the CAMP ENRON Report


CAMP ENRON:
... 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.


OUR DEPARTMENTS:

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


CAMP ENRON:
... 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.
Saturday, June 01, 2002

 
--- Friday NewsBag: A Day in the Life of Camp Enron ---

We don't do play-by-play on a routine basis, for reasons this post may help explain. Consider this a time capsule of items in the news of May 31, 2002. If you're unclear as to the connection between any of these items and the unfolding Enron meta-scandal ... you haven't been paying attention.

FERC orders El Paso Corp to renegotiate natural gas pipeline contracts, arguably removing preferences that arguably enabled it to play withholding games to spike California prices at the heart of the 2000/2001 "energy crisis". (NYT)

FERC denies California's petition to add $2.8B to the existing $8.9 energy overcharge refund proceeding. CA contends the lack of accurate filings by energy companies prejudiced California's ability to file for relief. FERC concludes the energy banditos failed to file required data, and ordered them to file revised reports (more paperwork! that'll teach 'em) but objected to California's A.G. Bill Lockyer's plea as a "collateral attack" on past rulings. (NYT) Well, duh! Some of those past ruling fairly well beg for collateral attack!

"Citigroup Inc. is being drawn into the problems at energy trader Dynegy Inc." (WSJ) Citi helped Dynegy structure and execute "Project Alpha" -- a sci-fi masterpiece of parallel universe financial engineering that enabled Dynegy to boost reported cash flow by $300M, and achieve an $80M tax benefit without actually moving any atoms in our universe.

Peregrine fired KPMG earlier in the week, after firing Andersen a few weeks back. KPMG had discovered $100M in questionable revenue recognition. KPMG traced the problem to Peregrine resellers whose "channel stuffing" teamwork enabled Peregrine to record sales without actually having sold software to customers. On further review, KPMG discovered one of these resellers was ... KPMG! KPMG is now re-reviewing its most recent review of conflict-avoidance protocols, instituted in response to a 2001 SEC cease-and-desist order. (WSJ)

SEC employees rally to protest the agency's 6% pay raise offer. (WSJ) SEC staff are outnumbered and out-compensated, and they don't have full confidence in their top brass, and the casework floodwaters are rising.

In the Houston obstruction of justice trial, Andersen partner Richard Corgel fulminates about lawyers' habit of spinning extraneous notes into damaging evidence ... possible reference to his own "Is this a Ponzi scheme?" note, considered key evidence against Andersen in the last month's Baptist Foundation of Arizona trial. (WSJ)

Europe's leading data-service network will shut down, maybe within days, as KPNQwest's credit structure imploded and takeover prospects failed to gel. KPNQwest -- valued at $36B two years ago -- is the progeny of Qwest (which seems to be well along in its own overbuilding, roundtripping, money-no-longer-grows-on-trees death spiral) and Dutch telecom KPN NV. (FT)

Moody's cuts Qwest credit rating to junk. (NYT)

Moody's warns companies now engaged in energy trading -- their debt may be doomed to junk status unless they achieve substantial restructuring. Options include merger with more stable businesses, creation of more transparent clearing systems, or spinning off flaky trading operations to preserve the credit of conventional lines of business. (WSJ) If energy arbitrage ever stabilizes as a real business (and it probably should) it'd be a low-margin, high-volume business ... which would necessitate access to large sums of low-cost capital.

Heard a voice on CNBC (didn't catch who, or which company) note a landmark US firm's bonds are now trading just two notches above Botswana.

Sixth-largest cable operator Adelphia -- maybe cable's largest pure play -- is in a big heap o' trouble, as is it's founding Rigas family, as may be its auditor Deloitte Touche, as may be the corporate HQ of Coudersport, PA, subsidized by the Rigas's as kind of a small-town nostalgia theme park. The family seems to have engaged in multi-billion-dollar self-dealing, mostly unrecorded on the company's books. Non-family shareholders are fighting for control before Rigas fire-sales the remaining assets. NASDAQ delisted the firm a day earlier, which may put some of its credit arrangements in default. (NYT)

An adverse opinion from JP Morgan Chase -- pulling the string on an earlier expected commitment -- is believed to torpedo two Asian companies' bid for the remains of Global Crossing. (NYT)

