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Oerdin
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of Internet Music.
Sep 2001
time: 21:30
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Here are a few salient details about Enron:
Enron at a Glance
-Enron began in 1985 as a traditional energy producer/seller.
-By the early 1990s Enron wanted to branch off into trading energy futures and derivatives. This wish was granted by Wendy Gramm, who George H. Bush had appointed to head the Federal Energy Regulatory Commission. Her husband, Texas Senator Phil Gramm furthered Enron's wishes by removing virtually all regulatory oversight over Enron's trading.
-With the right to trade these nearly metaphysical derivatives Enron decided it was easier to cheat than play by the rules. Rather than letting the free market decide energy future prices Enron set up nearly 3000 offshore companies, many of which they treated as partnerships.
-These offshore companies provided Enron with the perfect ruse to manipulate energy prices and, at the same time, hide its own debts.
-When states like California came to Enron to lock in energy contracts Enron would show them contracts it had signed with its "partnerships" offshore locking in contracts at increasingly astronomical prices. Faced with what appeared to be legitimate contracts with others, Enron's customers had no choice but to submit to Enron's extortive energy prices.
-Now that it could circumvent the magic of the marketplace and set its own price for energy, Enron executives saw no end to the possibilities for its offshore entities. By transferring its obligations to some of the these shell companies they were able to show Wall Street profits when in fact the company was being looted into insolvency by its top managers.
-When their Texas friend, George W. Bush, won the White House Enron's CEO, Kenneth Lay, saw the possibility of extending Enron's giant Ponzi scheme well into the future. Lay was appointed to the Bush transition team where he worked directly with Vice President Cheney to develop the administration's national energy policies.
-No fewer than 52 former Enron executive, lobbyists, lawyers or significant shareholders ended up working for the Bush administration.
-It was only when an uncontrollable meltdown of Enron's scheme began in December 2001 that the world learned that Enron's apparent success had been little more than a complex illusion.
-Within days of Enron's bankruptcy California's energy prices returned to normal levels -convincing proof that Enron had successfully distorted national energy market prices. (It is now being learned that other energy companies, such as El Paso Natural Gas, may have participated in the scheme by actually withholding energy from the market.)
-But, before Enron collapsed insiders, like Kenneth Lay, dumped over 16 million shares of Enron stock pocketing over $1 billion in profits.
-When Enron failed its 15,000 employees learned they had lost $1 billion in pension funds.
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Oerdin
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of Internet Music.
Sep 2001
time: 21:30
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The Meltdown
12/2000
Enron announces that president and chief operating officer Jeffrey Skilling will take over as chief executive in February. Kenneth Lay remains as chairman. Shares hit 52-week high of $84.87 on Dec. 28.
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4/17/2001
Ken Lay and Vice President Cheney meet to discuss energy policy.
8/14/2001
Skilling abruptly resigns after running the company for just six months; Lay becomes CEO again.
8/14 & 27/2001
In a pair of emails to his employees, Lay touts the company's stock and declares that Enron's growth "has never been more certain."
8/15/2001
Sherron Watkins, a vice president of corporate development, writes a memo to Ken Lay expressing concern that the company will "implode in a wave of accounting scandals."
9/17/2001
Skilling sells 500 shares. As of the end of July, Lay has sold shares worth $21 million in 2001 alone.
9/26/2001
Lay tells employees that Enron stock is an "incredible bargain" and will rise in value by 800 percent over the next 10 years.
10/16/2001
Enron reports a $638 million third?quarter loss and discloses a $1.2 billion reduction in shareholder equity, partly related to partnerships run by chief financial officer Andrew Fastow.
10/24/2001
Enron ousts Fastow.
10/28-29/2001
Lay talks to Treasury Secretary O'Neill and Commerce Secretary Evans about Enron's problems. The Cabinet members decide not to intervene.
10/31/2001
Enron announces the SEC formal investigation into a possible conflict of interest related to the company's dealings with the partnerships.
11/8/2001
Enron files documents with SEC revising its financial statements for past five years taking away $586 million in profits and adding another $2.5 billion in debt to its books.
11/28/2001
Dynegy backs out of proposed deal to buy Enron after Enron's credit rating is downgraded to junk bond status. Enron shares plunge below $1.
12/2/2001
Enron files for Chapter 11 bankruptcy protection, the biggest bankruptcy petition in U.S. history.
12/3/2001
Enron fires more than 4,000 of its US employees. That same week, it fires more than 1,000 European employees.
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1/9-10/2002
Justice Department confirms it has begun a criminal investigation of Enron. The company's auditor, Arthur Andersen LLP, says it has destroyed some Enron documents. The White House discloses Lay sought the administration's help shortly before the company collapsed. Attorney General John Ashcroft, who received campaign funds from the company for his 2000 Senate race, recuses himself from the investigation.
1/19/2002
The White House acknowledges that Vice President **** Cheney tried to help Enron secure payment last year on a $64 million?dollar debt owed to it by a large Indian energy project.
