Enron's Last Mystery

Amid all the carnage that has surrounded Enron Corp.'s collapse, one player in the drama has remained remarkably unscathed: Vinson & Elkins, the giant Houston-based law firm that played a central role advising the company throughout its spectacular rise and fall. Accounting firm Arthur Andersen is dead, JPMorgan Chase & Co. (JPM ) has spent $2.2 billion settling a shareholder fraud lawsuit filed in a Houston federal court, a handful of other banks and outside Enron directors have coughed up nearly $5 billion more, and yet V&E has not even had a slap on the wrist. Not a single lawyer at the firm has faced professional misconduct charges by the Texas bar, the firm has yet to pay a penny in damages, and Joseph C. Dilg, the partner who oversaw the Enron account, is now V&E's managing partner. In 2005, it became the first Texas law firm in which average partner compensation broke $1 million.

But the firm's Teflon days may be coming to an end. Enron's bankruptcy trustee is negotiating to settle claims with V&E for $30 million, BusinessWeek has learned. As part of the deal, the law firm will also drop its claim for $3.9 million in legal fees billed to Enron before the company went out of business, a small fraction of the $162 million the firm charged Enron from 1997 to 2001. Although the biggest fish at Enron, Kenneth L. Lay and Jeffrey K. Skilling, were convicted in a Houston courtroom on May 25, the Securities & Exchange Commission is continuing to investigate the advice that V&E and other outside law firms gave the company. And in the same class action in which they have targeted the banks, plaintiffs' lawyers are preparing to unleash a new volley of evidence on June 13 to support allegations that V&E should be liable for some of the $40 billion in investor losses resulting from the energy giant's collapse.