Remnant sale: banker stays busy cleaning up Enron's books.

Rob Deutschman has been too busy scouring bankruptcy documents to see the new documentary "Enron: The Smartest Guys in the Room."

But the president of Los Angeles-based investment bank Cappello Capital Corp. already has a front-row seat for corporate America's longest-running drama.

He is vice chairman of Enron Corp.'s board, joining four directors who are managing $60 billion in unresolved claims against the Houston-based energy giant.

A restructuring expert and lawyer, the Los Angeles-based Deutschman now spends a large portion of his time unraveling the remnants of Enron--including three remaining operating units with 18,000 employees.

"This company was so complex that the list of entities on its bankruptcy filing is a dozen pages long," said Deutschman, who travels to Houston once a month to meet with Enron directors and puts in lots of weekend reading. "The documents in this case are being measured by the pound, not the page."

Enron has begun the process of resolving claims that were approved by the bankruptcy court. In April, $600 million was distributed to various creditors, and the company, which has roughly $10 billion in cash, has set aside a reserve to pay claims as they are approved. The board also is selling off small business units and pursuing Enron's claims against various organizations.

Eventually, the remainder of Enron, with 700 employees at its headquarters in Houston, will ultimately be dissolved.

There has been much debate over what caused Enron's collapse--among the possibilities are greed among its top executives or a flawed deregulation plan. But Deutschman, who gets paid an annual fee as an Enron director, has his own reading of the company's cinders.

"It's easy to see how things in this case started to unravel," he said. "Everyone at Enron paid attention to very large transactions, since the big deals translated into big bonuses. That led to a culture in which everyone wanted to do big deals and no one really paid attention to anything else."

Deutschman helped negotiate the distribution of $600 million to the largest holders of trade claims against Enron, including two large hedge funds, Baupost Group LLC and Racepoint Partners LLC.

A former lawyer at Gibson Dunn & Crutcher LLP, he said market forces and the general business climate also helped perpetuate the Enron scheme of hiding liabilities in off-balance-sheet entities.

"There are certain parties, like the banks, certain law firms and accounting firms, who knew very well what was going on, what was real, and what was for show, and they went along with it anyway because there were a lot of fees to be made," he said.

Enron filed for bankruptcy protection in 2001 after restating $586 million in earnings. In the aftermath, more than 5,000 employees were fired and $800 million in employee pensions were lost. Former Chairman Ken Lay, Chief Executive Jeffrey Skilling and others go on trial in January 2006.

Deutschman said he got picked as an Enron director from a list of a dozen contenders. One of his selling points was that he had no ties to any of the "mega banks," including J.P. Morgan Chase & Co. and Citigroup, who are being sued by Enron and by stockholders trying to recover $30 billion in losses.

The banks' claims are the biggest remaining variables in the disposition of Enron's estate. They underwrote a combined $12.8 billion in debt that helped Enron keep its unsuccessful business ventures afloat - and have denied any involvement in the company's accounting fraud.

Deutschman regularly fields phone calls from hedge funds and other holders of Enron's distressed debt. Most of them bought it after the company collapsed, and stand to profit on recoveries the board can make.

Last week, a report by Tejas Securities Group Inc, in Austin, Texas, raised recovery estimates for bondholders to between 50 cents and 67 cents on the dollar, from a range of 40 cents to 55 cents. Tejas based its estimates on settlements in the WorldCom bankruptcy, the largest in U.S. history.

"While the complaints are similar, we believe that the potential liability of the banks in Enron--particularly Citibank and JP Morgan, who allegedly designed the special-purpose entities that concealed debt--should be greater on a percentage basis than in WorldCom," the Tejas report stated. "The Enron banks were allegedly responsible for constructing fraudulent financial vehicles, rather than ignoring ongoing company fraud."

Even as Enron's directors try to claw back money from various parties, the tendency in a case so large is to ignore small claimants. "I've been a board member at other companies where we're looking at every $20,000, but here you have to add two or three zeros for anything to get noticed," Deutschman said. "It's one sad story after another."

Downward Spiral

Rob Deutschman is trying to salvage something out of Enron's collapse. Some of the key points in the company's rise and fall:

* Highest share price: $00.56 (August 2000)

* Lowest share price: 25 cents (after bankruptcy filing in December 2001)

* Sales increase from 1996 to 2000: $13.3 billion to $100.8 billion

* Revenue per employee in 2000: $5,235,000

* Amount spent on congressional lobbying in 1999-2000: $3.5 million

* Amount paid in income taxes in 1999 and 2000: $0

* President Bush's biggest contributor: Kenneth Lay 

* Amount Enron contributed to the Democratic Party after President Clinton intervened to help Enron gain a $3 billion project in India: $100,000