Posted on 11/28/2001 2:14:15 PM PST by RightWhale
The accounting "tricks" uncovered in just this quarter alone wiped out over $600 Million in profits from a year that saw only $900 Million in "dressed up" profits.
It's difficult to see in the articles above, but here is how just ONE of those accounting tricks was used:
The CFO formed his own private company. Enron funded the company and went in on 50-50 deals, with Enron co-signing the note for 100% of the debt. Per certain accounting rules (Gaap, perhaps), if your company doesn't own 50.1% of a venture, then you don't have to carry the debt on your books, but you do get to count 100% of the assets of the venture on your books.
So shareholders didn't realize the full extent of Enron's debt due to these and other such "tricks", and they were misled over the the actual real value of Enron's assets due to these same tricks.
The real rub is that a third-party audit (required for the 10-Q's) is supposed to document these transactions so that stock holders, employees, and stock brokers can view the full risk picture. Instead of red-flagging these and other tricks, Andersen buried them in long-winded paragraphs and acted as though they were no big deal.
This behavior allowed the big three credit rating agencies to issue inflated grades to Enron's known public debt, and those cheery ratings misled ordinary bond investors to get sucked into junk bonds thinking that they had "A" quality paper.
Also, if you will review Enron's campaign donations, you will see that they spread their donations almost evenly between Democrats and Republicans in 2000, so a political "payback" theory makes no sense.
How?
Credibility for what? I am make no claim here. Only stating my opinion. And yes, they are Whackos.
Chapter 11 Field
_ _ _ _ _ F I E L D
The Astro-Retractable-Ceiling Park
Compaq Center (formerly the Summit) is also in the market for a new name.
How long before Reliant Energy's $300million naming of the Astrodomain puts them into bankruptcy?
Nationally yes, but locally (Houston) no, BILLIONS of dollars have been siphoned off for downtown white democrat property owners with the public's full knowledge (and "support"). The re-election campaign for the mayor who is doing this is close and his largest support comes from impoverished black voters.
??
"From my perspective, Enron's top most management were involved in a four-year scandelous program of misrepresentation, deciet, dishonesty, and criminal behavior while espousing the "Enron Values" of Integrity, Respect, Communication, and Excellence, and pontificating and diaplaying huge arrogance and smugness to everyone in general. "
9 posted on 11/28/01 5:09 PM Pacific by Jalapeno
Unless you don't understand what "perspective" means it sounds like you am make a claim to me...Who are the "whackos" again.?
I don't see how these guys can make ends meet.
Taxpayer-supported international racketeering
"Other big donors were also invited to China. They also cut million-dollar deals and then sliced a percentage off for the DNC. Another news article kept by Ron Brown in his files listed Enron, Mission Energy, California Energy, Hughes, AT&T, Federal Express, Sprint and Chrysler as donating money to the DNC.
Ron Brown's Indonesia trip
"Furthermore, the EXIM bank under Brody financed over $4 billion dollars worth of gas deals with another energy company, Enron. Enron is also an Akim/Gump client. In fact, Enron executives traveled with Ron Brown in 1994 on trade missions to Russia, Indonesia and China, cutting EXIM and OPIC backed deals in each country. Enron is not only another Akin/Gump client but it is listed as one of forty-four such companies in which Rubin had "significant contact" with during his years at Goldman Sachs."
Who's who in the Commerce scandal
"Li Ka-Shing is not the only one to take advantage of the Clinton sponsored changes in the Maritime finance program. For example, two power barges for export to Indonesia made by Enron Corp., a large contributor to Bill Clinton, were also built through the DOT Maritime-funding program, and backed by $50 million in taxpayer financing. Another questionable ship deal included over $60 million to build a paddlewheel steam boat/casino. Still another deal landed millions in taxpayer supported loans for two floating combination hotel/casino barges.
