Key figure in USF&G fate stirs interest as Enron fails

January 30, 2002|By Jay Hancock

FORMER employees of Baltimore insurer USF&G Corp. are closely following the Enron debacle, particularly the travails of a Chicago-based member of Enron's board, one Norman P. Blake Jr.

Blake was USF&G's boss from 1990 to 1998, arriving to rescue the downtown Baltimore employment anchor from the last recession and leaving after he slashed staff, moved the company out of downtown and sold it off to St. Paul Cos. of Minnesota.

Under previous honcho Jack Moseley, USF&G had made bad bets on real estate and junk bonds and got steamrolled by the general financial slump of 1990. Blake sold the company's junk bonds at close to the bottom of the market, reduced employment by half and earned $44 million for his trouble.

The U.S. insurance industry was due for some slimming, but there was nothing worthy of megapay in Blake's Baltimore performance. USF&G's stock tripled during his tenure, but so did financial services stocks generally as the economy recovered and then boomed.

Employees and civic leaders are still bitter about Blake's Baltimore sojourn.

The downtown tower that bears the Legg Mason name once was named after USF&G and held 700 white-collar jobs. Under Blake, USF&G first consolidated in Mount Washington and then became a division of St. Paul, removing another Fortune 500 corporate headquarters from Maryland. (Legg Mason moved into the tower from another downtown spot after USF&G bugged out.)

In an interview with CFO magazine this month, Blake expressed dismay at his "Pink Slip Norm" nickname and expressed contempt for "Chainsaw Al" Dunlap, who vaporized jobs at Sunbeam and Scott Paper. So he must be chagrined to be caught up in a Chainsaw Al-style accounting scandal at Enron.

Since leaving USF&G in 1997, Blake has been boss of three other organizations: Promus Hotels, which he sold off to Hilton Hotels after a year; the U.S. Olympic Committee, where Pink Slip Norm didn't fit in with the prevailing culture, leading to Blake's resignation after a few months; and now, Comdisco, a Chicago-based technology services company that is in bankruptcy proceedings.

Blake has been an Enron director since 1993, so he had plenty of opportunities to see the grime accumulate there before it clogged up the pipes. Through a Comdisco spokeswoman, he declined to be interviewed for this column.

As one of Enron's 12 outside board members, Blake was charged under corporate protocol with keeping extra close tabs on the doings of management. Only a few people know what really went on inside Enron over the past few years, but the prima facie evidence suggests that the outside directors performed with the diligence and scruples of a fence post.

An Enron spokeswoman declined to discuss Blake's role or that of any other directors, saying an internal investigation would eventually disclose all the pertinent facts.

Sitting on the board's Compensation and Management Development Committee, Blake signed off on the outsized pay packages for Enron executives. As part of Enron's Finance Committee, Blake was supposed to keep track of the company's deployment of capital, including the debt it hid in outside partnerships controlled by management.

The board was intimately involved in the partnerships' creation, making them possible with a 1999 waiver of Enron's ethics policy, which prohibited business dealings between executives and the company, according to an investigation by law firm Vinson & Elkins at Enron's request. It is those partnerships that are at the heart of Enron's collapse.

Blake is a defendant, along with the rest of Enron's board, in numerous shareholder lawsuits alleging that directors withheld information about the company's perilous financial condition and unfairly profited by selling Enron shares before they collapsed.

Blake sold 21,200 shares at $80.44 each in October 2000 to reap $1.7 million, according to regulatory filings. Yesterday, Enron stock traded for 42 cents.

Pink Slip Norm is likely to be bruised by the Enron blowup but emerge with most of his wealth, if not his reputation. It is difficult to tar outside directors with corporate misdeeds. Blake and the other Enron directors are shielded by liability insurance, a typical arrangement. In a nice touch, the Enron board's insurer is St. Paul.

In 1998, Blake told The Sun' s Bill Atkinson that he was "embarrassed" by his $44 million windfall from the St. Paul/USF&G merger, a seemingly appropriate emotion. How does he feel about Enron?

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