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Newsweek Cover: 'Enron. Burned!'
Hart Energy Markets ^ | Jan. 13 -02 | PRNewswire

Posted on 01/13/2002 4:47:12 PM PST by lewislynn

Newsweek Cover: 'Enron. Burned!'



      Commerce Secretary Evans Phoned Lay on October 15, the Day Before
    The Enron CEO Told Wall Street About the Company's Financial Troubles;
          But Both Men Say They Did Not Discuss the Impending Crisis

      Enron Bubble Bursting is Emblematic of Wholesale Systemic Failure;
           Anderson Errors Could Cut Accounting's Big Five to Four

    NEW YORK, Jan. 13 /PRNewswire/ -- Last fall, Commerce Secretary Donald
Evans, who was halfway around the world in Moscow on a trade mission, reached
out to Enron CEO Kenneth Lay in Houston to discuss with him Enron's
disastrously controversial, financially-draining electricity plant in India.
Specifically, Evans suggested that Lay consult with Sig Rogich, a veteran
Republican PR man (and another friend of the Bush family), who was on his way
to New Delhi to pitch his services to the government. Perhaps Rogich could
soothe the locals, who had been loudly accusing Enron of price-gouging, report
Chief Political Correspondent Howard Fineman and Investigative Correspondent
Michael Isikoff. While such calls are typical, what makes this one noteworthy
is the date on which it took place, October 15. On that day, Lay knew that his
world was about to fall apart.
    (Photo:  http://www.newscom.com/cgi-bin/prnh/20020113/NYSU004 )
    In a conference call with Wall Street analysts the next day, Lay would
have to disclose that Enron, the largest energy trading company in the world,
had lost an astounding $618 million in the third quarter. More important, he
would be forced to admit that Enron had lost $1.2 billion in a labyrinth of
partnerships that hadn't been -- but should have been -- counted on the
company's books. The company was near collapse. In the January 21 issue of
Newsweek (on newsstands Monday, January 14). Fineman and Isikoff write that
while Evans was an old friend in the Texas energy business, he and Lay say
they did not discuss the impending crisis.
    The company, which imploded last December 2, produced the largest
bankruptcy in American history and now the shockwaves have moved from Enron
headquarters in Houston and Wall Street to Washington. The Lay-Evans call, it
turns out, was the prelude to a flurry of others (all initiated by Lay) in
which the Enron chief executive emitted increasingly urgent distress signals
to Evans, Treasury Secretary Paul O'Neill and Federal Reserve Chairman Alan
Greenspan. But Lay apparently got no help, Fineman and Isikoff write. White
House officials insist that he never contacted them and they never contacted
him, even though he was running (into the ground) the seventh largest
corporation in the country and the second largest in Texas. They flatly deny
that President George W. Bush or Vice President Dick Cheney (or any aides) had
direct knowledge of Enron's predicament. No evidence surfaced last week to
contradict their story and the Bushies point out with relief that someone else
had called O'Neill on Enron's behalf: Robert Rubin, the highly-regarded
(Democratic) Treasury Secretary under Bill Clinton and now a leader of
Citigroup, one of Enron's largest creditors. And though Lay and Enron papered
the Congress with campaign donations to Republicans and Democrats alike, six
committees were planning to investigate.
    Lay built his business by getting regulatory relief from Congress - from
Republicans, to be sure, but from the Democrats as well. There were silent
partners in the myriad Enron off-the-books secret partnerships. They might
include, inconveniently, a fair number of the Democrat's top donors. Numerous
officials in and around the White House have or had extensive financial ties
to Lay and Enron. They include political adviser Karl Rove, economic adviser
Larry Lindsay and GOP Chairman Marc Racicot, who last week declared that he
would cease lobbying work. Lay is also the biggest individual contributor to
President Bush's presidential and Texas gubernatorial campaigns. Investigators
will also have numerous contacts to examine. On October 29, Lay called Evans
and discussed with him the impending lowering of Enron's credit rating. Lay
talked with O'Neill twice, and Enron's president Greg Whalley, had several
conversations with Under Secretary Peter R. Fisher. Lay's attorney, Robert
Bennett, tells Newsweek that his client was merely "doing the responsible
thing" by informing officials of "the possibility of bankruptcy" at Enron.
    Enron, writes Wall Street Editor Allan Sloan, turned out to be another
bubble. However, unlike a Pets.com or a Webvan, whose implosions did little
damage outside of costing dice-rolling speculators some money and techies some
jobs, the Enron bubble exploded like a grenade: stockholders and lenders are
out tens of billions of dollars; at least 20,000 Enron employees have lost
their jobs and many of them have lost their retirement savings too. And the
collateral damage keeps spreading. Prominent among the wounded is Arthur
Anderson, Enron's outside auditor, which admitted last week that some
employees destroyed documents, has been tarnished to the point that the Big
Five accounting firms might shrink to the Big Four. Wall Street's credibility
has been shattered. Utilities deregulation, for which Enron was the poster
boy, is now on the back burner. The spectacle of impoverished, unemployed
Enronites has thrown a harsh spotlight on the risks of 401(k) accounts stuffed
with company stock. And confidence in financial markets has been shaken too.
    Sloan reports that Enron's end is emblematic of a wholesale systemic
failure. The multi-layered system of checks and balances that is supposed to
keep a company from running amok completely broke down. Executives of public
companies have legal and moral requirements to produce honest books and
records, but at Enron, they didn't do that. Outside auditors are supposed to
make sure that a company's financial reports not only meet the letter of
accounting rules but also give investors and lenders a fair and accurate
picture of what's going on, but Enron's auditor, Arthur Anderson, failed that
test. Regulators didn't regulate and Enron's board of directors didn't direct.
In reconstructing Enron's fall, Sloan, who first reported on Enron's demise in
the December 10, 2001 issue of Newsweek and again on December 17, 2001,
identifies the "too-clever-by-half" financial structures that Enron planted
that led to its undoing and how and why those off-the-books partnerships
worked for so long without detection.

