Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (47156)	1/28/2002 5:17:16 PM
From: stockman_scott	Respond to of 65232

Chilling lessons at al-Qaida U. msnbc.com Remains of training camp show how Sept. 11 attacks were studied Notebooks filled with the teachings of al-Qaida instructors are scattered around a training camp in southern Afghanistan. By Preston Mendenhall © MSNBC ROD PARA MOUNTAINS, Afghanistan, Jan. 27 — Within weeks of the Sept. 11 attacks on the United States, al-Qaida’s leaders in this remote region of Afghanistan were showing videos of planes hitting the World Trade Center, heralding the success of Osama bin Laden’s terror network and seeking to inspire future radicals to stage global attacks, documents uncovered by MSNBC.com show. THE DOCUMENTS, unearthed this week in the rubble of a large al-Qaida training camp in southern Afghanistan, portray a chillingly efficient organization that boasted to new terrorist recruits of its involvement in the Sept. 11 attacks. The al-Qaida camp in the Rod Para Mountains, known as Meivand by U.S. intelligence officials because of its proximity to a village of the same name, lies 30 miles west of Kandahar and a one-hour drive over unmarked desert tracks that frequently disappear with no warning. Meivand, which was destroyed on Jan. 1 by U.S. warplanes, was one of al-Qaida’s largest training camps in Afghanistan, with infrastructure to support up to 700 fighters. Above ground, the camp consisted of more than 50 buildings, including a hospital. The facilities extended into a large cave complex used for storage and housing. Though reduced to rubble, there is evidence of a running water supply and underground wiring for electricity. AL-QAIDA UNIVERSITY Near a faded metal sign that reads “school” in Arabic, MSNBC.com discovered several notebooks filled with copious notes of apparent terrorism students, which demonstrate how al-Qaida quickly used the global impact of Sept. 11 to inspire a future generation of fighters. The lessons focused on the terror attacks, but were interspersed with instruction on firing missiles, laying and mapping mines and tactical fighting in the mountains. Some lessons were dedicated to learning al-Qaida’s code, and notebooks were filled with keys to the terror organization’s secret language. The students listed their teachers’ names at the beginning of each lesson. At least six were mentioned in the translation of three notebooks, all written in Arabic. The names of the students were not apparent. A teacher called Maqbal sought to prove al-Qaida’s association with the Sept. 11 terror attacks by showing a video of the two commercial airliners hitting the World Trade Center towers. “You may have seen it on the Internet, heard about it on the radio or as I am showing you now on television,” a student quoted Maqbal as saying. Another teacher, Ali Hadif, told the students to expect more activities from al-Qaida. “In the near future, you may see some military areas (hit) and other targets as well,” Hadif is quoted as saying. AL-QAIDA’S EFFICIENCY The ability to power televisions and video recorders in one of the most remote regions on earth, where the desert meets the rocky, inhospitable 5,000-foot high Rod Para mountain range, demonstrates al-Qaida’s easy access to funding and freedom to operate under the Taliban government, which banned television. Afghan villagers scavenging for scrap metal at Meivand said that “foreigners” — a general term Afghans use to describe al-Qaida fighters from countries like Saudi Arabia, Yemen, Algeria and Chechnya — were frequently on the roads leading to the camp. Within days of the U.S. bombing of Meivand on Jan. 1, American special forces arrived with pickup trucks to cart away documents and evidence of al-Qaida’s presence, the villagers said. Ahead of MSNBC.com’s Friday visit, another group of special forces was seen departing the camp. Due to the confidential nature of their mission in Afghanistan, special forces refuse to speak to reporters. Besides the remaining al-Qaida schoolbooks, numerous mortar casings and surface-to-air missile launchers littered the barren landscape of the camp. LARGER ATTACK PLANNED? The boasting by the al-Qaida teachers permeated the notebooks filled by recruits at the camp. According to the students’ notes, the teachers also provided information about the attacks. One teacher, Imam Ghurfa, spoke about the planning of the attacks. He said that the airplanes that crashed in New York and Washington were part of a larger conspiracy to hijack 25 airliners around the world and to turn them into weapons of terror. Ghurfa said that hijackings were planned in “Germany, Saudi Arabia, France, Turkey, Lebanon, Sweden, Iran, Burma, Pakistan, Philippines, Thailand, Indonesia, UAE, Malaysia, Sudan, Algeria, etc.” U.S. officials analyzing al-Qaida evidence gathered in Afghanistan have said previously that they believe bin Laden’s organization had planned other similar attacks. There were indications in the notebooks, however, that the instructors at the camp were not privy to full information about the attacks, including the number of casualties. Ghurfa tells his students that 51 people died in the “attack on tijarti mahal” — Arabic for World Trade Center. Nearly 3,000 perished in both attacks on New York City. The teachers at the camp appeared to go to great lengths the to convince the students that al-Qaida was behind the Sept. 11 attacks. Instructor Hadif told his class that “if you need further confirmation of (our success), you can write or call Ali Salah for confirmation.” The notebooks do not make immediately clear the identification of Ali Salah. In one notebook a student lists the names of the teachers who appear to speak in succession and back up each other’s statements about Sept. 11. “Mr. Al-Shammali, Shoaib Maqdad, Abu Hamza al-Saria, Abu Jaffer al-Taifia all confirm the statements,” the student writes. “God willing, you will see more events like this,” a student quotes teacher Hadif as saying. U.S. military officials in Kandahar declined to comment on the books found by MSNBC.com, citing security procedures during the ongoing investigation into al-Qaida. One official who spoke on condition of anonymity said that similar al-Qaida school materials had been found in several locations in Afghanistan and were being analyzed by U.S. intelligence experts. _______________________________ MSNBC.com’s Preston Mendenhall is on assignment in Afghanistan.

