Conspiracy of Fools (121 page)

20.
The FERC decision and its effect on Enron stock from Christian Berthelsen, “Texas Power Firm’s Shares Falling,”
San Francisco Chronicle
, June 22, 2001, B1.

21.
Some details of Skilling’s meeting with the lawyers from entries in his schedule book, along with the Sanders testimony of July 9, 2002, 162–65.

22.
Details of Herrold’s efforts and the answers he received to his questions from a series of handwritten notes he took beginning on June 20, 2001, in his conversations with Rex Rogers.

23.
Skilling testified about the events in San Francisco before the SEC on Dec. 5, 2001. The author obtained an audiotape of the events that transpired in the meeting room. Also see Karen Gaudette, “Enron CEO Gets a Pie in the Face,”
Associated Press Online, June
21, 2001.

24.
Details of the Fastows’ trip to Florida from a series of documents, including Fastow’s “Company Airplane Transportation Request” of May 30, 2001, which was approved by Skilling; an itinerary headed “Fastow Foundation Travel; Cheeca Lodge, Florida; June 21–24, 2001,” which includes multiple copies with handwritten notes about events participated in; the flight schedule and plan submitted by the pilots of the Hawker for June 21, 2001; an undated printout of an e-mail from Bridget Maronge to a travel agent at Travel Park and three others from her to Fastow’s siblings; bills from the Cheeca Lodge from June 21 through 24, 2001, for Andy Fastow; copies of reimbursement requests submitted to the foundation through Maronge; and the attachment “SIFL Detailed Summary Report,” which was provided to Fastow in a July 6, 2001, memo from Kristi Monson headed “Personal Use of Corporate Aircraft.”

25.
Details of the foundation meeting from the document “Fastow Family Foundation Annual Meeting, June 22, 2001” Also see the foundation’s 990-PF form (Return of Private Foundation) filed with the Internal Revenue Service for the tax year ending Dec. 31, 2000.

26.
Some details of Skilling’s trip from entries in his travel book. The type of transaction being pursued by Nacchio, known as a capacity swap, was part of the regular form of business at Qwest for years. According to Qwest’s filings with the SEC, the accounting used by Qwest for such swaps was approved by Arthur Andersen; however, in 2002, after Qwest brought in new accountants from KPMG, the telephone company began to restate its financial performance for those transactions. For example, on Sept. 22, 2002, Qwest filed documents with the SEC announcing that it was reversing $1.48 billion in revenue, with more than $1 billion of that amount reported in 2001. However, while the accounting
proved to be incorrect, there is nothing about Nacchio’s proposal that is on its face illegal or clearly improper; it made little business sense for Enron, however. That Qwest discussed such swaps with Enron is confirmed in the congressional hearings “Capacity Swaps by Global Crossing and Qwest: Sham Transactions Designed to Boost Revenues?” before the House Energy and Commerce Committee’s Subcomittee on Oversight and Investigations, Sept. 24, 2002. In that hearing Nacchio testified, “During my tenure as CEO, to my knowledge, every purchase of capacity by Qwest was with the intent of furthering the company’s business plan,” and not for the purpose of booking revenues on a quarterly basis. That several parties in June 2001 were negotiating with Enron to do a broadband swap deal is documented in a June 11, 2001, e-mail from Nancy Davidson on behalf of Gary Winnick, CEO of Global Crossing, to Tom Casey, another Global Crossing executive, in which Winnick describes recent discussions with Skilling about broadband deals.

27.
Details of Watkins’s discovery from Swartz with Watkins,
Power Failure
, 268–70.

28.
Some details on the troubles in broadband from an internal “news” article distributed over the Enron corporate Web site on July 12, 2001, “Enron Reports Strong Q2 Earnings Despite Broadband Loss.”

29.
Mordaunt discussed her approach by Fastow to join him in her Jan. 12, 2002, interview with Wilmer, Cutler.

30.
Some details of the transfer of $750,000 to Mordaunt from the RADR conspiracy were disclosed in the indictment in
U.S. v. Fastow et al
.

31.
Timing of the Skilling meeting with Buy and other details from entries in Skilling’s schedule book.

32.
Some details of the meeting between Lay and Skilling from the two men’s schedule books.

33.
Some details of Watkins’s meeting with Williams and Li from a printout of an entry in her electronic schedule book. Also see Swartz with Watkins,
Power Failure
, 269.

