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Avow or Avoid?: The Public Communication Strategies of Enron and WorldCom
Unformatted Document Text:  Avow or Avoid? 13 earnings into the middle of a conference call with analysts (Forest, Zellner & Timmons, Nov. 12, 2001). Power Markets Week did try to paint a positive forward-looking picture for Enron. In the article, Lay conceded that “mistakes and bad investments had been made,” and acknowledged that one related-party entity being investigated by the SEC had resulted in conflicts of interest, “both real and perceived” (Picture of new Dynegy, Nov. 19, 2001, para. 31, 20). Enron’s financial executives reassured investors that the company had more than enough cash to handle its short-term liquidity needs. Plans were also revealed for “slimming down” (Picture of new Dynegy, Nov. 19, 2001, para. 20). Bankruptcy On Wednesday, November 28, 2001, Enron issued a news release announcing that Dynegy had terminated their merger agreement. By that Sunday, Enron was announcing that it was seeking bankruptcy protection under Chapter 11 and suing Dynegy for breaching their agreement. Shortly thereafter the company was able to report it had obtained debtor-in- possession financing. It also issued a formal statement responding to the testimony of Andersen executives at a Congressional hearing. In this period, Enron maintained a positive outlook and employed traditional public relations tactics of self-disclosure and rapid response. Despite the termination of the merger agreement, Enron was taking steps to “preserve value in the company’s core trading and other energy businesses” (Enron announces notification, Nov. 28, 2001, para. 2). Those steps included active discussions with leading financial institutions for credit support (Enron files, Dec. 2, 2001). To conserve capital, Enron would implement a “comprehensive cost-saving program that will include substantial workforce reductions” (Enron files, Dec. 2, 2001, para. 6). All of these steps were intended to “preserve capital, stabilize our businesses, restore the confidence of our

Authors: Reber, Bryan. and Gower, Karla.
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Avow or Avoid?
13
earnings into the middle of a conference call with analysts (Forest, Zellner & Timmons, Nov. 12,
2001).
Power Markets Week did try to paint a positive forward-looking picture for Enron. In the
article, Lay conceded that “mistakes and bad investments had been made,” and acknowledged
that one related-party entity being investigated by the SEC had resulted in conflicts of interest,
“both real and perceived” (Picture of new Dynegy, Nov. 19, 2001, para. 31, 20). Enron’s
financial executives reassured investors that the company had more than enough cash to handle
its short-term liquidity needs. Plans were also revealed for “slimming down” (Picture of new
Dynegy, Nov. 19, 2001, para. 20).
Bankruptcy
On Wednesday, November 28, 2001, Enron issued a news release announcing that
Dynegy had terminated their merger agreement. By that Sunday, Enron was announcing that it
was seeking bankruptcy protection under Chapter 11 and suing Dynegy for breaching their
agreement. Shortly thereafter the company was able to report it had obtained debtor-in-
possession financing. It also issued a formal statement responding to the testimony of Andersen
executives at a Congressional hearing.
In this period, Enron maintained a positive outlook and employed traditional public
relations tactics of self-disclosure and rapid response. Despite the termination of the merger
agreement, Enron was taking steps to “preserve value in the company’s core trading and other
energy businesses” (Enron announces notification, Nov. 28, 2001, para. 2). Those steps included
active discussions with leading financial institutions for credit support (Enron files, Dec. 2,
2001). To conserve capital, Enron would implement a “comprehensive cost-saving program that
will include substantial workforce reductions” (Enron files, Dec. 2, 2001, para. 6). All of these
steps were intended to “preserve capital, stabilize our businesses, restore the confidence of our


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