<<Is this what happened.....??>>
I don't know more than what Watkins wrote and to an outsider, its less than what would be necessary to fully understand.
As she described Condor deal, there is a sale by Enron to Condor of 800 mil of "merchant assets" (whatever those are). Reality appears to be that Condor was capitalized with a promise of 800 mil in Enron stock sometime in the future. Its not real clear just who ponied up the 800 mil in cash to fund the sale, but it looks like the net effect is to recognize the money coming in without recognizing a the associated future liability. The Raptor deals look more complicated but the net results look similar, an infusion of cash (in this case earnings) into Enron without really recognizing the future liability to deliver an equivalent value in ENE stock.
Actually, as Watkins describes it, the only partner at risk in these particular "partnerships" was Enron itself. I get the feeling they did this stuff to inflate their current numbers, which drives their stock higher, which in turn reduces the future dilution when they would have to pony up Enron shares. I doubt that the price of oil had much to do with this .... sounds more like summa cum laude slickery (i.e. fraud with a Harvard accent), done in by an unexpected steep decline in certain equity prices.
It should be noted that she identified by name two senior internal guys (McMahon and Baxter, I think it was Baxter that just put a gun to his head) who apparently tried mightily to do the right thing. And she lists 4 others who can be used to verify her facts. Looks like all those super Wall Street Analyst types don't get down to those levels, not to mention I don't know how many mutual funds that really study every business they take a position in. Ahhh the marketing we do is a wonder to behold.
The trouble we have expecting ethical behavior from corporate employees is that there is no outside path of expression, particularly when the infractions are interpretations of accounting rules. Take any of Watkins, Baxter, or McMahon. Rebuffed by senior management, where to next? The Board of Directors maybe? You want them to tell the board that the books are cooked, as Anderson signs off on the audit? Right! How about FASB or whoever it is that judges accountants? "Hey guys, our auditor is letting our management get away with cooking the books .... please help!!!" Uh-huh. The local DA maybe....what law was it you think has been violated here? Congress perhaps?...u no, the place where Enron slopped serious money into the sty. A journalist maybe? Sure, look how fast they have gotten to the heart of this thing since the shit hit the fan around October...anyone remember how well they did following the Whitewater transactions? Hey, their not exactly made for this. The path really should lead to the SEC, but it will take some legislation to do that. Its a lot to expect an employee to blow the whistle, which is the equivalent of suicide. How many people would hire a guy who ratted out his boss, his company? It takes enormous courage to do that...and not many will. True of both whistle blowers and folks that might hire them after the whistle blowing.
I note the various forecasts for a Seagate IPO with some amusement. Will this mean a return to cut throat drive pricing?? :o)
In this case they are going to have to do a lot more than those measly "pro forma" statements they are currently putting out.
Finding any good investments these days? WDC and MXTR still look dangerous to me, I don't (and never did) trust RDRT's numbers, and HTCH looks fully valued. Everone else has gone broke or private or merged. Quiet times in DDSDF :o)
Best Regards........Tom |