Clinton Export Policy Helped India Hide The Bomb
"Another Brown document for the Russian trip, dated February 1994, lists Tamraz along with CEO's from Tenneco, Texaco, ARCO, Enron, Conoco, AT&T, Motorola, and Silicon Graphics. In 1994, Silicon Graphics, along with Tandem and several other major computer companies, hired Tony Podesta to lobby for them. Tony Podesta is the brother of John Podesta, Assistant to the President and Staff Secretary for Bill Clinton."
The power behind Kyoto
"But there are a few big corporations that favor some form of limits on so-called greenhouse gas emissions, and they are lobbying the Bush administration to be less implacable on the subject. The bad guy list includes Royal Dutch/Shell Group, BP, Cinergy, AEP, Entergy and Enron."
In 1988, he raised eyebrows by lobbying Argentina on behalf of a proposed Enron pipeline, again invoking Dad's name. Enron was headed by Bush family friend and Republican bankroller "Ken Lay".
From Here:
To represent its interests, Enron has employed former Secretary of State James Baker and former Commerce Secretary Robert Mosbacher from the Bush administration as well as former Clinton administration Treasury Secretary Lloyd Bentsen.
A 1993 New Yorker article reported that Baker and Bush's son Neil lobbied Kuwaiti officials that year to select Enron to rebuild a power plant destroyed in the Iraqi invasion.
Lay acknowledged that Baker was on an Enron retainer when he visited Kuwait in 1993 for ceremonies honoring the former president.
"I'm not sure [ Baker ] even mentioned our project while he was there," said Lay, who said the New Yorker article "was loaded with total inaccuracies and falsehoods."
The Nation magazine reported in 1994 that Bush's son George W. Bush phoned Argentina's public works minister in 1988 to ask him to award Enron a contract to build a natural gas pipeline.
"I felt pressured," the minister was quoted as saying. "It was not proper for him to make that kind of call." Enron later won the contract, the magazine reported.
Enron spokesman Mark Palmer said no member of the Bush family has ever had a financial or consulting relationship with the company. Palmer said George W. Bush, now governor of Texas, told Enron officials he never called the public works minister.
Enron's board of directors includes Wendy Gramm, wife of Sen. Phil Gramm (R., Texas). Wendy Gramm was appointed to the board in 1993, five weeks after resigning as chairwoman of the Commodity Futures Trading Commission, where she had supported Enron proposals to relax regulations on trading of energy futures. Enron and Gramm both said in published reports that there was no connection between her appointment and her actions as a regulator.
Tony Lentini, head of Apache Corp., a Houston oil and natural gas exploration company, said because Enron controls distribution of large supplies of energy, its futures traders have undue influence over prices.
"It's insider trading, but it's legal to have this superior knowledge and trade on it in the futures market," Lentini said. "Do the same stuff in the stock market, you go to jail."
Lay acknowledged that Enron, which invented several of the financial instruments now being used in the futures market, is a "very significant participant.
"I'm not sure that's the same as, quote, 'insider trading.' " Lay said. "We have a number of very strong competitors, including the major oil companies and the investment banking houses and electricity companies."
Last week, Enron's oil and gas subsidiary added to its board of directors Frank G. Wisner, who had reportedly helped Enron win a $2.8 billion contract for a power generating station as U.S. ambassador to India.
The New York Times reported in 1995 that Wisner "constantly cajoled" Indian officials and that the company also was aided by the Central Intelligence Agency, which assessed the strategies of the competing contractors.
Lay denied Enron received any assistance from the CIA: "To my knowledge, I don't think we've ever received any information from the CIA. When we go into these countries and bid on these projects, we rely solely on our own intelligence."
In July, Amnesty International issued a report accusing Indian police of beating and arbitrarily arresting opponents of the Enron project. The group accused police of "collusion" with Enron.
Enron officials acknowledge reimbursing the government for extra police at the site -- as it says it is required to do -- but denied any role in the alleged mistreatment. They said police were always under police control and not under the direction of Enron.
