Jeff McMahon, promoted Tuesday to president and chief operating officer at scandal-wracked Enron Corp., has a knack for finding himself in the middle of corporate maelstroms. 

His ability to deal with trouble in a straight-shooting style was likely attractive to a company desperately needing some truth serum. 

McMahon is said to have openly questioned some of the major off-balance sheet partnerships set up by Enron that contributed to the energy giant filing the largest bankruptcy in U.S. history in December. 

As a company insider, he understands the inner workings of Enron's complex dealings. That asset could help Enron in its survival strategy. But it could also prove to be a liability, if inquiries about off-balance sheet structures raise concerns about McMahon's involvement. 

The boyish-faced McMahon, a trained accountant known for his political savvy and strong sales ability, has held a number of senior roles at Enron, including executive vice president of finance and treasurer for Enron Corp., and president and chief executive officer of Enron Industrial Markets. 

Enron isn't the first place in which McMahon, 41, has found himself at the center of a major corporate controversy. 

A decade ago, he was a young internal auditor caught up in a case that gained almost as much notoriety as Enron, as trading losses at his former employer, the U.S. subsidiary of German industrial giant Metallgesellschaft AG, nearly bankrupted the parent company. 

A HEDGE GONE AWRY 

In the early 1990s, McMahon was an internal auditor at the U.S. unit of Metallgesellschaft, MG Corp., which eventually lost more than $1 billion from oil futures trading, making headlines throughout the world. 

He wrote a series of internal audit reports critical of risk management and accounting procedures at the MG Corp. subsidiary responsible for the losses, MG Refining and Marketing, Inc. 

``(McMahon) was one of the heroes at MG Corp.,'' said Bob Bernstein, a lawyer at Kaye Scholer LLP in New York, who represents Metallgesellschaft, now known as mg Technologies. 

Figuring out exactly what went wrong at MG Corp. is a cottage industry. The case is studied in business schools, and many former employees of the company and some academics insist that in the long-term, the MG trading strategy would have made money. 

MG Corp. was caught out in a trading strategy that amounted to a huge bet on oil futures prices. When oil prices dropped in 1993, the futures positions hemorrhaged cash, threatening the collapse of the entire company. 

``They were involved in giant speculation,'' said Jeff Parsons, an economist at Charles River Associates in Boston, who has studied MG Corp. The oil futures were meant to hedge longer-term supply contracts, but also provide a source of profit. 

RAISING RED FLAGS 

Internal audit reports obtained by Reuters indicate that McMahon's audit team was sounding alarms even before MG Corp. began hemorrhaging cash, and continued to do so as the problems persisted. 

An audit of risk management procedures at MGR&M dated August 27, 1993, found that risk management ``require(d) improvement,'' The amount of risk capital committed to the trading was ``much larger than anticipated in the original business plan,'' according to the report. 

Although the internal audit team was told that the Board of Directors had approved changes to the business plan, there was no formal written approval of the changes, the report continued. 

``The lack of formal approval presents the risk that deviations from the approved plan occur, go undetected, and expose the Company to financial loss,'' McMahon's report said. 

Management at the time ignored him, but after the losses were sustained, new management was brought in, saw McMahon's reports, considered additional evidence, and fired the architects of the strategy, Kaye Scholer's Bernstein said. 

MG managed through the crisis and continued to operate, though with significant help from bankers in a major bailout operation. 

A SIMILAR ROLE 

At Enron, McMahon may have played a role similar to that at MG Corp. 

According to a letter sent from Sherron Watkins, a vice president at Enron, to former Chairman Kenneth Lay, which was written after Enron CEO Jeffrey Skilling resigned in August, McMahon was highly concerned about the off-balance sheet LJM partnerships, a series of deals set up by Enron. 

McMahon, then Enron's treasurer, demanded that five issues regarding LJM be addressed, if he was to remain in that position, Watkins said. Three days later, Skilling offered him the chief executive officer spot at Enron Industrial Markets, the letter said. 

For his part, Skilling has said that McMahon did raise concerns -- but his primary issue was the impact of LJM on his compensation, according to Judy Leon, a spokeswoman for Skilling in Washington, D.C. 

OFF-BALANCE SHEET DEALS MAY PROVE NETTLESOME 

McMahon reports to Stephen Cooper, who on Tuesday was named acting chief executive. 

This joins Cooper, an outsider with a restructuring background, with McMahon, an insider not implicated directly in any wrongdoing. Still, McMahon was a senior financial official while a series of off-balance-sheet transactions were structured, and many of them had cross investments in one another, a banker who knows McMahon said. 

McMahon has so far successfully avoided criticism for his involvement with off-balance sheet structures, the banker said. ''But who knows if he'll get dragged into this?,'' he added.