SUSIE GHARIB: The Enron story took on new drama today. Just a day after the troubled energy company filed the biggest corporate bankruptcy in US history and sued its one-time suitor, Dynegy responded by filing its own lawsuit against Enron. It's the latest chapter in Enron's six-week fall from the heights of the energy world. Here's Erika Miller with details.

ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Enron's filing in federal bankruptcy court in New York caps one of the largest corporate collapses in US history. The company, which just last year ranked seventh among Fortune 500 companies, is now seeking to keep a long list of creditors at bay while it reorganizes.

SHELDON HIRSHON, BANKRUPTCY ATTORNEY, PROSKAUER ROSE: The company just filed for bankruptcy for protection, which means that it need not pay its prepetition obligations until the court allows it to do so through either through a special order or a confirmed plan of reorganization.

MILLER: Today Enron announced it will cut 4,000 jobs; 20 percent of its workforce. In addition, the company says it is in advanced talks with several major financial firms to arrange new funding. As part of the reorganization process, Enron also filed a $10 billion suit against Dynegy for backing out of the merger. And it is asking the court to block Dynegy from buying Enron's large Northern Natural Gas pipeline, one of its most prized assets. In a statement, Dynegy chairman and CEO Charles Watson said "Enron's lawsuit against Dynegy has no merit whatsoever in law or in fact." And today, Dynegy countersued to keep its option to buy the pipeline.

DARYL BRISTOW, SR. TRIAL PARTNER, BAKER BOTTS: Our lawsuit in Houston has to do with our specific right, our option to acquire from certain companies that are not in bankruptcy, the ownership of Northern Natural Gas, which was a part of our deal going in and a part of the consideration for our putting up $1.5 billion to buy preferred stock in that company.

MILLER: Despite the bankruptcy filing, and news of countersuit, Enron shares rebounded 50 percent today, while Dynegy stock fell more than 10 percent. But bankruptcy experts say Enron shareholders may well end up with nothing.

HIRSHON: It's too soon to tell whether the asset values will hold up and whether this company will have sufficient assets to pay off its creditors. And if it does, shareholders will receive something. And if there's not sufficient value, the shareholders will not receive any distribution from this Chapter XI case.

MILLER: Bankruptcy analysts predict Enron will spend a long time in bankruptcy court. The average for public companies is about a year and a half. But given the complexity of Enron's case, some experts predict it could take the company up to three years to emerge. Erika Miller, "NIGHTLY BUSINESS REPORT," New York.

Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. © 2001 Community Television Foundation of South Florida, Inc.

12/03/01: The Enron Investigation

PAUL KANGAS: The bankruptcy of Enron leaves shareholders with more than $63 billion in losses. Bondholders, banks and Enron's trading partners are also out billions. And as Stephanie Woods reports, the role of Enron's auditor, Arthur Andersen, is key to the investigation into Enron's collapse.

STEPHANIE WOODS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Congressional investigators plan to meet this week with executives from Enron, the Securities and Exchange Commission, and Arthur Andersen. Former SEC accountant Lynn Turner says Enron's financial restatements raise many questions, including why the auditors didn't investigate Enron's practice of keeping debt off its balance sheet.

LYNN TURNER, FORMER CHIEF ACCOUNTANT, SECURITIES AND EXCHANGE COMMISSION: Was this company, in fact, taking on tremendous amounts of debts, facing liquidity problems as they took on that debt, and covered that up by using these special purpose entities by misstating their financial statements? We know they are misstated now because the company itself has corrected those. And was it really something that was coming undone over a number of years?

WOODS: Last year, Enron paid Arthur Andersen $52 million in fees. Nearly half was for auditing the companies financial statements, $27 million was for consulting services, such as risk management and tax compliance. And some question whether that money influenced the auditors to go easy on the company.

TURNER: How did that $27 million influence their thinking as to whether to stand up and say, "no, the financial statements had to be corrected?" Were there any trade-offs between taking that position, which is what investors are hiring these auditors to do, versus trying to figure out how to justify what the client was doing.

