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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This is great! Thanks for the tip; I've always wondered where to find old quotes.
Looking at the bump in the chart above, I have to ask why did the price go up in October and the volume down.
I had no point or hidden agenda ,just the simple question WHY!
What is so hard to understand about that.
I wanted someone who keeps up with the marker to answer my question, which is why did Enron's stock price rise in October?
Can you get your mind around the idea that I was really asking a question and nothing else.
It was in a slide for months and started a rally in October.
I dunno bert, I'm not someone who "keeps up with the market" who can answer your question. I'm simply somebody that figured out how to post a very illustritive chart to FR. But as long as your asking, what "drove demand" during this 00-01 period? I'm not seeing a lot of volume.....
You're welcome. Try stockcharts.com for some other good free tech analysis tools, data, and charts.
He's not trying to prove a point. He's asking questions because he doesn't know the answers. Try dropping your defensive posture and just read what's written. Sheez. :-p
< Sigh >
True, but maybe people weren't holding the stock voluntarily. I have lost track of the lock-out timeline.
Which is my question, why the rise then?
Last of October/first of November. Doesn't look like much of a rally during that period. The bump in the stock price could be from some false hope of additional financing. Enron was in the news a lot and traders responded to just about every comment.
Thank you.
I knew Freepers would have the answer.
A stock can go up on light volume because there are EXTREMELY few motivated sellers. So, a few buyers make the stock move higher, because every ask side order is wiped out quickly without any depth.
Use a mirror for the opposite. Light volume driving a stock down is a simple issue of very few willing new buyers.
Really, the whole thing is very rubik's cube (sp)unless you're a professional. A good reason why I cringe when I hear about people that are going to do it on their own. Granted, some of the other pro's I know, make me cringe too!
"To: katherineisgreat
Oh man! People are gonna be making jokes about this for weeks, probably longer. At least it happened in private. Didn't his dad once throw-up or pass out (or something) at some overseas state dinner? How embarrassing.
171 posted on 1/13/02 11:46 PM Central by Sandy
That is true in other business too.
I have to wonder at the faith people put in CEOs who move from widgets to thingabobs with no real knowledge of the thingabob industry.
A CEO goes to meetings, funerals, and poses for cameras. Only a small business CEO actually ever DOES anything. I can barely stand to read my firms memo's, full of fluff words and hype.
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