price, to make himself look like Dick Tracy. At a time when most Americans feel confident that the war on terrorism is going as well, if not better, than could be expected, his every ineffectual and extralegal move waves an anomalous but still chilling white flag of defeat.

Drawing
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Business/Financial Desk; Section C
THE MARKETS: STOCKS AND BONDS
Heartened by Holiday Shopping, Shares Rise in Quiet Day
By Reuters

11/24/2001
The New York Times
Page 5, Column 5
c. 2001 New York Times Company

Stocks advanced during yesterday's holiday-shortened session as traders snapped up retail stocks, heartened by signs that the year-end shopping season opened with a strong start.
The discount retailer Wal-Mart Stores and Federated Department Stores, the department store operator, helped bolster the broad-market indexes amid only light trade. Deep discounting has helped bring shoppers into the malls despite some large job losses and the slump in spending that followed the Sept. 11 terrorist attacks.
Traders also said they were optimistic that the war in Afghanistan might end soon, after reports that some Taliban troops are close to a surrender.
''It looks like the war is over and traders are getting a jump on it before everyone comes in for work on Monday,'' said Mace Blicksilver, a money manager for Marblehead Asset Management. ''Retailers are doing well and the mood is better,'' he added.
Hopes for a rebound in the economy and corporate profits sometime next year have driven the market higher in recent weeks, pulling it off the three-year lows that followed the Sept. 11 attacks. The Standard & Poor's 500-stock index has closed up for seven of the past nine weeks.
The Dow Jones industrial average rose 125.03 points, or 1.3 percent, to close at 9,959.71, while the broader S.& P. 500 gained 13.31 points, or 1.2 percent, to 1,150.34. The technology-laden Nasdaq composite index advanced 28.15 points, or 1.5 percent, to 1,903.20.
Stocks closed higher for the third consecutive week, with the Dow rising 0.94 percent, the S.& P. 500 gaining 1.03 percent and the Nasdaq inching up 0.24 percent.
Consumers thronged shopping malls yesterday, traditionally the busiest shopping day of the year, a sign that shoppers are willing to spend.
The discount retailer Wal-Mart rose 68 cents, to $55.80, while Federated, parent of the department stores Bloomingdale's and Macy's, gained $1.10, to $38.21.
The S.& P. retail department store index rose 2.63 percent.
The United States-backed Northern Alliance said that it had suspended attacks on the Taliban-held city of Kunduz to allow besieged defenders more time to agree to surrender, but said that it would resume attacks if no deal was struck by this afternoon.
Trading was light, with many portfolio managers taking the day after Thanksgiving off. The stock market closed early at 1 p.m.
The energy-trading company Enron, which has already plunged to its lowest levels in more than a decade on worries about its credit standing and fears that a proposed rescue by Dynegy could fall through, was the most actively traded issue on the New York Stock Exchange for the third consecutive session. Enron fell 30 cents, to $4.71. Dynegy rose 64 cents, to $40.40.
Treasury bond prices drifted lower yesterday, kicking up yields on the benchmark 10-year note to 5 percent for the first time since August.
Trading was subdued during the shortened session after the holiday. ''It's a really light trade; I don't think you're going to have to read too much into it,'' said Drew Forbes, a trader at Daiwa Securities. ''People are very cautious.''
Treasuries have sold off sharply in the last two weeks as investors, betting on a swift economic recovery in 2002, have scaled back hopes for an 11th interest rate cut this year when the Federal Reserve meets in December.
Yields on the rate-sensitive two-year notes have spiked more than 0.75 percentage point in two weeks. Thirty-year bonds are now yielding more than they did before the Treasury surprised markets on Oct. 31 by canceling sales of these issues, which set off a huge scarcity rally.
The 10-year Treasury note fell 15/32, to a price of 100. The note's yield, which moves in the opposite direction from the price, rose to 5 percent from 4.95 percent on Wednesday.
The price of the 30-year Treasury bond fell 20/32, to 99 31/32. The bond's yield rose to 5.38 percent from 5.35 percent on Wednesday.

Graph tracks the Dow Jones industrial average over the past year. (Sources: Associated Press; Bloomberg Financial Markets) Tables: ''Hot & Cold'' provides a look at stocks with large percentage gains and losses; ''The Favorites'' lists stocks held by largest number of accounts at Merrill Lynch. (Compiled from staff reports, The Associated Press, Bloomberg News, Bridge News, Dow Jones, Reuters)
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Business; Financial Desk
Dynegy Scrambles to Save Enron Deal Energy: Shares of the acquisition target have fallen 45% since the merger was announced. Analysts say the companies might renegotiate.
C. BRYSON HULL
REUTERS

11/24/2001
Los Angeles Times
Home Edition
C-1
Copyright 2001 / The Times Mirror Company