WOODS: Andersen's consulting links to Enron are also raising questions about the accounting firm's role in the establishment of the partnerships. Don Langevoort teaches corporate and securities law at Georgetown University. He says if Andersen did have an active role in setting up the partnerships, it could have a lot more questions to answer.

DON LANGEVOORT, PROFESSOR, GEORGETOWN LAW CENTER: To the extent that the money can be tied to the setting up of these partnerships, it eliminates Andersen's ability to say, "we didn't really know what was going on." It ties them directly to a set of facts, a set of knowledge that can also be damaging.

WOODS: Arthur Andersen says it's too early to make judgments and is cooperating fully with the SEC and Congressional investigators. Experts say it could take three to five years to unravel exactly what happened. Stephanie Woods, "NIGHTLY BUSINESS REPORT," Washington.

Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. © 2001 Community Television Foundation of South Florida, Inc.

12/03/01: One On One With Lakshman Achuthan, International Economist, Economic Cycle Research Institute

SUSIE GHARIB: The US stock market was pressured today by increasing tensions in the Middle East, with Israel firing missiles near the headquarters of Palestinian leader Yasser Arafat, plus Argentina's continuing economic problems. Joining us live from midtown Manhattan to talk more about this is Lakshman Achuthan. He's international economist with the Economic Cycle Research Institute. Nice to see you, Lakshman.

LAKSHMAN ACHUTHAN, INTERNATIONAL ECONOMIST, ECONOMIC CYCLE RESEARCH INSTITUTE: Good evening, Susie.

GHARIB: Hi. Let's start first with just you giving us an overview of how vulnerable do you think that the U.S. economy and the U.S. stock market is to these international events?

ACHUTHAN: Well, we're in a recession here in the U.S. and recessionary periods in particular are times when events, if there's some unknown shock that occurs, it has a much larger impact than if you're in a non-recessionary time. Furthermore, we're in a synchronous global recession and that hasn't happened in a long time. So even compared to, say, '90-'91, I think the event risk that is out there is quite significant.

GHARIB: Well, let's talk about the Middle East specifically. How concerned do you think investors should be about the increasing tensions between Israelis and Palestinians?

ACHUTHAN: Oh, I think quite concerned. You know, that's been an area that it was very important to keep kind of under control as we have this coalition to prosecute the campaign in Afghanistan. And so you can have political event risk and at a time when the economy is in recession and trying to get a recovery going, those kinds of negative impacts-for example, of oil prices rise, that could really hurt the economy right now.

GHARIB: So what do you see as the biggest risk to the U.S. from what's going on in the Middle East?

ACHUTHAN: Well, I think...

GHARIB: Is it oil?

ACHUTHAN: Yes, oil is certainly one. We've seen for the last few weeks oil prices falling and that increases discretionary spending to consumers immediately. And the consumers have been the only thing holding this economy up from a deeper recession.

GHARIB: Let's talk...

ACHUTHAN: And so it's very critical.

GHARIB: OK. Let's talk a little bit about Argentina and the continuing financial woes there. What's the risk to the U.S. from what's going on in Argentina?

ACHUTHAN: Well, with the emerging market debt problem -- Argentina holds about 25 percent of all emerging market debt. And so if the interest rates demanded from Argentina, which are very high-they're about 34 percent or so now-if those spread to other emerging markets that are unrelated, they could put pressure on those economies, too. Remember, they're part of the global economy. We're in a recession so they're not exporting. They're under a lot of pressure right now. And we had the Thai currency issue in '97 start the Asian crisis and then in '98 we have the Russian defaults trigger LTCM.

GHARIB: OK...

ACHUTHAN: So we don't know how it happens, but it could happen.

GHARIB: Just to wrap it up here, we saw the dollar, though, trade up against other foreign currencies. Do you see that as a positive or a negative for the U.S.?

