Report: Enron Disguised Debt as Trades
Feb 16 11:21pm ET
NEW YORK (Reuters) - Collapsed energy giant Enron Corp . disguised loans as financial hedges to hide its debts and mask its deteriorating financial condition, the New York Times reported on Sunday quoting accountants and industry analysts.
In addition to hiding debt in partnerships, Enron listed loans from Wall Street firms like J.P. Morgan Chase, Citigroup and Credit Suisse First Boston as financial hedges on its balance sheets, the Times reported.
Records from Arthur Andersen, Enron's auditor, and sources close to the transactions show that Enron received $3.9 billion worth of these loans from 1992 to 2001, the Times said. At least $2.5 billion came in the three years before Enron filed for bankruptcy protection late last year.
Citigroup lent Enron $2.4 billion between late 1999 and early 2001 to be repaid over five years, people close to the deals told the Times.
Credit Suisse First Boston lent Enron $150 million to be paid over two years, the Times said. Credit Suisse listed the money as a loan, but Enron posted it as "assets from price risk management."
Enron had at least another $8 billion in long- and short-term debt, which it had disclosed, but the additional loans would have tipped credit rating agencies, analysts and investors off to Enron's troubles.
Analysts who questioned what appeared to be a surge in hedging activity would be reassured that the numbers did not reflect new financing, the Times said.
"They'd always tell us, 'Don't worry about that; it's just hedging activity,"' said John E. Olson, research director at Sanders Morris Harris.
The Times said that Enron did not respond to its requests for information for the story.
While Enron's practices were allowed under existing recommendations of the Financial Accounting Standards Board, which governs U.S. accounting, there were plans in the works in September to require that such financing be listed as loans, Timothy Lucas, director of research and technical activities at the board, told the Times.
Enron's stock hit an all-time high of $90.56 in August 2000. But on Dec. 2, 2001, Enron filed for Chapter 11 bankruptcy, the biggest in U.S. history.
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