Posted on 01/12/2002 2:39:35 PM PST by anniegetyourgun
WASHINGTON - In a pair of e-mails to his employees in August, the chairman of now-bankrupt Enron touted the company's stock and declared that the energy trader giant's growth "has never been more certain."
"Our performance has never been stronger; our business model has never been more robust. ... We have the finest organization in American business today," Ken Lay said in an Aug. 14 e-mail just two months before Enron's long-hidden financial problems surfaced.
In an Aug. 27 e-mail, Lay announced the details of an employee stock option program which spoke of "a significantly higher price" for Enron stock in the future. Selling for $37 a share in August, Enron stock now sells for 68 cents. The stock was at $83 a share a year ago.
"It appears that you misled your employees into believing that Enron was prospering and that its stock price would rise," Rep. Henry Waxman, the ranking Democrat on the House Government Reform Committee, said in a letter Saturday to Lay. Waxman released the e-mails along with the letter to Lay, whose political donations along with those of other Enron executives have made the company President Bush's biggest financial supporter through two governor's races and the presidential election.
Enron spokesman Mark Palmer responded Saturday that the picture for the company was solid in August and that financial problems didn't become clear until later.
"Ken Lay was telling the truth" in August, said Palmer. "We had had 21 consecutive quarters of earnings growth, the same number of consecutive quarters of volume growth. Our core business at Enron had never been in better shape."
On Oct. 16, the company acknowledged hundreds of millions of dollars in third-quarter losses and a billion-dollar writedown of its equity, a belated admission that touched off a crisis in investor confidence and sent the company careening toward bankruptcy. The company for several years had kept huge amounts of debt off the company's books in partnerships that had been set up by Enron executives, who collected millions of dollars from the partnerships.
Declaring that Lay sold $40 million of Enron stock between January and August last year, Waxman demanded to know whether Lay was aware of the company's financial vulnerabilities.
"If you were not aware of this, please explain whether this was because Jeffrey Skilling or other executives withheld that information from you," Waxman wrote. Skilling had abruptly left the company in August after just six months as president and CEO.
In one of the August e-mails to employees, Lay said he regretted Skilling's "resignation. ... Jeff is resigning for personal reasons and his decision is voluntary.
Palmer said that "all of those partnerships had been through review processes and approval processes that were set up with and in many cases worked out with Arthur Anderson as our outside auditors, plus outside legal counsel."
The Enron spokesman said problems with the partnerships were brought to light "as the result of our investigation. We found there were accounting problems with one of those partnerships and we fixed that by restating those earnings and that was not knowledge we had in August."
"The company's later writedowns in connection with problems with the partnerships were not understood until later," Palmer added.
The company says its executives regularly sold some of their own Enron stock as part of their compensation packages. A lawsuit in Texas alleges that Enron's top management received $1.1 billion by selling 17.3 million shares of the company's stock from 1999 through mid-2001.
Finally, any stock sales by principals is a matter of Federal public record AND the internal company rumor mill is very effective at circulating stories of upcoming problems. Did everyone think that the Enron stock price dropping from $83 on Jan. 1, 2001 to $24 on Oct. 1, 2001 and $14 on Oct. 29 was just a fluke? Get serious!
Fact #2: "In a pair of e-mails to his employees in August, the chairman of now-bankrupt Enron touted the company's stock and declared that the energy trader giant's growth `has never been more certain.'"
If these two facts are indeed true, GWB will not come to Lay's defense no matter how close they have been.
LOL If it gets too hot Lay might have a good insanity defense.
Fact #2: "In a pair of e-mails to his employees in August, the chairman of now-bankrupt Enron touted the company's stock and declared that the energy trader giant's growth `has never been more certain.'"
Nah, you miss the point. See Mr Lay thought the stock was in such good shape and in such demand that he sold some of his so everyone would have a chance to own some. He was just sharing. Jeezzz, I coulda been a lawyer.
"If it looks too good to be true, it probably is."
While in NO WAY excusing the perfidy of the Enron management, anybody that puts their entire savings in one stock is an idiot. And to invest your savings in the SAME company you work for is double folly.
These people were blinded by greed. They thought they had found the road to easy wealth. Their ruin is a perfect metaphor (and omen) for the 1990's.
Me too. Just for info, here's a copy from the .pdf file of the Enron report, showing the typical boilerplate that is attached to deflect legal responsibility. (Any emphasis or paragraphs in the two statements are mine.)
