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Enron explained

post #1 of 11
Thread Starter 
In case you were wondering how Enron came into so much trouble, here is an
explanation reputedly given by a Colorado Ag professor to explain it in
terms his students could understand.

You have two cows.
You sell one and buy a bull.
Your herd multiplies, and the economy grows. You sell them and retire on the

Enron Capitalism
You have two cows.
You sell three of them to your publicly listed company, using letters of
credit opened by your brother-in-law at the bank, then execute a debt/equity
swap with an associated general offer so that you get all four cows back,
with a tax exemption for five cows.
The milk rights of the six cows are transferred via an intermediary to a
Cayman Island company secretly owned by your CFO who sells the rights to all
seven cows back to your listed company. The annual report says the company
owns eight cows, with an option on six more.

Now do you see why a company with $62 billion in assets is declaring bankruptcy?
post #2 of 11
The full version

How to Explain Enron to Your Children:

Feudalism - You have two cows. Your lord takes some of the milk.

Fascism - You have two cows. The government takes both, hires you to take
care of them, and sells you the milk.

Communism - You have two cows. Your neighbors help take care of them and you
share the milk.

Totalitarianism - You have two cows. The government takes them both and
denies they ever existed and drafts you into the army. Milk is banned.

Capitalism - You have two cows. You sell one and buy a bull. Your herd
multiplies, and the economy grows. You sell them and retire on the income.

Enron Venture Capitalism - You have two cows. You sell three of them to your
publicly listed company, using letters of credit opened by your
brother-in-law at the bank, then execute a debt/equity swap with an
associated general offer so that you get all four cows back, with a tax
exemption for five cows. The milk rights of the six cows are transferred via
an intermediary to a Cayman Island company secretly owned by the majority
shareholder who sells the rights to all seven cows back to your listed
company. The annual report says the company owns eight cows, with an option
on one more.
post #3 of 11
Thread Starter 
gee thanks Todd, I'll let my source know hes sending incomplete bull.
post #4 of 11
It wasn't a critique - it was posted in the spirit that folks who thought those two parts were funny would also enjoy the rest. Relaxxxxx !! :
post #5 of 11
Thread Starter 
oops I guess I had been at work too long. [img]redface.gif[/img]
post #6 of 11
oooh mama... here's a killer from Michael Moore, who happily brought us "Roger & Me"

George W. in the Garden of Gethsemane

An Open Letter to George W. Bush from Michael Moore

Dear George,

When it's all over in a couple months, and you're packing up your pretzels and Spot and heading back to Texas, what will be your biggest regret? Not getting out more often and seeing the sights around Rock Creek Park? Never once visiting the newly-renovated IKEA in Woodbridge, Virginia? Or buying your way to the White House with money from a company that committed the biggest corporate swindle in American history? I got a feeling you didn't miss much by not spending an entire Saturday afternoon assembling a Swedish bookcase -- but you should have known that there was no way you would ever finish your term by hopping into bed with Kenneth Lay. It's kind of sad when you think about it. Here you were -- the most popular president ever! -- the recipient of so much good will from your fellow Americans after September 11, and then you had to go and blow it. You just couldn't stay away from your old cowpoke friend from Texas, Kenneth Lay.

Kenny has always been there for you. You needed a way to fly around to all the primaries and campaign stops in the 2000 election -- so Kenny gave you his corporate jet. Did you tell the voters when you arrived in each city that the bird you flew in on was from a billionaire who was secretly conspiring to give the bird to all his employees and investors? He flew you around America on the Enron company jet, and for that favor you touched down on tarmac after tarmac to tell your fellow citizens that you were "going to restore dignity to the White House, the people's house." You said this standing in front of an Enron jet!

Man, you loved Lay so much, you not only affectionately referred to him as "Kenny Boy," you interrupted an important campaign trip in April, 2000, to fly back to Houston for the Astro's opening day at the new Enron Field -- just so you could watch Kenny Boy Lay throw out the first pitch. How sentimental!

