# The Tragic Collapse of Enron **URL:** \ **Category:** The BBQ Pit\ **Created:** [November 29, 2001, 5:03pm UTC](https://boards.straightdope.com/t/the-tragic-collapse-of-enron/95953 "2001-11-29T17:03:40Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Tranquilis](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tranquilis/32/3639_2.png) [@Tranquilis](https://boards.straightdope.com/u/Tranquilis)\ **Post date:** [November 29, 2001, 9:39pm UTC](https://boards.straightdope.com/t/the-tragic-collapse-of-enron/95953/21 "2001-11-29T21:39:28Z")
It smells downright stanky. ::Speculation:: If Dynegy were to aquire the title to the pipelines, they may also become responsible for loans against which those pipelines were pledged. If so, Dynegy would have aquired a load of debt, but _also_ aquired the pipes and their revenue stream. ::End Speculation:: I would be highly unsurprised to see numerous Enron suits wearing Dynegy colors in a month or two. ---
**Author:** ![IzzyR](https://avatars.discourse-cdn.com/v4/letter/i/2acd7d/32.png) [@IzzyR](https://boards.straightdope.com/u/IzzyR)\ **Post date:** [November 29, 2001, 9:45pm UTC](https://boards.straightdope.com/t/the-tragic-collapse-of-enron/95953/22 "2001-11-29T21:45:43Z")
> [@](#): > > \*Originally posted by Maeglin \* > I just find it hard to believe that Enron hadn’t already pledged the pipelines in prior credit agreements. And it’s certainly going to need them as collateral for any bankruptcy proceeding. Here’s a link: [Citigroup, J.P. Morgan face Enron exposure](http://biz.yahoo.com/rf/011128/n28294328_8.html) > [@](#): > > Included in that exposure is a $1 billion joint credit line the banks extended to Enron when the Dynegy merger was announced. Enron has already drawn down the entire credit line, according to company spokesman Vance Meyer. > > That credit line is fully secured by Enron’s Trans Western and Northern Natural Gas pipeline systems. Northern Natural’s future was somewhat clouded on Wednesday by Dynegy’s claim that it would exercise an option to buy the pipeline for $1.5 billion, but sources familiar with the situation said both banks expect to be repaid in full either way. > > J.P. Morgan late on Wednesday said it has about $500 million of unsecured exposure to Enron and another $400 million in exposure secured by the Trans Western and Northern Natural pipelines. ---
**Author:** ![Tranquilis](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tranquilis/32/3639_2.png) [@Tranquilis](https://boards.straightdope.com/u/Tranquilis)\ **Post date:** [November 29, 2001, 10:15pm UTC](https://boards.straightdope.com/t/the-tragic-collapse-of-enron/95953/23 "2001-11-29T22:15:50Z")
Hmmm, and Hmmm again. Something is very rotten here. Dynegy claims the pipes, and the pipes are pledged as security. So unless Dynegy is planning on assuming sole responsibility for the debt, there’s a finiancial “Mexican Standoff”. Curiouser and curiouser. ---
**Author:** ![RTFirefly](https://avatars.discourse-cdn.com/v4/letter/r/c77e96/32.png) [@RTFirefly](https://boards.straightdope.com/u/RTFirefly)\ **Post date:** [November 29, 2001, 10:28pm UTC](https://boards.straightdope.com/t/the-tragic-collapse-of-enron/95953/24 "2001-11-29T22:28:32Z")
Is this the same Enron that has been [in bed with Dubya](http://www.progressive.org/pc0900.htm) for awhile now? ---
**Author:** ![jk1245](https://avatars.discourse-cdn.com/v4/letter/j/49beb7/32.png) [@jk1245](https://boards.straightdope.com/u/jk1245)\ **Post date:** [November 29, 2001, 10:31pm UTC](https://boards.straightdope.com/t/the-tragic-collapse-of-enron/95953/25 "2001-11-29T22:31:47Z")
This thing is going to get _ugly_! (Not that it isn’t already ugly enough for people who lost 401ks) This will go very high into government too. Bailout or no, Bush is damned either way. He sits back and watches a homegrown, big-time company flop in a Jerry Bruckheimer-sized implosion, or he backs a bailout and looks like he was bought and paid for by Enron. Who wants popcorn? ---
