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Enron cracks the whip He Was Right. Bad Career Move.By Rick Horowitz
When you fantasize about being rich, it's never just about the money, is it? OK, so it's mostly about the money -- but it's also about the things that the money gets you, and not just the tangible things. When you have enough money, you can make things happen. You can bend other people to your will. You snap your fingers, they come running. You say jump, they jump. You say handle it, they handle it. Even if handling it means throwing someone out of a job. Especially if it means throwing someone out of a job. I mean, what's the point of being rich if you can't see to it that those who displease you pay for their transgression? Including the transgression called: Being Right. Which brings us to the curious (and highly instructive) case of Enron and the stockbroker. The broker's name was Chung Wu. He didn't work for Enron -- at least he didn't think he did. He worked for UBS PaineWebber, as a financial adviser in its Houston office. Last August, Mr. Wu offered his clients some financial advice about Enron. Sell. This was just one week after Enron CEO Jeffrey Skilling had suddenly jumped ship, and Mr. Wu apparently decided it was time for everyone else to take to the lifeboats. So shortly after midnight on August 21st, he sent an e-mail message to 73 clients, including Enron employees. "Financial situation is deteriorating in Enron," he told them. And also, "I would advise you to take some money off the table even at this point. And also, "Time is value and waiting to make a decision would cost you a fortune." Mr. Wu hit the "send" button at 1:20 in the morning. At 1:17 that afternoon, the writ hit the fan. It was an e-mail sent to Mr. Wu's bosses by one Aaron Brown, an Enron exec in charge of the company's stock-option program. Mr. Brown had seen Mr. Wu's message. He was not pleased. "Please handle this situation," Mr. Brown told Mr. Wu's bosses. "This is extremely disturbing to me." Another Enron exec, Mary Joyce, checked in similarly; she wanted something done, and she wanted it done promptly. Less than three hours later, Mr. Wu was unemployed. (Is that promptly enough?) PaineWebber couldn't have been more apologetic. Not to Mr. Wu -- to Enron. And by that evening, PaineWebber's Houston branch manager was in full debasement mode, writing to Mr. Wu's clients and trying to toss Mr. Wu's advice down the memory hole. "Foremost, I wish to apologize for Mr. Wu's statements. To the fullest extent possible, on behalf of UBS PaineWebber, I hereby retract Mr. Wu's statements.... Mr. Wu's statements are contrary to UBS PaineWebber's current recommendation concerning Enron stock." Which recommendation, you'll be happy to know, was a "strong buy." A "strong buy" on August 21, when Enron's stock stood at about $36 a share, less than half its peak price, and still a "strong buy" all the way to November 28, when the stock stood at a whopping 61 cents a share and the mighty company was just four days away from declaring bankruptcy. Nice work, folks! Way to protect those investors! PaineWebber, meanwhile, says that Mr. Wu was "terminated for violating firm policy concerning electronic communications"; he sent his famous e-mail to more than 10 clients without getting prior approval. As it happens, he had done that sort of thing at least twice before without anyone getting all hot and bothered about it. But this time was different somehow. Did I mention that PaineWebber handled the stock options and deferred-benefit plans of many Enron employees, including top Enron executives? And that the arrangement may have been worth hundreds of millions of dollars a year to PaineWebber? You don't think that that kind of money would have been enough to convince PaineWebber to stay on Enron's good side, do you? To keep recommending Enron stock even if individual investors could wind up getting shafted? To fire an analyst who sensed that Enron was rotting away? To jump when Enron said jump? Of course not. Posted 3/28/02. Get
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Rick Horowitz
