Enron President Quits

Enron Corp. President Jeffrey McMahon, who complained two years ago about impropriety of financial partnerships that helped fuel the company's swift downfall, said Friday he will resign effective June 1.

McMahon, 41, said he decided his resignation was necessary to help ensure Enron's successful reorganization into a mover of electricity and natural gas.

"I strongly believe that the best course for the Enron estate, its creditors and its employees is to use our core pipeline and electricity assets to create a new company apart from the litigation and diversions of bankruptcy," McMahon said.

"For that effort to have every chance of success, it became clear that outside leadership is required."

Stephen Cooper, a restructuring specialist hired in January as Enron's interim chief executive officer, said McMahon's position will remain open until an outside successor is found.

"Regrettably, I support Jeff's decision," Cooper said. "Last fall, during tremendous turmoil within the organization, Jeff stepped up as a true leader."

McMahon has accepted two promotions since Enron began a dizzying descent into bankruptcy last fall that left thousands jobless.

He succeeded Andrew Fastow, his former boss, as chief financial officer on Oct. 24. Fastow was fired after creating and running the partnerships which earned him more than $30 million.

McMahon later moved up to president and chief operating officer in January when Lawrence "Greg" Whalley followed Enron's energy trading business to UBS Warburg.

"It's not unusual in a bankruptcy to have a lot of shifts in leadership," said Charles Elson, director of the Center for Corporate Governance at the University of Delaware.

"The creditors at this point basically control the operation," Elson said. "I'm sure (McMahon) has been through quite a bit and either he felt or they felt it was time to bring someone else in."

Twice this year McMahon testified before Congress that he was concerned about being caught in a conflict of interest with Fastow in March 2000. Then Enron's treasurer, McMahon answered to Fastow and had to negotiate deals on behalf of Enron as Fastow negotiated on behalf of the partnerships.

McMahon complained to then-chief operating officer Jeff Skilling.

"I find myself negotiating with Andy on Enron matters and am pressured to do a deal that I do not believe is in the best interests of the shareholders," McMahon wrote in a note to himself after meeting with Skilling.

But Skilling told Congress he recalled McMahon being concerned about how conflicts with Fastow would affect his compensation.

Within days of that meeting, McMahon was promoted to president and chief operating officer of Enron Net Works, where he handled e-commerce needs and no longer interacted with Fastow. Skilling told Congress the promotion was unrelated to the complaint. He later became president and CEO of Enron Industrial Markets until he replaced Fastow.

McMahon began his career with Arthur Andersen LLP in Houston. He was chief financial officer of MG Natural Gas Corp. in Houston from 1989 to 1994, when he joined Enron's London office as chief financial officer of the company's European operations.

By Kristen Hays