| Enron's
Bust: Was it the result of Over-Confidence or a Confidence Game? "Enron never understood that business is not just about numbers and the balance sheet: it's about your brand, and the confidence you inspire." - Chuck Watson, Dynegy Corporation by Judith Haney USNEWSLINK/December 13, 2001 The decline of Enron Corporation, formed in July 1985 as a result of the merger of Houston Natural Gas and InterNorth of Omaha, Nebraska, is not just another over-hyped story about entrepreneurial intentions gone bad. The rise and fall of Enron is unique to corporate America. Corporations rise and fall with the economic tides. Stockholders lose money. But there is something different and compelling about Enron's story. What renders the Enron story irresistible reading is the manner in which the corporation's leaders regularly and flagrantly bought and wielded political power and influence within the United States government and the Texas state government. And, of equal interest is what Enron is doing now, post Chapter 11 petition, to avoid liability for its acts of harm to its stockholders and former employees. The watchful observer can gain clear insight into Enron's well established reputation for unethical business standards and practices by simply following the attendant lawsuits filed against it subsequent to its filing a Chapter 11 petition for bankruptcy protection from its creditors and stockholders. In retrospect Enron's collapse should and could have been predicted. The grandiose schemes conjured up by ambitious executives and offered up to powerbrokers and politicians should have alerted mature observers to the fact that Enron would need unprecedented amounts of capital to fund its proposed acquisitions and fast-track expansion across the globe. But as ridiculous and unrealistic as its premature vision of global expansion was in lieu of having no cash to make it happen, Enron executives were able to dodge and weave their way, undetected, into a position of political influence among government officials by painting a less than honest picture of Enron's capital resources and its available cash to fund growth. To sum it up, at a certain juncture in Enron's history, a high profile confidence game was launched using billions and billions of dollars belonging to Enron stockholders. Those who needed Enron's money bought, or pretended to buy, the story. Politicians hungry for donations to pay off campaign debts wanted to believe Enron's plans for global expansion and Enron's vision of breaking up smaller companies with grandiose merger schemes that never came to fruition. Politicians on both sides of the isle became so dependant upon Enron's cash to fund their campaigns that they were hamstrung to stop the Enron train from careening out of control. At a certain point in mid-2000, those in the Enron inner circle, like former Texas Senator Phil Gramm's wife, who is a current Enron board member, simply stood by and watched the precarious dealings unfold. It is no secret that between Jan. 1999 and Jan. 2001, George W. Bush, #43, depended heavily upon Kenneth L. Lay, Enron's Chairman and CEO, for soft and hard money donations to his campaign for President. Lay, as a member of Bush's elite group of fundraisers, the "Pioneers", was expected to keep campaign coffers full. He did so in spades, raising an unprecedented amount of campaign dollars on behalf of Bush within a short span of a year and a half. The following is an excerpt from a
1999 biography of Kenneth
Lay, Chair & CEO, Enron Corp, whose 1999 salary & perks amounted to $42.4
Million: Not surprisingly, this global natural gas giant and its top executive are big political contributors who keep revolving doors whirling. Lay hired President Bush’s cabinet members James Baker and Robert Mosbacher as they left office. After President Bush’s ’93 Gulf War victory tour of Kuwait, Baker and other members of his entourage stayed on to hustle Enron contracts. The Clinton administration also threatened to cut Mozambique’s aid in ’95 if the world’s poorest country awarded a pipeline contract to a different company. Enron got Bush to contact Texas’ congressional delegation in ’97 to promote a corporate welfare program in which U.S. taxpayers finance political risk insurance for the foreign operations of corporations such as Enron. Enron plants around Houston—which surpassed LA for the title to the nation’s worst air—are “grandfathered” air polluters that exploit a loophole in state law to avoid installing modern pollution-control technologies. Earlier this year the Houston Astros inaugurated their new Enron Field, which was financed with $180 million in public tax dollars and $100 million from Enron. In return, Enron landed tax breaks and a $200 million contract to power the stadium. Topping Enron’s political wish list in Texas was deregulation of the state’s electrical markets. Bush signed this dream into law in ’99." But can Enron's relationship to Bush save it from further