HOUSTON -- A long weekend of work faced Dynegy Inc. and proposed acquisition Enron Corp., whose worsening stock woes Friday heightened fear that the deal could be renegotiated or collapse entirely.
Enron shares fell 30 cents, or 6%, to close at $4.71 on the New York Stock Exchange. Dynegy shares rose 64 cents to $40.40, also on the NYSE.
Dynegy and its advisors were expected to spend the weekend reviewing rival Enron's complex books, as both parties race against the decline in Enron's stock to complete the thorough financial examinations a merger requires.
Houston-based Dynegy on Nov. 9 agreed to pay about $9billion in stock for Enron. But after the 45% drop in Enron shares by Friday's close, on fears the company could run out of cash before the deal closes, Enron's market capitalization is only about $4 billion.
At Dynegy's current stock price, its offer for Enron is worth about $10.85 a share--more than twice Enron's current share price.
Executives and advisors from both companies are in the final stages of the review, known as due diligence, sources familiar with the matter said. The sources said that renegotiations had not been discussed as of Friday afternoon and that such discussions could not occur until the review is finished.
But should it turn up any more unpleasant surprises that qualify as a "material adverse change" in Enron's business, the likelihood increases of Dynegy invoking escape clauses or renegotiating, analysts and observers say.
"You've got to believe there is that possibility. There is a 90% spread on the deal," one analyst said. "There's unquestionably continued malaise in Enron's core business, and Dynegy has left itself open to renegotiate with Enron."
Enron spokeswoman Karen Denne said that, to her knowledge, Dynegy was not renegotiating the terms of the acquisition.
She repeated that Enron was working on obtaining an additional $500 million to $1 billion in private equity funding to help shore up the balance sheet.
Dynegy spokesman John Sousa said that due diligence was continuing and that the company remains optimistic about the merger.
Enron's recent admission that lower volumes at its trading business--the crown jewel of Enron that Dynegy most covets--could cause low fourth-quarter earnings raises the possibility that the trading business is losing its profitability.
Electricity traders said the latest developments are making it seem more likely that Dynegy will renegotiate the deal or back out, a move they said would leave Enron vulnerable to creditors and a possible bankruptcy.
This week, rating agency Fitch Investors said that if Dynegy stepped away from the merger, Enron's credit situation seemed untenable and a bankruptcy filing was highly possible.
Traders, speaking on condition on anonymity, said they expected Dynegy to scramble over the weekend to narrow the growing share-price gap. Enron's dropping market value and the shrinking volume in its EnronOnline trading system increase the likelihood that Dynegy could pull out, traders said.
Meanwhile, energy traders reiterated that they would shy away from long-term deals with Enron unless they received substantial assurances the company's credit rating would soon improve.
Enron's bonds on Friday were again talked at junk bond levels, but even lower than before.
Enron's 6.4% notes maturing in 2006 and its 6.75% notes were bid at 57 cents on the dollar, down from a respective 62 cents and 60 cents on Wednesday, according to a trader. The notes yield to maturity a respective 21.5% and 17%. Its 20-year zero-coupon convertible bonds fell about 1 cent on the dollar to just more than 33 cents.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Business; Financial Desk
Lawsuit Slows MSN Broadband Roll-Out Internet: The action by partner Enron hurts sales during important holiday season, analysts say. The service has reached only 33 of the 45 targeted markets.
DINA BASS
BLOOMBERG NEWS

11/24/2001
Los Angeles Times
Home Edition
C-2
Copyright 2001 / The Times Mirror Company

Microsoft Corp.'s plan to expand its MSN high-speed Internet service has been delayed by a lawsuit by Enron Corp., which could cost the software giant customers during the holiday season.
MSN, with Enron's help, had hoped to have fast Internet access over telephone lines available in 45 markets starting Oct. 25. Instead, the service is available in only 33 markets, including Los Angeles and San Diego, a Microsoft spokesman said.
Houston-based Enron, which agreed in June to provide the backbone for a nationwide expansion of MSN's service, contends that it isn't required to deliver broadband services if Microsoft hasn't first provided a billing and ordering system.
Microsoft officials declined to comment on the suit but said some of their other high-speed access partnerships, including a 14-state deal with Qwest Communications International Inc., are going well.
The delay is problematic because the holidays are a popular time for consumers to buy broadband access, often with new personal computers. It follows a string of setbacks for the roll-out of the service.
Microsoft has "a track record of picking broadband partners that don't quite work out," said Joe Laszlo, senior analyst at market researcher Jupiter Media Metrix Inc. "It definitely hurts them with customers who want broadband right now."
The company originally began a service with NorthPoint Communications Group Inc., a now-bankrupt provider of fast Web access.
MSN expanded elsewhere by working with Enron competitors, which MSN Marketing Director Bob Visse declined to name. Most recently, MSN's high-speed service expanded into San Francisco, Sacramento, Houston, Dallas, San Antonio and Austin, Texas.
MSN Product Manager Lisa Gurry said Microsoft will have broadband access for sale by the end of March to 90% of the households that have digital subscriber lines in their neighborhoods. MSN had aimed for 90% by last month.
Subscribers to fast Internet access services are expected to grow fourfold by 2006 as sales of slower access plans decline, according to Jupiter Media Metrix.
Top Internet service provider America Online, owned by AOL Time Warner Inc., also has been slow to get into the high-speed market, analysts said.
Laszlo said MSN and AOL might pay for their sluggishness with tougher competition from third-place EarthLink Inc. and from cable and telephone companies that have more experience selling high-speed Internet access.
America Online has more than 31 million subscribers, MSN has 7 million, and EarthLink has 4.8 million. Laszlo doesn't think MSN or America Online can build the kind of lead in the high-speed market that America Online has in the slower dial-up access market.
"There is very little growth left in the dial-up access space for Microsoft or anybody, which leaves them with broadband as the only potential growth area," said Youssef Squali, an analyst at FAC/Equities.
Analysts also said Microsoft still needs to find a cable partner that will let MSN use its network to sell fast access over cable lines. Cable is more popular than DSL with customers looking for fast Web service. The five largest cable providers control 51% of the U.S. high-speed Internet market.
MSN Vice President Yusuf Mehdi said last month that the company might be interested in an investment in AT&T Corp.'s cable television unit, which AT&T is considering selling.
*
Times staff writer Joseph Menn contributed to this report.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Business
Review could alter terms of Enron sale to Dynegy
From Tribune news services

11/24/2001
Chicago Tribune
North Final ; N
1
(Copyright 2001 by the Chicago Tribune)

