the CAMP ENRON Report
... gateway to the next Progressive Era?
Some say it's nothing but a train wreck ... roll in the big cranes, clear the track, see what the crew's been smoking. If I thought so, I'd not be writing this ... and if they thought so, they'd not be drumming so hard.
For a brief orientation, see this
Welcome to Camp Enron
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Camp Enron Archives
01/01/2002 - 02/01/2002 02/01/2002 - 03/01/2002 03/01/2002 - 04/01/2002 04/01/2002 - 05/01/2002 05/01/2002 - 06/01/2002 06/01/2002 - 07/01/2002 07/01/2002 - 08/01/2002 08/01/2002 - 09/01/2002 06/01/2003 - 07/01/2003
NOTE to READERS:
(2) All "major" articles of older material have now been imported, some with updates worth perusing. We'll keep it all on the main page for a while, will add a few loose pieces of history, will trim the main page and index the archives for convenience later.
the COGENT PROVOCATEUR:
free agent, loose cannon, pointy stick ... taking an imposing analytic toolkit out of the box, over the wall and into the street ... with callous disregard for accepted wisdom and standard English
reading the tea leaves from original angles, we've led with uncannily prescient takes on the federal surplus, the dotcom crash, the "Energy Crisis", the Afghan campaign, the federal deficit.
More where those came from ... stay tuned.
For brief orientation, see this
Welcome to CP
... gateway to the next Progressive Era?
For a brief orientation, see this
Welcome to Camp Enron
OTHER GOOD STUFF:
Many thanks to Tony Adragna and Will Vehrs, still shouting 'cross the Potomac at QuasiPundit. Early Camp Enron material can be found in QP's Dispatches department.
Monday, February 18, 2002
--- Watkins Skates, Sharks Gather, Vultures Circle ---In a triumph of Artistic Impression triumphs over Technical Merit, a congressional panel melts as Sherron Watkins skates over ethical thin ice. Watkins' performance sets the stage for Ken Lay's vaunted "out-of-the-triple-toe-loop" defense of his crown.
FLASHBACK to Camp Enron Report of 2002-01-18:
The big fish could still slip the net on the premise that everything they did was stupid but technically legal, or done on misinformation, or on somebody else's authority, or done "virtually" in places where it wasn't even illegal. Or "auditor ate my homework" defense, or some premature proceeding leaves them with Ollie North immunity. Or they pull a Marc Rich ... or find Jesus, plead out for a slap on the wrist and retire to the Cayman Islands to write their memoirs.Also recall our suggestion of the Enron Valdez defense: "I wasn't even on deck".
In Iran-Contra, you may recall, nobody was in the loop, from Reagan the delivery boys ... at least on the record. Little fish were just following ultra-secret orders. Big fish never even heard of the operation. Middle fish could not recall "at this point in time". Whatever links the prosecution could cobble together were ultimately blown to smithereens in a barrage of presidential pardons.
Watkins may be stranded in ethical no-man's land ... not in on the original Enron caper, but implicated in the getaway as an accessory after the fact. At any rate, the hunger for telegenic testimony, the dearth of competing witnesses, and her own survival instancts should guarantee sympathetic treatment.
Once thought to be destroyed, recap notes from interviews in Enron's internal investigation suggest big differences between what Lay knew and what Lay said as he exercised PR damage control over Skilling's abrupt departure. See WSJ on MSNBC
Meanwhile, Texas archivist are gradually releasing documents (the "KennyBoy Papers"?) revealing Bush and Lay as penpals. GWB carrying water for ENE in Pennsylvania, Uzbekistan, and Texas ... not necessarily a bad thing for the guv to do for a home-state biz. Enron staff carried water for Bush on political errands, too ... that could be a shade more problematic. Scope of contacts and buddy-buddy tone demolish GWB's "KennyBoy who?" disclaimers. As far as we know Bush has little or nothing to hide ... why work so hard to hide it? "Guilty knowledge"? The Smoking Gun has more originals than you ever want to see.
FLASHBACK to this Short Takes of 2002-01-11, breaking ground for Camp Enron, where I suggested:
For future reference, remember this phrase ... "a Culture of Minimal Disclosure". ... Conventional wisdom says it's just more Hatfields and McCoys. I predict it becomes a major historical turning point.Most incriminating statement to date!
Not Skilling. Not Watkins. Andersen CEO Joseph Berardino, before the House Financial Services Subcommittee (2002-02-05), fields a softball question re legit uses of off-balance-sheet financing and Special Purpose Vehicles, and answers -- "because a company wants to show a better financial position, perhaps attract a lower cost of capital ... very common". There really are legitimate accounting, business and economic reasons for SPV's ... but apparently none came readily to mind when Mr. B was caught in the glare of the headlights, er, spotlights. An indictment of the system ... if you're looking for Mr. Big, the Culture is the real killer.