1/30/2002
The General Accounting Office, the investigative arm of Congress, vows to sue to obtain documents that may show Enron's influence on the Bush administration's energy policy, after the White House claims the papers are privileged.
2/2/2002
A special investigative committee set up by Enron's board of directors reports that an elaborate scheme involving multiple partnerships allowed top Enron executives to inflate earnings by nearly one billion dollars and pocket millions in the process.
2/4/2002
Lay resigns from Enron's board.
3/14/2002
Enron accounting firm Arthur Andersen is indicted by a federal grand jury for obstruction of justice charges for "knowingly, intentionally and corruptly" persuading employees to shred Enron?related documents last October.
3/15/2002
The U.S. government suspends new business dealings with Enron and its former accounting firm Andersen, citing evidence of misconduct by the former energy giant and the criminal indictment of the auditor.
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Lefty Scaevola
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San Antonio TX USA
Oct 2000
time: 23:30
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In any case your premises of this thread are mutiply false. Beside the 925 day figure (its been less than two years since it tanked) I can recall two officers convicted (guilty pleas) Kopper and Belding (sp?) and more, including Fastow, indited.
a write up for 2002 on prosecution prospects:
"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."
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MichaeltheGreat
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Apolyton Grand Executioner
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mooning the house that Ruth built.
Oct 1999
time: 21:30
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quote:
Originally posted by Oerdin
No but it pisses me off. Why doesn't it piss you off?
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Unless you've got the firepower to start a revolution, ain't nothing you can do about it, except vote for the next set of non-incumbents, so at least we can rotate the pigs at the trough.
Meanwhile, no matter what the market's doing, there's a profit opportunity somewhere.
A few points about your linkies are "somewhat" inaccurate:
quote:
"-Enron began in 1985 as a traditional energy producer/seller." |
Enron didn't start out in 1985, it was a name change/reincorporation from the Transwestern Pipeline Co., which had already been around for years and was a huge force in natural gas markets. Enron made a very slow move out of natural gas transport, and it's first forays as an "energy producer" were for it's own pipeline compressor stations.
quote:
"-By the early 1990s Enron wanted to branch off into trading energy futures and derivatives. This wish was granted by Wendy Gramm, who George H. Bush had appointed to head the Federal Energy Regulatory Commission. Her husband, Texas Senator Phil Gramm furthered Enron's wishes by removing virtually all regulatory oversight over Enron's trading." |
This is a pretty gross distortion, inasmuch as it implies special consideration for Enron. The development of a natural gas and energy futures market was planned from the early 1980's as an essential feature of natural gas deregulation, and was based on the same model as oil futures and derivatives, as an ordinary commodities market. The implementation of the futures markets for natural gas and electricity was driven by NYMEX, under the regulatory oversight of the CFTC. FERC submissions to participate in natural gas trading were required of all pipeline companies, and were routine ministerial actions, as all interstate gas and electricity transactions have been subject to FERC rules and approval. At the time Enron got involved in this, they, and all other pipeline companies, were heavily involved with FERC in carrying out the different FERC Orders relating to natural gas deregulation and transitional costs. Nothing special or exciting there, and Enron was no different than any other gas pipeline company.
The bit about "removing all regulatory oversight" is a bit disingenuous, as futures, swaps and futures options contracts are done through NYMEX according to pre-existing exchange rules which are under the oversight of the CFTC, not the FERC.
It's true that FERC has no jurisdiction over some forms of energy trading, it's not true that there's no oversight, because the commodities market has been under the CFTC for decades, and it makes more sense to have regulators with legal and market specific experience.
quote:
"-With the right to trade these nearly metaphysical derivatives Enron decided it was easier to cheat than play by the rules. Rather than letting the free market decide energy future prices Enron set up nearly 3000 offshore companies, many of which they treated as partnerships.
-These offshore companies provided Enron with the perfect ruse to manipulate energy prices and, at the same time, hide its own debts." |
This is written by someone who simply doesn't understand commodity futures markets. Both NYMEX and the EIA (Energy Information Administration, another part of DoE) have historical data on gas storage, futures and spot transactions, etc. There is no evidence at all of any single party, or group of parties in collusion, manipulating natural gas prices, with the late 1980's exception of Hadson Gas, which took itself from being the largest non-pipeline affiliated gas marketer (with 6% of US daily gas purchases under contract) to out of business within months when they tried to play with contract deliveries to increase their spot market position.
The California electricity market had a combination of natural shortages, demand spikes, and abuse of market power by multiple participants. Enron was a relatively minor overall factor in the Cali mess. Enron was more notable for what they failed to do (build a lot of projects, because their debt problems were already putting them in a squeeze before the news broke publicly), than for what little they actually did.
Many of the Enron companies were in fact partnerships, I participated in buying three of them for clients - the sole asset in each case was a GE LM6000PC SPRINT turbine generator package, and the reason each one was held by a separate company was GE's warranty terms, which didn't allow transfer of warranty rights. The solution, used by everybody, was to make a special purpose company for each turbine-generator set, so when you move the turbine, you move the company that owns it as a unit. Special purpose companies for independent energy projects are the norm, for accounting, financing, and insurance reasons. So not all, in fact not even a majority of Enron's separate units were set up for any improper purpose.
