BUSINESS The Michigan Daily - Friday, February 8, 2002 - 5 {1 Former Enron exec testifies to no wrongdoing Former Enron Chief Financial Officer Andrew Fastow Is sworn in on Capitol Hill yesterday before subcommittee hearings on Enron began. Kopper incuded In Enron.scand2 The Washington Post Around the corner from Enron founder Kenneth L. Lay's $7 million penthouse apartment, Michael J. Kopper has almost completed work on his own Hous- ton dream home, a gleaming, modernist house that appears to be made of pale, pearly marble. There is no grass yet, though there is evidence, small bushes, that the landscapers have begun their work. The house itself looks finished, save for the brown paper that covers the huge front windows and the plywood protecting the front door. There is a three-car garage and a slate driveway, and every- thing about the house seems sharp-edged and sleek, which makes it stand out in this neighbor- hood of large, stately brick-and-stucco homes. When he closed on the property in January 2001 - taking out a mortgage in excess of $1 million, according to public records - Kopper was a man- aging director in Enron's Global Equity Markets Group, earning millions through his work with then-chief financial officer Andrew S. Fastow. He was not, however, one of the high-flying Enron executives cashing in on stockoptions to make dizzying amounts of cash. In fact, he wasn't even well known inside the company. Lay has told investigators he did not know Kopper at all. Yesterday, though, Kopper was to join some of Enron's biggest names - Fastow, Lay and former CEO Jeffrey K. Skilling, among others - when he was to appear under subpoena before a congressional committee just days after a report prepared by a spe- cial committee of Enron's board portrayed him as one of the major players in the company's collapse. Kopper has engaged the international law firm Dechert to represent him, and declined interview requests through both his attorneys and his assis- tant at LJM2 Capital Management LP, an Enron- related limited partnership where Kopper served as general partner until he was removed last month. Edward B. Horahan III, a financial services and securities litigation lawyer based in Dechert's Washington office, said Wednesday that Kopper planned to appear before the House Energy and Commerce Committee and that he intended to invoke his Fifth Amendment rights. According to the Enron report, Kopper was paid $2 million in management "fees" as general partner of Chewco, a limited partnership set up by Fastow. Kopper, the report said, earned another $10 mil- lion when Enron repurchased Chewco. That wind- fall came from a $125,000 investment made by Kopper and William Dodson, a man who is described in the report as Kopper's domestic part- ner and who has shared residences with him since 1997, according to public records. Kopper brought Dodson into the deals in December 1997, when he transferred his owner- ship interest in a limited partner of Chewco's called "Big River Funding LLC" to Dodson, thus WASHINGTON (AP) - Former Enron executive Jeff Skilling testified yesterday under tough questioning by lawmakers that he was unable to recall key events surrounding the off- the-books partnership arrangements that sent the energy trading company into bankruptcy. He said he knew of no wrongdo- ing. Skilling, the former chief executive officer, said he didn't recall longtime colleague Andrew Fastow - who collected $30 million for run- ning the partner- ships - telling a board of directors meeting that Skilling would approve all the 4 RM partnerships. AP PHOTO "You never heard" that state- ment? asked Rep. SKILLING Billy Tauzin (R- d "I was in.and out of the meeting" and "I don't recall if I was there specifically at the time Andy" made he had the comments, said Skilling. er." He said the board meeting in West of the Palm Beach, Fla., took place under - to difficult conditions because the elec- Place," tric power had gone out and "the w and room was dark." Enron When he resigned his post in accord- August, "I did not believe the compa- ny was in any financial peril," s, "... Skilling said in his first public testi- xpense mony on the Enron disaster. impton And the company's financial state- scribes ments, "as far as I knew, accurately fiduci- reflected" Enron's condition, Skilling Enron's told the House Commerce oversight ct. and investigations subcommittee. couple Skilling said he had no knowledge olsover that the partnerships run by his long- orhood time colleague Andrew Fastow were designed to conceal losses. novated "It was my understanding that the om the purpose of the transactions was to ea, and provide a real hedge" - locking in herron profits from technology investments, lower." the former CEO said. d civic Skilling's testimony came as Fas- Center tow and three other current and for- [son's a mer Enron executives exercised their )odson Fifth Amendment right not to testify at the House hearing. giving the appearance, the report says, "that1 no formal interest in Chewco's limited partn Kopper also is cited as having been one six Enron employees - including Fastow participate in a deal named "Southamptonl after the neighborhood where both Fasto Kopper own homes. That deal also drained of cash while lining the investors' pockets,a ing to the report. "Michael Kopper," the report read enriched himself substantially at Enron's e by virtue of his roles in Chewco, Southai Place, and possibly LJM2." The report de these transactions as "inconsistent with his ary duties to Enron," "unauthorized" by E board and in violation of its Code of Condu Neighbors had no idea that the low-key who live in a well-kept bungalow on B Street in the upscale Southampton neighb had anything to do with Enron. The house - which was extensively ret three years ago - is walking distance fr home where Fastow lives with his wife, L just one block over from the home of S Watkins, now known as the Enron "whistlebl They paid their dues to the neighborhoo club, and made contributions to the local for AIDS. They both drove BMWs - Dod Z3 sports car, Kopper's a 328is coupe. D worked for Continental Airlines. In contrast to Skilling's testimony, Enron's new chief operating officer, Jeffrey McMahon, said earlier yes- terday that he was transferred to a new job shortly after he complained to Skilling about the obscure partner- ships in a 30-minute