exposure to investigations and potential indictments? Maybe. Consider this: Enron has timed its filing for Chapter 11 bankruptcy protection precisely at a time when it has in place a formidable defense team, i.e., the politically powerful Lloyd Cutler, who has family connections to the SEC's Enforcement Director as of 10/29/2001, one Stephen Cutler, (Cutler Named SEC's Enforcement Director) who is a former partner in Lloyd Cutler's firm of Wilmer, Cutler & Pickering. Simultaneously with the appointment of Stephen Cutler to the top enforcement position at the SEC, was the announcement of the SEC's new policy that the commission may not take enforcement action against a company it investigates -- if the company cooperates fully with the authorities. Is it a mere coincidence that the SEC has adopted its no-prosecution policy precisely at the time that Enron collapses, or that Stephen Cutler is elevated to the position of Enforcement Director of the SEC a month before Enron collapses? It is more likely part of a larger Bush administration plan to protect Enron executives and board members from prosecution and financial ruin. In lieu of these circumstances, it is doubtful that an ongoing investigation by the SEC will yield meaningful results or indictments of Enron and/or its various corporate leaders. Ruling out the SEC taking remedial action, stockholders victimized by the doings of Enron can next look to the pending private lawsuits and pending congressional investigations to ferret out the truth about what went wrong inside Enron. And this process will take years. Certainly long enough for Enron to be dissolved and its assets distributed to its various debt-holders. Notwithstanding the SEC's new flaccid policy of not prosecuting violators and offending corporations, certain facts appear to support the conclusion that various oversight roles were unexplainably ignored by Arthur Anderson, the accounting firm responsible for auditing Enron's various subsidiaries; and, Enron's past and present board of directors; and, its past and present corporate executives, all of whom bore a fiduciary responsibility for identifying and remediating areas of potential loss to Enron's stockholders. That all backup systems failed in concert induces speculation of a conspiracy and cover-up of wrongdoing by those involved in the company's operations. This theory is supported by Chuck Watson, CEO of Dynegy Corporation. Watson pulled the plug on a cash infusing deal with Enron following Enron's filing its 10-Q form with the SEC on 11/19/2001, which disclosed previously undisclosed financial facts concerning the deteriorating condition of the company. During its negotiations with Dynegy, Enron failed to disclose the company's real condition, preferring to supply fraudulent financial statements and inflated values of assets to Watson. Upon discovering the real facts, Watson pulled out of the deal with Enron, but too late to recover Dynegy's $1.5 Billion Dollars advanced to Enron mid-way through the negotiations. In an effort to point attention away from the company's questionable doings, and re-route adverse public opinion toward an unwitting scapegoat, Enron filed suit against Dynegy, on the same day it filed Chapter 11, claiming breach of contract. Meanwhile Enron has kept Dynegy's $1.5 Billion Dollars AND the Northern Natural Gas Company. Curiously the circumstances surrounding Enron's desperate wooing of Dynegy in the 11th hour of its financial collapse, coupled with its failure to disclose its true financial condition, points to a conspiracy by and between desperate Enron executives charged with overseeing the operation. These executives were in possession of evidence that the formidable Enron ship was sinking and sinking fast but they hid it from Charles Watson and grabbed Dynegy's $1.5 Billion Dollars like bandits in the night. According to Watson, within three weeks of receiving the $1.5 Billion Dollars, Enron executives were unable to account for the money's whereabouts or how the money was spent. But, no matter how the case(s) against Enron turns out, the truth will ultimately emerge. And when it does, the future(s) of high profile political leaders who have thus far been untouchable in their associations with Enron "could" be swept away by the same tide that swept away Enron. And, henceforth and forever more, no amount of Enron money will buy back Enron's prior position of global influence and prevent ambitious politicians from distancing themselves from its high profile confidence games. And then what will Enron have to show for its grandiose dealings? Only a trail of victims left in the dust of illusions of power and dreams of global domination. What a waste of political influence that was. ADDITIONAL READING: Enron
Traders Caught On Tape When a forest fire shut down a major
transmission line into California, cutting power supplies and raising prices, Enron energy
traders celebrated, CBS News Correspondent Vince
Gonzales reports.
