Enron, CUC legal counsels’ ‘close links’ questioned

Lawyers for two power firms edged out from a final negotiation on the 80-megawatt power plant have asked the Commonwealth Utilities Corporation to hire new outside legal counsels, citing potential “conflict of loyalties” with project contractor Enron.

Steven P. Pixley, attorney for the Tomen Consortium, and Rexford C. Kosack, for Saipan Power Partners, expressed concern over retention of Fulbright & Jaworski to assist CUC in closing a deal with the Houston-based conglomerate as well as in settling pending protests.

The international law firm — with offices worldwide and its base in Houston, Texas, the two claimed — was hired last month by the CUC board to work on the much-delayed project. Its Hong Kong office is expected to provide legal services to the government-owned utility firm.

But the two losing bidders, which have formally protested the awarding of the estimated $120 million plant to Enron, questioned whether Fulbright can “objectively” advise CUC on these issues.

“We have believed from the start that something was not right about Fulbright being retained,” Mr. Pixley and Mr. Kosack said in a joint letter to CUC Executive Director Timothy P. Villagomez.

“Given the dozens, if not the hundreds, of well-respected national and even international law firms available to advise CUC with respect to the project, there is simply no need to create the appearance, if not the reality, that CUC is not receiving the best legal advise possible,” they added.

Close link

They alleged there is a history of “close relationship” between the firm and Enron, citing news reports detailing business transactions involving the two companies.
Mr. Pixley and Mr. Kosack attached copies of the reports in their letter dated August 23.

In one report published July 29, 1999 in the New York Law Journal , Fulbright was retained by Enron’s affiliated company, Enron Oil & Gas, where it sold 76 percent of its ownership interest in exchange for foreign properties in India and China. Four lawyers from its office in Houston were involved in that transaction, the report showed.

“It would seem to be difficult for a law firm which has spent considerable time recently in working on a major transaction between Enron and its affiliated company to all of a sudden have to sit in judgment of an award to Enron and negotiate for CUC against Enron,” said Mr. Pixley and Mr. Kosack.

They noted other reported transactions such as:

– a Fulbright lawyer helped a start-up business obtained funding from Enron whom he has had contact in the past;

– the firm served as counsel for the floating of bonds for a new stadium, Enron Field, in Houston where Enron was of the companies providing loans to the state government;

– both companies are clients of same commercial real estate firm; and

– both have been underwriters of the same technology event and a charity event.
Tomen and SPP asked: “If the law firm and Enron move in the same circles back home in Houston, how likely is it that Fulbright will take action that harms Enron when Fulbright is hired overseas?”

Conflict

Although the law firm is capable of providing excellent legal services, the two power companies wondered why CUC would choose it for the project in view of its connection with Enron.

“To be blunt, when the project is over, Fulbright likely will be looking to only one entity for future work and referrals of work: Enron, not CUC,” its lawyers said.

“Given this high potential for conflicting loyalties, CUC would be better advised to seek an unquestionably independent outside legal counsel,” they added.

Mr. Villagomez could not be reached for comment on the letter as his office said he is off-island.

Board Chair Jesus T. Guerrero has disclosed that full negotiations with CUC, through Fulbright, would begin Sept. 11, with the preliminary discussion set middle of this month.