meeting in March 2000. McMahon was treasur- er at the time of the meeting. "His parting words to me were he understood all my concerns and he would remedy the situation," McMa- hon told the subcommittee. McMa- hon said Skilling called shortly after the meeting and offered him a job elsewhere in the company. McMahon was named Enron's president and chief operating officer last week. His testimony followed the refusal -by Fastow and ex-executive Michael Kopper to testify. The two are at the center of the partnerships which kept hundreds of millions of dollars in Enron debt off the company's books. "On the advice of my counsel I respectfully declinewto answer the questions," said Fastow. After telling the committee that would be his answer to all questions posed by the panel, Fastow was dis- missed. Kopper also invoked the constitu- tional protection against self-incrimi- nation. Kopper saw an investment of $125,000 become $10.5 million in less than three years. After Kopper departed, two current Enron executives, Richard Buy and Richard Causey, also declined to answer questions. Both had knowl- edge of the partnerships that Fastow and Kopper ran. McMahon and ex-Enron attor- ney Jordan Mintz testified they were concerned about conflicts of interest arising out of Fastow's financial interests in the partner- ships while he was Enron's chief financial officer. Mintz suggested that the close relationship between Skilling and Fastow was an obstacle to bringing the partnerships under control. According to McMahon, Fastow said "everything Mr. Skilling says, I hear about." According to Mintz, Skilling ignored Mintz's repeated requests to meet about the partnerships. Consumer spending slow despite discounts Dr. Bill Gates Judges to consider refining the Microsoft antitrust case NEW YORK (AP) - Deep dis- counting lured consumers into the nation's stores last month, offering struggling retailers a brief respite from a sluggish sales trend. But while analysts said they see the sales gains announced yesterday as encouraging, they don't believe con- sumers are ready to splurge. Discounters, like Wal-Mart Stores Inc., wholesale clubs and other moder- ate-price stores, continued to outper- form the rest of the retail industry in January. Department stores and appar- el chains still struggled, though most sales declines weren't as deep as Wall Street expected, with the notable exceptions of May Department Stores Inc. and Gap Inc. "This may be a signal that the end of the recession is near. The weakness wasn't as bad in some areas as we have seen," said Michael Niemira, vice pres- ident of Bank of Tokyo-Mitsubishi Ltd. But he cautioned that January is not representative of spending trends because it is a time when merchants clear out inventory to make room for spring goods. The bank's index measuring the sales of 80 stores rose 5.1 percent in January, better than the 3 percent Niemira had projected. The gain was the strongest monthly showing since January 2000, when the index rose 5.7 percent. "Consumers came out in response to the great values in the stores, but are they willing to pay regular price for spring? It is tough to say," said Richard Jaffe, an analyst at UBS Warburg. The January results came as the Labor Department reported that new claims for state unemployment insur- ance dropped by 15,000 last week to a seasonally adjusted 376,000. Jobless claims slowly have been declining since peaking Oct. 20 at 507,000. "There is still a lot of negative news out there;' Niemira said. Most notably, there haven't been any job gains, he said. Niemira expects sales at stores open at least a year, known as a same-store sales, to be up about 2.5 percent to 3 percent during the next few months, more in line with the retail sales trend of 2001. Same-store sales are considered the best indicator of a retailer's health. Wal-Mart, which posted an 8.3 per- cent gain in same-store sales, beat Wall Street estimates of a 6.2 percent gain. Rival Target Corp. reported a better- than-expected 5.8 percent gain. Analysts believe the two will contin- ue to profit from the problems of Kmart Corp., which filed for bank- ruptcy Jan. 22. Kmart did not report January sales, but will be reporting monthly operating statements with the bankruptcy court. J.C. Penney Co. Inc. also posted a better-than-expected 5.9 percent gain in same-store sales in its department store division. The Limited Inc. posted same-store sales gains of 6 percent, after analysts predicted a 2.4 percent decline. Saks Inc. recorded a 1.7 percent gain, dra- matically better than the 5 percent decline expected. U s The Washington Post Microsoft Corp. and the Department of Justice are weighing the possibility of modifying the con- troversial settlement they reached last year in the long-running antitrust case. In a joint filing to a federal judge, lawyers for the two parties said that in light of roughly 30,000 opinions about the proposed deal received during a legally mandated public-comment period, they might propose changes, although they did not commit to doing so. If any are made, they will be submitted to the court by Feb. 27. Microsoft spokesman Jim Desler cautioned that any modifications would be "refinements" rather than wholesale changes to the agreement. Of the 30,000 public comments received, the Justice Department said that roughly 7,500 were in favor of the settlement, roughly 15,000 opposed and roughly 7,000 expressing no clear opinion. The department said that 2,900 of the com- ments were substantive critiques of the agreement, with 45 of those being in-depth analyses. Another 2,800 were form letters or e-mails: The filing comes as a U.S. District Court judge is deciding how to proceed in determining whether to approve the proposed settlement. Under federal law, she must decide whether the agreement - which has been attacked by Microsoft rivals, con- sumer groups and many antitrust scholars as being inadequate - is in the public interest. Judge Colleen Kollar-Kotelly had recently asked the two sides whether they planned to amend the agreement and for advice on how to proceed. Microsoft and the Justice Department urged her to hold a one-day hearing in which only the com- pany, federal prosecutors and representatives of nine states who joined in the agreement would present arguments and answer questions. 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