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Enron Emerges From Bankruptcy

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Enron Corp. received court approval Thursday to emerge from one of the most expensive bankruptcies in history.

U.S. District Judge Arthur Gonzalez in New York signed off on Enron's plan to exit Chapter 11 bankruptcy protection with no notable adjustments.

Houston-based Enron went bankrupt in December 2001 amid revelations of hidden debt, inflated profits and accounting skullduggery. Thousands of workers lost their jobs and millions of investors who hadn't already bolted watched their shares become worthless.

The massive bankruptcy generated more than $665 million in fees for lawyers, accountants, consultants and examiners, according to the Texas Attorney General's office.

The bankruptcy ruling comes after a week in which the former chairman and CEO of the company was led into a federal courthouse in handcuffs, and the wife of another top executive began serving a one-year prison sentence in the affair.

Founder Kenneth Lay became the 30th person charged in the scandal when he was indicted on 11 counts of conspiracy, fraud and lying to banks.

And Lea Fastow, a real estate and grocery heiress, reported to the federal lockup in downtown Houston, to serve the sentence for her misdemeanor conviction of signing a fraudulent tax return to help her husband, Andrew, hide ill-gotten income from schemes that fueled the energy company's crash.

Andrew Fastow, Enron's former finance chief, pleaded guilty in January to running schemes and partnerships to hide Enron debt and inflate company profits while funneling millions of dollars to himself. Fastow is the government's most high-profile cooperating witness.

In an interview this week, Lay contends he was clueless about fraud at Enron when he retook the reins of the company in mid-August 2001, after the abrupt resignation of his protege, former CEO Jeffrey Skilling.

He also says that even as he was being warned about questionable activities, he was working hard — and legally — attempting to straighten out the company's financial problems.

He said Fastow was the "mastermind" of the Enron scandal.

Convincing a jury of that may prove to be crucial if he hopes to avoid a long prison term, since federal prosecutors are alleging that when the longtime Enron chairman regained the CEO's title, he took the reins of a long-standing conspiracy to fool investors and regulators into believing the company was healthy.

Lea Fastow wasn't accused of masterminding shady partnerships or financing schemes that led to Enron's collapse. Although she had been assistant treasurer, the schemes largely were hatched after she quit Enron in 1997 to be a full-time mother.

She was indicted on six felony tax and conspiracy charges in April 2003, about six months after her husband's initial indictment on what grew into 98 counts of conspiracy, fraud, insider trading and other charges.

She pleaded guilty to a charge of signing tax forms she knew didn't include ill-gotten income from her husband's schemes. She also admitted she endorsed and deposited checks of ill-gotten gains disguised as gifts written to their sons.

The ventures that once defined Enron as a leader in energy and other markets, such as trading and broadband, are long gone. The reorganization plan aims to pay most of the more than 20,000 creditors about $12 billion of the approximately $63 billion they are owed in cash and stock in one of three new companies created under the plan from Enron's remains.

Sales are pending for two of those companies — CrossCountry Energy Corp., which comprises Enron's whole or part interest in three domestic natural gas pipelines, and Portland General Electric, its Pacific Northwest utility. The third is Prisma Energy International Inc., a smattering of pipeline and power assets in 14 countries, mostly in Latin America.

If the sales of CrossCountry and Portland General close later this year as expected, the $11 billion will be distributed to creditors with 92 percent in cash and 8 percent in Prisma stock.

If one or both of the sales crumble, creditors will receive less cash and more stock in the multiple companies. The Enron name will disappear.

CrossCountry has so far attracted two buyers.

The first bidder, Texas billionaire and Coastal Corp. founder Oscar Wyatt Jr., in May offered $2.2 billion. Then last month a joint venture of Southern Union Co. and GE Commercial Finance Energy Financial Services offered $2.3 billion. Both offers include $430 million in assumed debt. Gonzalez will consider those and any other bids at a Sept. 1 auction, and is slated to approve the winning bid Sept. 9.

CrossCountry's holdings are the 2,600-mile Transwestern pipeline, which transports gas from West Texas, Oklahoma, eastern New Mexico, the San Juan Basin in northwestern New Mexico and southern Colorado to California, Arizona and Texas markets; half-ownership with El Paso Corp. of Citrus Corp., a holding company that owns the 5,000-mile Florida Gas Transmission pipeline from southeast Texas to Florida; and a less than 2 percent interest in Northern Border Partners, which transports natural gas from Canada to the Midwest.

Last year Enron announced plans to sell Portland General to an investment group backed by Texas Pacific Group for $1.25 billion in cash and $1.1 billion in assumed debt.

"Undoubtedly, this was an extremely complex bankruptcy. Today's court approval acknowledges not only the tremendous amount of work that has been accomplished during the last two and a half years, but also the overwhelming support of our economic constituents," said Stephen F. Cooper, Enron's acting CEO and chief restructuring officer, said in a news release.