The collapse of Enron: Timeline of events Houston, We Have a Problem: More on the Enron Shakeup Circuit Breaker: Enron Dumps CFO Amid Conflict Questions Related Party Crashers? SEC Looking Into Possible Conflict on Interest at Enron SEC Names Beller New Corporate Finance Head The Amazing Disintegrating Firm It's Official: Everyone Looking Into Enron Fiasco ANDREW S. FASTOW - ENRON CORP. BACKGROUND ON ENRON: Enron, a Houston, Texas-based wholesale power marketer, reported a third-quarter loss of $618-mil Oct 16, and the US Securities and Exchange Commission subsequently announced an investigation into Enron's dealings with two partnerships involving its ex-CFO Andrew Fastow. In an announcement late Nov 9, Dynegy and Enron unveiled their $7.8-bil merger agreement. Dynegy called off the merger Nov 28 after S&P's Enron rating eroded confidence in Enron. Financially besieged Enron filed Dec 2 for Chapter 11 Bankruptcy Code protection in the US. Lawsuits filed in December, 2001, against
Enron and its corporate executives, by its former employees allege: 2. that Enron issued a series of statements concerning its business, financial results, and operations which failed to disclose, among other things: 3. that the company's Broadband Services Division was experiencing declining demand for bandwidth, and the company's efforts to create a trading market for bandwidth were not meeting with success, as many of the market participants were not creditworthy. 4. that the company's operating results were materially overstated, since Enron failed to write down in a timely fashion the value of its investments with certain limited partnerships — the partnerships that were managed by Fastow. 5. that Enron failed to write down impaired assets
on a timely basis in accordance with GAAP. 12/3/01: Dynegy CEO Calls Enron Lawsuit "Frivolous and Disengenuous" 11/30/01: Dynegy Clarifies Northern Natural Gas Investment 11/28/01: Dynegy Terminates Merger With Enron Information for Enron Alumni Affected by Chapter 11 Filing Enron Chapter 11 Reorganization Filings ENRON ANNOUNCES INFORMATION REGARDING DIVIDEND PAYMENTS -12/11/2001 ENRON RECEIVES APPROVAL OF “FIRST DAY ORDERS” -12/03/2001 ENRON ARRANGES $1.5 BILLION OF DEBTOR-IN-POSSESSION FINANCING-12/03/2001 EOTT ENERGY PARTNERS, L.P. ANNOUNCES INTERIM CREDIT AGREEMENT -11/30/2001 NORTHERN BORDER PIPELINE COMPANY REASSURES STAKEHOLDERS REGARDING ENRON EXPOSURE -11/29/2001 NORTHERN BORDER PARTNERS REASSURES INVESTORS REGARDING ENRON EXPOSURE -11/29/2001 ENRON ANNOUNCES INFORMATION REGARDING DIVIDEND PAYMENTS -11/29/2001 ENRON APPOINTS RAYMOND S. TROUBH TO BOARD-11/28/2001 ENRON FILES 10-Q WITH SEC; PROVIDES MORE INFORMATION ON -11/19/2001
THE FALLOUT:
Talking heads, wonks,
scribblers and wise men
Bill Kristol
$100,000
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This list below matches names from the above documents
(directors, some officers, and major shareholders) with names from NameBase. It appears
that unlike the BCCI scandal, there are no major spook connections with Enron. What we
have here, apparently, is an assortment of talented wheelin', dealin', cheatin' Texas oil
cowboys. 