I mean, you loved this man so intensely that, when you were awarded a set of keys the Supreme Court had made for you so you could live in the White House, you invited Kenny Boy to set up shop -- at 1600 Pennsylvania Avenue! He interviewed those who would hold high-level Energy Department positions in your administration.

You not only let Kenny Boy decide who would head the regulatory agency that oversaw Enron, you let him hand-pick the new chairman of the Securities and Exchange Commission, Harvey Pitt -- a former lawyer for his accountant, Arthur Andersen! Kenny and the boys at Andersen also worked to make sure that accounting firms would be exempt from numerous regulations and would not be held liable for any "funny bookkeeping" (don't you wish you were this forward-thinking?).

The rest of Kenny Boy's time was spent next door with his old buddy, Dick Cheney (Enron and Halliburton, as you'll recall, got the big contracts from your dad to "rebuild" Kuwait after the Gulf War). Lay and Dick formed an "energy task force" (Operation Enduring Graft) which put together the county's new "energy policy." This policy then went on to shut down every light bulb and juicer in the state of California. And guess who made out like bandits while "trading" the energy California was in desperate need of? Kenny Boy and Enron! No wonder Big Dick doesn't want to turn over the files about those special meetings with Lay!

The only thing that surprises me more than all the Enron henchmen who ended up in your cabinet and administration is how our lazy media just rolled over and didn't report it. The list of Enron people on your payroll is impressive. Lawrence Lindsey, your chief economic advisor? A former advisor at Enron! Treasury Secretary Paul O'Neill? Former CEO of Alcoa, whose lobbying firm, Vinson and Elkins, was the #3 contributor to the your campaign! Who is Vinson and Elkins? The law firm representing Enron! Who is Alcoa? The top polluter in Texas. Timothy White, the Secretary of the Army? A former vice-chair of Enron Energy! Robert Zoellick, your Federal Trade Representative? A former advisor at Enron! Karl Rove, your main man at the White House? He owned a quarter-million dollars of Enron stock.

Then there's the Enron lawyer you have nominated to be a federal judge in Texas, the Enron lobbyist who is your chair of the Republican Party, the two Enron officials who now work for House Majority Leader Tom DeLay, and the wife of Texas Senator Phil Gramm who sits on Enron's board. And there's the aforementioned Mr. Pitt, the former Arthur Andersen attorney whose job it is now as SEC head to oversee the stock markets. George, it never stops!

My fingers are getting tired typing all this up -- and there's lots more.

Don't get me wrong, George -- I do not think you're an evil man. You don't need any crap from people like me -- heck, you got mother-in-law problems! Now, I have a very good relationship with my mother-in-law, but then, I never told her to put $8,000 of her money into a company my administration knew was going belly-up.

You say you didn't know? Your bag man -- Don Evans, the man who squeezed all that money for you from Enron as your campaign finance chairman (and is now collecting his reward as your Commerce Secretary) -- has admitted that he got calls from Enron begging for help last year because they were going under. Didn't he tell you this?

Then Paul O'Neill, your Treasury Secretary, admitted that Enron and Kenny Boy called him, too, for some special favors to save Enron. Didn't he mention this to you? They claim to have called your chief of staff, Andrew Card, and he said he didn't bother to inform you. What does your mother-in-law think about these boys her daughter's husband consorts with?

I love watching the O'Neill and Evans show. What a couple of cut-ups! They're, like, all proud of themselves for "not doing Enron any favors." Actually, I think it's more like they didn't do your MOTHER-IN-LAW any favors. Enron got LOTS of favors. And why not? Kenny Boy has been your number one financial backer since you ran for governor. No other American or Saudi has given you more money than Kenny Boy and his gang at Enron. O'Neill, Evans, Cheney, Energy Secretary Spencer Abraham -- ALL of them gave Lay and Enron special favors from day one. The New York Times last May was so concerned about how Kenny had the run of the place (1600 Pennsylvania Ave.), they referred to Lay as the "shadow advisor to the president."
And what advice! Who was it that wanted you to deregulate the energy industry further? Kenny Boy! Who was it that convinced you to explore the sick idea of PRIVATIZING our water supply and then allow private corporations to "trade" it in the future? Kenny Boy! Who was it that wanted Social Security to be tied to the stock market? Yup, Kenny Boy! (Imagine, if you will, what would have happened to our precious Social Security funds had they been invested in Enron stocks as you, George, suggested be done during your campaign as yuppies everywhere clucked along in agreement over that genius idea.)