Enron accepted resignations of two directors who'd been involved in audit relationships and code-of-ethics waivers, and appointed two new board members. Former director Savage was connected to Alliance Capital Management (target of Florida pension fund litigation for doubling down as Enron fell). Former director Mendelsohn was president of cancer mecca M. D. Anderson Hospitals, beneficiary of lavish Enron contributions. (NYT)

WSJ's Laurie Cohen and Dennis Berman uncork a steaming expose of Salomon Smith Barney's controversial telecom tout Jack Grubman's insider relationship with fiber-optic dark star Global Crossing. In daily contact with GX CEO Gary Winnick, Grubman influenced key hires, helped negotiate major acquisitions, advised Winnick on personal stock sales, and advised GX on corporate strategy ... while publicly lauding GX for "building a truly unique and very valuable strategic asset". Grubman occasionally refrained from writing research reports for brief periods after working directly on GX deals (two months, in one instance, bargained down from Salomon's preferred six months -- at Winnick's insistence!). Grubman seems to have been the power behind the throne, as kingpin Winnick went into the game without benefit of telecom experience. Winnick says "Jack Grubman was the Bruce Springsteen of telecom" ... does that mean he was really the Boss at Global Crossing?

WSJ's Friday evening TV chat show, "Editorial Board with Stuart Varney", offered a grand disjunct from the weeks hard news and analysis. As it turns out, everything's OK! Editor Bartley blithely assures everyone Global's share price collapse proves no corrupt analyst could ever boost prices in the first place. (Grubman finally went "neutral" on GX at $1.07.) Varney opined that stuff happens, The Market clears it, and then it's business as usual again. This view went unchallenged ... no grasp of the market dynamics of unsymmetric information. The Wall Street Journal Editorial Page -- telling moneybags what they wanna hear since 1889. They see each dot, they don't mind if the news-hounds on the other side of the house reports the dots, they love those little half-tone newsmaker thumbnail portraits, but when it comes to abstract pointillism on a "Cristo" scale . . .. ... ..... ........ ............. they just don't get the big picture!

NYT's Floyd Norris notes corporate insider sales outweigh share purchases 4.2-to-1, "more bearish than at any time in years".

In Houston, witnesses recounted conflicts between Enron, Andersen's partners on the Enron engagement, and Andersen's Professional Standards Group. PSG were double-teamed, and lost. Later, they remember being "bothered" by document destruction directed by Andersen in-house counsel Nancy Temple. (And these are the defense witnesses.) (Houston Chronicle)

LA Times reports a new Enron smoking gun memo (dated 2000-10-30, by former Brobeck atty Gary Fergus), apparently a what-if "wargaming" document addressing legal adversities and countermeasures related to trading strategies employed in the tight California energy market. Enron disputes LAT's characterization of the memo and its context.

Texas PUC is investigating Enron spin-off New Power for charging higher fees to electric customers with poor credit. New Power defends the practice ... though it's banned under Texas rules and reg's. (Chron)

At their annual shareholders meeting, CSFB defends it's dealings leading up to Enron's collapse. They face multiple big-ticket lawsuits, and the digging has only just begun. (Chron)

Enron lawyers went to court to get recover part of a $212K luxury suite deposit at Reliant Field. (Chron)

EOTT Energy Partners, 37% owned by Enron, reported net losses for the year, dominated by write-offs of Enron contracts. (Chron)

Alabama pension fund suit will be tried in Alabama courts under Alabama law. This reportedly increases exposure of external accountants, attorneys and financial institutions. (Chron)

Extensive forensic tests and circumstantial evidence confirm: Cliff Baxter is still dead, and it really was suicide as initially believed. (Chron)

IRS has begun a review of Enron's $1B tax reduction transactions. (WP)

Enron tells the judge it is now eager to pay $6M annually for independent manager Fleet Street to administer retirement funds covering 20,000 employees and retirees. Enron has zigged and zagged on this offer, drawing strongly worded reprimands from, well, just about everybody at one time or another. (WP)

And as usual, somewhere, out there, someone is assuring somebody "The Enron story is dead".