A primer for Freepers on three issues of the Enron fraud and investigation

self

[ken5050]

There are two distinct aspects to the Enron mess; the political mudslinging, and the criminal fraud aspects of the case as pertains to the company and its auditors, Arthur Anderson. Oddly, in all the verbiage that has been written to date, very little has been written that begins to explain the TRUE nature of the financial fraud at Enron. More oddly, it is not that difficult to understand. For those who would like some insight, I will attempt to clarify, in lay terms, three points which, I believe, will ultimately be crucial as the investigations commence. So, if you'd like to learn, and understand a few things, read on.....

[rwfromkansas]

Uh, no. The media is harping about "connections" to the Bush admin.

[hole_n_one]

Marvelous post!

[doug from upland]

Very well done, Ken. I taught real estate law and real estate economics at the college level. In 1993, my students got an earful about leverage, fraud, and phony appraisals regarding certain Arkansas land dealings.

I wish the info given to be by a source I trust would have been revealed. Hillary Clinton was personally liable on a Castle Grande loan.(Man, it seems so long ago. Wasn't it Castle Grande?) She signed her name on it. The lender had too many assets in the form of land loans and they were in jeopardy of being shut down. A bank examiner would be there any day.

An Arkansas trooper drove Hillary to the bank (Smith or Perry County?, I can't remember) and she wrote a personal check to pay off the loan. They retired the debt. Of course, there were not sufficient funds in the Madison account when the check was received for payment. That is why there was so much pressure on David Hale to fund the fraudulent loan. They had to get money in her account to cover it.

One of the most important things Clinton did early was to fire all the U.S. attorneys. He really only had to fire one --- in Kansas City. Firing one, however, would have raised suspicions. Paula Casey controlled the investigation of Madison Guaranty. Jean Lewis was smeared. Jon Parnell Walker was thrown off a building to shut him up. What an operation.

[Billy_bob_bob]

Yes, "flipping" was involved here. Primarily Enron executives "flipping the bird" at their shareholders and employees. What a disaster! Nice primer, BTW.

What is really, really scary is that this was one of the ten largest companies in America, and it turns out that it was apparantly little more than a Ponzi scheme. This doesn't do a whole lot to bolster confidence in American corporations, or American stock markets. Just what we need right about now! Special thanks to all of those wonderful Enron execs who made this financial debacle possible. Stand up and take a bow!

[ken5050]

If it results in meaningfful reform, then some good may come of it....Public accounting and auditing is a joke, a farce....

[Buckeroo]

We won't discuss our Vice President, he already has a heart condition. I certainly think the world of him.

[ken5050]

Did you see Tony Coehlo tonight on Crossfire?..I almost urped..the hypocrisy of that crook complainng that the Bush administration has problems with Enron?....It boggles the mnd...

[YaYa123]

I think long term effects of this, will be to:

1. Give John McCain another platform to preach campaign reform.

2. Squelch any Social Security reform allowing people to invest in the market.

3. Give democrats running in 2002 and 2004 the chance to drag out their favorite campaign line.... that republicans care more about their big corporation friends than they do the little guys.

[ken5050]

Thanks for the kind words, Doug....glad to see the decaf is working (G)...I reallythinkthe "smoking gun" will be the freeze in the 40lk plan.....I thikmit was deliberatgely manipulated, to keep the employees from selling the stock, and if so, should be easy to prove..

BTW, my favorite character from the "good old days" was the Clinton stooge who testified druing the Jean Lewis hearings that he "lied" to his diary.....I can't remember his name......what a beaut..

[SpencerRoane]

Josh Steiner

[hole_n_one]

Let's say that Enron owned a pipeline, or a plant, or anything, and let's say that Enron had paid $10 million for it years ago. Enron decided, presto, like magic, that the plant, or pipeline, or whatever, is now worth $110 million. So it assign the plant to the partnership at a value of $110 million,......

Can you define the term assign for me as it relates to the above comment.

[cookcounty]

But, at least formally, legally, the directors are elected by the stockholders to provide oversight. If they didn't, aren't they at least liable for civil, if not criminal penalties? Some of these directors have a lot of assets (e.g., Smith, with 10-20% of FDX) and I'm wondering if some combination of stockholders/ESOP members might bring suit to recover some fraction.

[doug from upland]

Josh Steiner.

[KC_for_Freedom]

I think it was deliberatgely manipulated, to keep the employees from selling the stock, and if so, should be easy to prove..

Yes, I like this hypothetical, there should be memos to the employees explaining the reasons for the freeze, informing them to take care of any plan allocations before the freeze Etc. I see an employees class action suit that will clean out the management and name AA as complicite. (Which their document destruction almost proves)

[Quicksilver]

Thanks for this very informative post. I have 3 questions:

1) Why would most Enron employees have "their life's savings" all in Enron stock? Were they encouraged to put it all in Enron by the company? I'm not an investor but it seems to me not to be the smart thing to do.

2) Do you think that the Enron Execs fully expected the Bush Administration to bail them out?

3) How much impact did the recession have on Enron's collapse? Energy prices did fall.

[YaYa123]

Missed Tony, but isn't that a sure sign the democrats will drag out all their old horses to go after the Bush Administration. No shame, democrat criminals got no shame...or Tony would remain hidden away, forever.

[ken5050]

Sure...a transfer to an "unrelated party" is deemed as a sale.....and must be booked as such. Enron decided what the value of the asset was at the time it transferred it to the SPE, and as I wrote, it then compounded the farce by booking the gain as profit.

[ken5050]

Ah, yes......what's he doing now?..in business with Craig Livingston, no doubt?

[Buckeroo]

Do you believe that government should "bail-out" the folks at ENRON?