O'Neill's and Evans's admission that they "did nothing" when Enron told them of the company's shell game and impending collapse is reason enough for you and yours to hit the Beltway and never return to that sacred trust we call Our American Government. They are proud of "doing nothing?" By doing nothing, millions of Americans have been swindled. Tens of thousands have lost their jobs. Thousands more have lost their savings and their retirement. Yet your cabinet secretaries gloat over what a "good job" you and they did by "doing nothing."

Let me ask you this: If someone was setting a house on fire, and they called you to help them set it on fire, and you said no you wouldn't help them -- BUT then you also DIDN'T call 911 and inform the police that someone was going to burn down a house, do you think you would have committed a crime? Of course you would have! You had prior knowledge and then you knowingly and purposefully HID this information from the authorities and the people living in the house! You only admitted that you knew a house was going to be torched when you were confronted by the police. Are you complicit? Yes! Are you an accessory? Yes! Who would even think of going around boasting, "Hey, look what a great guy I am -- a friend of mine told me he was going to commit an act of arson, and then I decided NOT to tell ANYONE about it!! WHOO-HOO!!"

Enron and Kenny Boy bought your silence and the silence of your cabinet members. You yourself didn't have to actually raid the 401(k) accounts of those poor people in Houston (many of whom probably voted for you every time your name was on a ballot). All you had to do was remain silent, change the government regulations that let them get away with it, and install their hand-picked cronies to sit on the "oversight" boards which were supposed to be keeping an eye on them.

While doing all this, you told the American people that these rich friends of yours were not getting any special breaks -- when, in fact, Enron had already scammed their way out of paying NO taxes in four out of the last five years. Your economic "stimulus" bill that you got the House to pass after 9-11 had a section that would give Enron a gift of $250 million of our tax money. You were pushing this bill in November and December, long after your administration knew that Enron was raiding the vault and screwing its workers and investors.

You and your Republican friends are quick to point out that Enron had their claws into the Democrats as well. Yes, they did, and thank you for making the case why we not only need an alternative to the current make-up of the Democratic Party, we need private money removed from our electoral process ASAP.

But, George, let's be real -- the Democrats only got a pittance from Enron compared to the millions you and the Republicans received. Democrats just don't have the killer instinct to do anything right, and they certainly don't know much about making money the old-fashioned way, one off-shore tax shelter at a time. I would expect nothing less from a Party that couldn't even put their candidate in the White House after he had already won the election.

The Democrats are like a Yugo -- you know it won't last long or work well, but it will occasionally get the job done. Fat cats know they can buy the Democrats at discount prices, and so they do. Anyone who tries to deflect this scandal away from you, George, or away from the Republicans, or away from the whole dirty way we elect our leaders, is someone who is desperately trying to cling to what's left of a very crooked system that has to go and go now.

The saddest part of this whole affair was the day the scandal was revealed -- and you denied that you even knew your good friend, Kenneth Lay. "Ken who?" you said. Oh, he's just some businessman from Texas. "Heck, he backed my opponent for governor, Ann Richards!" was your way of trying to deflect the truth that was hitting you like a Mack truck. You knew that he, in fact, endorsed YOU and gave you THREE times the money Ann Richards ever saw from him.

I hardly ever talk to the guy, you said. You were like Peter outside the walls of Herod after they grabbed J.C. from the Garden of Gethsemane. Three times he denied he knew Jesus, and three times the cock crowed. But Peter, unlike you, felt shame and wept, and then ran away.

