Did Enron Warning Prompt Firing?

N E W   Y O R K, March 26 -- Stock market analysts have been faulted for not knowing how bad things were at Enron, or knowing and not warning clients. But one financial adviser for a big Wall Street firm did try to warn his clients and paid for it with his job.

Last Aug. 21, one week after Enron CEO Jeffrey Skilling unexpectedly resigned from the firm and months before its financial problems became painfully obvious to the world, UBS PaineWebber financial adviser Chung Wu sent this e-mail to 73 clients just after midnight:

"Financial situation is deteriorating in Enron. … I would advise you to take some money off the table. … Waiting to make a decision would cost you a fortune."

The e-mail reached Enron executive Aaron Brown. At 1:17 that afternoon, he sent this e-mail to Wu's bosses at PaineWebber: "Please handle the situation. … This is extremely disturbing to me."

Hours later, Wu's boss, Patrick Mendenhall, fired Wu. And at 7:26 p.m., Mendenhall sent this e-mail to Wu's 73 clients: "I hereby retract Mr. Wu's statements. … UBS PaineWebber has a strong buy recommendation on [Enron] stock."

Enron stock was worth almost $37 a share when Wu urged his clients to sell it. By the time UBS PaineWebber dropped its "buy" recommendation, in November, Enron was on the brink of bankruptcy and the stock was worth just 61 cents a share.

Waxman: 'People Are Starting to Feel Uneasy'

Rep. Henry Waxman, D-Calif., who is now investigating Wu's dismissal, says the evidence suggests UBS PaineWebber was far more interested in protecting its business relationship with Enron than protecting its clients.

"I think Mr. Wu was fired because the higher-ups at PaineWebber didn't want to offend the higher-ups at Enron," said Waxman.

In a letter to Waxman, the firm said, "Mr. Wu was terminated for violating firm policy concerning electronic communications," a policy that requires firm approval for "correspondence being sent to 10 or more persons."

However, two previous e-mails Wu sent to more than 10 clients did not result in termination.