**Author:** ![Tretiak](https://avatars.discourse-cdn.com/v4/letter/t/a88e57/32.png) [@Tretiak](https://boards.straightdope.com/u/Tretiak)\ **Post date:** [November 29, 2001, 10:34pm UTC](https://boards.straightdope.com/t/the-tragic-collapse-of-enron/95953/26 "2001-11-29T22:34:09Z")
There’s nothing real fishy here. Dynegy wanted to buy out Enron, so Chevron/Texaco gave Dynegy $1.8 billion to give to Enron so that they could stay in business while the deal was worked out. If the deal went through then it was washed out, of course. But to protect themselves, the terms of the loan included preferred stock in the pipeline with Dynegy (read Chevron) having the option to purchase the pipeline, including taking on whatever debt that included, should the deal collapse and Enron unable to pay them back. ---
**Author:** ![jab1](https://avatars.discourse-cdn.com/v4/letter/j/ee7513/32.png) [@jab1](https://boards.straightdope.com/u/jab1)\ **Post date:** [November 29, 2001, 10:35pm UTC](https://boards.straightdope.com/t/the-tragic-collapse-of-enron/95953/27 "2001-11-29T22:35:44Z")
Does this mean the Houston Astros’ ballpark has to be re-named? More seriously, Enron’s Ken Lay was one of the people pushing for the deregulation of electricity here in [California](http://www.laweekly.com/ink/01/31/news-bradley.shtml): > [@](#): > > Bush buddy Ken Lay, head of Enron, the nation’s biggest electricity marketer, garnered some unwanted press from the San Francisco Chronicle when someone leaked a memo Lay gave to participants in a closed-door meeting with L.A. notables last month (May, 2001). Among those in attendance were [lame-duck] Mayor Richard Riordan, Arnold Schwarzenegger and convicted junk-bond-financier-turned-philanthropist Michael Milken. Lay’s purpose, as the memo made clear, was to enlist high-level support for the continuance of deregulation in California. But **he also stressed that deregulation could work, that prices for electricity could begin to moderate from their skyrocketing levels.** Yeah, sure it would. While power rates did go down, it was because we had an unusually cool summer; demand was down. As for the [relationship](http://www.laweekly.com/ink/01/16/news-bradley.shtml) between Lay and the Prez: > [@](#): > > Enron, incidentally, is headed by George W. Bush intimate Ken Lay, an old Texas buddy of the new president who helped lobby through California’s deregulation scheme. Lay and Enron have provided over half a million dollars to Bush, along with his campaign plane. Lay is regarded as the most influential member of the Bush Energy Advisory Team. I certainly have sympathy for the people who lost their shirts in this, but Lay is one of the people responsible for the price of electricity skyrocketing here in California, so I certainly have no sympathy for him. ---
**Author:** ![IzzyR](https://avatars.discourse-cdn.com/v4/letter/i/2acd7d/32.png) [@IzzyR](https://boards.straightdope.com/u/IzzyR)\ **Post date:** [November 30, 2001, 1:31am UTC](https://boards.straightdope.com/t/the-tragic-collapse-of-enron/95953/28 "2001-11-30T01:31:14Z")
> [@](#): > > \*Originally posted by RTFirefly \* > Is this the same Enron that has been [in bed with Dubya](http://www.progressive.org/pc0900.htm) for awhile now? I wonder if I could ask you what you mean by posts of this sort? The facts you bring up were noted by me in an earlier post. I also noted then that there seems to have been no move by the government to help Enron, despite this. Do you have evidence to the contrary? Or are you trying to suggest somehow Bush was aware of the misdeeds by Enron executives, or party to them? I would have thought this was beneath you. But maybe I’ve misunderstood your post, and apologize if you had some other point that I missed. **jk1245** , I don’t think this is a problem at all for Bush. The world will go on, likely without Enron. The thousands of individual tragedies will not be blamed on Bush (at least by most people 😉 ) ---
