February 13, 2002

Six Enron Board Members Resign, Including Four From Audit Panel

Enron Corp. announced late Tuesday the planned resignations of six board members, including four who served on its highly criticized audit committee. Simultaneously, Enron dropped its request to employ its longtime outside counsel, Vinson & Elkins, as special counsel to the bankruptcy proceedings.

The audit committee members leaving March 12 are Robert K. Jaedicke, the committee's chairman and a former dean of Stanford University's Graduate School of Business; plus three foreign-based directors: Ronnie C. Chan, a Hong Kong billionaire property developer; Paulo V. Ferraz Pereira, a Brazilian investment banker; and Lord John Wakeham, a member of Britain's House of Lords. An internal report released by a special board investigative committee earlier this month chastised the audit panel for reviewing Enron's now infamous off-balance-sheet transactions in only a "cursory way."

The other audit panel members still on the Enron board are Wendy Gramm, director of the Regulatory Studies Program for George Mason University's Mercatus Center and former chairwoman of the Commodity Futures Trading Commission; and John Mendelsohn, president of the University of Texas' M.D. Anderson Cancer Center.

In a federal regulatory filing, Enron also disclosed next month's planned departures of John H. Duncan, an investor who is the former chairman of Gulf & Western Industries' executive committee; and Charles A. LeMaistre, Dr. Mendelsohn's predecessor at M.D. Anderson Cancer Center.

"The foregoing constitute three of the longest-serving members of the board and three who are required to travel great distances to attend meetings," Enron said in its filing. Following their departure, the board will have eight members.

The resignations represent part of a broad exodus that will result in every Enron director stepping down except for Raymond Troubh, a New York financial consultant who joined its board in late November, said one person close to the situation.

Replacements for the six departing directors haven't been lined up yet. Incumbent board members have been asked to suggest possible replacements, though Enron eventually may seek a search firm's help, according to the informed individual.

Separately, in federal bankruptcy court in New York, Enron withdrew its application to hire Houston-based Vinson & Elkins as outside counsel. Enron's lawyers, Weil Gotshal & Manges, filed its application to withdraw its request after lawyers for New York City's pension fund and Florida's pension fund objected. Weil Gotshal has sought to hire Vinson & Elkins, which has worked with Enron since its formation in the mid-1980s, on a broad range of legal matters.

Vincent Cappucci, who represents the pension funds, said Tuesday "it was highly improper for [Enron] to continue with this application" given what is known about the firm's role in Enron's collapse.

Joe Householder, a spokesman for Vinson & Elkins, said Enron and its counsel had asked the firm to continue on as counsel to various divestiture projects unrelated to the partnerships. But given the objections, he said, "we are in agreement with the decision to withdraw Enron's application to the court on our behalf." Previously, Vinson & Elkins has declined to specify their role in the partnerships, citing client-lawyer confidentiality. Weil Gotshal couldn't immediately be reached for comment.

Write to Joann Lublin at joann.lublin@wsj.com³ and Kathryn Kranhold at kathryn.kranhold@wsj.com⁴

Updated February 13, 2002 12:09 a.m. EST