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CNN Sunday Morning

Enron Execs Received Fat Bonuses

Aired February 10, 2002 - 07:03   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.
MILES O'BRIEN, CNN ANCHOR: At Enron, word of some of fat bonuses paid to executives just before the company went belly up. Our Ed Lavandera tells us the bonuses totaled $55 million.

(BEGIN VIDEOTAPE)

ED LAVANDERA, CNN CORRESPONDENT (voice-over): When Enron workers packed out and moved out last December, most of their bank accounts were drying up, but at the same time, CNN has learned some employees were making lucrative deposits in their own accounts.

CNN has obtained the list of retention bonuses paid to Enron workers just a few days before the company filed for bankruptcy protection. About 500 people were paid all together more than $55 million. Many were awarded hundreds of thousands of dollars to see the company through its reorganization process. Recently appointed president, Jeffrey McMahon and broadband division executive James Fallon each pocketed 1.5 million. John Lavarato and Louise Kitchen were awarded five million and $2 million. They were prominent traders at Enron, but now work for UBS Warburg, which purchased Enron's highly profitable trading company.

Several executives on the list left Enron several weeks after receiving the bonus. Congressional investigators are also paying closer attention to what motivated these bonuses.

REP. HENRY WAXMAN (D), CALIFORNIA: We've also heard that some of those who received such payments did not remain at Enron.

LAVANDERA: Many former Enron workers also questioned the timing of these payments. At least two former executives tell CNN, many on the list worked on the infamous partnerships that led to Enron's collapse.

One former executive described the payouts as hush money. But even Enron executives who sounded warnings about the partnerships defend the bonus payments.

JEFFREY MCMAHON, ENRON PRESIDENT: The notion behind the retention payments, Congressman, was one that, if we were to go into bankruptcy, that these key individuals would remain within the company to protect the businesses and assets valued for the creditors.

LAVANDERA (on-camera): According to finance laws, money spent 90 days before a company declares bankruptcy could be recovered by creditors. Those include Enron investors and especially former workers who got stiffed on severance packages. They're trying to get their hands on as much of that $55 million as possible.

Ed Lavandera, CNN, Dallas.

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