HOUSTON -- Sharon Lay's corporate agency, Alliance Worldwide, is
coping with greatly diminished business from a high-profile client
-- Enron.
How much lost business?
A spokeswoman for the Lay family put it this way: Enron spent
$117 million on travel with the agency in 2001, and Alliance
Worldwide received a 5% travel management fee. That translates to
about $5.9 million.
Sharon Lay owns 50% of the company that was known until
September as Travel Agency in the Park (TAP). She's the sister of
Kenneth Lay, the former chief executive officer of Enron, which
filed for bankruptcy on Dec. 2 in a now-infamous accounting
scandal.
TAP was rebranded as Alliance Worldwide and continues to have a
service agreement with Enron and its affiliated companies.
As Enron's lead agency since 1988, TAP and its successor,
Alliance Worldwide, handled the bulk of Enron's travel business and
operated a customer service office on Enron property. Enron, in
turn, accounted for the bulk of the agency's business -- about 70%
or 80%, according to one source.
TAP also became prominent in Houston social and business
circles.
Although the Enron bubble has burst, Alliance Worldwide "is
doing fine," the spokeswoman said.
The agency is projecting 2002 sales of $15 million from 40
"ongoing" corporate clients and three under contract, she said,
adding that the company plans a "guerrilla-marketing campaign to
call and see everyone."
It hasn't been an entirely smooth transition, though.
A CBS News report in early February cited allegedly
"questionable financial dealings" between Enron and Sharon Lay's
agency.
Enron made a $350,000 "utility payment" to the agency less than
three weeks before its Chapter 11 bankruptcy filing, according to
the published report.
And two days before the bankruptcy filing, according to the
report, another $350,000 payment was authorized, but the check
didn't clear.
The Lay family spokeswoman said the CBS report was "wrong," and
she said the $350,000 payments were for travel management fees.
It is not clear how much Enron paid the agency earlier in 2001.
The Enron financial statement that would have detailed the 2001
payments normally would have been filed this spring.
The timing of the two $350,000 payments could become an issue in
the bankruptcy proceedings because relatives or friends of company
officials can't be given preferential treatment as creditors.
An Enron spokesman declined to return phone calls about the
$350,000 payments but did phone earlier to cite disclosures in
corporate financial reports about Sharon Lay's relationship to her
brother and payments to TAP.
Founded in 1983, TAP began doing business for Enron's operating
companies in 1985 and "won the Enron Corp. contract in competitive
bidding in 1988," the Lay family spokeswoman said.
The AFL-CIO, which represents some Enron employees, cited the
Enron-TAP relationship as a conflict of interest at a meeting of
Enron's board of directors in 1997, said AFL-CIO research analyst
Dieter Waizenegger.
"It smelled weird, of favoritism," he said.
Whether it was a conflict or not, there certainly was a close
relationship between Enron and its corporate travel agency. TAP
employees, for instance, were eligible to join the Enron Federal
Credit Union.
Today, four months after Enron's fall, Alliance Worldwide is
"highly optimistic" about its future, the Lay family spokeswoman
said.
Although it had to cut staff, Alliance Worldwide is emphasizing
its customer service and technology, which is comparable to
"mega-agencies," the spokeswoman said.
She noted that the company's Web site, at www.allianceworldwide.com, features online booking for
groups and meetings, e-ticket tracking and itinerary services.
As Alliance Worldwide tries to regain some traction, the Houston
economy still is adjusting to the ripple effects of the Enron
bankruptcy.
Houston hotels, for example, can expect a decline in occupancy
of 2% to 4% this year because of Enron's collapse, according to HVS
International, a lodging industry tracking firm.
Still, a spokeswoman for American Express Travel said its
agencies report that business in and out of Houston remains "good
overall" because of the city's diversified economy.