Power companies Enron Corp. and Dynegy Inc. and their advisers are scheduled to spend this weekend poring over Enron's books, which could lead to a renegotiation of Dynegy's acquisition of embattled Enron.
The specter of renegotiation pushed Enron shares down 6 percent, or 30 cents, to $4.71 at the close of Friday trading on the New York Stock Exchange. Dynegy shares closed up 64 cents, or 1.61 percent, to $40.40.
Despite the light trading of the overall market in the holiday- shortened session, Enron shares were trading robustly. Enron again led the list of the most heavily traded stocks on the exchange by a wide margin.
Dynegy agreed to pay about $9 billion in stock for Enron. But after falling 45 percent by Friday's close amid fears that it could run out of cash before Dynegy completes its buyout, Enron sports a market capitalization of only about $4.03 billion.
With Enron shares continuing to trade at a steep discount to the deal's value, the trading pattern indicates the market has little faith in the deal being completed as announced.
Investment bankers on the deal are in the final stages of due diligence, sources say. Should the examination of Enron's business turn up any more unpleasant surprises, renegotiation of the deal's terms is a strong possibility.
An Enron spokeswoman said that, to her knowledge, Dynegy was not renegotiating the terms of the acquisition. Dynegy could not be reached for comment.
In a report on Wednesday, Ronald Barone, an analyst at UBS Warburg, suggested that the deal's exchange ratio of 0.2685 share of Dynegy for each share of Enron could be readjusted.
"We believe the odds of Enron incurring a material adverse change on its operations is soaring, which suggests that--assuming Dynegy wants to continue to move forward with the deal--the 0.2685 ratio will not hold," he wrote.
Barone said that a much lower exchange ratio of 0.15 was more realistic.
There also is the possibility that Enron's lower stock price is an indication that traders are speculating Enron will need to issue more stock to stabilize its financial position.
The market is closely waiting to hear if there is more news to come from the credit rating agencies. Any downgrade would be devastating to Enron, which is sitting just one notch above speculative status.
On Wednesday, Fitch Inc. said it was maintaining Enron's credit rating, based on the possibile merger and on the support of its lending banks.
Glen Grabelsky of Fitch's credit policy group said he expects Enron to close on additional financing, but he couldn't specify a time frame in which it would occur.
Enron spokeswoman Karen Denne said the company was trying to get $500 million to $1 billion in additional financing.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Business & Finance: Enron's dizzy fall from grace threatens disruption in US energy markets - Shares in the US's biggest electricity trader, Enron, are down from dollars 90 to dollars 5 and it is under federal investigation. How did it all go so wrong? Co

11/24/2001
Irish Times
Copyright (C) 2001 Irish Times; Source: World Reporter (TM)

Six months ago, when US President George W Bush turned down California's request for energy relief, many observers believed the reason was the close ties between Mr Bush and the Enron Corporation of Texas, the biggest US electricity trader.
Enron's chief executive, Mr Kenneth Lay, was the President's biggest campaign contributor. The 58-year-old billionaire, who ran Mr Bush's Texas gubernatorial campaign, loaned the Bush family Enron's private Lear jets, and contributed dollars 100,000 (?114,000) towards the inaugural gala in January.
After Mr Bush took over the White House, Mr Lay became a powerful voice in Washington as energy adviser, helping to shape a policy which enraged environmentalists and encouraged Mr Bush to use California as a stalking horse for plans to drill for new oil on federal lands.
Now Mr Lay's reputation and career lie in ruins, and his company is fighting for survival.
Stock in Enron, once considered the smartest and most aggressive company in the electricity and natural gas industries, has crashed from dollars 90 to dollars 5.
Enron's controversial financial dealings are under federal investigation following the disclosure of massive write-offs in hitherto hidden partnerships.
The dizzying speed of Enron's fall has threatened widespread disruption in the US energy market which it dominated.
Whether the company survives depends now on its banks and the commitment of rival energy firm, Dynegy, to follow through on an offer to pay about dollars 9 billion in stock for the debt-ridden company.
Since the scandal broke it has been revealed that Enron had 33 partnerships which held billions of dollars in debt, for which the company was liable.
Enron needed such debt, analysts said, to support expanding levels of trading in electricity and gas. However, the weight of debt left the company unable to maintain its credit rating, growth and high stock valuation.
The revelation that partnerships were used to move debt off the company's balance sheet and that Enron overstated profits in the past five years by almost dollars 600 million was shocking enough for Enron employees.
However, they were infuriated further when they learned on Thursday that Mr Lay was due to get a severance package of dollars 60.2 million from Dynegy at the same time as the value of their stock options and retirement accounts had evaporated.
The reaction to the idea that Mr Lay would profit handsomely from the merger was so hostile that the chief executive was forced to waive the compensation, amounting to three year's severance pay.
Still, Mr Lay's personal wealth is not threatened; last year he cashed in options for dollars 123 million.
Since 1989, Mr Lay has accumulated dollars 13 million in salary, dollars 26.8 million in cash bonuses and dollars 266.7 million in profits from selling stock.
His bonus in 2000 was dollars 7 million, an award that Enron's board said was based on rising profits and high shareholder return.
The company has since admitted it improperly applied accounting rules and that about 40 per cent of its profit in 2000 came from transactions with partnerships controlled by Enron's chief financial officer.
Yesterday, shares in Enron fluctuated wildly as concerns grew over whether the Dynegy acquisition plan could be changed or that the deal could collapse.
Enron shook the markets when it disclosed on Monday that it might have to repay dollars 690 million debt by November 26th because its credit ratings had been lowered, but on Wednesday repayment was postponed to mid-December.
The three-week reprieve gives the company more time to restructure its finances, but its bonds fell amid concern Enron would run out of cash before the Dynegy takeover is completed next year.
Enron's current cash balance is inadequate to pay off debt repayments of dollars 2.8 billion due before the end of December, according to Goldman Sachs, and wholesale trading customers have asked Enron to put up more cash for collateral, according to the Fitch ratings agency.
Mr Lay, the son of a country preacher, and his partner Mr Jeffrey Skilling - who resigned abruptly as Enron's CEO in August - used innovative financial techniques during the 1990s to profit from increased federal deregulation of the energy industry.
The financial control Mr Lay exerted over the oil and gas markets - labelled excessive and misguided by critics - had an enormous effect on California's disastrous experiment with electricity deregulation, according to the Los Angeles Times.
Analysts said Enron faced collapse if the merger with Dynegy, a much smaller company, fell apart - and that its survival depended on being able to restore investors' and trading partners' confidence in its financial health. Many energy companies have already scaled back their dealings with Enron.
The Enron case will come before the Securities & Exchange Commission (SEC) chaired by Bush appointee Mr Harvey Pitt.
The commission will look into whether Enron adequately disclosed the risk to shareholders from its partnership deals.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Business
Enron price slides amid fear for rescue bid
Carl Mortished International Business Editor

