Comments on: Enron collapse

Question: Enron collapse

Tryptophan-5ht — Thu, 03 Jun 2004 19:29:42 -0800

ENRON: They were making money hand over fist. How is it that they went bankrupt?

By: calwatch

calwatch — Thu, 03 Jun 2004 19:34:31 -0800

See this news series in the hometown newspaper of Enron, the Houston Chronicle.

By: scarabic

scarabic — Thu, 03 Jun 2004 19:57:31 -0800

It's called the stock market. Hiding losses does wonders for your stock price. The company was not necessarily doing so great, but individuals who sold stock at the right time certainly walked away with fortunes.

By: rdr

rdr — Thu, 03 Jun 2004 20:20:24 -0800

Do you think they'd only lie to and cheat their customers and somehow be honest with their stockholders?

By: Fupped Duck

Fupped Duck — Thu, 03 Jun 2004 20:32:43 -0800

Creative accounting. Its really as simple as that.

By: jbrjake

jbrjake — Thu, 03 Jun 2004 20:36:38 -0800

One small tidbit that illustrates it all was the fake trading floor they used to pump up their stock price every year.

I suspect your question is more, "Technically, how can you go bankrupt, i.e., have no money, when you were raking in unethical bucks day in day out? Where'd the cash go?" In which case the answer probable involves a lot of off-shore accounts. But I'm not sure that's what you mean. Could you provide more detail, please?

By: i_am_joe's_spleen

i_am_joe's_spleen — Thu, 03 Jun 2004 20:40:54 -0800

They weren't making money hand over fist. While they reported great profits, this was done through accounting trickery. In particular, losses and debt were offloaded into "special partnerships" and not disclosed in the books of the main company.

The fact is they put a lot of effort into creating the impression that they were making money hand over fist, but this simply wasn't true. That's why the execs etc should be in jail. Not for incompetence - hey, we all make mistakes! - but for deliberately misleading investors and other stakeholders.

Individual officers of the company profited greatly from this mess, but the company itself never did.

By: Tryptophan-5ht

Tryptophan-5ht — Thu, 03 Jun 2004 21:12:34 -0800

jake - exactly! didn't they rob californian energy consumers of 8 billion dollars (or something to that tune)? Where did all that money go? They couldn't stay afloat, even bilking consumers for literally billions? Wouldn't you kind of have to *try* to fuck up?

just read joe!

so the money went into pockets, not corporate reserves?

...and so that means - they were so drunk with power and greed, that despite all the money flowing in, they couldn't restrain themselves enough to keep the whole mess rolling?

By: SpecialK

SpecialK — Fri, 04 Jun 2004 00:55:37 -0800

Tryp -- Read i_am_joe's response again. No conspiracy here, the money didn't go into offshore accounts... they may have taken in a lot of money, but they spent or lost gobs more than that (energy brokering/trading is risky and expensive, and most of their hard assets (i.e. PGE) weren't profitable) and hid the losses elsewhere.

It's like making $50,000 a year and spending $150,000/year. You're making decent money, 'cept that additional $100k/year is on credit cards registered in your little sister's name and doesn't show as your debt, so you leave people wondering what you did with that $50k per year you were making.

By: Tryptophan-5ht

Tryptophan-5ht — Fri, 04 Jun 2004 02:43:32 -0800

i see. makes sense.