To: Jim Willie CB who wrote (47156)	1/28/2002 5:48:17 PM
From: stockman_scott	Respond to of 65232

Enron Enabled by Clinton SEC newsmax.com

To: Jim Willie CB who wrote (47156)	1/28/2002 5:54:54 PM
From: BirdDog	Read Replies (2) \| Respond to of 65232

does Linda Lay know what an offshore bank is? / jw I didn't see the interview. I guess she doesn't know that her husband sold Enron stock last year either. Or that he knew anything about forcing employees to hold their crashing Enron stock. Sure...what a Saint... BirdDog@Disgusting.com

To: Jim Willie CB who wrote (47156)	1/28/2002 6:05:11 PM
From: stockman_scott	Respond to of 65232

Special-purpose vehicles used to control market, credit rating HoustonChronicle.com -- houstonchronicle.com Section: Business Jan. 28, 2002, 6:31AM By DAN FELDSTEIN As accountants, stockbrokers and others study Enron's collapse, they focus on the company's now-infamous "special-purpose vehicles" -- independent companies that propped up Enron's income and hid its debt. They want to know whether the vehicles' goosing of Enron's financial statements was a side effect or their sole purpose. One good clue is the list. In the last year at Enron Global Finance group, managers were sometimes handed a list of Enron assets and instructed to go out and sell some to the vehicles, said an employee with direct knowledge of the procedure. "Knowing what I do now, I know that was used directly to manipulate the (stock) market," the employee said. A manager would pick something, from a plant to stock to a piece of a start-up company. Then he would walk the deal through a team of internal lawyers and auditors. The bigger the "sale," the bigger his bonus. What actually happened was that a bank or other investor lent money to the newly created company to finance the purchase. The new company, in turn, paid the money to Enron. Why didn't Enron just get a loan itself without going through a middleman? Because the loan now belonged to the new company, not Enron, and thus didn't count as a debt on Enron's financial statement. Instead, it counted as income to Enron when the new company passed on the proceeds. Less debt and more income do wonders for a quarterly report. The procedure assured Enron would keep its high credit rating, saving big bucks, and would keep the stock price up. After a while, the employee said, employees joked that there would be no assets left to deal. "Every associate on up knew. We used to joke about, `I want this thing to stand up until I get my money and go,' " he said. Two former Enron employees who worked on the special-purpose vehicles spoke at length to the Chronicle about what they did for a living. One met with a reporter in the offices of a Rice University accounting professor. The employees, graduates of top schools, spoke on the condition that they not be identified. Both said there were many uses for the vehicles that they considered legitimate, such as bringing in outside partners to share the risks of a particular venture. But there was little question, especially toward the end in the finance group, that many had no real "business purpose" other than improving financial appearances. "They are created merely to make the income statement look better. An average person would say there's something wrong," said Michael Granof, a University of Texas accounting professor. The employee with direct knowledge of the process didn't disagree. It's just sort of what they did, he said, and he never realized the extent of the company's debt. The anatomy of the deal was simple, he said. Say the asset was 100 shares of IBM stock. Enron would divide each share into two parts, one called a "control interest" and one called an "economic interest." Then it would sell the economic interest to a newly created special-purpose vehicle. The asset was rarely as simple as 100 shares of another company's stock. So Enron had to put a value on it. Because there wasn't really an outside buyer, it decided the price itself and had that number blessed by its auditor, Arthur Andersen. The deal was placed with a bank, insurance company or other major lender, which