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 (47316)	1/31/2002 12:56:52 PM
From: stockman_scott	Read Replies (1) \| Respond to of 65232

Lays' assets still seem substantial By Chris Woodyard and Christine Dugas USA TODAY Wed. Jan 30 HOUSTON -- Linda Lay's tearful contention that she and her husband, former Enron CEO Kenneth Lay, are trying to keep from going broke wasn't winning sympathy Tuesday from shareholders' attorneys. ''It's apparent to everyone (Kenneth) Lay knew there were serious problems months ago,'' says attorney Bill Federman, whose firm has one of the many lawsuits against Lay and other Enron officers. An analysis of the Lays' holdings shows the value of stocks of companies in which Kenneth Lay has served as an officer or director alone had a market value of $10.9 million as of Tuesday, including remaining Enron shares. The high-powered couple sold 1.8 million shares of Enron stock, reaping more than $101 million, from 1999 through 2001, records show. The Lays own property in Aspen, Colo., Houston and Galveston areas valued in excess of $20 million. According to property records, most of it appears to be mortgage-free. While most of the couple's Colorado properties are on the market, Houston and Galveston real estate brokers say they haven't seen listings yet. In a segment on NBC's Today show, Linda Lay said, ''Virtually -- other than the home we live in -- everything we own is for sale.'' The financial figures don't include Kenneth Lay's salary leading up to his resignation from Enron last week or his income from outside investments. What's unknown is how much personal debt the Lays carry. Kenneth Lay borrowed heavily against his Enron holdings and repaid those loans with Enron stock, his attorney has said. ''There's nothing left,'' Linda Lay said of the family fortune in her Today segment. ''Everything we had was mostly in Enron stock.'' Linda Lay could not be reached for comment Tuesday. A woman who would not identify herself but said she was from the ''Lay Family Office'' politely declined comment. She said Linda Lay has done all the speaking in public about the family's problems that she will do for now. Likewise, Kenneth Lay's attorney Earl Silbert didn't respond to a request for an interview. Linda Lay's contention that the family is trying to stave off bankruptcy didn't ring true to attorneys for shareholders and employees who have filed lawsuits in the case. ''Certainly they are not bankrupt or are even close to being bankrupt,'' says Sean Jez, a Houston attorney. No one could have known Enron's financial condition, and prepared for it, better than Lay, they say. But, for now, there's little the attorneys can do. The bankruptcy court judge overseeing the Enron filing has yet to grant any freeze on the Lays' assets, already sought by attorneys in the cases. That could require a showing that the Lays have either tried to shelter assets or that they are actually doing so, neither of which has occurred. For now, the Lays appear to have amassed a tidy sum, at least on paper: * As of filings through Dec. 31, the most recent available, the Lays held stocks in eight companies he had served as either a director or officer, including Eli Lilly, Baker Hughes and his single largest holding, Compaq Computer. He had 340,724 shares of Compaq stock worth $3.8 million. His 2.9 million Enron shares were still worth $1.2 million. * The Lays live on a floor of Houston's super-luxury Huntingdon condominium high-rise. The floor below theirs is being offered for sale at $7.8 million. Texas is one of a handful of states that let debtors keep a primary residence in bankruptcy no matter how valuable it is. * Properties that the Lays are selling in Aspen include a five-bedroom, cabin-style home and a four-bedroom riverfront home. Each is being offered for $6.1 million. In addition to the two homes in Aspen, the Lays have a vacant lot that they have entered into a contract to sell. According to property records, the land is worth $2.1 million. However, the Lays are keeping a cottage in Aspen that is valued at $4.1 million, property records say.

To: Jim Willie CB who wrote (47316)	1/31/2002 2:00:34 PM
From: stockman_scott	Read Replies (1) \| Respond to of 65232

Do Conflicts of Interest Hinder Professional Judgment? This earnings game has led to a crisis within the accounting profession that could set a course for a more serious crisis of confidence for investors and ultimately the financial markets. The accountants are the scorekeepers of the financial numbers. Until recently, they have been above suspicion and shrouded by a veil of creditability and confidence. For decades, they have convinced investors, analysts and the government that the numbers they blessed were free from sin. Yet over the years, what began as small venial sins have now led to mortal sins. Today, what accountants sign off on can no longer be read with confidence. This situation is most visible with Enron and its auditors, Arthur Andersen. Arthur Andersen was also Waste Management and Sunbeam’s auditor. The Enron case is once again raising the long-standing debate of the decade of whether accountants are capable of policing themselves. Arthur Levitt, the former SEC Chairman, didn’t think so. He felt that consulting fees conflicted with an accounting firm’s ability to remain independent and objective. He wanted to separate the auditing side of the business from the consulting side of the practice. The accounting profession argued and lobbied against it. Now a new SEC Chairman, Harvey Pitt, must face the same problem. Pitt was an attorney before becoming Chairman of the SEC. In private practice, he spent much of his time defending large accounting firms. So, even here, there are questions of his objectivity. There are many individuals outside the industry, including Lynn Turner, a former chief accountant with the SEC, that feel the time is right for a new independent body, similar to the securities industry's National Association of Securities Dealers which works with the industry and the government in self-policing the securities industry. There is nothing like that within the accounting profession that has the teeth to enforce discipline. The accounting profession is against it, but many feel the profession is incapable of self-control. Concerns are mounting that accounting firms are no longer independent. Like Wall Street firms that depend on investment banking fees, accounting firms have come to rely more on consulting fees, which have surpassed audits for their revenues. When revenues depend on large consulting fees, the temptation to look the other way when improper bookkeeping is suspected becomes more difficult. A Crisis in Confidence All of this degredation of professional integrity is leading to a crisis in confidence for the financial markets. Investors have come to the realization that they can’t believe in anything that management tells them. They have also come to disbelieve in the numbers reported and signed off on by accountants in the financial reports. Confidence in analyst’s recommendations is also waning. Do you ever hear analysts recommend selling a stock? On Wall Street, everything is a buy because it is in its own self-interest to keep investors fully invested. The system is breaking down and in danger of imploding. It is not just an issue of complexity. The larger issue is a moral one. How do you stop the lying, cheating and stealing? The government has never been good at legislating morality. When it comes to character and integrity, these are spiritual issues that rest in the hearts of men. To the financial world, spiritual issues are best left in the hands of priests, pastors, rabbis and clerics. On the other hand, how do you make a complex world understandable? Financial transactions have become increasingly intricate as a result of globalization and floating exchange rates between currencies. Fiat money systems have always been unstable. The ability to print unlimited amounts of money out of nothing has always been a temptation of government. It has resulted in irreparable harm to the financial system. It is one of the mistakes of history that seems to repeat itself in every century. It is one of the larger immoralities of our current system and one I believe that is also breaking down. Just as there are concerns over who is policing the accountants, there is also concern over who is watching the government. Up to the present, that has been the role of the markets. In the end, it may be the markets that provide the final solution. But all of that is for the future. At the moment, we must deal with the present. We must learn to understand how complex and broken down the system has really become. financialsense.com