The project, the biggest international investment since India moved to open its economy in 1991, has become the object of protests by thousands of local residents who say the power-plant will take their homes and destroy their fishing grounds and coconut groves.
The opposition party won a state election in 1995 after a campaign in which it accused Enron of using bribery to win the contract. Although the accusers later retracted their bribery allegations, Enron was forced to renegotiate the deal at more favorable terms.
In Indonesia, Enron won a power plant contract through a partnership that includes the son of the country's president.
"There are very few large companies in Indonesia that do not have involvement with one or more members of the president's family," Lay said.
He insisted, however, that Enron abides by the U.S. Foreign Corrupt Practices Act, which bars companies from paying bribes abroad.
...Some analysts have suggested Enron has overextended itself financially in preparing for electric competition and could face ruin if deregulation stalls.
Lay insisted that won't happen.
[End of Partial Transcript]
DUBYA - From Oil to Baseball to the Governor's Mansion
an excerpt from "Enron: The Global Gospel of Gas":
In this country Enron has traditionally been a major supporter of the Republican party. Ken Lay, the chief executive of Enron, hosted the Republican national convention in Houston in 1992. After George Bush, the incumbent president, lost the 1992 election, Enron started to pump money into Democratic coffers such as Lloyd Bentsen, another Texan, and Clinton's first treasury. In one Senate election campaign, the Democrat received more than $14,000 from Enron. According to the Washington, D.C.-based Center for Responsive Politics, the amount is the second highest paid out by Enron to a political campaign.
Bentsen quit his job as Treasury Secretary at the end of 1994 and was succeeded by Robert Rubin, who worked closely with Enron when he was co-chair of Goldman Sachs investment bank. Clinton first hired Rubin to head his National Economic Council. Soon afterwards, Rubin wrote on Goldman Sachs stationery to former clients, including Enron, saying he "looked forward to continuing to work with you in my new capacity."
After this ethical lapse, Rubin filed a White House financial disclosure form that listed Enron among the names of 42 former clients with whom he had had "significant contact." Rubin pledged to recuse himself from any government dealings affecting these former clients for one year, a period that has since lapsed.
Enron's lobbying clout was demonstrated in its attempts to deregulate the energy futures markets that enhance its profits. Enron was one of nine energy companies that asked the U.S. Commodity Futures Trading Commission (CFTC) in November 1992 to exempt energy derivative contracts from federal government oversight as well as from fraud laws. The request was made right after Bill Clinton won the U.S. presidential election at a time when the political composition of the board was likely to change soon. The five-member commission is made up of three members from the ruling party and two from the majority party.
The deregulatory push was advanced by Wendy Gramm, the CFTC chair, who authorized the commission staff to begin the lengthy rule-making process required when a federal agency makes a major policy decision. Gramm, a former senior staff member of the Reagan White House, resigned as chair of the commission on January 21, 1993, as Clinton took office. Wendy Gramm is the wife of Phil Gramm, the ultra-conservative Republican Senator from Texas.
Five weeks after Gramm resigned, she was appointed to Enron's board of directors, just as the commission voted two to one to deregulate the energy derivative contracts business. President Clinton had yet to appoint anyone to the two vacant seats on the CFTC board; the commissioners who embraced deregulation were Gramm allies appointed during the Bush administration.
The regulatory exemption for energy futures was made retroactive to 1974 - when the CFTC was created - to remove any potential legal challenges to past energy contracts. The exemption from fraud legislation that the industry wanted was dropped in response to objections in Congress. Gramm and Lay say there is no connection between the CFTC decision and Gramm's appointment to Enron's board.
Enron has also been under fire for the environmental impact of its activities at a company power plant in Boston. Each day, for six weeks in the summer of 1995, a million litres of water were trucked to the plant just outside Boston to prevent the Charles river from shrinking to less than half its normal flow as a result of plant operations.
