Wall St. Journal Article on Enron

[jj]

Not sure if it was today's or not, it was banging around the lunchroom.

In it, it says that Lay and his buddy are using the defense that everything they did was common, legal, corporate practice.

Ok, I am NOT taking any position here, I frankly don't know enough about this issue. It does have a cachet of fertilizer, but I can't support that contention firmly, at least yet.

Anyone want to take a shot at this?

 

[Vagabond]

Well if what they did was "legal" they have nothing to worry about. But, what I have seen that they did is not legal in the slightest.

 

[The Central Scrutinizer]

Not sure if it was today's or not, it was banging around the lunchroom.

In it, it says that Lay and his buddy are using the defense that everything they did was common, legal, corporate practice.

Ok, I am NOT taking any position here, I frankly don't know enough about this issue. It does have a cachet of fertilizer, but I can't support that contention firmly, at least yet.

Anyone want to take a shot at this?

It was in today's WSJ (01/20/2006). No, I don't want to take a shot at it! Skilling has accumulated a 40 million dollar(!) legal defense fund, so I guess he's counting on it being a long process.

Here's the link for subscribers:

http://online.wsj.com/article/SB113772974804651717.html?mod=home_page_one_us

 

[jj]

I've seen a bit more on it in the Seattle Times. There is little real data at this point, but the argument seems to be that they committed no crime, and that their accounting practices were all normal ways to do things.

I wonder how shaking down the power grid for cash works into that? Monopoly issues, anyone? Is this Park Place or Mediteranean Ave?

 

[bob_kark]

I've seen a bit more on it in the Seattle Times. There is little real data at this point, but the argument seems to be that they committed no crime, and that their accounting practices were all normal ways to do things.

I wonder how shaking down the power grid for cash works into that? Monopoly issues, anyone? Is this Park Place or Mediteranean Ave?

Well if running power from California through Nevada, then back to California in an effort to avoid California price caps for utility service, overbooking shipments and scheduling power transmissions it had no intention of making in order to recieve as much as $750.00 per megawatt hour because they didn't ship the power on overburdened power lines, setting up partnerships to hide losses, and keeping employees from selling their stock in the company, effectively bankrupting them, is considered illegal then I think they may be in for some trouble. However, I don't know much about business law.

 

[hgc]

Well if running power from California through Nevada, then back to California in an effort to avoid California price caps for utility service, overbooking shipments and scheduling power transmissions it had no intention of making in order to recieve as much as $750.00 per megawatt hour because they didn't ship the power on overburdened power lines, setting up partnerships to hide losses, and keeping employees from selling their stock in the company, effectively bankrupting them, is considered illegal then I think they may be in for some trouble. However, I don't know much about business law.

FYI the California shenanigans are not part of the current prosecution. Hopefully they can also come under the gun for that one day.

 

[a_unique_person]

I've seen a bit more on it in the Seattle Times. There is little real data at this point, but the argument seems to be that they committed no crime, and that their accounting practices were all normal ways to do things.

I wonder how shaking down the power grid for cash works into that? Monopoly issues, anyone? Is this Park Place or Mediteranean Ave?

Sounds like normal business practice to me. A manager at EDS explained it to me once. Dominate the market, then put the screws on the competition by manipulating the market, then use your virtual monopoly status to haul in the money.

 

[specious_reasons]

Well, after reading 2 books on this, I'm an Enron expert.

I really doubt that those types of arguments will hold water, especially when Enron was an "innovator" in accounting practices. There are documented accounts of Anderson's standards and practices committee rejecting some of Enron's accounting practices, but they were ignored by the auditors in charge of Enron's account.

Lay's case is going to be hard. I mean, is it criminal to be a completely ineffective CEO? At best, what could be said about the guy is that he didn't pay any attention to Enron's business and completely trusted his underlings to do the right thing.

 

[specious_reasons]

BTW, Lay is being indicted for saying things like this:
http://www.businessweek.com/bwdaily/dnflash/aug2001/nf20010824_288.htm

Q: There has been some concern among investors that perhaps there is more to his resignation than meets the eye, perhaps accounting or other issues that have yet to come to light. Is there anything more?
A: There are absolutely no problems that had anything to do with Jeff's departure. There are no accounting issues, no trading issues, no reserve issues, no previously unknown problem issues. The company is probably in the strongest and best shape that it has ever been in.

There are no surprises. We did file our 10-Q [with the Securities & Exchange Commission] a few days ago [Aug. 14]. And, if there were any serious problems, they would be in there. If there's anything material and we're not reporting it, we'd be breaking the law. We don't break the law.

and

Q: Judging by the stock's performance since the announcement, investors appear to still be skeptical.
A: Yes, and I understand that. Investors don't like uncertainty. When there's uncertainty they always think there's another shoe to fall. There is no other shoe to fall.

(Bold emphasis mine.) This was in August 2001. Enron completely collapsed a few months later.

 

[headscratcher4]

Watched the Smartest Guys in the Room the otherday. A court will have to decide the legalities, but these guys smell bad. Maybe, ultimately, that isn't a crime but the devestation that they wrought to shareholders, employees and just average folks is amazing. Besides, they may want to put it all off on Andy Fastow, but he's pleaded guilty and will be testifying against them. They can say "I didn't know what he was doing...." but it will make them look stupid and out of the loop, and -- if the Tycho prosecution is any indication -- that will only go so far.

However, keep in mind this is in Texas -- the land where GWBush is a "successful" businessman -- so anything is possible there...the jury just might buy it.

 

[specious_reasons]

Watched the Smartest Guys in the Room the otherday. A court will have to decide the legalities, but these guys smell bad. Maybe, ultimately, that isn't a crime but the devestation that they wrought to shareholders, employees and just average folks is amazing. Besides, they may want to put it all off on Andy Fastow, but he's pleaded guilty and will be testifying against them. They can say "I didn't know what he was doing...." but it will make them look stupid and out of the loop, and -- if the Tycho prosecution is any indication -- that will only go so far.

I haven't seen the documentary, but read the book by the same name. I also read A Conspiracy of Fools. Fools is slightly more forgiving of Skilling and Lay. I have a feeling that's because Eichenwald interviewed both of them. For those interested, I would recommend Smartest Guys in the Room over Fools, but primarily because it does a better job of explaining the hoary financing that Enron engaged in.

Both books really paint Fastow as the source of corruption. The question then becomes how much Skilling and Lay approved of Fastow's activities.

I find the Enron story fascinating. It should probably be taught in Business 101, as an example of all that can go wrong. Plus, I find myself in amazement at the arrogance of people in charge. While Enron was collapsing, the executives attempted to sell the company to its competitor. One condition of the merger was that Lay needed to leave, then Lay tried to cash in on his $70 million severance package. It was one of the things that helped kill the deal.