A federal judge yesterday approved Enron Corp.'s bankruptcy plan, paving the way for a resolution to one of the nation's costliest business collapses.
U.S. Bankruptcy Judge Arthur J. Gonzalez gave his blessing to Enron's exit strategy of selling most of its prized assets to repay creditors about 20 cents on the dollar in cash and stock.
Before it filed for bankruptcy protection in December 2001 amid disclosures about billions of dollars in debt and phony earnings, Enron reported revenue figures that made it the nation's seventh-largest public company. The Houston energy giant, which once employed as many as 32,000 workers around the globe, now has 9,352 employees, according to spokeswoman Karen Denne.
Claims against the company will amount to nearly $63 billion, according to Stephen F. Cooper, a turnaround expert serving as acting chief executive, while Enron has on hand about $12 billion in cash and equity in its Prisma Energy International Inc. unit. Enron did not set a time frame for when payments to creditors would come because there are still tax and legal issues to be ironed out, Cooper said.
"We will continue working diligently to address those issues so that we can begin initial distributions to creditors as expeditiously as possible," Cooper said in a statement.
As part of the reorganization, Enron's name will disappear, along with its now infamous "crooked E" logo. But Cooper said the bankrupt company's estate will proceed with lawsuits against investment banks and former executives accused of playing a role in the firm's demise. Any financial settlements those cases might generate would be shunted to creditors.
Among the biggest winners in Enron's bankruptcy were accountants, lawyers and other professionals who took part in the 31-month process. Professionals submitted bills for $702 million in fees and expenses as of May 2004, according to Texas Attorney General Greg Abbott, who tracks the fees.
Meanwhile, other industries continue to suffer from the effects of Enron's downfall. Citigroup Inc. said yesterday that its net income for the second quarter fell 73 percent after taking a $4.95 billion charge against earnings for lawsuits related to its dealings with Enron and WorldCom Inc. And some Western utilities are in financial straits because the bankruptcy judge granted Enron claims that they owed it millions because of termination clauses in long-term contracts.
Gonzalez's approval came one week after former Enron chief executive Kenneth L. Lay pleaded not guilty to charges that he engaged in a conspiracy to mask the company's financial problems in the months before it fell apart. Lay's lawyers said they will ask for a trial this year on the 11-count indictment.
In all, the Justice Department's Enron Task Force has filed criminal charges against 31 people. Trials of investment bankers, Internet unit executives, and former chief executive Jeffrey K. Skilling and accounting chief Richard A. Causey are scheduled for this year and into 2005.