Why Spottiswoode quit Enron

Former gas regulator Clare Spottiswoode resigned as a vice-president of Enron's water subsidiary because she had grave concerns about its financial management, she told The Observer.

In remarks that throw further light on the disastrous fall of the Texan energy giant, Spottiswoode said she quit as senior vice president of regulatory affairs in Europe for Azurix, Enron's global water business, after four months because of her worries.

Azurix has a controlling stake in Wessex Water, the south of England utility, which it wants to sell following the collapse of its parent company in Houston.

Spottiswoode said she was worried about the high price investors paid at the flotation, or initial public offering (IPO), of Azurix in 1999 and about the Texas-based management, led by Rebecca Mark, paying too much for overseas assets. 'I had serious concerns about the way it was being run,' said Spottiswoode . 'The IPO was a way of offloading the Azurix investment onto other banks.

'The price of the IPO was very high, and I could not see how, even if the investments were good, it could work. It was practically bound to fail.

'It was also clear that Azurix in Houston was over-paying [for international water businesses] and that the returns to investors were never going to match them.'

The acquisitions repre sented a 'failure of due diligence', she said.

Azurix shares were floated at $19 in June 1999. Enron took Azurix back into private ownership in October 2000 for $7 a share. Spottiswoode said she did not realise then the extent of the mismanage-ment. She believes the company's lawyers and accountants matched the letter of the law in recommending that it shift assets off its balance sheet, which led to its demise. But the change was wrong, she said.

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