(Speaking of SPV's, scuttlebutt around Camp Enron says DOD is field testing a ruggedized all-terrain amphibious version of the Enron SPV for high-risk operations. On background, one source notes "If we only had these babies back in the day, we'd still own Havana, the Philippines, and the Panama Canal.")
"Feeding Frenzy" -- the expression properly pertains to sharks, who can get so excited over blood in the water that they'll bite on anything (including each other). The metaphor extends less than rigorously to pack journalism. But it applies with a vengeance to bankruptcy proceedings, where creditors and other litigious scavengers are at once teammates (trying to maximize nutritional value extracted from the whole carcass) and competitors (elbowing each other for position in the pecking order).
The Great John Nash ("A Beautiful Mind") won a Nobel for formalizing the game-theoretic foundations of such cooperative conflicts. Nash thought he'd found a system of elegant rational solutions ... further examination it revealed a perverse infinite regress of games within games.
FF#1: The ENE creditors committee is dominated by megabanks, who have conflicted motives based on overlapping relationships (including the prospect they'll end up on the defense side of the table with Enron in related cases). A scuffle is brewing between the megabanks, ordinary creditors, Enron affiliates inside the bankruptcy envelope, Enron affiliates outside the bankruptcy envelope, and arms-length transactional counterparties. Bones of contention include disposal of valuable properties, and interim management of the ENE Empire's integrated cash management system (see earlier item on NEPCO).
Barnet Skelton, a Houston attorney who was arguing for the motion to wall off Enron N.A. from the corporate cash-management system, said the creditors committee was not the "watchdog" for all creditors it claimed to be. Rather, he said, it is a "lapdog" for Enron's biggest creditors, Citicorp USA and JPMorgan Chase Bank, who have substantial holdings in Enron Corp. (Houston Chronicle)FF#2: In a mass consolidation of shareholder lawsuits, the University of California is designated lead plaintiff. Based on coherence and experience, Cal edged out bids by an NYC/Florida coalition, and a four-state combo (OH, WA, GA, AL). Potential for mixed motives here, too, since California is going after Enron for billions in energy market manipulation refunds.
FF#3: One subset of Enron employees and retirees aren't getting paid on the deferred compensation plan they bought into and worked for in years past. Another subset cleaned up on up-front salary and bonuses shortly before ENE filed bankruptcy. Money in the bank? Yes. In the clear? Not necessarily. The first group may have a case against the second group, since payments made in contemplation of bankruptcy may be unwound as "preferences".
FF#4: Enron's tax history goes under the scanning electron microscope. Did ENE net $381M in tax rebates over five years (as claimed by Citizens for Tax Justice)? Did ENE pay $112M net taxes (mostly AMT) last year alone, as they claim? Or did ENE pay relatively modest amounts in net taxes, as ENE financial statements suggest? Enron agrees to waive privacy and turn over tax records for thousands of subsidiaries and partnerships back to 1985. By my reckoning we're looking at millions of pages of tax returns in umpteen national jurisdictions with no central clearing house, and no direct way to backtrack the offsets and reconcile competing claims of fact, equity and priority. (See previous item re PGE.) When the facts are sorted out, competing governments will chase money that's no longer in ENE's vault. Where is it, and how far will they chase it? Looks to me like at least a twenty-year case ... the kind that stimulates development of novel litigation technology and artificial intelligence ... maybe even a lively futures market in Enron tax liability swaps.
FF#5: Finally and hilariously, Enron is as Enron does. Some enterprising post-Enron jackal tried to file a (forged) deed in Galveston County, transferring title to $15M in (genuine) properties owned by Ken and Linda Lay -- three houses in (appropriately) Pirate's Cove -- to the "Enron 401(k) Employee Trust".
Is Ken Lay really broke? We really don't know. Disclosures of previously unreported stock sales (under a reporting exception where the buyer is the corporation) undermine the "poor KennyBoy" storyline ... but suppose Lay was cockeyed optimist enough to plow the proceeds into frothy tech stocks on margin? Leverage works both ways. The sob story could be essentially true if Lay continued investing borrowed dollars, on borrowed time, into a collapsing bubble.
Access of Evil?
And "In public policy, it matters less who has the best arguments and more who gets heard -- and by whom." (Ralph Reed memo to Enron)
And just outside the Enron envelope, "Not that he owes me a vote, but he owes me a phone call." (Trial lawyer/lobbyist Dickie Scruggs in re Sen. John Edwards, D-NC).
Remember Rudy G's venture with Ernst & Young to provide crisis management consulting to distressed businesses and agencies? WSJ reports Giuliani Partners declines invitation to help a distressed Enron. OK, then, how about Global Crossing?
Coming soon -- how Al Gore nearly saved Enron AND Global Crossing!