                      (Read Newsweek's news releases at
              http://www.Newsweek.MSNBC.com. Click "Pressroom.")

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TOPICS: Business/Economy; Editorial
KEYWORDS: enron; michaeldobbs
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1 posted on 01/13/2002 4:47:12 PM PST by lewislynn
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To: lewislynn

2 posted on 01/13/2002 4:53:28 PM PST by A Citizen Reporter
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To: lewislynn
One thing I respect about President Bush is that he will terminate with extreme prejudice anyone who acted inappropriately on Enron's behalf (if such activity is discovered). Clintoon would just pretend it never happened.
3 posted on 01/13/2002 4:53:57 PM PST by GraniteStateConservative
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To: GraniteStateConservative
I don't know of any proof of that, but lets hope you're right.
4 posted on 01/13/2002 4:58:05 PM PST by lewislynn
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To: A Citizen Reporter
What an incredible graph!......
5 posted on 01/13/2002 4:59:20 PM PST by lewislynn
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To: lewislynn

Too bad that the undereducated hacks at both Newsweek and MSNBC still haven't learned how to spell. It is AndersEn, not AndersOn.

They can't spell. They honestly don't know that the auditor is named Andersen. They can't think for themselves and tey can't be objective. Welcome to the modern world of journalism...

6 posted on 01/13/2002 5:05:59 PM PST by Southack
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To: lewislynn

Too bad that the undereducated hacks at both Newsweek and MSNBC still haven't learned how to spell. It is AndersEn, not AndersOn.

They can't spell. They honestly don't know that the auditor is named Andersen. They can't think for themselves and they can't be objective. Welcome to the modern world of journalism...

7 posted on 01/13/2002 5:06:40 PM PST by Southack
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To: lewislynn;carlo3b;LadyX,Billie,ofMagog,COB1,scuttlebutt,parsifal,Fred Mertz,Snow Bunny...
. There were silent partners in the myriad Enron off-the-books secret partnerships. They might include, inconveniently, a fair number of the Democrat's top donors

This is news to me.

8 posted on 01/13/2002 5:16:58 PM PST by razorback-bert
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To: A Citizen Reporter

Looking at the bump in the chart above, I have to ask why did the price go up in October and the volume down.

Wish I could find a spreadsheet on price and volume.

Anyone know where?

9 posted on 01/13/2002 5:22:54 PM PST by razorback-bert
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To: lewislynn
Just a few comments.

First, anybody that puts the majority of their 401(k) assets into company stock is taking ahuge risk. Amazing that Enron forced its employees to take such high risks.

Second, I read that article from 'Fortune' posted here which says three other major corporations may be headed the way of Enron. One of the three is Ford Motors. Does the President have any legal duty to 'look out for the employees' of Ford or any other major corporation? The answer is No!

Qwest is a telephone company serving the Northwest. It's stock had been trading above $ 70 a share and I heard from a friend the stock is now about $ 10. Yet, the CEO paid himself hundreds of millions last year. Perhaps Qwest may find itself listed as another burn job.

10 posted on 01/13/2002 5:35:41 PM PST by ex-Texan
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To: ex-Texan
Exceptionally well-written thread on the facts of the Enron case can be found here
11 posted on 01/13/2002 5:46:01 PM PST by Teacher317
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To: lewislynn;*Enron_list
Bump List
12 posted on 01/13/2002 5:47:13 PM PST by Free the USA
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To: razorback-bert
HUH? "I have to ask why did the price go up in October and the volume down."

You seem to have posted it already... .....are you making acusations?

Spell out what you mean.....

13 posted on 01/13/2002 6:17:41 PM PST by A Citizen Reporter
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To: A Citizen Reporter
Okay, I didn't see any demand driving the price.
14 posted on 01/13/2002 6:21:05 PM PST by razorback-bert
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To: razorback-bert
Demand for Enron stock?
15 posted on 01/13/2002 6:29:39 PM PST by A Citizen Reporter
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To: lewislynn
The spectacle of impoverished, unemployed Enronites has thrown a harsh spotlight on the risks of 401(k) accounts stuffed with company stock.

Lesson...Never let anybody else "hold" your money...

16 posted on 01/13/2002 6:30:54 PM PST by copycat
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To: A Citizen Reporter
What else drives the price of stock up?
17 posted on 01/13/2002 6:32:01 PM PST by razorback-bert
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To: lewislynn
Let's see. For years they have maintained fraudulent claims of their value, their leaders are all lying, money pilfering vermin, they distorted the facts in their books, they own a 700 horsepower document shredder that works overtime, they have duped millions of people out of billions of dollars, and consummated a lot of questionable political quid pro quo deals with other people's money. Are we talking about Enron Corporation or the Democrat Party?
18 posted on 01/13/2002 6:33:07 PM PST by HighWheeler
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To: razorback-bert
Actually many things do, care do illuminate? Or just make claims?
19 posted on 01/13/2002 6:57:22 PM PST by A Citizen Reporter
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To: A Citizen Reporter
Actually many things do

Such as?

If no one in buying or selling, how does the price move?

20 posted on 01/13/2002 7:04:57 PM PST by razorback-bert
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