put up 97 percent of the money. Sometimes the promise of Enron stock would be put up to guarantee the loan, as a sort of collateral, although Enron stockholders were never told of the risk that their shares could be diluted if such new shares had to be issued, the employee said. To qualify as "independent" from Enron for accounting purposes, an SPV had to be owned by someone else. So an outside entity would be brought in to make the required investment, which was just 3 percent of the SPV's total start-up cash. In some cases, Enron is alleged to have lent that money to the outside equity partners, though the employee said he had no direct knowledge of that. Enron no longer owned the economic interest in the asset, but it did own control over it. In the sales contract with the vehicle, Enron promised always to act in the interest of the SPV. Lawyers and auditors said all this was OK. As the asset made money for the SPV -- if it did, and many didn't -- it made principal and interest payments to the lender and issued dividends to the outside equity partners, just like in a normal company. So what was left for Enron? Unlike a normal company, the yield to the equity partners was capped. If the partner's yield cap was 15 percent and the asset made 20 percent, Enron got 5 percent. Most important, Enron got to report the proceeds of the sale of the asset as earnings. It had to repay the loan, of course, but the debt didn't show up on Enron's financial statements. A basic question is why Enron didn't just sell the assets normally to raise money. The answer is control, the employee said. If the asset were a plant, perhaps Enron would give itself the operating and maintenance contract. If it were private shares of another company, maybe Enron was technically forbidden to sell, or it could make another deal later. By keeping its visible debt low, Enron retained a higher credit rating and thus paid a lower interest rate on money it borrowed and money borrowed by the SPVs, the employee said. When Enron was forced to restate its earnings last year to include some of that debt, and as debt from other sources also surfaced, Moody's Investor Services downgraded Enron's bond rating. With a trading company such as Enron, where the ability to borrow vast sums at favorable interest rates is key, that was fatal. Bankruptcy quickly followed. Such accounting practices were a factor in the company's fall, but the real problem was that many of Enron's recent major investments -- broadband and water divisions, New Power and an Indian power plant -- did not work out, said the employee and Rice University accounting professor Bala Dharan, who also questioned the employee. "Investors don't like to hear you say, `Oh, I was wrong.' So you start having a yard sale to boost CFO (cash flow from operations) and net income," the employee said. The second employee said many SPVs were easier to justify. Sometimes they were created to bring two other parties together, with Enron merely providing the expertise. Both said investors were happy to get involved in the deals. But in recent years, the first employee said, their use became more questionable. "Is any of that illegal? No, but it's shady. The investor couldn't truly know what Enron owned or what Enron owed. People don't pay attention to the footnotes," he said. And the footnotes in Enron's required financial statements also weren't much help. Granof, an author of accounting textbooks with an MBA and doctorate, said he found them "unintelligible." "That was conscious. No two ways about it," the employee responded. Granof said he still couldn't quite understand why SPVs are considered legitimate. While expressing disappointment with Andersen for "deceiving" investors while meeting the letter of the law, he said, "there but for the grace of God go four other major accounting firms" of the Big Five that could have been similarly ensnared in the Enron fiasco. "Something is wrong with the rules," he said. Copyright 2002 Houston Chronicle

To: Jim Willie CB who wrote (47156)	1/29/2002 12:02:11 AM
From: stockman_scott	Read Replies (1) \| Respond to of 65232

