Enron Ousts CFO Amid Questions

Enron Corp. may have added another question to the list investors already have by ousting its chief financial officer a day after the company stressed its confidence in Andrew Fastow amid a Securities and Exchange Commission inquiry. 

``It could either be viewed as a positive step toward easing investor concern or it could be interpreted as if Enron removed the CFO at the request of the SEC,'' Prudential Securities Inc. analyst Carol Coale said Wednesday. ``Who knows?'' 

Enron officials hope it will result in increased investor confidence after the energy trading giant's stocks have declined in value each day since Monday's announcement that the SEC had inquired about partnerships which did business with Enron while they were managed by Fastow. 

``In my continued discussions with the financial community, it became clear to me that restoring investor confidence would require us to replace Andy as CFO,'' Enron chief executive officer Kenneth Lay said after markets closed Wednesday. 

Fastow will take a leave of absence from the company while Jeff McMahon, who has served as chairman and chief executive of Enron's Industrial Markets group, takes over his role. 

``I think change is good at this particular point in time,'' said FAC Equities analyst Robert Christensen said. ``I think Andy was somewhat beleaguered.'' 

A.G. Edwards & Sons analyst Mike Heim, however, said it will take more than replacing Fastow as chief financial officer to clear the uncertainty looming in the financial world about Enron and its partnerships. 

``I think the reason why the stock has been declining so sharply the last few days is due to a lack of clarity on the partnership arrangements,'' Heim said. 

Replacing Fastow alone won't clarify those arrangements, he added. 

``There is still uncertainty despite promises by management to be more transparent to the financial community,'' Heim said. ``Instead of being more transparent there is more confusion than ever.'' 

Enron's stock continued to plummet Wednesday, closing down $3.38 to $16.41 per share, a 17 percent decline. 

Since the Wall Street Journal first reported on the partnerships last week, Enron's stock price has slid nearly 52 percent. 

``The market was asking for that to happen,'' J.P. Morgan analyst Anatol Feygin said of Fastow's departure. ``This is really the first time Enron has acted as an agent of the shareholder in this crisis.'' 

Previously, Enron's managers have been ``cautious and defensive in their approach,'' he said. 

During a conference call Tuesday to address investor concern, Lay said the partnerships were fully disclosed and contained measures to ensure no conflict existed as Fastow carried out the dual roles. The partnerships have since been dissolved. 

The call didn't work for many, including Feygin and Heim. 

``I didn't hear things like we've unrolled all these partnership dealings or here's all the exact details of how the partnerships work or we don't ever expect to take any more charges,'' Heim said. ``What I heard is we don't have to disclose that information until the 10-Q is filed.'' 

The turbulent past few months which have included the SEC inquiry, third quarter losses and the August resignation of the company's chief executive officer, Jeff Skilling, have left many analysts questioning the company's future, Heim said. 

``It's really a speculative bet right now, but the odds favor the company being able to weather the storm and being a healthy company if not a year from now, two years from now,'' he said. 

But much is going to depend on how much Enron discloses to its investors, Feygin said. 

Feygin said McMahon worked as Enron's treasurer for two years under Fastow before a disagreement over Fastow's involvement in the partnerships caused McMahon to leave his job as treasurer. 

``Internally, Jeff was always a proponent of Andy not being involved in (the partnerships),'' Feygin said. ``Three days ago I would have said there is no need for a change at the CFO level. Today, it was pretty obvious it was something Enron needed to do.''