Information Regarding Forward-Looking StatementsI too have a 401K, but it is under the control of Fidelity, and has no provision for me to place it all in my company's stock. I learned of that when my company was bought by another that only put the employee retirement funds in their own stock. Started at +$20/shr in 1979, and was down to less than $4/shr by the time we were resold in 1989. Now both the retirement and the 401K funds are segregated, and out of the control of the company. I do have some personal stock in the company, but if I lose it, my retirement funds are not at stake.This Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts contained in this document are forward-looking statements.
Forward-looking statements include, but are not limited to, statements relating to expansion opportunities for the Transportation Services, extension of Enron’s business model to new markets and industries, demand in the market for broadband services and high bandwidth applications, transaction volumes in the U.S. power market, commencement of commercial operations of new power plants and pipeline projects, completion of the sale of certain assets and growth in the demand for retail energy outsourcing solutions.
When used in this document, the words “anticipate,” “believe,” “estimate,” “expects,” “intend,” “may,” “project,” “plan,” “should” and similar expressions are intended to be among the statements that identify forward-looking statements. Although Enron believes that its expectations reflected in these forwardlooking statements are based on reasonable assumptions, such statements involve risks and uncertainties and no assurance can be given that actual results will be consistent with these forwardlooking statements.
Important factors that could cause actual results to differ materially from those in the forward-looking statements herein include success in marketing natural gas and power to wholesale customers; the ability of Enron to penetrate new retail natural gas and electricity markets (including energy outsourcing markets) in the United States and foreign jurisdictions; development of Enron’s broadband network and customer demand for intermediation and content services; the timing, extent and market effects of deregulation of energy markets in the United States, including the current energy market conditions in California, and in foreign jurisdictions; other regulatory developments in the United States and in foreign countries, including tax legislation and regulations; political developments in foreign countries; the extent of efforts by governments to privatize natural gas and electric utilities and other industries; the timing and extent of changes in commodity prices for crude oil, natural gas, electricity, foreign currency and interest rates; the extent of success in acquiring oil and gas properties and in discovering, developing, producing and marketing reserves; the timing and success of Enron’s efforts to develop international power, pipeline and other infrastructure projects; the effectiveness of Enron’s risk management activities; the ability of counterparties to financial risk management instruments and other contracts with Enron to meet their financial commitments to Enron; and Enron’s ability to access the capital markets and equity markets during the periods covered by the forward-looking statements, which will depend on general market conditions and Enron’s ability to maintain the credit ratings for its unsecured senior long-term debt obligations.
Management’s Responsibility for Financial Reporting
The following financial statements of Enron Corp. and subsidiaries (collectively, Enron) were prepared by management, which is responsible for their integrity and objectivity. The statements have been prepared in conformity with generally accepted accounting principles and necessarily include some amounts that are based on the best estimates and judgments of management.
The system of internal controls of Enron is designed to provide reasonable assurance as to the reliability of financial statements and the protection of assets from unauthorized acquisition, use or disposition. This system is augmented by written policies and guidelines and the careful selection and training of qualified personnel. It should be recognized, however, that there are inherent limitations in the effectiveness of any system of internal control.
Accordingly, even an effective internal control system can provide only reasonable assurance with respect to the preparation of reliable financial statements and safeguarding of assets. Further, because of changes in conditions, internal control system effectiveness may vary over time. Enron assessed its internal control system as of December 31, 2000, 1999 and 1998, relative to current standards of control criteria.
Based upon this assessment, management believes that its system of internal controls was adequate during the periods to provide reasonable assurance as to the reliability of financial statements and the protection of assets against unauthorized acquisition, use or disposition.
Arthur Andersen LLP was engaged to audit the financial statements of Enron and issue reports thereon. Their audits included developing an overall understanding of Enron’s accounting systems, procedures and internal controls and conducting tests and other auditing procedures sufficient to support their opinion on the financial statements. Arthur Andersen LLP was also engaged to examine and report on management’s assertion about the effectiveness of Enron’s system of internal controls. The Reports of Independent Public Accountants appear in this Annual Report.
The adequacy of Enron’s financial controls and the accounting principles employed in financial reporting are under the general oversight of the Audit Committee of Enron Corp.’s Board of Directors. No member of this committee is an officer or employee of Enron. The independent public accountants have direct access to the Audit Committee, and they meet with the committee from time to time, with and without financial management present, to discuss accounting, auditing and financial reporting matters.
If your company is doing the Enron shuffle, I suggest you get in touch with your Employee Benefits Office and find out how to force a change.
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