Posted on 07/29/2002 1:47:42 PM PDT by LakerCJL
This is the second of 5 articles detailing what happened at Enron. It is extremely interesting and easy to understand for everyone (even those that don't have an advanced degree in accounting).
There are links to the first article and, I suppose, the last three will come over the next couple of days. This particular report focuses on Jeff Skilling and his role in the collapse...
Here's an interesting excerpt:
"Skilling's most important innovation may have been in spearheading a fundamental change in the way Enron did business. In 1992, he persuaded federal regulators to permit the company to use an accounting method known as mark to market. It was an accepted technique for brokerages and trading companies, who used it to record the value of their securities at the close of the market each day. Until Skilling, it had not been permitted for energy companies.
He won approval over the objections of some Securities and Exchange Commission staffers. That day, he gave an elated shout and a cheer went up in the office. The coup allowed the company to count projected earnings from long-term energy contracts -- money it might not collect for 20 years, if ever -- as current income."
click here to read the entire article
(Excerpt) Read more at washingtonpost.com ...
What, other than potential fraud would be the advantage of counting "projected earnings" as current income?
The "shout and cheer" from the office speaks volumes about the crooks in charge....may they rot in hell.
Excellent question. I was taught to book transactions in the period in which they occured. Guess I way too unsophisticated.
Enron shares were trading at slightly more than $36 a share.
In the third week of August, Chung Wu, a UBS PaineWebber broker in Houston, e-mailed 73 investment clients saying Enron was in trouble and advising them to consider selling their shares. Some of his clients were Enron executives, and the managers of the company's stock option plan soon heard about Wu's action. They demanded that he be disciplined.
PaineWebber handled personal investing for many Enron top executives, and the firm itself was recommending Enron to investors as "a strong buy." PaineWebber later said it fired Wu because he gave clients advice contrary to the company's without authorization.
Why we never seem to get "sell" advice from the "stock experts"
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