It's nice spin to say that Enron is guilty of everything under the sun, but they're only guilty of part of everything under the sun, and sorting out which of their business activities was legitimate (the majority) from the portion that is questionable, from the portion that's provably criminal (as opposed to inept and pushing the rules) is no easy deal.
Is the administration whitewashing it? Sure, at the very least they're not in a big hurry, and there may be more to it than that, you betcha. Do the financial markets as a whole want to make a big deal out of Enron? Hell no, because the dirt might point in their directions as well.
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HershOstropoler
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Lefty:
"One such prosecution likely take 100 to 1000 times the amount of investigation and prosecutorial work as a street crime. They do not come quick, cheap, or easy, and have a high failure rate."
And how many 1000s of burglaries does it take to do as much damage as one case of large scale corporate fraud?
"Commoly in the SEC or coporate cases there will not be iditments until shortly before the staute of limitations runs out,, and then the prosecutor is still unprepared and racing to complete an investigation."
And who sets the statute of limitations?
"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"
And who makes the rules vague and creates those daunting hurdles?
"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"
That's the same standard as in your run of the mill fraud case. Of course it is so much tougher to get a successful prosecution when the defendant has large funds available for his defense.
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st_swithin
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10069
Nov 2002
time: 05:30
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The Magic Pudding should go bomb the sh1t outta those muthaphuqas.
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HershOstropoler
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That the excuses don't fly as soon as you look at the system as a whole.
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HershOstropoler
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Trying to miss the issue again.
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HershOstropoler
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As Mike said: "We all know our politicians are bought and paid for whores of corporate interests."
Those politicians write the rules. They make it harder to prosecute corporate fraud.
Your "Fraud is easy to prosecute?" just invites the standard lawyer reply: it depends.
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JohnT
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Capitalist
Mar 1999
time: 00:30
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quote:
925 days have passed since the Enron scandal broke and as of today not a single person has been charged for wrong doing. Not Bush's pal Ken, not anyone on the board of directors, not anyone any where has been punished except for the million of pensioners who were defrauded, the employees who lost their jobs and retirement savings (which Ken Lay mandated had to be invested in Enron stock), and the consumers of California who lwere bilked billions due to Enron's fraud. |
http://www.enronfraudinfocenter.com/information.php
quote:
What is the current status of the Enron case?
Because of the complexity of the Enron case and because of the number of people and partnerships being investigated, probes by the SEC and Department of Justice are ongoing. In addition, a class action lawsuit on behalf on Enron shareholders is in its early stages.
Convictions
As mentioned, the first to be convicted was former Enron executive Michael Kopper. Kopper worked closely with Andrew Fastow, the former chief financial officer, who has been indicted on 78 counts of conspiracy. In August 2002, Kopper was convicted to charges of money laundering and wire fraud. He had pled guilty to the charges.
In addition, Enron’s accounting firm, Arthur Anderson, LLP, has been convicted of obstruction of justice. Employees were involved in a massive destruction of files pertaining to Enron, preventing the court from seeing past financial records, transactions, emails, memos, and other potentially relevant documents. Anderson was responsible for auditing Enron and for ensuring that its accounting practices adhered to regulations. Arthur Anderson was also fined $500,000 and was placed on five years probation.
Indictments, Defendants, and Investigations
There are more than 29 defendants listed in a case filed by the federal government against Enron and its executives. Some of those suspected of wrongdoing are:
· Jeffrey Skilling, former Enron president who served as CEO from February to August 2001
· Andrew Fastow, former chief financial officer who was in charge of LJM and has been indicted on 78 counts of conspiracy (he has pleaded not guilty on all counts)
· Richard Causey, former chief accounting officer
· Jeffrey McMahon, former treasurer
· Ben Glisan Jr., former treasurer
· Kenneth L. Lay, founder, former chairman, and former CEO of Enron
· J. Clifford Baxter, former vice chairman, died of apparent suicide in January 2002
· Wendy L. Gramm, member of Enron’s Board of Directors and its audit committee
· Gary Mulgrew, Greenwich Nat West bank employee, accused of defrauding his company through the LJM investment
· Giles Robert Hugh Darby, Greenwich Nat West bank employee, accused of defrauding his company through the LJM investment
· David John Bermingham, Greenwich Nat West bank employee, accused of defrauding his company through the LJM investment
J.P. Morgan Chase & Co. officials have been interrogated regarding their role in dealings with former Enron executives, but no criminal charges have been filed.
In addition, a lawsuit has been filed against Enron’s law firm, Vinson & Elkins LLP.
Timothy Belden, a former Enron energy trader pleaded guilty to charges of conspiracy regarding illegal dealings that took advantage of the California energy crisis. In essence, he explained, Enron took energy out of California to avoid price caps, sent it elsewhere to make a profit, and then sold it back to California at higher prices. |
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27-08-2003 22:46
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