What shame do you feel tonight, George, for the lies you have told? What shame do you feel using the dead of 9-11 as a cover for your actions, hoping that our sorrow for those lost souls and our fear of being killed by terrorists would distract us from what your boys and Kenny Boy were up to during those horrific weeks in September and October?

It was during those very days, while the rest of us were in shock and sadness, that the executives at Enron were selling off their stock and shifting assets to their 900 phony partnerships overseas. Did they notice the remains of the dead being pulled from the rubble while they were downloading their millions, or were their eyes glued only to the bottom third of the TV screen as the stock ticker with the rigged Enron price crawled across the images of firemen desperate, in tears, to find their fallen brothers?

The country was behind you when you said you were fighting the evildoers who did this. In fact, all the while, the real fight your friends at Enron were conducting was the fight against the clock, to see how fast they could transfer all the loot to their personal accounts and run away. Those were the evildoers, George, and you knew it. And because you, by design or negligence, allowed this to happen, it is time for you to resign. The cock has crowed for the last time.

At the very least, your mother-in-law deserves better.


Michael Moore
Owner of 7th LARGEST COMPANY IN AMERICA! (revised ranking)
post #7 of 11
Whoa! That's not funny.
I guess someone's laughing on their way to the (Swiss)bank?
post #8 of 11
Jane & Todd do you both read rec.humour, or are you on the mailing list of someone who does? That one appeared on it earlier this week!

post #9 of 11
Nope, I'm not on that mailing list, but another mailing list (FreeThinkers) sent it out to me, they probably got it from the rec.humor list.
post #10 of 11
Letter to Paul H. O'Neill,

January 18, 2002

Paul H. O'Neill
Secretary of the Treasury
U.S. Department of the Treasury
15th and Pennsylvania NW
Washington, DC 20220

Dear Secretary O’Neill,

In a new report, Public Citizen has researched Enron’s Securities and Exchange Commission 10-k filings and found that the company has 874 subsidiaries—more than 30 percent of the company’s total 2,832 —registered in the Cayman Islands and other nations with weak bank disclosure laws. These offshore subsidiaries have enabled Enron to hide potentially billions of dollars from American government officials, shareholders and credit rating companies at a time when Enron is being sued by shareholders and investigated for possible fraudulent accounting practices.

Public Citizen is deeply concerned that your office, shortly after the Bush administration assumed power, initiated actions which aided Enron’s ability to hide assets (and losses) in the company’s bank accounts registered in off-shore subsidiaries by delaying a new international agreement negotiated between the OECD and the United States.

In April 1998, the Organization for Economic Cooperation and Development (OECD) released Harmful Tax Competition: An Emerging Global Issue that discussed strategies for how OECD member nations (of which the United States is one) could deal with "harmful preferential regimes" such as the Cayman Islands. In response to this report, President Clinton directed the United States to co-chair an OECD body called the Forum on Harmful Tax Practices, which the U.S. headed for two years beginning in October 1998.

Led by Clinton Treasury Secretary Lawrence Summers, the administration focused on first "naming and shaming" countries with little or no banking regulations, and then working on multilateral agreements to bring nations into compliance with acceptable standards of disclosure.

The Clinton Administration was also motivated to crack down on tax havens after Osama bin Laden’s August 7, 1998, terrorist attack on U.S. embassies in Kenya and Tanzania. The Clinton administration knew that bin Laden used al Qaeda to funnel money, possibly through nations with lax banking regulations. Clinton’s anti-terrorism initiative culminated with the December 2000 publication of the International Crime Threat Assessment, which blamed nations with "weak financial regulatory systems [and] lax enforcement measures" for facilitating international crime networks like al Qaeda. In addition, the 1995 Mexican peso crash and 1997 Asian financial collapse were blamed partly on the lack of adequate transparency involving financial deals in the Cayman Islands and other tax havens.

