The dizzying pace of Enron Corp.'s deal-making overwhelmed its ability to track simple billing payments and some retail energy clients were overcharged tens of millions of dollars, a problem that could have contributed to the now-bankrupt company's distorted revenue picture, former employees said.

One of the biggest clients, insurance giant Kaiser Permanente, paid $30 million more than it should have because Enron's computer system was so scattered and poorly managed, Rod Jordan, a former data manager with Enron Energy Services, the company's retail division, told Knight Ridder.

Enron's slide from the nation's seventh-largest company into bankruptcy has been blamed on lax accounting practices that disguised massive debt. But the former employees said problems with the company's checks and balances ran much deeper, to the most basic levels of information management.

In a culture that stressed deals over details, Enron sometimes took in excess revenue until clients discovered the problem and demanded refunds, the former employees said.

"We . . . found millions of dollars in billing errors," Jordan said. "Basically, there wasn't a process in place to manage payment data. There were no checks and balances to flag anything."

Enron Energy Services, begun in 1997, managed the energy needs of retail customers. Its services included selling energy to individual businesses and finding ways to cut consumption.

But when it came time to collect payments, bills were duplicated, went missing or weren't archived into the computer system, according to Enron internal records.

The problems were exacerbated by Enron's reliance on outside contractors to process billing services for some clients, turning the entire process into a labyrinth.

Enron announced in November that it had overstated income by nearly $600 million over the past five years. The resulting crisis in investor confidence sent the company's stock price plunging, and it declared bankruptcy on Dec. 2.

Enron officials declined to comment for this report.

Enron Energy Services, run by Lou M. Pai and Thomas E. White, now President Bush's secretary of the Army, was hailed as one of the corporation's biggest growth machines, signing up giant retailers and corporations such as OceanSpray, IBM, Chase Manhattan, Prudential Insurance, Simon Property Group and J.C. Penney.

After losses of $119 million in 1998 and $68 million in 1999, the division reported its first profit of $165 million in 2000. In its annual report, the company painted a glowing picture of future prospects, citing $16 billion in contracts signed that year.

But former employees have accused the division of using questionable accounting to overstate profits. Others said the growth, whether real or imagined, far outpaced the company's information management infrastructure. It is unclear how much Pai and White knew about the problems.

"It's sort of like a chicken-and-egg scenario that can be a real business dilemma," said Joe Whittenburg, a former data specialist who, like Jordan, was laid off by Enron. "Do you ramp up and hope you can sell it? Or do you sell it and hope you can ramp up? We were selling and selling and hoping we were going to eventually ramp up."

It's unclear how much Enron overcharged clients because billing problems varied with thousands of accounts. Lack of controls also occasionally produced some sizable undercharges, caught by Enron's most experienced managers.

J. Paul Oxer, an executive who moved to the energy services division from the company's faltering water venture, known as Azurix, said he discovered millions of dollars in "underbillings." Essentially, the names of thousands of tenants at properties where Enron Energy Services managed energy were not in company databases, so the tenants were not charged for services.

"The company was just scrambling all these things," Oxer said. "It was part of the culture, being inattentive to detail, and being fast-tracked on everything. I asked whether anyone had audited this, and somebody said, yes, Arthur Andersen did. Apparently, they did a really quick job of it."

Officials at Andersen, which signed off on Enron's questionable accounting practices, also declined to comment.

Margaret Ceconi, a former sales manager for Enron Energy Services, said the billing problems - some partly due to delayed processing by outside contractors - saddled the division with steep interest costs and late fees.

"Basically, these were unnecessary interest costs of over $30 million," she said.

In November 2000, as billing problems mounted, Kaiser began complaining.

The deteriorating relationship with Kaiser triggered an internal investigation to "wipe clean the slate and establish world-class billing services," according to Enron documents.

An 11-member special project team, including Jordan, was assigned to fix the problems.

The team found that business had grown so fast that some employees had created their own databases, which did not always match others. Among the glitches: J.C. Penney was spelled 13 different ways, a seemingly small error that could prove fatal to any accurate accounting of costs.

"You couldn't link these names together, so you didn't know it was the same deal," Jordan said. "We had all these separate pieces of information that lent to mass confusion."

One day, Jordan walked into an office to find a box of bills that had not been entered into the computer system. He was told that the filing didn't take place because the person responsible was "out for the week."

By early 2001, databases had been consolidated and safeguards added to prevent deletions and double billings, according to company memos.

By February 2001, Kaiser officials, who declined to comment for this story, were happier.

"I notice a tremendous improvement for both (Southern California and Northern California) in the past due accrual situation," Neil Jongepier, a Kaiser representative, wrote in an e-mail to Enron. ". . . It makes my life easier."

Enron Energy Services problems were also created by poor profit and loss projections and unprofitable contracts, former managers say.

For example, Ceconi has said Enron lost $60 million on a $600 million contract signed with J.C. Penney in April.

"Enron always bragged that it was state of the art in risk management, but here's a company that didn't really do its risk-management homework," Jordan said.

Twin Cities

-- Anonymous, February 16, 2002