11/24/2001
The Times of London
News International
Final 2
60
(Copyright Times Newspapers Ltd, 2001)

SHARES in Enron yesterday continued their precipitous fall amid fears that a rescue bid for the embattled US power group could fall at the last hurdle.
The shares plunged another 6 per cent, taking losses for the week to more than 50 per cent, as it emerged that the rival Dynegy, which launched a $9 billion (Pounds 6 billion) rescue bid earlier this month, might try to walk away from the deal.
Dynegy's current offer values Enron at about $10.85 a share -more than twice the group's current share price.
Enron's troubles were further aggravated yesterday by the revelation that members of the company's retirement plan have filed class-action lawsuits against the company alleging that they were misled about the risk of investing in Enron shares. Under the 401(k) retirement plan, employees are able to choose a number of different investments, including mutual funds, but one option is stock in their own company.
The suit alleges that the trustees of the Enron plan failed to inform plan participants that the company stock was in peril. Enron was unavailable for comment yesterday.
Investment bankers working on Dynegy's offer will spend the weekend carrying out due diligence on Enron's books. Wall Street sources believe advisers might use the opportunity to renegotiate the price, or worse still, walk away from a bid altogether.
One analyst, who declined to be named, said that the chance of Dynegy wriggling out of the bid by citing a "material change" was rising with every hour that passed.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Business
Market Report: Investors fret over Barclays' exposure to troubled Enron
Michael Jivkov

11/24/2001
The Independent - London
FOREIGN
22
(Copyright 2001 Independent Newspapers (UK) Limited)

THE BANKING giant Barclays found itself firmly on the blue chip fallers list yesterday as investors fretted about the group's exposure to the beleaguered US energy group Enron. Talk in the market was that Barclays, down 98p at 2,150p, has a significant exposure to the company, which has been teetering on the brink of collapse for the last few weeks.
Although Enron has received a $9bn (pounds 6bn) rescue approach from the US company Dynegy, the troubled group has seen its share price nearly halve since the offer was tabled. This has led to speculation that the deal has collapsed which according to analysts would leave Enron facing bankruptcy.
Bank of America also weighed on Barclays shares as the broker reduced its rating to "market perform" from "buy". In the meantime it upgraded HBOS, off 13.5p to 844.5p, to "buy" from "market perform". It argued that the switch was an attempt to reposition clients out of what it perceived was Barclays' international and US exposure and into a bank more focused on the UK.
The FTSE 100 slipped 52.7 points to 5,293.2, largely ignoring gains on Wall Street, which was open only for a half day.
Oils stocks had a roller-coaster ride yesterday. They made impressive gains at the start of the session buoyed by Norway's decision on Thursday to cut production by 200,000 barrels a day but fell back in late trade as it emerged that Russia would shave only 50,000 off its daily production of 7 million. The market viewed the cut as far from sufficient, sending the price of crude lower and with it Shell, off 4p at 493p, BP, down 5.5p to 530p, and Enterprise Oil, 13p weaker at 451p. Analysts at Credit Suisse First Boston advised clients to sell down holdings in the sector, arguing that fundamentals for the industry are looking weak.
Man Group rose 18p to 1,255p as Merrill Lynch upped its price target to 1,750p from 1,500p and reiterated its "buy" rating. The broker reckons there is no short term pressure on the fund manager's margins and applauded the fact that Man charges significant fees but also delivers significant performance benefits after all fees have been paid.
GKN was not so lucky, slumping 13.5p to 300p, after HSBC Securities downgraded its rating to "hold" from "add". In a note to clients HSBC highlights the stock's impressive rally from the 220p level since late September and suggests that it has little further to run. It reckons that the automotive sector in which GKN operates will hit negative newsflow in the coming months as market conditions in Europe and the US continue to deteriorate.
The television and radio group Chrysalis jumped 15p to 230p after deputy chairman Charles Levison disclosed the purchase of 10,000 shares at 215p. The media sector more generally, which has been in vogue in recent weeks on hopes of an economic recovery, was in retreat as investors opted for the safety of defensive plays. Pearson fell 38p to 827p, BSkyB lost 35p to 812p while Reed International was off 13p at 577p.
Hays fell 9.25p to 202p as Dresdner Kleinwort Wasserstein downgraded to "hold" from "buy" citing concerns about volumes in the group's network areas and concerns about delays to new outsourcing contracts. The German broker also warned that the hangover from last year's problems and staffing slowdown could lead to no earnings growth in 2002 for Hays.
The food manufacturer Geest rose 20.5p to 669.5p after City analysts visited the group's Lincolnshire sites and returned to upgrade their estimates. Charles Hall of WestLB said that a presentation by management during the visit showed that growth continues to be excellent and that Geest is starting to deliver attractive returns. He said that both the plants visited were well invested and "as good as anything we have seen in the industry".
Princedale rose 3.5p to 19.5p after the plastics manufacturer received a 20p per share cash bid valuing the group at pounds 15m. The offer represents a premium of 25 per cent on the previous session closing price.
The boilers to workspace solutions group Bullough fell 2.25p to 19p after warning of significant full year losses and unveiling job cuts. The group also said that the well known value investor Peter Gyllenhammar will join the board as a non-executive director. Mr Gyllenhammar is also deputy chairman of Montpellier, which recently picked up a 26 per cent holding in the company. Bullough planned to sell off its boilers division but yesterday announced it was halting the sale, saying that the offers it had received were inadequate.
IT EMERGED yesterday that Robert Bonnier, the former chief executive and founder of Scoot.com, has sold the bulk of his stake in the troubled on-line information company.
At the height of the dot.com boom his 44 million shares, held in the name of Toocs International, were worth more than pounds 100m. At the end of last month he could only raise a mere pounds 440,000 for his stake selling it at 1.1p a share. Scoot shares were up 0.14p to 1.74p yesterday.
MARKET MOVERS
Regus 48p (up 5p, 11.6 per cent). Major competitor HQ Global plans to close down the majority of its European operations.
Telewest 72.5p (up 4p, 5.8 per cent). Morgan Stanley reiterates its "outperform" rating with 132p target price.
Manchester United 143p (up 6p, 4.4 per cent). Reports that strike by footballers has been averted excite investors.
Brake Bros 542.5p (up 20p, 3.83 per cent). Credit Suisse First Boston upgrades to "buy" from "hold" with 700p target price arguing that the recent sell-off has been overdone.
Henlys 113.5p (up 20p, 21.4 per cent). Nova Bus division wins contract with Transport Urbain de Quebec in Canada.
Lastminute 36.75p (up 4.25p, 13.1 per cent). Announces a surge in sales and says it will break even in six months time.
Applied Optical Technologies 98.5p (up 11p, 12.6 per cent). Confirms anti-counterfeiting contract for 2004 Athens Olympic Games merchandise range.
Jacobs 21p (up 2p, 10.5 per cent). Plans restructuring and possible disposal of non-core assets.
Wellington Underwriting 91.5p (up 9p, 10.9 per cent). Says it is in talks with a number of venture capitalists with view to setting up a new insurance company.
Cambridge Antibody Technology 1,879 (down 41p, 2.1 per cent). Slight nervousness ahead of full year results on Monday with analyst expecting losses to widen.
Gameplay 0.85p (down 0.30p, 26.1 per cent). Takeover talks collapse.
William Baird 50.5p (down 14p, 21.7 per cent). Says full year results will be significantly below expectations.
Black Arrow 52.5p (down 13p, 19.9 per cent). Says order book at a low and unveils a slump in first half pre-tax profits.
Durlacher 7p (down 0.75p, 9.6 per cent). Lehman Brothers dumps 1.2m shares on the market.
SEAQ TRADES: 116,464
SEAQ VOLUMES: 1.86bn