Prior to the July 2000 G-7 summit, the Clinton administration negotiated a deal with six nations—including the Cayman Islands—extracting nonbinding commitments from the countries to work with the U.S. to improve transparency of the nations’ banking laws. In exchange for this commitment, the OECD did not include them in the June 2000 list of "pariah" nations with banking systems that encouraged criminal behavior. At the July 2000 G-7 summit, the Clinton administration took the lead on a plan threatening strict economic sanctions on all nations identified by the OECD, including the Cayman Islands, unless the countries cleaned up their lax banking laws by July 2001. The threat of these sanctions alone would have helped enforce a global trend towards increased financial transparency.

But on February 17, 2001, you announced at another G-7 press conference that the Bush Administration was placing this multilateral agreeement and its threat of sanctions under review, effectively delaying it. As a result, your announcement helped allow Enron and other companies to continue to hide money in Cayman Island bank accounts. Your responsibility as Secretary of the Treasury is to collect properly owed and due taxes, not to facilitate tax avoidance. If Enron and other companies are using the Cayman Islands to hide income, then you have an obligation to end that abuse.

On November 27, 2001, a few days before Enron declared bankruptcy, your office announced an agreement with the Cayman Islands that does not force that nation to tighten its tax or banking laws until 2004—giving companies like Enron twenty-four months to move their assets to another tax haven and destroy the records of their cheating from scrutiny.

Since your efforts—whether intentional or not—have allowed Enron to hide potentially billions of dollars that rightfully belongs to shareholders and company employees, your action must be viewed in the context of the more than $1.1 million Enron contributed to George Bush’s presidential efforts and inauguration, and the close, personal relationship between the President and Enron CEO Ken Lay.

To remove the appearance of impropriety, Public Citizen requests that you immediately provide documentation and personally respond to the following questions and statements:

1. When did you first learn about the Clinton Administration’s OECD-inspired agreement with suspected tax haven nations on transparency of their banking laws? Who brought this to your attention? When did you decide to delay the agreement and why?

2. Who oversaw and staffed this at the Treasury Department and who at Treasury and other U.S. government agencies approved (or disagreed) with this decision?

3. Did you or other Treasury employees discuss this issue with Ken Lay, any other Enron employees, board members, or agents operating on behalf of Enron since President Bush assumed office? If yes, what was the substance of each such conversation?

4. Were you told by the President or Vice President to postpone the agreement orally or in writing? Did you have any conversations with or receive any documents from any White House staff or non-Treasury government officials (including members of Congress) regarding concerns about or the decision to delay the agreement on tax havens? If yes, please describe each one.

5. Did you or any other government officials to your knowledge realize or discuss that these tax havens provided opportunities for terrorists to hide money?

4. Why did you decide on November 27, 2001 to reestablish an agreement with the Cayman Islands? Why did you select the effective date of 2004, two and one-half years after the Clinton Administration agreement date of July 1, 2001? Did you realize that this delay would protect Enron from disclosure and give it time to destroy documents and records related to its involvement there before the effective date?

5. Were you asked or told by anyone to renegotiate the agreement with the Cayman Islands? If yes, who did so and in what form? Why did you exclude the other nations from the new agreement?

6. Are you aware of any other companies that are potentially in financial trouble that have investments hidden in the Cayman Islands or other tax havens? If yes, please list them.

Thank you for your prompt attention to this matter.


Joan Claybrook, President

Public Citizen
post #11 of 11
Dec. 21, 2001

Electricity, Commodities Deregulation Allowed Enron to Loot Billions from Lenders, Shareholders, Employees and Consumsers

Tangled Web of Deceit, Political Influence Must be Unraveled by Congress

WASHINGTON, D.C. — After Enron Corp. used its vast web of political connections to win December 2000 passage of commodities trading legislation that helped the company shield its energy trading activities from government scrutiny, California’s energy crisis suddenly took a dramatic turn for the worse as artificial supply shortages led to frequent rolling blackouts, according to a new Public Citizen report released Friday.

