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Enron under SEC probe
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October 31, 2001: 6:23 p.m. ET
Regulators investigating energy firm's links to CFO partnerships.
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NEW YORK (CNNmoney) - Enron Corp. disclosed Wednesday that it is under formal investigation by the Securities and Exchange Commission and has formed a special committee to deal with the probe.
The SEC query covers certain matters that were the subject of recent press reports, Enron said. Last week, Houston-based Enron (ENE: down $1.40 to $12.50, Research, Estimates) replaced Chief Financial Officer Andrew Fastow, who has been linked to transactions the government is investigating.
"I have asked the board to take this action to address fully and forthrightly investors' questions and concerns," Enron Chairman and CEO Kenneth Lay said. "Responding to the SEC offers us an additional opportunity to achieve this same goal for investors, and we will cooperate fully. We will also make every appropriate public disclosure during the course of the SEC's investigation."
Enron's special committee also has hired attorney William McLucas of the law firm Wilmer Cutler and Pickering as its counsel. McLucas is the former head of the SEC's division of enforcement.
News of the SEC probe came to light Oct. 22 when regulators requested information from Enron concerning two partnerships organized by Fastow.
Enron's most notable transaction with the partnership, LJM2 Co-Investment LP, involved the partnership's purchase of 55 million Enron shares in exchange for a note, with the aim of hedging against certain technology investments. When the value of Enron's stock and the investments dropped, Enron repurchased the shares at the lower price and cancelled the partnership's note.
The disclosure caused Enron shares to plunge nearly two-thirds, but the stock staged a rebound Wednesday, surging 24.5 percent to $13.90. In after hours trading on Instinet, shares dropped 75 cents to $13.15.
Enron also announced Wednesday the election of William Powers, Dean of the University of Texas law school, to its board.
Enron also is seeking more financing, reportedly $1 billion to $2 billion in additional funds. Enron now is the object of takeover speculation, with General Electric's GE Capital, Warren Buffett's Berskshire Hathaway and Royal Dutch Shell possible buyers, press reports said. 
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