El Paso ( EP) is starting to fight like a scrappy underdog. The Houston energy giant was knocked down Tuesday by a powerful recommendation against current leadership in a heated proxy fight. With the odds now tilted against it -- and just two weeks left to cast votes -- the company is throwing some fierce punches at a strong dissident camp. On Tuesday, El Paso criticized proxy adviser Institutional Shareholder Services for a "flawed" decision that went against incumbent management, even as it vowed to win the fight anyway. And in attacking ISS, the nation's leading proxy firm, El Paso jumped on the opportunity to kick around its opponents anew. "Notwithstanding ISS's flawed evaluation," the company stated, "we believe our shareholders share our concerns regarding the risks of replacing our entire board with a slate of nominees that has no well-defined business plan for El Paso and that has selected one of its own as CEO without undertaking a process to select the best possible candidate for this critical post." El Paso is now relying heavily on its "sizable retail shareholder base" to carry it to a victory. In the meantime, the company is taking direct aim at several dissident candidates who are among those fighting to replace the entire board. The company has specifically linked one candidate to a long career at Enron and two others to the boardroom of a bankrupt energy company. But El Paso's targets are now dodging those punches and criticizing the company's aim. El Paso stock, having nearly tripled off its winter low after a long plunge, rose 7 cents Tuesday to $9.
"Basically, I spent 20 years of that career running pipelines," Burns said. "If anybody did the research, they would find that my record was pretty unblemished at Enron." At one point, Burns was viewed as a potential heir to the Enron throne then filled by longtime CEO Ken Lay. But Skilling outlasted Burns by far. In mid-1995, after just one year of leading the trading department with Skilling, Burns left Enron to accept an offer to become CEO of Union Pacific ( UNP) in his hometown of Omaha. He later spent a brief stint as president of Entergy ( ETR), a big New Orleans utility, before returning to his family in Nebraska. Today, he offers no apology for his long career at Enron, which began shortly after he graduated from the University of Nebraska at Northern Natural Gas -- now Enron -- in Omaha. "There was no trouble at Enron until 1997 or 1998," Burns insists. "Everything was run completely above board then."
the founding CEO of Kinder Morgan ( KMI) were pushing the company into what I would call 'virtual operations'" -- and what Skilling would later hail as "asset-lite" business. "I did not want to be a part of that."
Instead, Bennett walked away from his new, five-year contract at Enron and went on to engineer turnaround jobs at several energy companies. So he probably seemed like an attractive candidate to serve on the board of TransTexas, a bankrupt company whose founder had tasted failure more than once. But Bennett wasn't interested. "My response was not just no -- but hell no!" Bennett said. "If I had known from day one
what I know now, I would have never gotten involved."
"Through a series of poor management decisions,
Kuehn brought the company to its knees," he said. "The appointment of Ron Kuehn as interim CEO of El Paso is more than disappointing. ... It's like a final slap in the face." El Paso has promised to replace Kuehn with a permanent CEO after the proxy contest ends. In the meantime, the company said it is already talking to "a number of outstanding candidates" -- including CEOs and operating chiefs at big energy companies -- who are interested in the job. At the same time, the company has taken swipes at the dissidents' choice for CEO. In a recent letter to shareholders, El Paso portrayed Stephen Chesebro as the "wrong choice" for El Paso's CEO because he's spent less than two years as an energy CEO in the past. But Chesebro spent the last nine years of his career -- from 1990 to 1999 -- as either an operating chief or CEO, which appears to put him on equal footing with some of the candidates the company is now considering. Rick Hare, a former Tenneco employee, portrayed Chesebro as a good man for the job. "Since El Paso bought Tenneco's energy assets some years ago, Chesebro will be familiar with the assets and many of the people," Hare said. And "he's a no-nonsense guy. He won't take long to separate the wheat from the chaff." Of course, Chesebro's group now enjoys much more powerful backing as well. The dissidents won over ISS by stressing both recent failures and promising sweeping change. "Given the incumbents' missteps in the past, management and the board face credibility issues, and the negative surprises by El Paso have not helped restore confidence," ISS stated. "In light of the likely benefits of a fresh start, the proposed improvements to the compensation practices by dissident nominees and the failure of the incumbent board ... to monitor management's questionable action, ISS does not believe that the incumbent board should be supported." Ironically, ISS withheld support only for dissident Selim Zilkha -- the candidate formally leading the proxy fight. ISS instead recommended a totally new board that would exclude Zilkha, who has served on El Paso's board in the recent past and voted on many of the company's failed decisions. Zilkha quickly brushed off the slight, however. "My involvement in this proxy contest has never been driven by personal reasons," said Zilkha, who has vowed to accept no compensation as a returning board member. "What is noteworthy is that this respected, independent organization has come out strongly in favor of instituting systemic and fundamental change at El Paso." For Wyatt -- who launched his campaign for reform at El Paso's annual meeting more than a year ago -- the victory would be a sweet one. "Whether I lose at tennis, gin rummy or marbles," he told the New York Times in 1985, "I don't like it."