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Business
Dynegy could renegotiate Enron bid --- Target stock sags to less than half of offer's value
Carolyn Koo

11/24/2001
The Toronto Star
Ontario
E09
Copyright (c) 2001 The Toronto Star

Power companies Enron Corp. and Dynegy Inc. and their advisers are scheduled to spend this weekend poring over Enron's books, which could lead to a renegotiation of Dynegy's acquisition of embattled Enron.
The spectre of renegotiation pushed Enron shares down more than 5 per cent, or 27 cents (U.S.), to $4.74 yesterday on the New York Stock Exchange. Dynegy closed up 64 cents, or 1.61 per cent, to $40.40.
Dynegy originally agreed to pay about $9 billion in stock for Enron. Amid fears that Enron could run out of cash before Dynegy completes its buy, however, Enron now has a market capitalization of only about $4.03 billion. At Dynegy's current stock price, the offer for Enron is worth about $10.85 a share, more than twice Enron's current share price.
Investment bankers on the deal are currently in the final stages of due diligence, sources said. They said renegotiations had not been discussed as of yesterday afternoon, and that such discussions could not occur until the due diligence review is finished. If the examination of Enron's business turns up any more unpleasant surprises, renegotiation of the deal's terms is considered a strong possibility.
In a report on Wednesday, Ronald Barone, an analyst at UBS Warburg, suggested the deal's current exchange ratio of 0.2685 of a share of Dynegy for each share of Enron could well be readjusted.
"We believe the odds of Enron incurring a material adverse change on its operations is soaring, which suggests that - assuming Dynegy wants to continue to move forward with the deal - the 0.2685 ratio will not hold," he wrote. He said a ratio of 0.15 was more realistic.
Another analyst also said renegotiation is likely: "You've got to believe there is that possibility. There's unquestionably continued malaise in Enron's core business and Dynegy has left itself open to renegotiate with Enron."
Recently, some of Enron's natural gas and electricity trading partners have further scaled back their activity, causing that "malaise." Many of those partners are shunning new long-term deals and greatly reducing the number of transactions.
Lower volumes in Enron's trading business, which is the largest and most coveted portion of its operation, could cause fourth-quarter earnings to come in below expectations, Enron has said.
Concern is also growing about Enron on the bond market. The company's 6.4 per cent notes maturing in 2006 and 6.75 per cent notes were bid yesterday at 57 cents on the dollar, down from a respective 62 and 60 cents on Wednesday, a trader said. The notes' yields to maturity are 21.5 and 17 per cent respectively.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Financial Post: World
Enron's stock slump could mean deal is renegotiated: Shares off 45%
Carolyn Koo
Reuters, with files from Bloomberg News

11/24/2001
National Post
National
FP8
(c) National Post 2001. All Rights Reserved.

