Judge OKs Probe of Enron’s Advisors

NEW YORK —  Hundreds of bankers, lawyers, executives and accountants who may have helped Enron Corp. hide debt and inflate profit must cooperate with investigations of the energy company’s collapse, a judge ruled.

A panel of Enron creditors seeking evidence to bolster a bid to recover more than $50 billion can begin investigating 47 financial institutions, U.S. Bankruptcy Judge Arthur Gonzalez ruled. He also authorized Enron bankruptcy examiner Neal Batson to subpoena documents from about 400 financial institutions, 63 law firms, 30 former Enron executives and two accounting firms.

The investigations “will necessitate a tremendous amount of effort and coordination,” Gonzalez said. He ordered the creditors’ committee and Batson to cooperate after Enron’s bankruptcy lawyer expressed concern about the costs of the case.

Also Thursday, an attorney for former Enron Chairman Kenneth L. Lay confirmed that investigators probing Enron’s collapse are examining Lay’s stock sales--a sign of interest in insider-trading or disclosure violations rather than accounting fraud.

Michael Ramsey, an attorney for Lay, said he had two meetings with officials of the Justice Department, FBI and Securities and Exchange Commission. Their questions centered on Lay’s sale of $70.1 million worth of stock back to Enron in the months before the energy trader sought bankruptcy protection in December, Ramsey said.

In an interview, Ramsey said Lay didn’t do anything wrong, and the federal investigators didn’t refer to Lay as a subject or target of fraud allegations. SEC and Justice Department spokesmen declined to comment on the investigation of Lay.

An insider-trading case might be easier to prove than accounting fraud, some lawyers say. Lay sold 4.2 million shares for $189.4 million from 1997 to 2001, as Michael J. Kopper and other Enron executives used off-the-books partnerships to hide $1 billion in losses.

“Given the large sums involved, insider trading offers the most direct theory for a jury” if the government pursues charges against Lay, said Jonathan Turley, a George Washington University Law School professor and criminal defense attorney.

Kopper, a former managing director of finance at Enron, pleaded guilty last week to conspiracy to commit fraud in some of the partnership transactions and implicated his former boss, ex-Chief Financial Officer Andrew S. Fastow. Lay, who was chief executive or chairman from 1997 to 2001, was not mentioned in the charges against Kopper.

Illegal insider trading, which carries maximum penalties of $1 million in fines and 10 years in prison, is the use of material, nonpublic information when buying or selling stock.