Convictions for Enron Execs Would Be Hard Won January 28, 2002 The LA Times By ERIC LICHTBLAU and DAVID G. SAVAGE WASHINGTON -- Although Enron Corp. may have destroyed thousands of documents, misled shareholders and left the retirement accounts of many of its employees nearly worthless, legal experts say the prospect of serious criminal convictions of corporate executives is far from certain. Despite some recent success in corporate fraud cases, prosecutors must overcome daunting hurdles, including changes in federal regulation of insider trading, the vagaries of securities law and the sometimes conflicting agenda of congressional investigators, according to law professors, attorneys who specialize in white-collar crime and law enforcement officials. Evidence that Enron destroyed documents related to the company's meteoric collapse offers the most compelling prospect for a criminal case, suggesting possible obstruction of justice charges, legal experts and law enforcement officials agree. But it could take years for authorities to build more serious charges of conspiracy, insider trading or securities fraud against Enron's higher-ups, and even then it may prove tough to return convictions, experts predicted. "Financial fraud cases are very hard to prove. [Executives] can say they made bad business judgments, but you have to prove unanimously and beyond a reasonable doubt that they deliberately intended to deceive" the public and their shareholders about the company's finances, said Columbia University law professor Jeffrey N. Gordon. Even as FBI investigators began descending on Enron's Houston headquarters last week to probe possible crimes, they probably will confront several legal and political realities that could work to Enron's advantage. Among the potential roadblocks: o The entire U.S. attorney's office in Houston has pulled out of the investigation because too many prosecutors are related to Enron employees, forcing the Justice Department to create a special task force that must start from scratch in probing the energy company's labyrinth of partnerships. o Democrats already have called for an independent counsel to probe Enron's well-documented political connections to the Bush administration, but the demise of the outside counsel law in 1999 has muddied the process for determining how and when to appoint an outside counsel. o A recent rule change at the Securities and Exchange Commission, authorizing prearranged sell-offs of executives' stock, gives added insulation to allegations of insider trading and could provide former Enron Chairman and Chief Executive Kenneth L. Lay and other executives with a built-in defense. o And Congress' zeal to conduct high-profile hearings on Enron could complicate the use of testimony from witnesses who become part of the criminal probe, as happened in the Iran-Contra scandal. In that case, charges against Oliver L. North and John M. Poindexter were thrown out in 1990 because their prosecutions were deemed tainted by immunized congressional testimony. Coordinating Immunity Offers Justice Department officials have begun discussions with Congress on how to coordinate immunity offers that Congress might make to witnesses, such as David B. Duncan, the partner at accounting firm Andersen who oversaw the Enron account. Duncan, who since has been fired, invoked the 5th Amendment last week before a congressional committee rather than answer questions about the destruction of Enron documents. The department hopes to blunt the effect that any congressional immunity deals would have on future criminal cases. "We never like to see potential witnesses paraded before Congress, but that's always a danger in a case like this," acknowledged a law enforcement official who asked not to be identified. Enron spokesman Eric Thode said it would be premature to discuss any criminal allegations, noting: "We'll just let the investigations take their course, and, of course, we're cooperating fully." Despite the obstacles that prosecutors face, authorities are buoyed by the recent progress they have made in several other high-profile financial fraud cases. In Pennsylvania, the former chief financial officer of apparel maker Leslie Fay Cos. was sentenced last week to nine years in prison for inflating the company's earnings by $81 million. The scheme forced the company into Chapter 11 bankruptcy protection for four years. In San Francisco, former executives at health services giant McKesson Corp., are facing civil and criminal charges for allegedly concocting bogus revenue figures. The losses for the company's shareholders: $9 billion. And in New Jersey, in a case with even more telltale similarities to Enron, the former chairman and vice chairman of Cendant Corp.