NEW YORK - Power companies Enron Corp. and Dynegy Inc. and their advisers are scheduled to spend this weekend poring over Enron's books, which could lead to a renegotiation of Dynegy's acquisition of embattled Enron.
The spectre of renegotiation pushed Enron shares down more than 5%, or US27 cents, to US$4.74 at the close of Friday trading on the New York Stock Exchange. Dynegy shares closed up US64 cents, or 1.61%, to US$40.40.
Dynegy originally agreed to pay about US$9-billion in stock for Enron. But, after falling 45% by Friday amid fears it could run out of cash before Dynegy completes its buy, Enron now sports a market capitalization of only about US$4.03-billion.
At Dynegy's current stock price, its offer for Enron is worth about US$10.85 a share -- more than twice Enron's current share price.
Investment bankers on the deal are currently in the final stages of due diligence, sources say. Should the examination of Enron's business turn up any more unpleasant surprises, renegotiation of terms is a strong possibility.
An Enron spokeswoman said that, to her knowledge, Dynegy was not renegotiating the terms of the acquisition. Dynegy spokesman John Sousa said the company "remains optimistic for the potential of the merger."
In a report on Wednesday, Ronald Barone, an analyst at UBS Warburg, suggested that the deal's current exchange ratio of 0.2685 share of Dynegy for each share of Enron could well be readjusted. Mr. Barone said a much lower exchange ratio of 0.15 was more realistic.
"You've got to believe there is that possibility. There is a 90% spread on the deal," said one analyst, referring to a potential renegotiation.
"There's unquestionably continued malaise in Enron's core business and Dynegy has left itself open to renegotiate with Enron," he continued.
Recently, some of Enron's natural gas and electricity trading partners have further scaled back their activity, causing that "malaise." Many of those partners are shunning new long-term deals and greatly reducing the number of transactions.
Lower volumes at its trading business, which is the largest and most coveted portion of its operation, could cause fourth-quarter earnings to come in below expectations, Enron has said.
Even as the two companies' advisers review the company's books, Enron is facing an increasing number of lawsuits and a tidal wave of potential liabilities, if the past year is any guide.
Some big pension funds that invested in Enron have said they are considering legal options in the wake of Enron's stock collapse and a regulatory probe of its dealings.
The company has also been sued by employees who say they lost large amounts of money in retirement savings that were heavily invested in Enron's stock. One of the suits, filed in U.S. District Court in Houston on Tuesday, alleged that Enron "recklessly endangered" the retirement savings of its employees by encouraging them to invest heavily in Enron stock without warning them of any risks.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Report on Business: International
Dynegy may renegotiate deal Firms to finish examining Enron's books
Reuter News Agency

11/24/2001
The Globe and Mail
Metro
B11
"All material Copyright (c) Bell Globemedia Publishing Inc. and its licensors. All rights reserved."

NEW YORK -- Power companies Enron Corp. and Dynegy Inc. and their advisers are scheduled to spend this weekend poring over Enron's books, which could lead to a renegotiation of Dynegy's acquisition of embattled Enron.
The spectre of renegotiation pushed Enron shares down more than 5 per cent, or 27 cents (U.S.), to close at $4.74 yesterday on the New York Stock Exchange. Dynegy shares closed up 64 cents, or 1.61 per cent, to $40.40.
Dynegy originally agreed to pay about $9-billion in stock for Enron. But since the company's stock fell 45 per cent by yesterday's close amid fears that it could run out of cash before Dynegy completes its buy, Enron now sports a market capitalization of only about $4-billion.
At Dynegy's current stock price, its offer for Enron is worth about $10.85 a share -- more than twice Enron's current share price.
Investment bankers on the deal are currently in the final stages of due diligence, sources say. Should the examination of Enron's business turn up any more unpleasant surprises, renegotiation of the deal's terms is a strong possibility.
An Enron spokeswoman said that, to her knowledge, Dynegy was not renegotiating the terms of the acquisition. Dynegy could not be reached for comment.
In a report on Wednesday, Ronald Barone, an analyst at UBS Warburg, suggested that the deal's current exchange ratio of 0.2685 shares of Dynegy for each share of Enron could well be readjusted.
"We believe the odds of Enron incurring a material adverse change on its operations are soaring, which suggests that -- assuming Dynegy wants to continue to move forward with the deal -- the 0.2685 ratio will not hold," he wrote.
Mr. Barone said an exchange ratio of 0.15 is more realistic.
"You've got to believe there is that possibility. There is a 90-per-cent spread on the deal," said one analyst, referring to a potential renegotiation.
"There's unquestionably continued malaise in Enron's core business, and Dynegy has left itself open to renegotiate with Enron," he continued.
Recently, some of Enron's natural gas and electricity trading partners further scaled back their activity, causing that "malaise." Many of those partners are shunning new long-term deals and greatly reducing the number of transactions.
Lower volumes at its trading business, which is the largest and most coveted portion of its operation, could cause fourth-quarter earnings to come in below expectations, Enron has said.
Even as the two companies' advisers review the company's books, Enron is facing an increasing number of lawsuits and a tidal wave of potential liabilities, if the past year is any guide.
Some big pension funds that invested in Enron have said they are considering legal options in the wake of Enron's stock collapse and a regulatory probe of its dealings.
Enron has also been sued by employees who say they lost large amounts of money in retirement savings that were heavily invested in the company's stock. One of the suits, filed in U.S. District Court in Houston on Tuesday, alleged that Enron "recklessly endangered" the retirement savings of its employees.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Business
INVESTORS RETURN STUFFED AND READY TO BUY; BLUE CHIPS TURN IN A STRONG DAY, REVERSING PROFIT-TAKING SESSIONS
BY ADAM GELLER, Associated Press

11/24/2001
San Jose Mercury News
Morning Final
8C
(c) Copyright 2001, San Jose Mercury News. All Rights Reserved.

