January 14, 2003
New AG says Enron should liquidate

New Attorney General Greg Abbott has some harsh words for Enron's bankruptcy attorneys:

Texas Attorney General Greg Abbott blasted Enron's bankruptcy attorneys Monday, saying they are "lining their pockets" with fees at the expense of taxpayers, former employees and investors.

At the present rate of spending, Abbott said, the money spent on lawyers and accountants sorting through Enron's remains could approach $1 billion. He said the company should consider an immediate liquidation.

Since going into bankruptcy 13 months ago, Enron has spent more than $300 million on professional fees -- easily a record -- and is burning through $25 million a month. The situation could linger for months, even years.

"What have we gotten for our money?" Abbott said. "There's been no reorganization plan, and there is no reorganization plan that is imminent.

"Not only are we not even coming close to seeing the light at the end of the tunnel, I don't think we're even in the tunnel yet."

Abbott goes on to say that Enron should be in Chapter 7, not Chapter 11. I'm not a bankruptcy guy, so I'm not sure what the legal details are. Anyone know better?

UPDATE: I posted this entry in a bit of a hurry, so let me clarify. I do understand that Chap7 means "liquidate" and Chap11 means "reorganize". I'm not clear on what that means in practical terms. Is he just mad at the pocket-lining people, and if so how would Chap7 stop them? What's the state's interest in this? That's what I don't understand. Sorry for the confusion.

Posted by Charles Kuffner on January 14, 2003 to Enronarama | TrackBack

Chapter 7 is the liquidation provision of the bankruptcy law, while Chapter 11 is the reorganization provision. It's just a shorthand for what he'd said previously.

Posted by: Chris Quinones on January 14, 2003 11:30 AM

As things stand, Enron is theoretically trying to reorganize, and that could go on forever. If the bankruptcy were filed under Chapter 7, the attorneys would be required to wind things up in a timely manner.

Since there is theoretically some hope of getting Enron running again, the attorneys can work (and bill) for a long time on the case. What Abbott is saying is that the company never will reorganize and the attorneys are just milking the corpse for fees.

Posted by: Ginger on January 14, 2003 1:55 PM

Why not revoke their corporate charter, sieze the assets and pay them out to the shareholders and former employees?

Posted by: John K. on January 15, 2003 12:12 PM