--a franchiser whose brands include Howard Johnson, Avis and Century 21--are awaiting trial on charges of conspiracy and securities fraud. Authorities allege that Cendant, in perhaps the longest-running scheme of its kind, was "cooking the books" for more than a decade, with former Chairman Walter A. Forbes reaping $30 million as the company's stock soared amid misleading financial reports. Once irregularities in the company's accounting were exposed in 1998, the value of Cendant's stock plunged $14 billion in a single day. Cendant and accounting giant Ernst & Young, accused of whitewashing the irregularities, agreed last year to pay a near-record total of $3.2 billion to shareholders who claimed they were defrauded by the scheme. But Forbes and former Vice Chairman E. Kirk Shelton, who have declared their innocence in the affair, are not expected to go to trial until late this year, about 4½ years after the scandal first broke. That arduous legal path is testament to the difficulty of bringing such complex financial fraud cases, law enforcement officials say. "It's a brutally hard case," said one official close to the Cendant prosecution. "It takes a special accounting knowledge, it's an incredible paper trail, and you have to have cooperators. We had [three] people pleading guilty, all the ones just below the top. . . . Without them, it would be a much more formidable task" to prosecute the company's top executives. Reports of widespread shredding of Enron documents give authorities substantial leverage to try to persuade witnesses to cooperate, experts said. "As a prosecutor, you are looking for evidence that the senior people had knowledge of the scheme," said San Francisco attorney Stephen Meagher, a former prosecutor of white-collar crime cases. "And typically, when you find documents were being destroyed, that answers the question. That means certain people were aware of problems and they were determined to destroy the evidence. It's the prosecutor's dream come true because it shifts the burden to the other side. They have to explain what they were trying to hide." Duncan, the Andersen auditor, has spoken with federal investigators at least twice, a sign that he may be willing to cooperate in exchange for a plea deal. It remains to be seen whether Duncan or someone at Enron turns out to be the star witness prosecutors are seeking. But Columbia Law School professor John C. Coffee, a securities specialist, noted that "historically in white-collar crime cases, you have a trail of falling dominoes, and you start low and offer leniency to cooperate and get evidence against the higher-ups. I think you're going to get a whole succession of people cutting deals here." The danger, however, is that such witnesses have a potential credibility problem: If they admit to destroying documents, will a jury believe their testimony fingering higher executives? "Those aren't necessarily the most credible witnesses on the stand," said Paul Fishman, a former Justice Department official who specializes in white-collar defense. Sending a Strong Message Beyond the obstruction issue, law enforcement officials say possible charges against executives at Enron and Andersen could include securities fraud, insider trading, wire and mail fraud, conspiracy and even racketeering. The case, if it can be proved, would hinge on a simple premise: that executives fooled the public and its shareholders into thinking the company was more profitable than it was--and enriched themselves in the process as the company's stock went up in value. The corporation itself faces possible indictment and criminal penalties, but legal observers said anything short of indicting top Enron executives could be seen as a failure in the eyes of the public. "Indicting a bankrupt company achieves next to nothing," Coffee said. Indeed, Duke University law professor James D. Cox said indicting Enron executives would send a strong message. "If they are serious about eliminating financial fraud, this is the battle the government needs to take on," he said. "This looks to be a case of purposeful manipulation of earnings and purposeful concealment of debt. They created a truly false facade." Class-action lawsuits against Enron maintain that Lay made more than $100 million from stock sales before the company's value plummeted. But Lay's lawyers have maintained that many sales were from prearranged sell-offs, which could give him insulation under a rule adopted by the SEC in 2000 regarding what constitutes insider trading. The so-called 10b5-1 rule holds that even if insiders possess sensitive corporate information, they can legally buy and sell company stock so long as it is part of a prearranged trading plan. The SEC and various courts have wrangled over how the new rule should be interpreted, and allegations of insider trading against Lay and other Enron executives could prove "a key test," said Jill Fisch, a corporate and securities law expert at Fordham Law School. Fisch compared the Enron probe to the financial scandal that led to the conviction of former junk bond kingpin Michael Milken and other Wall Street traders in the 1980s. As in the Milken case, Fisch said, she believes Enron is "an impure case on a lot of legal questions." But, she added, the public backlash--fueled by headlines about document shredding--may be enough to drive the investigation in the absence of clear law. latimes.com