NEW YORK -- Investors returned from the Thanksgiving holiday in a buyingmood Friday, sending blue-chip stocks to strong gains and reversing the profit-taking trend of recent sessions.
The Dow Jones industrial average ended an abbreviated trading session up 125.03 to 9,959.71. For the week, the Dow climbed 92.72 points, or 0.9 percent.
Broader stock indicators also rose. The Standard & Poor's 500 index was up 13.31 to 1,150.34, to end the week up 1 percent. The Nasdaq composite index rose 28.15 to 1,903.20, to end the week up 0.2 percent.
Advancing issues outnumbered decliners by a nearly 3-1 ratio on the New York Stock Exchange, where consolidated volume came to 512.75 million shares, down sharply from 1.28 billion in Wednesday's session.
The rise in stock prices, despite the absence of news, shows some investors see buying opportunities after market backtracking earlier this week, analysts said.
''We did see some selling. We did see some money taken off the table. But there are bargain hunters that refuse to sit idly by as optimism appears to be increasing,'' said Alan Ackerman, executive vice president at Fahnestock & Co. in New York.
Friday's gains reversed the trend of earlier this week, but are in line with the market's recent surge, which has seen stocks gain about 20 percent from the lows that followed the Sept. 11 terrorist attacks.
Stock markets closed early at 10 a.m. PST.
Gainers included Ericsson, whose chairman said this week he expects less competition in the market for third-generation wireless technology. The company's stock rose 33 cents to $5.55.
Wal-Mart Stores, the nation's largest retailer, rose 68 cents to $55.80 as consumers headed to stores on the day regarded as the official start to the holiday shopping season. Toys R Us shares also rose, up 95 cents to $23.05.
Enron, whose acquisition by Dynegy is now being questioned by investors, fell 30 cents to $4.71.
The Russell 2000 index, which tracks smaller company stocks, rose 6.11 to 458.42.
Bond prices fell in an abbreviated, post-holiday session as investors seemed to prefer stocks instead.
The price of the benchmark 10-year Treasury note fell 1/2 point, or $5.00 per $1,000 in face value. Its yield, which moves in the opposite direction, rose to 5.00 percent compared with 4.95 percent late Wednesday. Bond markets were closed Thursday in observance of Thanksgiving Day.
The 30-year Treasury bond fell 5/8 point to yield 5.38 percent, up from 5.35 percent on Wednesday, according to Moneyline Telerate.
Overseas, stock markets were mixed. In Europe, Germany's DAX index rose 0.2 percent, while Britain's FT-SE 100 was off 1 percent, and France's CAC-40 fell 0.6 percent. Japanese markets were closed Friday for a national holiday.
In currency trading, the dollar managed four-month highs against the yen and the pound.
The dollar reached 124.48 yen, its highest since Aug 2. The British pound had a low against the dollar at $1.4035, its lowest since July 18.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Business
DYNEGY, ADVISERS PORE OVER ENRON DETAILS; DEAL
From Reuters and the Associated Press

11/24/2001
San Jose Mercury News
Morning Final
2C
(c) Copyright 2001, San Jose Mercury News. All Rights Reserved.

A long weekend of work faced Dynegy and proposed acquisition Enron, whose worsening stock woes Friday whipped up fear that the deal could be renegotiated or collapse entirely.
Houston-based Dynegy and its advisers were expected to spend the weekend reviewing larger cross-town rival Enron's complex books, as both parties race against the decline in Enron's stock to complete the thorough financial examinations a merger requires.
Enron shares ended down 6 percent, or 30 cents, to $4.71 at the close of abbreviated Friday trading on the New York Stock Exchange. Dynegy shares rose 64 cents, or 1.6 percent, to $40.40.
Dynegy on Nov. 9 agreed to pay about $9 billion in stock for Enron. But, after falling 45 percent by Friday's close amid fears it could run out of cash before the deal closes, Enron's market capitalization is only about $4.03 billion.
At Dynegy's current stock price, its offer for Enron is worth about $10.85 a share -- more than twice Enron's current share price.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

EDITORIAL
WORKERS, NEST EGGS DEVASTATED

11/24/2001
Portland Oregonian
SUNRISE
D07
(Copyright (c) The Oregonian 2001)

About 2,700 local Portland General Electric/Enron employees, along with 18,000-plus other Enron employees, had their 401(k) plans locked down after Enron announced a $618 million third-quarter loss, suffering huge losses to their retirement nest eggs ["401(k) plans sink with Enron," Nov. 16].
This is the corporation that gave millions of dollars to get President Bush's regime into power. I'm surprised Bush did not, without congressional consent, offer Enron a multibillion-dollar "economic stimulus" package to save the corporation.
Meanwhile, the hard-working Enron employees are devastated.
JOHN B. WAITE Milwaukie

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Analysis: Travails of the Enron Corporation

11/24/2001
NPR: Weekend Edition - Saturday
Copyright 2001 National Public Radio, Inc. All Rights Reserved.

