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American Morning

Interview of Andy Serwer, "Fortune"

Aired February 21, 2002 - 09:32   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JACK CAFFERTY, CNN ANCHOR: A lot of news about Enron this morning, not much of it favorable. No surprise there. Among the stories, a new report about Enron's efforts to try to influence the Clinton White House.

Andy Serwer, the editor-at-large in our publication over there, "Fortune" magazine, is here to take a look. And they went after a marquee name, didn't they?

ANDY SERWER, "FORTUNE" MAGAZINE: Yeah, they did. It's just another little interesting twist and turn here, Jack. Apparently, Ken Lay, then CEO of Enron, of course, offered then Treasury Secretary Robert Rubin a spot on the Enron board while he was still Treasury Secretary. He announced his intention to leave, and we have got the letter here. This was first reported in the "Washington Post." It is very nice and ironic. You are going to like this.

"Given," this is Ken Lay writing Robert Rubin, "given the way Enron has evolved, not only do we badly need a person with your experience and insights," got that right, "but also, I think you would find serving on our board intellectually and otherwise interesting." You got that right.

CAFFERTY: Man, that's incredible.

SERWER: Anyway, Rubin, of course, this fall, did make a phone call on behalf of Enron to the Bush administration. He is now an official at Citigroup. You might remember part of that flap, but that went nowhere.

CAFFERTY: Well, the argument being, he is a member of the private sector, and he can do what he wants now. He has no government connection anymore, so they really couldn't make much out of that. They tried, but...

SERWER: The good thing for Bush administration is nothing -- they didn't do anything (UNINTELLIGIBLE).

CAFFERTY: What else?

SERWER: The other interesting thing going on here today is Arthur Andersen, Enron's beleaguered auditing firm trying to get itself out of this massive litigation soup, and we do mean massive. Today, the "Wall Street Journal" reporting Enron offering $700 to $800 million to the three groups; that would be the employees, the shareholders, and the creditors, the bond holders. That sounds like a lot of money, Jack, but I don't think it's enough.

CAFFERTY: It is up from the opening gambit (ph), though, which was only -- what, 250, 300 million, now in three days it has gone to 700 or 800. But you are right, it isn't near enough.

SERWER: They're jacking it up. And this has to do with Arthur Andersen's survival, because they are going to be sued -- you add all this stuff up, it is going to be billions of dollars, and they have got two pots of money. They've got their own assets, the capital of the firm, and their insurance. And it is going to be simple math in the end, Jack. It is going to be, you know, how much is the litigation, and then how much money they have, and how much insurance they have, and if the numbers don't work, they are going to be toast.

CAFFERTY: And in the meantime, they are anxious to make this go away. They are losing customers, they are losing employees, they can't recruit new people. Who wants to work for a firm that has got this kind of a litigious cloud hanging over it. So, they want it to go away, but you are right, it is going to cost them more than that.

SERWER: A tough road to hoe.

CAFFERTY: Yeah. All right, thanks, Andy. Talk to you tomorrow.

SERWER: Okay.

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