In the early 1990s Enron bid for a contract to rebuild Shuaiba North, a 400-megawatt power plant that supplied 5 percent of Kuwait's electricity before it was bombed during the 1991 Gulf war, according to journalist Seymour Hersh.
Hersh wrote in a 1993 New Yorker magazine article that Enron's price for supplying the power is 11 cents a kilowatt hour. The rival bid put forward by the German company Deutsche Babcock was six cents, while the state-subsidized rate is half-a-cent a kilowatt hour.
Despite the large price difference, Hersh noted that Enron's bid received favorable consideration after help arrived from former US president George Bush, a good friend of Enron founder and chief executive Kenneth Lay. Lay, raised funds for Bush's 1992 re-election bid and hosted the reception committee for the Republican National Convention that year.
In 1993 Bush visited Kuwait along with former U.S. Secretary of State James Baker. At the time Baker, former Commerce Secretary Robert Mosbacher, as well as Thomas Kelly, the director of operations for Bush's Joint Chiefs of Staff during the Gulf war, were on payroll working for Enron.
Hersh says in his New Yorker article that Baker, along with the former president's two youngest sons, Neil and Marvin, remained in Kuwait after Bush left to promote the Enron bid to rebuild Shuaiba with the Kuwaiti utility ministry. Their efforts apparently paid off initially. Hersh's sources told him that Enron's Kuwaiti business partners in the bid to rebuild Shuaiba had "obviously been hand picked" by the Kuwaiti prime minister. Enron calls the New Yorker article "completely incorrect." The company now says it has abandoned the project in Kuwait.
In Mozambique, the Philippines and Argentina, Enron has been accused of putting pressure on the local authorities through powerful figures in the United States government.
75 Posted on 01/11/2000 15:54:12 PST by Boyd
This morning another fellow summed up a couple of points quite nicely.
"lawsuits galore, no matter how it goes.
About those auditors, they too should be pushed into BK.
About the corporate officers, they should be pushed into a prison cell.
About Dynergy, they may well have been given good records, and decided to pull out because it got too hot for them. That is not a good reason. So they give the excuse that things weren't disclosed. We'll see, but I would not be buying Dynergy these days.
Somewhere a deal could be coming together. Sell 15x the outstanding shares for some price, say $15B. (essentially, you are selling nearly the whole company). All the debts get paid off. You have a debt free entity there, with a good credit rating. The market cap is then, say $25B. Shares would trade for $3. Something like this should be done. But greed, etc., will probably interfere.
So it will probably wind down to zero while Nero fiddles. Hopefully there will be a dead cat bounce along the way."
Before the tin-foilers compeltely over-run this thread let's explore some of Enron's background and take a decidely pessimistic look at the market (the financial, the commodities and the *real* energy business/opoerations of Enron) that Enron attempted to insert itself into ... an analysis from the fool.com:David Langford (wot_dabny@yahoo.com)I can't believe we're even discussing a utility. A utility! Just look at their track record. As the 1980s kicked off, utility stocks were 25% of the S&P 500. Now? Less than 7%. Energy stocks? As a percentage of their weight of the S&P, they've been cut in half over the same period.
Why is that? Because there are better sectors, better industries, and better companies to invest in, and lots of them. Technology has gone from 11% of the S&P 500 to 25% since Reagan was elected president the first time around. Financial services and healthcare? Both have gone roughly from 5% to 15%.
Guess what kind of companies are in the Rule Maker Portfolio? Looks pretty much like technology, healthcare, and financial services. Coincidence? See any utilities or energy companies in the Rule Breaker Portfolio? Let's look at the Drip Portfolio, then. Nope, no energy, no utilities, nowhere, no how. Hmmm.
Oh, but Enron's different. It's really a market maker in the business of energy, and branching out into pulp, paper, and metals. Care to take a guess how pulp, paper, and metal have done over the last 20 years? Anyone looked at U. S. Steel (NYSE: X) lately? It's embarrassing. I mean, that company used to be a Dow component, fer cryin' out loud.
