Enron Taps Reorganization Whiz as CEO
HOUSTON – Hobbled energy giant Enron Corp. Tuesday named restructuring expert Stephen Cooper as acting chief executive, the latest effort to clean up after former managers who brought the company to its knees.
Cooper, 55, is managing principal of New York-based restructuring firm Zolfo Cooper, an advisory firm for companies in crisis. He will take the reins from embattled former Enron Chairman and Chief Executive Kenneth Lay, who resigned on Wednesday under fire from Enron's bankruptcy creditors' committee.
Cooper, vice chairman of troubled bus company Laidlaw Inc. won the committee's blessing after weeks of discussions over candidates that included former General Electric CEO Jack Welch and former New York Mayor Rudy Giuliani, according to one member.
Cooper expressed confidence that Enron could be restructured successfully and eventually emerge from bankruptcy, although industry experts were doubtful.
"The physical assets look to me to be of an enormous advantage here," Cooper said in a voice mail to employees, according to a transcript obtained by Reuters. "The regulated assets -- the pipelines and generating plants -- provide reliable, steady cash flow and returns. And they provide a very sound, fundamental base to restructure around."
Cooper will start immediately in his new role as interim CEO and chief restructuring officer to tackle the myriad problems afflicting what was once the world's biggest trader of electricity and natural gas and the 7th biggest U.S. company by revenue.
Enron filed for Chapter 11 bankruptcy on Dec. 2 after damning allegations of insider trading and financial misdeeds evaporated investor confidence in a once-proud linchpin of the Houston economy and national energy market.
Cooper's appointment is the latest step in a management transformation at Enron, which has seen the departures of Andrew Fastow, former chief financial officer accused of reckless financial reporting, and Clifford Baxter, the former vice chairman found dead last week of an apparent suicide.
Enron also said Jeff McMahon, named last year as CFO to replace Fastow, was named president and chief operating officer, replacing Lawrence Whalley, who resigned to join UBS Warburg , where he will run Enron's former energy trading operations that were transferred to the Swiss bank.
It said Treasurer Ray Bowen was named to replace McMahon as CFO, and that it is seeking a new chairman.
Industry observers generally had positive things to say about Cooper and his firm, who has been involved in dozens of distressed company reorganizations over 30 years, including that of Macy's parent Federated Department Stores Inc. and construction giant Morrison Knudsen. In addition to vice chairman, Cooper is chief restructuring officer of Laidlaw, parent of the Greyhound bus line.
"Zolfo Cooper is an impressive firm and does good work," said Randall Patterson, a restructuring specialist with Chicago-based BBK, which focuses on auto industry reorganizations.
Patterson predicted Enron will eventually be liquidated, but said lawsuits over its demise will prove the most pesky problem.
"Obviously Enron is going to be a 'tear apart, sell off the pieces' case, but the biggest complexity will be centered around the lawsuits that fly around it and Arthur Andersen," said Patterson, referring to Enron's former auditor.
The Chicago-based firm is under assault by politicians, lawyers, employees and former CEO Ken Lay, who has blamed his problems on Andersen's faulty auditing.
Cooper was to have been available for media interviews but the company inexplicably postponed his availability indefinitely.
Industry experts say say he will face a major challenge if he seeks to bring Enron out of bankruptcy, a process that usually lasts a year or more. With huge debts looming and limited resources to pay it off, Cooper may be forced to liquidate Enron, although the company maintains it has prospects.
"Our focus is on the future of Enron," said Cooper in a statement. "With more than 19,000 employees worldwide, Enron has real businesses with real value." He said he will "develop a reorganization plan to maximize value for the company's stakeholders."
One member of the Enron creditors committee, who asked not to be named, said it considered only a handful of people for the interim CEO post, including Welch and Giuliani, although neither were ever interviewed. It decided on Cooper even though he has limited experience in restructuring energy companies.
"A number of people on the committee were familiar with him and they felt he was the best," despite "some trepidation" from some of those in the energy business who felt he might not be familiar with the energy market.
Richard Cieri, a restructuring specialist with Cleveland-based Jones Day Reavis & Pogue, expects Cooper to instill confidence in Enron management among creditors and other stakeholders.
"You can expect he will be an honest broker and evaluate matters intelligently," said Cieri, who is advising Laidlaw on its restructuring.