This was in a Thread But I thought many in Houston would be interested in this: I am a financial analyst and the head of a Houston financial company and have spoken to Jeff Skilling and Andrew Fastow many times and attended analyst meetings with less than 20 people to discuss earnings, growth outlook and other business prospects and this is my opinion about the matter. First of all, I don't believe Bush and others did anything wrong. If almost all senior management at Enron did not know about the "fuzzy" accounting and partnerships used to funnel debt off their balance sheet, do you honestly believe Bush ( aka the accounting/financial genius ) knew what was going on? I myself relinquished a position in Enron in March and April of this year because of dificulty in understanding the web of financial mazes that comprise not only its debt, but how it counts future earnings in today's receivables. Also disheartening was their arrogance and vision that the broadband network was worth " OVER 36 BILLION DOLLARS " - Jeff Skilling. I see Skilling and Fastow as the main architects behind the scheme's to hide debt to maintain a stronger balance sheet to have a subsequent higher rating by Moody's, Standard and Poor's etc of their debt. Because much of their debt was tied to their rating and their liquidity, they manifested these partnerships to fuel Enron's growth by assuming the losses in India and the Broadband division would turn around. Simply stated, Ken Lay, I don't feel had the financial savvy to implement this scheme. I feel he found out later on and tried to rectify the situation, but was more guilty of not coming public earlier. Though he is the CEO and it is his responsibility to know what is happening, I feel he was in the dark for quite some time and when he realized what was happening had to make a decision much like the Captian of the Titanic to try to steer to the side essentially ripping the company apart. Because the strategy over the last decade has been to become a liquid, service-oriented company with little or no physical assets to decrease efficiency, this also led Enron to having few assets that could be sold off as a base to which Enron could not plunge below. With Enron being the leader in the new deregulated energy markets, "THE" pioneer in the field, and 7th in the US in Revenues produced in 2000 (allegedly) of course the Energy Secretary and others will take personal calls from them. They were consulted when deciding Energy policy simply because they were the best. They created a model of efficiency that has been duplicated and will be a standard for deregulation for decades to come. Enron, Lay and others gave significant monetary donations to anyone from Texas, because of their roots and very similar to many large corporations. I see this as a Bi-partisan witch hunt more than anything. Many prominent people in Texas served on the board of these companies and especially with Bush's family background in the Texas/Houston Oil families. I think more questionable is the Democrats receiving funds from China and military communication equipment going into the wrong hands....
F. D., do you believe as I do that this shows the horrible problem with corporations and lobbying groups of all types funding our elections. China is a problem, so is Israel, and so is Enron. As the saying goes we get "the best politicians that money can buy". Aside Ifrom the urgent need for campaign finance reform think it shows the limitations of an overly ideological approach to a modern economy. Extreme free market ideology can lead to problems. Some things are better left to the government. Do you agree? We are seeing the abuse of the private prison industry where for instance the executives and even the priosn guard unions lobby for increasingly long sentences and three strikes and you're out in order to boost profits. Same is true with health care, social security and other areas of the economy. The idea of the rugged rish taking entrepeneur just doesn't make sense in some areas of the economy. To me most thinking pragmatic people think that some things are best done by the government and some by private industry. A further complication is that things might be best done by private industry but in the form of a heavily regulated monopoly.
Thanks for the "insider's view" - I am finding the Enron collapse as a very interesting case study to follow.......but are you sure you aren't being too kind to Ken Lay? He's no idiot.......maybe he wasn't implementing the complicated schemes, but he most certainly would have been the one approving them. Everything you else you said seems right on the money IMHO.
Glynch: Actually I am a huge proponent of a free market economy and making the government have less and less to mess up. Simply stated, Energy deregulation is better for you and me. In the future energy prices will come down because of the increased competition and service will rise as well. People had the same idea about the inability to deregulate telephone service, yet that has worked out extremely well and i'm sure anyone can remember how bad the service was 10 years ago vs. that of today. Competition breeds excellence and innovation. Enron's problems did not come about because of the deregulation of the energy markets, it came from non-core assets such as the broadband network and the operations in India. If they had stuck to Energy and other commodity trading (broadband being the exception), they probably would not have accumulated so much debt that had to be hidden so triggers would not be set off when the bond rating was downgraded because of high debt to equity. Cuttino: I truly feel Ken Lay is Guilty of many things, and as the CEO it is his job to know what is going on and be responsible for the actions of his protege: Jeff Skilling...and Skillings protege: Andrew Fastow. But simply stated, I still cannot believe Lay has the financial prowess to pull something like this off. Skilling was the architect of the Broadband network and Fastow, the financial whiz that hid the debt through aptly named Star Wars named partnerships like JEDI. I believe he found out what was happening a little to late and tried to play cover up to internally rectify the situation, but the snowball effect became too great.
<I>http://www.chron.com/cs/CDA/story.hts/business/1216603</I> As of yet, we don't know the truth on Enron & Bush, because the Administration is refusing to release the documents on Cheney's six meetings with them. Congress is considering suing Bush to force them to release the files. This should get fun.
I agree with F.D. that Ken Lay is guilty of many things but probably does not have the capacity to plan something like this, while Fastow and Skilling do. However, if Enron hopes to survive at all, I feel that it is imperative that Ken Lay resign as CEO immediately.
In December, Ken Lay had a Golden Parachute he could have excercised and walked away with close to $50 million dollars but chose not to. Of course he could know that creditors and the SEC will go after his personal funds and will look upon this negatively. But if the Creditors, 401K's etc have any hope of getting anything from Enron, its in their best interest that it resumes trading activity again. That is the reason they paid huge amounts to top traders so that they would stick around to try to re-vamp the company. The trading business is all about reputation and liquidity. That is the reason behind the USB Warburg deal. Enron's trading prowess and USB Warburg's financial backing is a great combination. Now they have the leverage to handle trades that previously would have been sketchy with their financial problems. Ken Lay is a staple at Enron and if they are banking on its reputation to kick start Enron again then he needs to be there to use his contacts to regain lost business.
Although Fastow and Skilling may have been the main culprits, certainly many others had to know what was going on with Enron's accounting practices. I know many people in the oil and gas industry and quite a few have been hesitant to do business with Enron in the past year because they were aware that it was only a matter of time before Enron collapsed. Ken Lay might not have taken the "golden parachute" in December, but he has been dumping stock and exercising options for the past year at a pretty steady clip. That alone should have been a warning sign to employees and investors when senior management is bailing out of the stock and the company does nothing to try and stop the freefall.
Heh... anybody who has a financial stake in the US government is going to attempt to influence it, whether it's Enron, China, or Unions. I don't really have a problem with it. After all, competing interest groups are just a part ouf our system, and they generally all balance each other out. I wish that money would be taken out of the equation... but am not sure how that could be done. I'm thoroughly disillusioned with domestic politics... which is why I find international politics much more interesting .
Lay isn't dumb enough to NOT know about this one. Oh, man the stories about Enron and those exec's I've heard from friends in the media and the political community are pretty unreal. What is surprising is that they didn't get caught sooner.
