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Enron Mail |
-----Original Message----- From: Mrha, Jean Sent: Tuesday, November 13, 2001 10:12 AM To: Schwieger, Jim Subject: FW: Sanders Morris analyst piece on Enron Jim, Do you remember Rob Lloyd? He know works at AIM Funds here in town. Please read the piece below - I think it is well written and summarizes our sad situation succinctly. Regards, Jean -----Original Message----- From: Lloyd, Robert J [mailto:Robert_Lloyd@AIMFUNDS.COM] Sent: Tuesday, November 13, 2001 9:41 AM To: Mrha, Jean Subject: Sanders Morris analyst piece on Enron Jean, Thought you'd find this interesting. It's an excerpt from an analyst's note out this AM. A Perspective: R.I.P. Enron: It took sixteen years to build Enron into a $63 billion asset powerhouse, but only 24 days for it to disintegrate. The fatal flaw was the aggressive accounting and leveraging done in various off balance sheet partnerships (Special Purpose Entities), which apparently became too aggressive to fully disclose. Wall Street had no idea of their holdings, their leverage or their derivative exposures. The SPEs mutated into something beyond the pale, becoming a company within a company. This evidently began 30 months ago when the new management regime (Skilling, Fastow, et al) sanctioned their evolution. Make no mistake: they were cleverly contrived. They involved conventional asset & debt transfers off the books, coupled with fair value (asset mark-to-market) accounting and synthetic equity financing. This allowed for considerable earnings management and the appearance of cost-free equity. If nothing else, they now appear in hindsight to have been vanity deals: very New Economy, very Virtual and very aggressive. But no clients ever complained, to our knowledge. Yet ENE clearly crossed the GAAP reporting lines, as the latest 8-K attests, and the dual role of the CFO (sitting on both sides of the table in the LJM transactions), profiting highly in the process, created in the LJM partnership natural conflicts of interest now being investigated by the SEC. Because of this elementary mistake in any seasoned judgment, which passed muster at every level, the most successful energy company of the 90s was vaporized in the marketplace. The main thing that brought ENE down was hubris. It had used up all of its credibility when the partnerships were brought to light. If these were fully revealed two years ago, a collapse would have been very unlikely. Rob Lloyd AIM Management 713-214-4355
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