HOUSTON -- An internal Enron Corp. report and a request for more information by the bankrupt company's creditors have heightened the possibility that Enron's outside lawyers could be sued, legal experts say.
The Houston law firm of Vinson & Elkins is vulnerable to lawsuits by Enron's creditors, shareholders, former employees and even the company itself, the observers say.
Last week's report by a special committee of Enron's board provided new details about partnerships that inflated Enron's profits and hid losses.
The report also gave a rare glimpse at the work done by a major corporation's law firm. The authors said Vinson & Elkins helped Enron obscure details of the partnerships that seemed designed to enrich insiders instead of benefiting Enron.
"The report didn't paint a pretty picture for Vinson & Elkins," said James Finberg, a San Francisco lawyer representing pension funds that lost money in Enron investments. "A lot of things were brought to their attention, and they didn't do anything to stop the web of transactions."
Finberg predicted that lawyers for shareholders and Enron creditors would sue the law firm on grounds that it helped prepare misleading financial reports.
A senior partner at Vinson & Elkins declined to discuss details of the firm's work for Enron. But he defended the firm's actions and said Enron didn't tell the lawyers everything about the partnerships.
"We didn't have the ability to examine what the facts were. We didn't have access to the executives," said the partner.
Enron "would take our advice when they concluded that they wanted to, and rejected it when they didn't," he said.
The Enron board committee's report was issued Feb. 2. On Friday, Enron's creditors asked a federal judge to see records of Enron, Vinson & Elkins and other Enron advisers related to more than 50 of the partnership deals that played a key role in Enron's collapse.
Lawyers familiar with the case said the unsecured creditors committee rejected a recommendation by Enron's bankruptcy advisers that it immediately sue accountants Arthur Andersen and some former Enron officials, opting instead to investigate further.
They said the creditors did not want to appear they were helping Enron blame Arthur Andersen for its collapse, and that a longer investigation increased the likelihood creditors would sue lawyers and other Enron advisers.
The creditors may try to undo some of the partnership transactions to bring money back on to Enron's books.