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Sarah Jewett March 1, 2011 at 8:37 pm

birthday shout out to Ray Bowen. his birthday is November 25.Happy Birthday babe , we all love you, love- your girl (:

caraellison March 5, 2011 at 12:51 pm

Where to begin? OK, ENRON. Could you show us a picture of ENRON? Give us a biography? How many kids does ENRON have? What schools did ENRON attend? Of course you can’t. “ENRON” does not exist. It has no corporeality. It is merely what the lawyers call a “legal fiction” (the rest of us, who have to live in reality, call it a ‘lie’ that is generally agreed to at large so things can be made to work. You wrote:

Yep, its a company. Agreed.

I said:
“In the first place, Enron was not a bad company.”

You asked:
Then why did it fail?

Enron failed due to a run on the bank.

it isn’t enough to load it all on Fastow. Why? Because there were other executives in the company who should have known about Fastow’s antics.

Should have known….maybe. But they didn't. Fastow said at trial that he was scared of being caught, that he conspired with Kopper to cover up his crimes.

When Fastow took his co-conspirators to the Caymens, he took everyone who made money with him. But Skilling wasn't there. Lay wasn't.

They did not, and down went ENRON. Remember the day Fastow was fired, and Jeff McMahon replaced him? McMahon asked for a debt maturities schedule. The treasurer of this Fortune 50 company couldn’t do it, and had to scramble amongst his staff for several hours before coming up with a figure, a figure that was several billion dollars low. This may not be criminal, but then you have a question to answer, viz: At what point does ineptitude, laziness, stupidity, incompetence, carelessness, and sloth cross the line to criminality?

Good question, but I doubt it will ever be answered. And I think that any judgement we have on the case is in retrospect.

Remember the legal fiction of a corporation? The law also has a legal fiction that there are degrees of incompetence severe enough to be treated as criminality. This is why Ken Lay was convicted.

No. He was convicted on conspiracy and a few banking charges from Regulation U.

I think you're falling for the myth here. He was a Ph. D in economics. He was not stupid or incompetent. He was a good man, and a good executive.

I have sympathy for the man. From what I’ve learned about him, he did seem honest. I can’t see him as a crook in the Andy Fastow manner. But consider this: when Skilling jumped ship as president (disgracefully, in my view) Lay came back. For this, the Board of Directors gave him a ten million dollar bonus. Ten million is more than 90% of all top bosses will earn in a lifetime. What value did Lay contribute to Enron for his ten million?

A few things here.

First, Skilling did not 'jump ship.' He had been talking to Ken Lay, his brother, and others about leaving Enron for YEARS.

Secondly, what business is it of yours what Lay did to earn the money? It's a serious question. His contract allowed for that, and he was entitled. Are you in a better position to value that than the Board of Directors?

The story of the merger with Dynegy is laugh out loud funny, as scheme after scheme blows up in Lay’s face. If you don’t laugh at it, you’d be horrified at such ineptitude. I can’t make Lay out. He seems a sharp fellow, but he was remarkably incurious about what was going on (”Ken gravitates toward good news,” as one of his staff put it) and lazy about finding out and correcting matters.

A lot of the top execs at the company were burning out. In the year preceding the collapse many of the old guard were leaving. I think Ken Lay was tired. That being said, I don't think he was incompetent. Through the summer of 2001, the stock was attacked repeatedly – plus 9/11 happened, plus Skilling left … yeah, I think he was tired.

With Skilling, matters are even worse. he allowed a system to come into being that spit in the face of honest effort, viz. the Performance Review Committee (PRC). This PRC rewarded Fastow & Co hugely, while downgrading Jim Bouillion (I may be misspelling his name) who bought Enron’s insurance, and Stinson Gibner, who recognized the danger a sudden drop in Enron’s credit rating would be to the company—and got an “average” performance rating for his pains.

You got that story from Conspiracy of Fools. I hate to break this to you, but PRC isn't illegal or even wrong. Do you ever have annual reviews at your job? I am sorry that some people were screwed over. One of the ENE people I speak with told me a story of being at the PRC and for no reason at all, Fastow attacked his guys. This is crappy, but it's not illegal.

How did Skilling defend and protect these two, who did their best for Enron?

It's not Skilling's job to put out every little grease-fire. He was the Chief Executive, he had bigger fish to fry.

Mark to market accounting works well in a deep, well-established market. Using it for Enron’s original natural gas business made sense. It made no sense at all for water businesses, for broadband (pre- 2001), or for power generation.

MTM was not used in any of the international assets – ie, water or power generation.

No fraud at Enron? You’ve sliced the baloney quite thin in re Fastow. How about the “Death Star” and “Richochet” and “Fat Boy” strategies for power trading in California? Are these fraudulent? if not, are they honorable practices that Enron could show the world with no worries?

I do not believe they are fraudulent. That was the point of them – the traders were taking advantage of the holes the CPU created.

How about the Raptor and Chewco “hedges”? Note how Enron officers kept pressing Arthur Andersen to approve the accounting.

Those were two of Fastow's projects – projects for which he is currently in prison.

Was this honorable?

Not my problem. It's either illegal or not. The hedges were fine – but Fastow's skimming was, obviously, not.

Were Rick Causey and Rick Buy crooks?

Absolutely not.

if not, were they honorable? If so, were they competent.

They were extremely competent, good men. Rick Causey is a sad case – if you've read his sentencing brief his attorney basically says – straight up – that he's pleading guilty EVEN THOUGH HE ACTED IN ACCORDANCE WITH GAAP. This is an odd thing to say at a sentencing. And Rick Buy was never accused of anything.

Mr. Greene, like you, says “Enron was good company.” Preposterous. This “good company” collapsed, ruining many reputations, and doing great harm financially and otherwise to Enron employees. I think he (and you) may mean:

“Enron had many good employees, and for a long time, was a first rate company. But in the end, there was enough incompetence, crookedness, and moral cowardice to overwhelm the good parts of the company, and bring it down.”

No. I mean: Enron was a good company. It was innovative. It was strong. There was no fraud or conspiracy at Enron.

I can’t prove Ken Lay or Jeff Skilling acted fraudulently.

Yet you believe they did. Why?

I can show they were remarkably out of touch, which did not stop them from claiming big money for performance they did not give. Crooked? Fraudulent? Perhaps not in the legal, or even the common use of the words. Did they act diligently and honorably? No they did not. And they claimed the rewards of a first class performance anyway.

Well, not so fast. Skilling didn't. At one point in his career he walked away from $50 million. Then when he left Enron, he was owed a severance and the company offered to repay a $2 million loan. Skilling opted out of the severance, and repaid the loan himself. If he's a crook, he's absolutely the most polite crook I've ever heard of. And I'd welcome him at my dinner table any day. I'd let him watch my children. I'd trust him, today, with my life savings.

Last question for you: Did Skilling and Lay’s actions make, say, Ray Bowen’s and Jeff McMahon’s lives easier? Or aren’t Bowen and McMahon worth defending.

Absolutely they are. I have been passionately pro-McMahon on this blog, for instance. But I reject the premise of the question. Skilling had no obligation to “make” anything easy for anyone. He was the CEO. His job was to run the company.

Douglas B April 14, 2011 at 6:42 am

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