1.
Copies of some of the draft press releases were obtained by the author.

2.
Details of the finance committee meeting from the official minutes, handwritten notes of the corporate secretary, and a copy of Fastow’s presentation. Also see the Batson Report, vol. 4, 105; vol. 4, app. D, 135; and vol. 2, app. E, 6.

3.
Some details of the board meeting from the official minutes.

4.
Some details of Watkins’s reaction from Swartz with Watkins,
Power Failure
, 270–71.

5.
Details of the Skilling and Lay conversation with analysts and reporters from an official transcript. The announcement of Skilling’s resignation was sent out in an e-mail from Lay and Skilling on the morning of Aug. 14, 2001, to employees worldwide. Also see Jonathan Friedland, “Enron’s CEO, Skilling, Quits Two Top Posts,”
Wall Street Journal
, Aug. 15, 2001, A3.

6.
Some details of the letter from a copy of the undated, unsigned document. Timing of the delivery of the document from an entry in a mail-tracking registry, headed “Log of Incidents,” maintained by the company’s legal department. Some details from Swartz with Watkins,
Power Failure
, 275—76.

7.
Some details of the initial response to the Watkins letter from Swartz with Watkins,
Power Failure
, 276.

8.
Some details of Derrick’s response to the Watkins letter from his September 26, 2003, sworn statement to the bankruptcy examiner. Also see the Batson Report, vol. 4, app. C, 159–61.

9.
Causey’s response to the Watkins letter is contained, in part, in an e-mail he sent on Aug. 15, 2001, to Mary Clark of Enron, with copies to Steve Kean and Derrick.

10.
Dialogue and other details of the employee meeting from a transcript of the event.

11.
Some details of Watkins’s reaction to the Lay meeting, and her subsequent visit to Olson, from Swartz with Watkins,
Power Failure
, 278–79.

12.
Details of Emshwiller’s meeting with Friedland from Smith and Emshwiller,
24 Days
, 12—13.

13.
A copy of Skilling’s plan for his future was obtained by the author.

14.
Details of Enron’s disclosures from its 10-Q filed August 14, 2001. Other details from Smith and Emshwiller,
24 Days
, 18–19, 21.

15.
Some details of Skilling’s conversation with Emshwiller from Smith and Emshwiller,
24 Days
, 22–24. Also see the Batson Report, vol. 4, app. D, 14.

16.
Some details of the trip from Lay’s itinerary headed “Analyst Meetings—New York/Boston; August 16–17, 2001.” The article read by Koenig was Emshwiller, “Enron’s Skilling Cites Stock Price Plunge as Main Reason for Leaving CEO Post.”

17.
A copy of the Kean e-mail was obtained by the author.

18.
Details of the
Journals
decision to put together a partnership story from Smith and Emshwiller,
24
Days
, 25–26.

19.
Some details of Watkins’s efforts to reach out to Mordaunt and Rogers from Swartz with Watkins,
Power Failure
, 281–83.

20.
Some details of the unopened Siurek e-mail from the FBI 302 of agents’ interview with Grutzmacher on Feb. 15, 2001.

21.
Some details of the Fastow and Bowen meeting from Bowen’s appointment book.

22.
Some details of the Watkins and Buy meeting from her Feb. 14, 2002, testimony in hearings before the House Energy and Commerce Committee’s Subcommittee on Oversight and Investigations. Also see Watkins’s June 6, 2003, deposition before the Enron bankruptcy trustee and Swartz with Watkins,
Power Failure
, 284–85.

23.
Some details of Watkins’s call to Hecker from an Aug. 21, 2001, memo of the call written by Hecker to the file, with copies to Duncan and the Enron engagement; Hecker’s Aug. 23, 2001, e-mail to Duncan, “Documentation of Client Call,” which included a copy of the Aug. 21 memo; Hecker’s May 8, 2001, testimony in
U.S. v. Arthur Andersen;
Duncan’s memo to the files of Oct. 16, 2001, “Enron Employee Assertions Regarding Certain Transactions”; the FBI 302s of agents’ interviews with Shannon Adlong on Feb. 5, 2002; David Duncan on Jan. 14, March 21, and April 5, 2002; Nancy Temple on Feb. 13, 2002; and the SEC notes of the interview with Duncan from Jan. 14, 2002. Also see Swartz with Watkins,
Power Failure
, 285; and the Batson Report, vol. 4, app. C, 174.

24.
Derrick’s limited action during the first week after reviewing the Watkins letter is documented in the Batson Report, vol. 4, app. C, 159. Some details of the concern about legal liability involving Watkins from an Aug. 24, 2001, e-mail written by Carl Jordan of Vinson & Elkins to Sharon Butcher of Enron. Also see the Batson Report, vol. 4, app. C, 159.