ACHUTHAN: Well, I mean it's a positive because it can help keep our interest rates down. It's a negative because it makes it more difficult for us to export abroad to these weaker markets. So it's a kind of double-edged sword.

GHARIB: OK, thank you very much, Lakshman. We appreciate your talking to us.

ACHUTHAN: Thank you, Susie.

Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. © 2001 Community Television Foundation of South Florida, Inc.

12/03/01: Kevin McCormally;s Tax Tips- Managing Your Flex Account

SUSIE GHARIB: Tonight we start our year end tax tips, a series of reports aimed at helping you cut your tax bill. We begin with a look at making the most of your flex account. Here's Kevin McCormally, Editorial Director of "Kiplinger's Personal Finance."

KEVIN MCCORMALLY, EDITORIAL DIRECTOR, "KIPLINGER'S PERSONAL FINANCE": Want to do your bit to get us out of this recession? Then buckle down to cut your taxes between now and the end of the year. You know that Congress and the President want to cut everybody's taxes to stimulate the economy. The least you can do is whittle away at your own tax bill. And one way to do that is by making the most of flexible spending accounts, those fringe benefits that let you use pretax salary to pay medical and childcare bills. The one drawback is that you must tell your employer each year how much to set aside and if you don't spend it all, you forfeit what's left. If your plan year ends December 31, check tomorrow to see how much is left in your accounts and do your best to spend it over the next few weeks. More important, however, is to be John Wayne when it comes to deciding how much to set aside for next year. Sure, the use it or lose it rule means you should be careful when estimating expected expenses. But don't be timid. The tax breaks are so powerful that you can afford to forfeit a good chunk of what you set aside. Say, for example, that you put $3,000 into a medical account but only spend $2,000. Sure, $1,000 disappears, and that hurts. But if you're a middle income taxpayer, you're still better off than if you had skipped the account and paid your bills with after tax dollars. If you're in the 27 percent federal bracket and face a five percent state tax, you need to earn $3,200 in order to have $2,000 left over after taxes to pay those medical bills. Since you only gave up $3,000 in salary, you still come out ahead even after forfeiting $1,000. That's how powerful this tax break is. I'm Kevin McCormally.

Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. © 2001 Community Television Foundation of South Florida, Inc.

PAUL KANGAS: Although the Enron bankruptcy was widely expected on Wall Street, the enormity of it undermined the stock market early today, and the other major negative was the serious flare-up in the Mideast between Israelis and the Palestinians. By 10:30 this morning, The Dow Industrial Average fell 145 points, or 1.5 percent, while the NASDAQ Index was down 28 points, that's also 1.5 percent. Stock prices steadied and improved modestly during the rest of the morning, thanks in part to some signs the economy may be recovering a little bit. October personal spending, for example, rose a rather brisk 2.9 percent. But that was in reaction to zero percent financing for autos. Also, the Purchasing Managers Index showed that while manufacturing activity did fall in November, the decline was not as steep as expected. By 1:30 this afternoon then, the Dow cut its loss to 73 points and NASDAQ was down only 11 points. The partial recovery had little staying power as oil prices began to move higher and renewed problems in Argentina stifled bullish enthusiasm as well. The Dow Industrial Average finally closed with a loss 87.60 at 9763.96. The NASDAQ Index lost 25.68 points, ending at 1904.90.

Big board volume a little on the slow side these days, 1.2 billion shares, and almost a 7 to 5 ratio of down volume over up volume.

The Dow Transport Index down nearly 28 3/4 points.

Utility Index down just over 1 point.

And the Closing Tick feebly bullish at +182.

Standard & Poor's 500 down just over 9 1/2.

A loss of 6.14 on the 100.

The MidCap 400 down 2.62.

And the Bridge Futures Price Index fell 0.15.

A loss of nearly 4 points in the New York Composite.

Three-point losses in the Value Line and the Russell 2000 Small Cap.

And the broadly-based Wilshire 5000 down 87 2/3 points.

