State: State gives subpoenas to Enron, two others

TALLAHASSEE -- Attorney General Bob Butterworth has issued racketeering subpoenas to Enron Corp. and two other companies as part of a security and consumer fraud investigation into the more than $300-million lost by Florida's employee pension fund.

The inquiry, expected to take several months, could end with the state suing the companies or striking a deal with them outside of court, much like the state's other major consumer cases against Bridgestone/Firestone and American Family Publishers.

Penalties include the companies being barred from doing business in Florida, being forced to change their business practices and paying fines.

The Attorney General's Office, which began investigating in December, expects to receive thousands of documents next month in response to the subpoenas sent to Enron, auditor Arthur Andersen and investment management company Alliance Capital Management Corp. The subpoenas were issued under the Racketeer Influenced and Corrupt Organizations Act. Butterworth, who has a half-dozen attorneys and investigators assigned to the inquiry, said he may target Alliance first for its role in buying Enron stock for the state pension fund as the stock was collapsing.

"We believe Alliance is probably the one we should be going after first -- everybody else is going after Enron and Arthur Andersen," Butterworth said. "We can't let them walk."

Florida's pension fund lost $325-million, which constitutes a relatively small percentage of the $94-billion fund, when it waited until the Friday before Enron declared bankruptcy to pull out of the Houston energy giant's stock. The fund also lost another $9-million on investments in Enron bonds.

The state Board of Administration, which is overseen by Gov. Jeb Bush, Comptroller Bob Milligan and Treasurer Tom Gallagher, already has joined a federal class-action lawsuit in Texas against Enron and Arthur Andersen. On Tuesday, Bush urged board director Tom Herndon to conduct a thorough but quick review of Alliance's role and possibly sue that company as well.

"Given the fact that they seemed to be buying stock as the stock was cascading downward . . . wouldn't it be worth exploring?" Bush said.

An Alliance executive, Frank Savage, also was an Enron board member. The company has previously said Savage had no influence in purchasing the shares, but Bush said "the connection" also figured into the need to investigate whether Alliance should be sued.

Herndon, who is interviewing law firms for a possible lawsuit against Alliance, said he will find out in two weeks whether Florida will become lead plaintiff in the class-action lawsuit in Texas. Even if the state is successful in the federal class-action suit it joined last month against Enron, it likely would recover just 30 cents to 50 cents for every dollar lost.

"The part that's heartbreaking is employees ... had expectations that got shattered in a two-week period," Bush said.

On Tuesday, House Speaker Tom Feeney said he is forming a special investigative committee, headed by Rep. Mark Flanagan, R-Bradenton, to review the pension fund's Enron purchases. The Legislature doesn't control the pension fund, but it does write the pension laws the state Board of Administration must obey.

Enron Corp., which had been in the forefront of energy development and trading, filed for bankruptcy protection in December in one of the largest corporate bankruptcies ever.

Florida is one of the first states to ask for documents from the three companies, partly because of concerns that some documents might be destroyed if the state waited, said Mary Leontakianakos, the office's chief of economic crime.

Alliance is the only company of the three to respond to the subpoenas issued Jan. 17 and served last week, saying they would comply, Leontakianakos said.

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Lucy Morgan

From the Times state desk