Word: enronize
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...House Energy and Commerce Committee and federal agents probing Enron's fall are skipping over the accounting schemes and other questionable business practices--including a bizarre sex angle: a scheme to offer pornography via the Internet. The investigators instead have zeroed in on what officials from Enron and Andersen did and did not do once they realized that the debts were mounting, that the stock price was falling and that the last people to learn of the looming reckoning were going to be millions of Enron shareholders. Watkins' two letters provide the road map for their inquiry...
...took Watkins weeks to work up the nerve to write her first letter to Lay. She had been working for chief financial officer Andrew Fastow last summer, looking for assets to sell as Enron ran into financial trouble while transforming itself into a company that traded energy, water, weather derivatives and anything else it could turn into a commodity. Watkins wanted to help, but everywhere she looked she ran into off-the-books arrangements that no one could explain or seemed to want to investigate. She knew that others who had pressed then CEO Jeffrey Skilling about the investments...
Watkins learned Enron was losing money on two equity investments: network-equipment supplier Avici lost 98% of its value, and another, New Power, an energy retailer that had Ken Lay on the board, dropped more than 80%. Because both firms were backed by Enron stock, Watkins knew their downfall was dragging down Enron too. None of that was being reflected in the company's public filings, as far as she could tell. As her lawyer Philip Hilder explains, "The numbers just didn...
...letter laid out what many executives knew but no one had the courage to say. Watkins homed in on two sets of transactions called Condor and Raptor (Enron had a penchant for names inspired by Jurassic Park and Star Wars) and argued that the accounting treatment was unsound, if not dishonest. Enron had booked huge profits from these entities while its stock price soared in 2000, despite the fact that neither Condor nor Raptor had any hard assets. But now that Enron's price was dropping, the company had to note these devaluations or pour more money into the companies...
...companywide meeting, Lay invited anyone troubled by Skilling's departure to meet with him. Four days later Watkins called a friend at Andersen and asked for advice. On Aug. 21 the friend drafted a memo detailing Watkins' concerns for Andersen auditors on the Enron account. Meanwhile, Watkins went to Lay seeking a meeting. The next day she met with the chairman...