tumbling Enron logo

[Connie Clark]

If you assume that this is a message about capitalists
run amok, and oh well, what's new, and of course, if
you have already read about it all, I suggest you DEL
now. This summary is from local Houston newspaper
reporters, but just touches on key parts of the whole
story.

It may be of interest because Enron was riding so high
last Spring controlling energy prices for the
unfortunate Californian electricity rate payers, as
well as folks elsewhere, trying to get power where
they could.  Enron represents the worst of marketplace
and capitalist gung-ho, and they have fallen so
precipitously.  For me personally, Enron and Dynegy
are here, just a few blocks away, and made big
contributions to our new baseball park (Enron Field),
just one block from here. It is one of the
cornerstones of this past decade's robust Houston
economy. I'll try to make this pithy.

Enron and Dynegy were local gas producing companies
until something happen to create a middle man market
in the energy business (mid 80s).  They became energy
traders, and Ken Lay soon started moving money around
in billions.  The notable legal staff with Enron was
considered top, the best, and smartest. Some say, they
all canceled each other out. 

A key aspect of the energy trading business is
maintaining good credit.  Like, who would place a bet
with a bookie that owes money all over town? So, to
grow and expand Enron, their newest CEO (David Fastow)
created this ballyhooed clever system called
'off-sheet balancing'.  AKA IMHO, 'under the table
dealing.'  Complicated way to create business with 50%
share.  The new companys take all the risks and debt,
and resulting profits come in, maintaining good things
on Enron's financial sheets, and nothing bad.  That is
until some of them (for example the mysterious LJM1
and LJM2 Cayman) didn't do so good, and they showed a
$1.2 billion loss in third quarter report.  Investors
and Wall Street had big questions, but the accounting
sheets were not forthcoming and were incomplete.  Some
of the big guys (attorneys and CPAs in the company)
were partnering in these side business making millions
for themselves personally, including Fastow.  These
guys, CEO, treasurer, CFO, chief counsel, are all
fired.  The report filed with the SEC can be found at
http://www.enron.com/corp/sec/  

The street talk about these two companies is that
Dynegy is a totally different kind of corporate
culture.  Arrogant Enron emps consider them inferior
and believe that when Dynegy buys out Enron, that
superior Enron talent will dominate.

The sad part is that much of Enron's investors were
institutional, like pension funds, etc.  It is
disconcerting that the mega companies that so many
people invest in are up to this kind of deception to
their stockholders.  When you look at the earnings
ratio of companies that use off-sheet balancing, you
won't see the whole story.

So, Jon get out your dancing shoes, and I hope none of
my friends had Enron shares prior to the fall.  Some
say it is a good buy now (1/10th), but I kind of doubt
it. Go with the little guys.

Connie

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