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Strategies & Market Trends : Waiting for the big Kahuna
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To: William H Huebl who wrote (56710)2/8/2002 7:37:00 PM
From: Skeet Shipman  Read Replies (1) of 94695
 
ENRON EXPLAINED
In case you were wondering how Enron came into so much trouble, here is an explanation reputedly given by a Texas Ag professor to explain it in terms his students could understand.

Regulated Capitalism
You have two cows. You sell one and buy a bull. Your herd multiplies, and the economy grows. You sell milk to the city and have a business with income.

Enron Deregulation Capitalism
You have two cows. You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt/equity swap with an associated general offer so that you get all four cows back, with a tax exemption for five cows. The milk rights of the six cows are transferred via an intermediary to a Cayman Island company secretly owned by your CFO who sells the rights to all seven cows back to your listed company. The annual report says the company owns eight cows, with an option on six more. The report does not note that an option for one cow each has been given to the Bush and Cheyney families and sides of beef promised to the chair of every congressional committee who would accept the gift.

Now do you see why a company with $62 billion in assets is declaring bankruptcy? And how so much milk was spilt getting to the city.
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