[hoosierboy]

telling the congressional inquiry that "prepay" transactions were legitimate financing structures used widely on Wall Street

Can someone tell me what a prepay transaction is? Sorry for my ignorance.

[MoscowMike]

Howdy

You know, its when coporations run like government does. The government loots your social security fund, spends the money on butt floss, then claims its IOU is an asset. This is your government running like a top.

Similarly, Citibank floats Enron a loan to cover their exposed corrupt clinton-screwed back sides, then claims the loan is an Enron asset, not a debt. This is corporate America running a moon sized fraud.

[TennesseeProfessor]

Can someone tell me what a prepay transaction is? Sorry for my ignorance

Pretty simple actually. Citibank gives Enron $500 million, and has a signed agreement that in a year Enron will give them $650 million worth of oil and natural gas. Enron then tells everyone "Look! We've sold $500 million of oil and are making lots of profit!". That's a prepay transaction.

Unfortunately for Citibank, it is not only blinding obvious that there is no oil pipline from Enron to Citibank, but there is also a memo in which an executive lets the cat out of the bag -- Enron will pay cash rather than oil. So this "Income" is actually a loan.

[Guillermo]

Simply, Enron was loaned money, but it wasn't called a loan, it was "prepay" for energy to be delivered in the future.

The reason this is a scam on Enrons end is that the interest payments aren't shown as an expense.

Imagine if you were a carpenter, and I gave you $10,000 for work you were going to do on my house in the future. But, both you and I know that you're not going to do any work, but instead pay it back. On your balance sheet it is shown as revenue and not an expense.

I think I got it correct ;)