Fried Frank Harris Shriver & Jacobson has been named by Congressional investigators as one of the few professional advisers to voice concern over the way the company was structured.
Houston firm Vinson & Elkins has lost money in addition to credibility following Enron's collapse. The firm is owed $8.6m (£6.09m), making it one of Enron's biggest creditors. But while that firm's reputation has been sullied by its associations with its energy client, New York firm Fried Frank offered an opinion that ran counter to the way Enron ran its business.
According to the investigators, Enron's legal vice president Jordan Mintz asked Fried Frank to review the company's outside investment partnerships.
Mintz made the request independently and was told by Fried Frank that the practice of investment partnerships should be brought to a halt. Chairman of the subcommittee on oversight and investigations, James Greenwood, has asked to receive a copy of Fried Frank's opinion.
Fried Frank joins New York peers Shearman & Sterling, Davis Polk & Wardwell and Skadden Arps Slate Meagher & Flom as the Wall Street names now linked to Enron. The association has more positive connotations for some than for others.
Skadden Arps partner Robert Bennett has been retained by Enron as a first line of defence. Weil Gotshal & Manges is handling the company's restructuring work, while Enron's auditor Arthur Andersen has instructed Daniel Kolb and Michael Carroll of Davis Polk. Davis Polk has already received criticism for its determination to run roughshod over claims of conflict. It has been booted off JP Morgan Chase's lawsuit against Federal Insurance Co because Federal is a subsidiary of Davis Polk client Chubb Corporation.
Shearman & Sterling has become a somewhat accidental participant in the fray. The firm's corporate finance and investment group is home to partners Joel Goldberg and Barry Barbash. Both men have attracted media scrutiny for their involvement in the process by which Enron gained an exemption to the 1940 Investment Company Act.
In 1997, having been unsuccessful in its attempts to persuade Congress to grant the exemption, the company approached Barbash. Barbash, then director of the Securities and Exchange Commission's (SEC) division of investment management, granted Enron's foreign operations an exemption from the act. The exemption allowed the company to set up a network of overseas partnerships. Enron had recruited Barbash's former SEC boss Goldberg to help make its case.
“I guess on the one hand, if Enron had been subject to the Investment Company Act, they probably could not have done these transactions”
Joel Goldberg, Shearman & Sterling
Goldberg recently told The New York Times: “I guess on the one hand, if they'd been subject to the Investment Company Act, they probably could not have done these transactions. The subsidiaries would not have existed and they would have had to make another plan.”
Some have argued that the exemption paved the way for Enron to exploit opportunities to shift debt from its books and avoid accounting restraints. It has been argued that without the exemption, Enron's branches in Europe and South America would not have been able to hive off debt and hide their financial structures from investors.
Others say that the exemption was narrow in its emphasis and not solely for the benefit of Enron. The exemption applied to an infrastructure company with projects outside the US. Enron had wanted a more broadly-worded exemption.
A Shearman source said: “To argue that none of this could have happened but for this exemption is ridiculous.” The source also said that any inference that Goldberg was hired to influence Barbash was not the case.
Both Congress and the SEC have taken steps to review this and other exemptions given to the company.