Energy firm Enron files for Chapter 11 bankruptcy

NEW YORK -- Beleaguered energy company Enron Corp. has filed for Chapter 11 bankruptcy protection for itself and 14 subsidiaries, the company said Sunday.

Enron also filed a lawsuit against would-be suitor Dynegy Inc. for wrongful termination of its $8.4 billion proposed merger. Both actions were filed in U.S. Bankruptcy Court for the Southern District of New York.

Houston-based Enron said it is in "active discussions" with several financial institutions to secure credit to continue to operate Enron North America Corp.

"From an operational standpoint, our energy businesses -- including our pipelines and utilities -- are conducting normal operations and will continue to do so," Enron chairman Kenneth Lay said.

Enron said it plans to launch "substantial work force reductions," mainly in Houston. It didn't say how many workers would be affected.

On Friday, Enron laid off 1,100 workers in Great Britain. The company employs more than 20,000 workers worldwide.

In its statement, Enron also said it was suing Dynegy for wrongful termination of the merger and seeking at least $10 billion in damages.

Enron claimed Dynegy terminated the merger agreement "when it had no contractual right to do so." It also claimed Dynegy had no right to exercise an option to acquire Enron's northern natural gas pipeline because it "can only be triggered by a valid termination" of the merger agreement.

Dynegy spokesman John Sousa said, "It would have been a breach of our fiduciary responsibility to our shareholders not to do so," Sousa said.

The bankruptcy filing had been expected by several analysts and stockholders, many of whom were stunned by the company's fall from grace.

Enron's loss of credibility in the market stemmed from revelations that its chief financial officer was running partnerships that allowed the company to keep half a billion dollars in debt off its books.

In early November, Enron restated its earnings back to 1997, eliminating more than $580 million in reported income.