Enron, which also filed a $10 billion lawsuit against one-time suitor Dynegy Inc. for breaking off the engagement, was hit from a countersuit Monday from Dynegy as the two battle over a prized natural gas pipeline.
The company, once the world's biggest buyer and seller of energy, traded gas and electricity in financial moves so complex it's trading floor was called "the black box." But Enron CEO Ken Lay defended the company's actions in a interview with PBS's "Frontline".
"I think that introduces some kind of mysticism into it that doesn't really exist," said Lay. "It's no more of a black box than what goes on every day in the world's financial markets."
The Securities Exchange Commission is now investigating Enron's accounting procedures after the company admitted it inflated earnings by more than half a billion dollars and hid another half a billion in debt off it's books, reports CBS News Business Correspondent Anthony Mason.
Most of Monday's 4,000 job cuts were at Enron's Houston headquarters, where the remaining 3,500 or so employees in the 50-story mirrored glass tower were sent home to await further instructions, said spokeswoman Karen Denne.
"The whole thing, it's a nightmare," Joann Matson, a human resources coordinator who was among those let go, said as she carted her belongings to a car.
Enron had warned of substantial job cuts when the company and 13 of its subsidiaries filed Sunday reorganize under Chapter 11 bankruptcy protection in the Southern District of New York.
Enron simultaneously sued Dynegy for at least $10 billion in damages, claiming that its smaller rival wrongly abandoned the $8.4 billion buyout, accelerating Enron's demise. The suit claims Dynegy has no right to acquire Enron's large Northern Natural Gas pipeline in return for a $1.5 billion investment.
Dynegy returned the punch Monday, suing several Enron subsidiaries not included in the bankruptcy case in Harris County District Court in Houston where both companies are based over the pipeline.
"It is a demonstration of sheer desperation that Enron would attempt to keep both Dynegy's $1.5 billion and the pipeline," Dynegy chairman and chief executive Chuck Watson said Monday.
Dynegy's lawsuit says the company wants to ensure that Enron subsidiaries meet contractual obligations to the pipeline to ensure it remains financially healthy.
"Until we take control of it, we are protected," Watson said.
Denne said Enron had no response to Dynegy's lawsuit, except to say Enron's lawsuit speaks for itself.
Last week, Dynegy walked away from the merger after a series of surprise financial disclosures left Watson fearful that he neded to protect his own company and stop trying to save Enron.
Enron claims Dynegy was aware of its precarious position all along and wrongly invoked an escape clause in the merger agreement.
"It does look like it will be quite a messy battle between the two," said Todd Zywicki, a professor of law and bankruptcy expert at George Mason University.
Zywicki said Enron's lawsuit, at least temporarily, will keep the pipeline in Enron's hands as the bankruptcy case buys time to get loans, pay debts and stay in business while trying to restore financial health.
In the bankruptcy filing, Enron listed just under $50 billion in assets and $31.1 billion in liabilities. Enron also said it was talking with several financial institutions to secure credit to keep on operating.
But Fitch Inc., the credit ratings agency, said in a statement Monday that Enron's physical assets the pipelines and power operations are largely encumbered, and the trading business is heavily damaged as cash, credit and traders evaporated over the last several weeks. The large physical assets, such as pipelines and power operations, aren't part of the bankruptcy case.
Fitch said that Enron would emerge from Chapter 11 a much smaller company or it would be completely liquidated, unable to restore its core trading business.
Enron shares were up 14 cents to 40 cents a share in trading Monday on the New York Stock Exchange. A year ago, Enron shares were trading near $85. Dynegy shares were off $3.18, or 10.5 percent, at $27.17, also on the NYSE.
Kenneth Johnson, a spokesman for U.S. Rep. Billy Tauzin, chairman of the House Energy and Commerce Committee, said the committee will send three investigators to Houston on Thursday to meet with Enron officials and lay groundwork for hearings next year into Enron's accounting practices and into what impact the company's problems might have on electricity and natural gas markets.
"The committee will be moving very aggressively to try and pinpoint what went wrong and what if anything Congress can do to prevent this type of thing from happening again," Johnson said.
©MMI CBS Worldwide Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press and Reuters Limited contributed to this report