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

(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.


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

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 08, 2002

--- TYCO: The Case of the Killer Tax Shelter? ---

TYCO Chairman/CEO Dennis Kozlowski was abruptly fired last week after being identified in a criminal indictment for evading $1M in NY sales tax (and possibly using Tyco resources and employees to carry out the scam). The scheme included shipping empty crates to tax-free Exeter, while the real artwork allegedly went home with Kozlowski.

Context: Koz was architect of Tyco's growth to multi-giga-global conglomerate eminence. Believers thought of Tyco as another GE. Skeptics never thought Tyco numbers passed the sniff test, and of late -- under "Enronitis" scrutiny -- the wheels have started coming off the Tyco juggernaut. Was it ever a well-managed operating enterprise ... or just a well-oiled acquisition-accounting scheme that parlayed bookkeeping magic into a stream of fabricated earnings? You don't want a known cheat at the helm when you are pushing the "well-managed enterprise" interpretation.

The Koz also enjoys the benefit of an $18M on Tyco's nickel. What's wrong with that? Nothing, necessarily, if it's disclosed to Tyco shareholders, and reported as personal income to the IRS. [That's one of the hitches in a tax model -- don't tax production, just tax consumption -- with considerable ivory-tower appeal ... it's just too easy to mask one type of transaction as the other.] Ooops! Another big-ticket tax evasion, board members were aware of the arrangement, and Tyco appears complicit. It now seems possible this development will queer the deal to spin off Tyco's CIT financial division in an IPO, which could leave the firm strapped for cash and ultimately push then over the edge inot bankruptcy.

Interesting angles here.

First, Tyco is a prime exploiter of the Bermuda tax dodge ... their official HQ is a Bermuda mail drop, while the real work is done in the "other" HQ in Exeter NH. Did Tyco's tax-flouting maneuver make its CEO a priority enforcement target? And if either the state or looming federal case pans out, will it put Kozlowski in the slammer (or in Switzerland hobnobbing with Marc Rich)?

Second, the ink is barely dry on a very favorable severance agreement Kozlowski negotiated with Tyco ... he gets $135M up front (per WSJ) plus a lifetime stream of other valuable considerations if Tyco lets him go ... and they can't fire him unless he's convicted of a felony involving the firm, and even then 3/4 of the board has to agree. Was Kozlowski fired? Apparently he resigned "for personal reasons"? A negotiated settlement of severance claims would seem likely.

Third, who else will get swept up in this particular dragnet? Names. Big names. In new-money billionaire subculture, status symbols are important. Who has the biggest yacht? Who owns the coolest fantasy island? Who has the most exotic collection of collectibles? And who has the slickest tax-avoidance scheme? Like cigar culture, tax schemes are an arena in which moguls vie for connoisseur status. Most take pride in turning favored comrades on to favorite pleasures ... including the joy of beating the taxman.

On another front, El Paso Natural Gas Treasurer Charles Dana Rice died last Sunday of an apparent self-inflicted gunshot wound. Most observers are laying it off to health issues. My Bayesian instincts chafe at that explanation. Fortune 500 treasurers don't blow their brains out every day. Fortune 500 companies don't have the feds double-checking their books every day. (Well, lately they do, but these are not ordinary times.) Improbable events don't usually coincide by coincidence alone.

Context: EP was one of the usual suspects in the western states energy holdup, had recently come under suspicion of roundtripping (which it denies), and just announced a decision to downsize the merchant trading business. Rice had a history of serious health problems, was on dialysis, was looking forward to a kidney transplant, and was due to step down in three weeks.

Former Enron executive Cliff Baxter is still dead by his own hand. We made a lot of prognostications early in the Enron saga, but refrained from predicting suicides ... and refrained from predicting more even after Baxter broke the ice. Executive suicide is now an established motif, and we expect more. (Note Rice's suicide came on the heels of a well-publicized coroner's report on the Baxter case.)

When the tide of easy money goes out, it leaves a lot of ugly stuff rotting on the beach. Muckrakers and official investigators come in, and all kinds of ancillary matters become fair game, and collateral damage piles up.

Official sleuths have lots of volunteer assistance. Enemies, rivals, plaintiffs, journalists, disgruntled employees, blackmailers looking for the opportunity shot. Outright con artists and nutcases angling for a piece of the action using some bizarre story as bait.

Pick a target, tick and foot every penny in or out, and the bad penny often turns up. Tax evasion, stupid "mad money" investments, leveraged investments, undercollateralized borrowing, "white lies" on resumes and loan applications, expense-account padding, kickback schemes, favors traded with unsavory characters.

Big men on the way down miss installment payments on all sorts of high-maintenance habits -- trophy wives, mistresses hidden from their mistresses, slush funds hidden from divorce lawyers. Drugs, gambling addictions, pedophilia, whole secret lives.

Health fails, bad habits run out of control, depression festers over loss of status, loss of self-esteem, loss of opportunities, interminable no-win legal proceedings, audits, public disapproval, loss of professional accreditations ... broken promises to self, to the kids, to favorite charities ... colleagues and proteges left holding the bag ... loss of one's seat at the big table where the big boys play the big game.

So even before we cut their pay and send 'em up the river, better take away their belts and shoelaces ... put the whole kit and kaboodle on suicide watch.