But let's ignore Enron's energy business. I mean, sure, Enron is one of the world's largest natural gas and electricity concerns, and it's only 92% or so of its revenue-generating business, but what's that? Sure, Enron is likely to go back to trading like an energy company when people figure this stuff out, losing its lofty valuation and a whole boatload of shareholders' money at that time. But we'll just pretend none of that matters, and that the only thing that matters is Enron's exciting new direction: making markets.
Enron's role as a market maker is to facilitate more liquid trading, and that means a better price for everyone, not to mention offering products that reduce risk. Let's look at that a second. Enron benefits, like all market makers do, when there's lots of trading. This happens when people who would trade do so because they're feeling antsy (California comes to mind). Enron helps people feel less antsy by allowing them to manage their risk better.
So as Enron succeeds, it is needed less. This is not an expanding possibilities scenario, but a growth-until-it-levels-off scenario -- a cyclical industry within the cyclical energy industry.
Besides, what is it exactly about the market-making business that couldn't be Napstered out of existence? Why can't energy companies post their own going rates to a free board, or to no board at all, like Gnutella? When they realize they can, just as they are only now realizing that Enron offers much greater liquidity than they used to have on tap, they will. Liquidity is necessary, but Enron won't always be.
You don't need a broker or a market maker when the market consists mostly of only a few big players, a host of which don't like Enron's driver's-seat position in writing futures contracts. Sure, Enron may be making a larger, more-liquid options and futures market just as fast as it learns how, but once the market is established and everyone knows how to play the game, Enron won't be needed anymore.
Enron's only 20% of the U.S. energy market -- those other big players can force their way in, or band together to create an even more liquid market. As long as Enron's calling the shots and scooping up the market-maker money, the incentive is very much there to do so. Where's Enron's moat?
And forget the other energy guys, what about the financial ones? What could possibly keep experienced players like the Chicago Mercantile Exchange from barging in and taking over? The CME has the incentive to do so -- it's the first exchange to transform into a for-profit company, and is soon to be publicly traded. Making futures and options on futures is the CME's home turf, not some new thing it's reading up on, and the company sports some of the world's largest banks and investment houses as its members.
In 1999 alone $138 trillion moved through the CME. Enron? In the 14 months since the inception of EnronOnline, Enron has moved about $390 billion of business, according to a company spokesman. That makes EnronOnline almost 3% the size of the CME -- big enough that the CME might actually take notice. Woe to EnronOnline if it does.
There's also the teensy-weensy issue of how Enron is paying for its growth. Enron just issued another $1.25 billion in debt. Let's see, that's less than $0.7 billion in cash, and now more than $15 billion in debt. Ick. Well, that's one way to expand your business. Why isn't Enron using cash to expand? Maybe because it can't -- the latest net margin came in just below 1%. Double ick.
Maybe my Bull counterpart will point out what the good news is, because I haven't found much here to love.
A former swashbuckler and a one-time fussbudget for the FBI, David owns no shares of any energy or utility company, including Enron, nor does he ever plan to. You can see all of David's personal portfolio holdings under Favorite Stocks here. The Motley Fool is investors writing for investors.
There's a lot of things about Enron that remind me of the Dial Corporation/Finova--mainly, there was an incompetent/worthless/greedy CEO who appointed his buddies as Board members. The board members in turn were completely remiss in their oversight responsibilities and rubber-stamped every looney thing the CEO and senior management wanted to do. Teets (Dial CEO) ran Dial into the ground, but he's still a "big shot" here in Phoenix (at least he thinks he's one--LOL).
They love the rewards but don't think they should ever bear any risk.
Enron is dead. Their lifeblood was their credit rating, and after hiding Billions of Dollars in debt off their books via their collaborator in crime Andersen/Accenture, people are unlikely to ever rate them as a stable, trustworthy borrower ever again.
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