To: Jim Willie CB who wrote (47156)	1/29/2002 8:28:16 AM
From: stockman_scott	Respond to of 65232

Ex-Analyst at BNP Paribas Warned His Clients in August About Enron By REBECCA SMITH January 29, 2002 THE WALL STREET JOURNAL Financial analysts who tracked Enron Corp. have taken a pounding for being company "shills" and for failing to concede they didn't fully understand the Houston energy-trading concern's complex finances. Then there is Daniel Scotto. The bond analyst in New York for BNP Paribas says he was forced out of the French securities firm because he told his clients in August that Enron securities "should be sold at all costs and sold now." That warning came about two weeks after Enron Chief Executive Jeffrey Skilling suddenly quit and a couple of months before Enron began the plunge that ended in federal bankruptcy court on Dec. 2. Mr. Scotto, 49 years old, issued a research report on Aug. 23 to his clients that lowered his firm's recommendation on Enron to "neutral" from "buy." He pushed that designation even further by suggesting Enron might be a "source of funds." Translation: Consider selling Enron securities to raise money for other investments. If he had gone with a "sell" rating, he says, "I'd have been taken out to the guillotine that very day." BNP Paribas declined to elaborate on the reasons for Mr. Scotto's departure. A spokesman says the move "was completely unrelated to any research he wrote on any company, including Enron." Spokesman Mark Wisniewski, reading from a statement, added that the securities firm "is committed to the integrity of its research product" and said the securities firm was surprised by Mr. Scotto's allegations, as "he has not raised this issue with us." Mr. Scotto's experience highlights one of the oldest pressure points on Wall Street involving financial analysts, who traditionally act as a filter between investors and the financial markets. During the past decade, Wall Street securities firms increasingly have pushed their research analysts to actively trumpet stocks and bonds, not impartially analyze them. The side benefits to the securities firms can be enormous: If an analyst touts a company's securities, the securities firm stands a greater chance at becoming an adviser to that company, and garnering the fees that will follow. Nowadays, analysts can be stars, receiving bonuses of several hundred thousand dollars for helping their firm to win big underwriting deals. Bash the securities of a corporate client, though, and the securities firm could be shut out of lucrative deals. Enron issued billions of dollars worth of securities in recent years, generating huge fees for its financial advisers and bankers. Some analysts say Enron wasn't hesitant to complain about research conclusions it didn't like. Some of these people say they now are under orders not to talk about Enron, in view of its stunning collapse. For his part, Mr. Scotto says Paribas didn't want him to say negative things about Enron because the securities firm had an investment-banking relationship with the energy trader. Still, Mr. Scotto says he followed up his August written report with an investor conference call -- recorded because it took place from the firm's trading floor -- that he says was much blunter. He says he decided to flatly advise his clients to dump Enron securities because Enron's profit margins "were flattening out and starting to decline. This wasn't a company with hard assets; it was built on paper and highly leveraged." A few days after the brouhaha, Mr. Scotto says he was told "you're demoted, and we don't think it was a good recommendation or a reasonable one." After the flap and reprimand, Mr. Scotto says, he was put on family leave, at full pay, for 120 days. He says he checked in frequently but was told he wasn't needed back at work and to take time to "cool off." He then received a termination letter dated Dec. 5. That letter said, in part, that due to a lack of documentation "justifying your continued absence from work, as well as the indeterminate nature of your extended leave, BNP Paribas is left with no choice but to terminate your employment effective December 5, 2001." Mr. Scotto says he is looking at other options and has no intention of returning to Wall Street. He once worked at New York investment bank Bear Stearns Cos. and the bond-rating division of Standard & Poor's Corp. He says he is considering writing a whistleblower-type book on how Wall Street "really works." He says he wants investors to understand that companies like Enron won't tolerate dissension. "You couldn't ask hard questions, because it was viewed as offensive," he says. Consider an April conference call Enron had with analysts. Mr. Skilling, then Enron's chief executive, called a questioner -- upset because the energy concern's balance sheet wasn't available when the quarterly earnings were released -- a vulgar term. In another call that followed the release of Enron's disastrous third-quarter financial results in October, Enron's former chairman, Kenneth Lay, cut off an analyst widely regarded as "short" on the stock, meaning the analyst's firm was betting on a continued decline in Enron's stock. Mr. Lay moved on to others with more sympathetic questions. "All I can say," Mr. Scotto says, "is it's been a long 30 years on Wall Street for me." He adds that the motto for the Street should be: "Don't ask, don't tell." __________________________ Write to Rebecca Smith at rebecca.smith@wsj.com