Bond prices rose today despite reports showing October personal spending was up a brisk 2.9 percent and construction spending increased 1.9 percent. There was a good deal of safe haven buying triggered by the Mideast tensions and Argentina's financial problems, and of course, the Enron bankruptcy as well. Tax-free and corporate issues closed with gains of 1/4 to 3/8 of a point on average. And the Treasury market ended moderately higher across the board.

The 5-year notes moving up 10/32.

The 10-year notes rising 16/32.

The 30-year bond, a gain of 20/32.

But the Lehman Brothers Long-Term Treasury Bond Index fell nearly 3/12 points.

Some bigger losses in the Dow Industrial Average today, off about 87 1/2 points, not quite a full percent. And the broader market lower by 600 more issues closing lower than higher; 81 new yearly highs, nevertheless, 47 new lows.

Enron (ENE) topped the active list again today on 84.2 million shares and it did rally rather nicely. It got as high as $0.45 but, of course, where is it down from is the question.

GE (GE) was weak, off $1.58 after Salomon Smith Barney cut GE's 2002 earnings estimate from $1.74 down to $1.66.

AOL Time Warner (AOL) fell $1.32. Soundview Financial downgraded it from "strong buy" to "buy."

Dynegy (DYN) itself fell $3.18. You saw that earlier.

Calpine (CPN) off $3.06 even though the company said last Thursday it has no net exposure to Enron. But the company is a major player in the now very, very much disrupted energy trading market and probably hurt business.

ExxonMobil (XOM) rising $0.26. New York January oil futures up $0.65 to just over $20 a barrel now.

Citigroup was down $0.99. It has exposure to Enron.

Compaq Computer (CPQ) a $0.04 gain.

AT&T Wireless (AWE) a $0.06 gain.

And then tenth in volume, Lucent Technologies (LU) edging up $0.02.

Barclays PLC (BCS), the big British bank, down $4.40. This is Enron's largest unsecured creditor, with exposure of about $126 million. Bear Stearns downgraded Barclays' stock from "attractive" to just "neutral."

Cablevision Systems (CVC) up $1.36. "Baron's" quoted a Merrill Lynch analyst who thinks this company is the best acquisition candidate in its industry and could fetch over $90 a share.

Convergys (CVG) up $1.64. Morgan Stanley upgraded it from "outperform" to a "strong buy."

Household International (HI) dropping $2.70. A "Baring's" article this week suggests the company is painting too rosy a picture for itself. The Alex Brown Brokerage, however, still repeated a "strong buy" today.

J.P. Morgan Chase (JPM) off $1.17. This company holds Enron's second biggest trade loan.

And Morgan Stanley Dean Witter (MWD) down $3.17. Goldman Sachs removed that stock from its "recommended" list.

EOTT Energy (EOT) the big percentage gainer of the day, up $3.80. The company says it is not a party to the Enron bankruptcy.

Collins Aikman (CKC) up $1.30 on news the company slightly lowered its bid to buy auto trim, the auto trim business of Textron (TXT).

Actuant (ATU) up $2.10. This company provides electronic systems and components to the computer and semiconductor industries. Goldman Sachs Friday said it has a 12 month target of $35 a share for the stock.

Micron Technology (MU) up $1.40. The company and Heinich Semiconductor are discussing a possible alliance. Standard & Poor's upgraded Micron from "sell" to "hold," Merrill Lynch from "accumulate" to "near term buy."

Too Incorporated (TOO), the clothing retailer, UBS Warburg downgraded it from "buy" to just a "hold."

And ORIX (IX) off $3.86. The company is in a joint power venture with Enron in Japan and now, of course, that could be very much in jeopardy.

Nasdaq trading, a loss of 25 2/3 points in the Index, 1.3 percent. Volume on the low side, below 1 1/2 billion shares. About 13 stocks up for every 22 lower.

Microsoft (MSFT) topped the active list, up $0.56.

Followed by Intel (INTC), down $0.62.

MedImmune (MEDI) off $5.27. It's goi