The legislation reducing government oversight of energy trading was muscled through Congress — without a Senate committee hearing — with the aid of U.S. Sen. Phil Gramm of Texas. Gramm was chairman of the Senate Banking Committee, which had jurisdiction over the legislation he co-sponsored, but he chose to bypass his committee, and the bill was quietly tacked onto a "must-pass" appropriations bill late in the session. Gramm’s wife, Wendy Gramm, also aided Enron’s rise to power. As chairwoman of the Commodity Futures Trading Commission, she pushed through a key regulatory exemption on Jan. 14, 1993, just as she was about to leave office. Five weeks later, she joined Enron’s board of directors, where she served on the board’s audit committee and had access to key financial information about the company.

On Sept. 4 of this year, Sen. Gramm announced that he would not run for re-election in 2002. Then in November, shareholders and federal regulators learned the extent of Enron’s financial troubles. Since the revelations, the company has filed the largest corporate bankruptcy in history, and shareholders, lenders and Enron employees have lost billions of dollars.

"Millions of people in California paid outrageously inflated prices for electricity because of Enron’s ability to manipulate the markets for electricity and natural gas, and thousands of Enron employees and shareholders have been devastated because of insider dealing and financial trickery," said Public Citizen President Joan Claybrook. "Republicans in Congress investigated Whitewater for years and spent millions of dollars. But that pales in comparison to Enron-gate. Congress needs to turn over every rock and see what crawls out from underneath. They should ask, who knew what and when did they know it? Investigations into any criminal conduct should extend to the political players who aided and abetted this company’s rapacious rampage across America. We should make no distinction between the officers who committed these acts and the politicians who enabled them."

Public Citizen called on Congress to force Wendy and Phil Gramm and Treasury Secretary Paul O’Neill to testify under oath about their knowledge of Enron’s alleged accounting fraud and use of offshore tax and bank regulation havens. Public Citizen also said that President Bush, Vice President Dick Cheney and political adviser Karl Rove should also be required to answer questions about whether administration officials discussed policies involving energy price controls, other energy regulations or tax havens with Enron representatives. Bush adamantly resisted price controls even though California’s wholesale energy costs had almost quadrupled in 2000; at the same time, Enron’s trading revenues nearly tripled.

The Public Citizen report — Blind Faith: How Deregulation and Enron’s Influence Over Government Looted Billions from Americans — details the political connections and government actions that helped Enron become the most prominent energy trader in the world before its recent collapse. The report found that:

From June through December 2000, California experienced only one Stage 3 electricity emergency (which requires rolling blackouts). But following passage of the Commodity Futures Modernization Act, which shielded Enron’s and others’ trading activities from regulators, the state had 38 Stage 3 emergencies — ending only when federal regulators finally imposed price controls in June 2001.

Enron took advantage of lax government oversight and formed a complex web of more than 2,800 subsidiaries — 874 of which were located in offshore tax and banking regulation havens, mostly in the Cayman Islands. Upon assuming office in 2001, Bush — who has accepted $2 million from Enron during his political career and counts Enron chief executive Kenneth Lay as a close personal friend — scrapped plans put into place by former President Bill Clinton to limit the ability of corporations to effectively use these offshore havens. The action came at the height of high West Coast energy prices, which would have allowed Enron to funnel billions in excess profits to offshore accounts.

As a lame-duck chairwoman of the Commodity Futures Trading Commission, Wendy Gramm exempted Enron and other energy futures traders from oversight in response to a request by Enron. At the time, Enron was a significant source of political funding for her husband. Five weeks later, she joined the company’s board and served on the board’s audit committee, where she would have had access to the company’s financial details. The chief executive of Arthur Andersen, Enron’s outside auditor, testified before congressional investigators in December that "illegal acts" may have been committed at the company.

"Buried amid the rubble of Enron’s fallen house of cards are the political ties that allowed this greedy company to rip off the public and its own employees, who saw their retirement accounts vanish overnight — even as top executives were bailing out and walking away with hundreds of millions of dollars," said report author Tyson Slocum, research director for Public Citizen’s Critical Mass Energy and Environment Program. "There’s an object lesson here for those who decry government regulation: Absent a strong regulatory presence, greed prevails and consumers get the shaft. We’ve seen it time and time again."
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