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Your first question is very good but your second question I think answers itself. There wasn't fraud or mismanagement on a huge scale. I don't think the partnerships that were moved off the books were on a huge scale. Compared to the Company's Trading volume and capacity, the accounting quirks were trivial. Something else is going on here.

Note that the SEC has implied that Enron is playing ball and has taken steps to show it's getting its act together. Second, note the following quote:

The U.S. Treasury Department said it was monitoring Enron, but said it has yet to see "anything extraordinary."

The above quote confirms why your first question and observation is so good. I've been following this story fairly closely for a few weeks now. It really doesn't add up other than a temporary dive in some IT side investing. But just about everyone is shell shocked over IT spinouts, it's not isolated to Enron. Enron can still make a lot of money.

You asked the right question.

I personally suspect some payback politics.

"Compared to the Company's Trading volume and capacity, the accounting quirks were trivial. Something else is going on here."

The accounting "tricks" uncovered in just this quarter alone wiped out over $600 Million in profits from a year that saw only $900 Million in "dressed up" profits.

It's difficult to see in the articles above, but here is how just ONE of those accounting tricks was used:

The CFO formed his own private company. Enron funded the company and went in on 50-50 deals, with Enron co-signing the note for 100% of the debt. Per certain accounting rules (Gaap, perhaps), if your company doesn't own 50.1% of a venture, then you don't have to carry the debt on your books, but you do get to count 100% of the assets of the venture on your books.

So shareholders didn't realize the full extent of Enron's debt due to these and other such "tricks", and they were misled over the the actual real value of Enron's assets due to these same tricks.

The real rub is that a third-party audit (required for the 10-Q's) is supposed to document these transactions so that stock holders, employees, and stock brokers can view the full risk picture. Instead of red-flagging these and other tricks, Andersen buried them in long-winded paragraphs and acted as though they were no big deal.

This behavior allowed the big three credit rating agencies to issue inflated grades to Enron's known public debt, and those cheery ratings misled ordinary bond investors to get sucked into junk bonds thinking that they had "A" quality paper.

Also, if you will review Enron's campaign donations, you will see that they spread their donations almost evenly between Democrats and Republicans in 2000, so a political "payback" theory makes no sense.