SCOTT SIMON, host: This is WEEKEND EDITION from NPR News. I'm Scott Simon. Coming up, recognizing New Yorkers by their lunch orders.
But first, trading energy. This week, stock in the Enron Corporation fell like a 14-pound turkey carcass thrown from a third-story kitchen window--kathunk. Continues a trend over the past few months. Enron shares have plunged more than 90 percent since the departure of the company's chief executive and the reworking of some balance sheets resulting in a restatement of income, about $580 million less than previously reported. Joe Nocera is the executive editor of Fortune magazine and a frequent contributor to this program.
Joe, thank you for being with us.
JOE NOCERA (Executive Editor, Fortune Magazine): Thanks for having me, Scott.
SIMON: Now Enron, we ought to explain, it's more than pipelines and gas. Yes?
NOCERA: It's a lot more--or a lot less, depending on how you look at it.
SIMON: A lot less perhaps, yes, now.
NOCERA: They've actually shed most of their hard assets when they became a trading company, trading energy futures, weather futures, broad band futures, a very complicated New Age, modern type company. And for a long time, everybody really believed in what Enron was. They were the kind of the dot-com of the energy world and were thought to do no wrong. And then, Scott, people stopped believing; people stopped having faith and, in particular, people stopped believing anything management said. This is a case study in what happens when management loses credibility. These guys kept saying, `All the problems are behind us,' and every time they said it, a week later, some new problem would crop up. And people started examining their balance sheet and finding all this squirrelly stuff in it. And now basically, if Enron doesn't do this deal that it's negotiated to do with Dynegy, they're going to go bankrupt. It's really an incredible story.
SIMON: Explain to us, if you could, what you refer to--and I guess it's a technical term among economists--`squirrelly stuff.'
NOCERA: Yeah, the squirrelly stuff.
SIMON: Yeah.
NOCERA: Well, the worst that happened was that they had--it turned out that they had all these side partnerships that included Enron officials that were doing billion-dollar trades with Enron, and nobody quite knows why they were doing this. Some people believe it was to enrich the officers in question, but other people believe that they were doing this to help smooth out their earnings. In other words, it was a form of hyping the stocks to keep the earnings going up, and they would take their losses--they'd bundle their losses and they'd throw them in these partnerships so they wouldn't be on the balance sheet.
And when this stuff started to emerge in the newspapers, that's when the wheels really started to fall off, and people were saying, `If this is going on, what'--I mean, this his terrible in and of itself--`but what else could there be?' And it turns out there've been other things as well.
SIMON: Well, you know, I think I understand why now Enron wants the deal with Dynegy to go through, but what does Dynegy see in this?
NOCERA: Well, Enron still does somewhere 25 and 33 percent of all the natural gas and energy futures trade in the United States. It's a huge marketplace, and Dynegy is a much smaller and more conservative player and, you know, by buying Enron, suddenly they became a much, much bigger player. Also, Dynegy actually has hard physical assets and, unlike Enron, they wouldn't just be a middleman on these trades, they would actually be delivering the natural gas. There is something in it for Dynegy. They're buying a very big company at for what now looks like $5 a share. It's really incredible.
SIMON: And let me ask about this, finally; some Enron employees--a good number of Enron employees are suing the company, contending, credibly, that they've been essentially defrauded out of pension money.
NOCERA: Right. Their big gripe is that when the thing started to tank, when the stock started to go down, they were unable to move their--get out of Enron stock and their pension fund--that Enron actually throws the stock in their fund, so they couldn't move out into a different investment vehicle. Now they're saying that, you know, they've been defrauded because the stock was fraudulently hyped. And you know what, Scott? When all is said and done, I think they've got a case. I think they're going to be able to, in fact, show that much of what Enron did, the reason they did the things they did was to hype the stock. And this is a classic case of what happens when you put the stock in front of the company instead of the company in front of the stock.
SIMON: I hate to ask a question like this with just five seconds left, but could there be a criminal investigation?
NOCERA: Oh, I think there will be. The SEC is already circling around.
SIMON: OK, Joe, thanks very much.
NOCERA: Thank you, Scott.
SIMON: Joe Nocera, executive editor of Fortune magazine, and speaking with us from the studios of member station WFCR, Amherst.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Dynegy's Right to Enron Pipeline May Be Disputed, Barron's Says
2001-11-24 13:52 (New York)

     Houston, Nov. 24 (Bloomberg) -- Dynegy Inc. may have a hard
time claiming one of Enron Corp.'s pipelines if their merger
agreement collapses, because the asset has been pledged as
collateral for $1 billion in bank loans, Barron's reported.

     Dynegy has said its initial investment of $1.5 billion in
Enron, using cash from ChevronTexaco Corp., gave Dynegy the right
to acquire Northern Natural Gas Co. if the deal falls through.

     Enron, though, has pledged the assets of its Transwestern and
Northern Natural Gas pipelines to get $1 billion in loans from
J.P. Morgan Chase and Salomon Smith Barney Inc. Dynegy's claim to
the pipeline may be challenged by Enron's lenders if Enron is
forced into bankruptcy, Barron's said.

     Dynegy may also be concerned about Enron affecting its credit
rating, Barron's said. Dynegy, which has a market value of more
than $10 billion and assets worth only $2.5 billion, is listed two
notches above junk status and is on watch for a possible
downgrade, the weekly newspaper said.

     Barron's said renegotiating the purchase in response to a
recent decline in Enron's shares might not make sense because the
company's debt accounts for most of the deal's value, now around
$23 billion.

Deal still on as Enron shares drop 6%
Houston Chronicle
By NELSON ANTOSH
Staff
11/24/01

Shares of Enron dropped another 6 percent Friday, as the investment community fretted that the acquisition price for the company by Dynegy may be reduced, or the deal might not go through at all.
The two sides didn't offer anything new for worried investors.
Dynegy stuck to its Wednesday statement that it is working to accelerate regulatory approvals in order to complete the deal as previously announced.
Dynegy is continuing to take a close look at Enron as part of the due diligence process, which will involve careful study of Enron 's books, Dynegy spokesman John Sousa said on Friday.
On Wednesday, Dynegy Chief Executive Chuck Watson said he was encouraged that Enron had closed a $450 million credit security and received an extension on a $690 million IOU.
Dynegy remains optimistic that the deal can be done, said a source close to the company.
Enron spokeswoman Karen Denne said she was unaware of any meetings planned between top executives of the two companies this weekend, which could signal alterations to the deal.
Enron 's stock, which was the most active on the New York Stock Exchange on Friday, dropped 30 cents to close at $4.71 per share.
This made it the worst performing stock in the Standard & Poor's 500 index for the week, with a loss of 48 percent for the holiday-shortened period.
It was a bad week for a stock that has come down from a 52-week high of $84.87 on Dec. 28 last year. For the year to date, Enron 's price is off 94 percent.
More than 40 million shares traded hands Friday. On Wednesday, 116 million shares were traded.
Analyst Ron Barone of UBS Warburg said the odds of a reduced exchange ratio in the deal were rising.
As announced Nov. 9, Dynegy would exchange 0.2685 of its shares for each share of Enron . According to Barone, 0.15 might be more appropriate.
Traders also speculated that Enron might need to issue more stock to stabilize its finances, which would dilute the shares currently outstanding.
Dynegy's stock gained 64 cents to close Friday at $40.40 per share, on trading of 2.1 million shares. For the year to date, Dynegy's price is off 28 percent.