25.
Details of the timing of Lay’s meeting with Watkins from his schedule book. Copies of the documents prepared by Watkins for the meeting were obtained by the author. Also see Swartz with Watkins,
Power Failure
, 287–89.

26.
Details of Derrick’s call to Dilg, and his failure to review the Watkins material before sending it to Vinson & Elkins, from his sworn statement to the bankruptcy examiner on Sept. 26, 2003. Also see unsigned, handwritten notes from Vinson & Elkins regarding the assignment.

27.
A copy of the Aug. 22, 2001, e-mail—originally from Zipter to Ding Yuan of Enron, and then forwarded by Zipter to Kaminski—along with Kaminski’s response, was obtained by the author.

28.
Details of Dilg’s efforts to assemble an investigative team from certain handwritten notes compiled by the lawyers. Also see the Batson Report, vol. 4, app. C, 161–62. Other details from Dilg’s sworn statement of Aug. 14, 2003, and Astin’s sworn statement of Sept. 10, 2003, to the bankruptcy examiner. Also see Hendrick’s handwritten notes from the Aug. 23, 2001, discussion with Astin, and the Batson Report, vol. 4, app. C, 162–63.

29.
A copy of the overnight letter announcing the margin call from Bank of America was obtained by the author.

30.
The Smith and Emshwiller article, “Heard on the Street: Enron Prepares to Become Easier to Read,” was published in
The Wall Street Journal
on Aug. 28, 2001, C1.

31.
By analyzing certain details, the author was able to determine the identity of the
Journal
’s source, and then confirmed that finding directly with the source. However, that confirmation was provided on a not-for-attribution basis.

32.
A copy of the MUI form filed by Hannan on Aug. 28 was obtained by the author.

33.
Some details of McMahon’s call to Watkins from Swartz with Watkins,
Power Failure
, 290–91.

34.
Details of the reporting by Emshwiller and Smith from Smith and Emshwiller,
24 Days
, 47–50, 73–75.

35.
Some details of Watkins’s learning of Fastow’s anger, and Olson’s response, from her congressional testimony of Feb. 14, 2002; her June 6, 2003, deposition before the Enron bankruptcy trustee; the Vinson & Elkins memo to the file regarding their interview with Fastow as part of the Watkins investigation, which documented his anger; and Swartz with Watkins,
Power Failure
, 291. Also see the Batson Report, vol. 4, app. C, 159.

36.
Some details of the Aug. 30, 2001, Vinson & Elkins interview with McMahon from the lawyers’ Aug. 30, 2001, memo to the file on the discussion. Also see the Batson Report, vol. 4, app. C, 169.

37.
Some details of the Woodlands meeting from handwritten notes taken by one of the participants. Also see the Aug. 31, 2001, e-mail to the management committee from Joannie Williamson of Enron, along with the attached agenda; Whalley’s Sept. 3 e-mail to Lay and Kean about the agenda; and notes of Lay’s Jan. 16, 2002, interview with Wilmer, Cutler.

38.
Kopper later admitted his destruction of the laptop, which was never recovered, in interviews with the FBI given as part of his effort to secure a plea deal in July and Aug. 2002. These acts resulted in obstruction-of-justice charges being filed against Fastow in
U.S. v. Fastow
. He also discussed it in his testimony of Sept. 27, 2004, in
U.S. v. Bayly et al
.

1.
The structure and problems that emerged with the third Raptor vehicle are described in the Powers Report, 114–18. Some details of the decision from the Wilmer, Cutler notes from the Jan. 9, 2002, interview with Rodney Faldyn.

2.
Some details of the Sept. 11, 2001, discussion between Stewart, Duncan, and Goddard from an FBI 302 of Stewart’s interview with agents on Feb. 8, 2002. Also see the 302s of the FBI’s Feb. 28, 2002, interviews with Goddard and with Goolsby. Also see the Batson Report, vol. 4, app. B, 52.

3.
Details of the Dilg, Hendrick, and Astin meeting from Astin’s sworn statement to the bankruptcy examiner of Sept. 10, 2003, and from Hendrick’s contemporaneous notes from the meeting. Also see the Batson Report, vol. 4, app. C, 170–71.

4.
A copy of Adlong’s Sept. 14 e-mail, “Raptor Documentation,” and the ten attached Raptor memos, were obtained by the author. Also see the Batson Report, vol. 4, app. B, 52.