**Author:** ![Cervaise](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cervaise/32/16693_2.png) [@Cervaise](https://boards.straightdope.com/u/Cervaise)\ **Post date:** [November 30, 2001, 1:33am UTC](https://boards.straightdope.com/t/the-tragic-collapse-of-enron/95953/29 "2001-11-30T01:33:59Z")
I’m hardly a dedicated market observer, but this doesn’t surprise me at all. See, I used to work at a telecommunications company. The founder, the CEO, the executive staff – they were all crooks, pure and simple. The company started out as a switchless reseller (if you don’t know telecom, basically this is a combination between being a manufactured middle-man and selling snake oil), but later acquired a couple of switches. They regularly slammed customers (i.e. signed them up for the company’s long-distance service without approval), including falsifying signatures on approval documents by copying-taping-and-faxing an authentic signature from some other piece of correspondence. There’s more, much more; suffice to say it was a pit of vipers, highly unpleasant but highly educational. At any rate, the company finally went down the tubes, bottoming at one penny per share, to the degree that NASDAQ was threatening to de-list them. Exit the CEO, enter white knight, who proceeded to dismantle the company in short order. The CEO and his executive cabal were named in several shareholder lawsuits after the company’s demise, mostly for defrauding the investors and making promises they had absolutely no intention of living up to. I was there; I watched it happen. So: That CEO, after leaving the company, was immediately picked up by, you guessed it, Enron. He was named as president of one of their energy divisions (differentiating from the financial-services area), despite the fact that the telecommunications company in question, during its death spiral, was a moderately hot topic on the Dow Jones wire. (Somebody called the company, and I quote, a “train wreck.” There’s a morbid fascination with watching somebody self-immolate, which generated quite a flurry of activity on the newswire for a while.) It was an open secret that the CEO and his cronies were squeezing as much blood as they could from the venture (which was originally started as a writeoff by the Chairman/Founder, who is an equally slimy real estate mogul) before dumping it and fleeing. Enron knew what they were getting. I heard through the grapevine that he was fired a few months after starting, which leads me to wonder if (1) he was actually skankier than they were, or if (2) he had learned his lesson at the telecom place and wouldn’t play ball. Either way, his character was well-known; he had previously destroyed one name-recognized telecom firm before coming to the one I worked at. (Oddly, the white knight who came in after the board fired him performed exactly the same rescuer role at this previous company.) There’s no way this guy’s new employer was surprised at his being a snaky bastard, and that’s when I knew that Enron, a company I’d barely heard of, was a place whose morals I could safely condemn without knowing anything else. These arrogant bastards skate around on top of the economy without ever having to suffer the consequences of their short-sighted greed. I used to be bitter; now I’m just tired. ---
**Author:** ![IzzyR](https://avatars.discourse-cdn.com/v4/letter/i/2acd7d/32.png) [@IzzyR](https://boards.straightdope.com/u/IzzyR)\ **Post date:** [November 30, 2001, 1:50am UTC](https://boards.straightdope.com/t/the-tragic-collapse-of-enron/95953/30 "2001-11-30T01:50:40Z")
[Enron Has Friends in High Places, No Help Likely](http://dailynews.yahoo.com/h/nm/20011129/pl/utilities_enron_politics_dc_1.html) > [@](#): > > The company and its chief executive Ken Lay have long been heavy contributors to powerful Republicans, including President Bush, and have lines of communication to the White House and Congress. > > But, say senior Republicans, its financial wounds are so deep and heavily self-inflicted that it is likely to get little more than sympathy from its well-connected friends. > [@](#): > > But despite its friends in high places, Enron may get little help from Republican lawmakers who say its problems are its own doing and beyond the reach of government. > > ``We can’t simply step into every bad market decision and every bad financing decision that occurs in American corporations in this country and work it for them,’’ said U.S. House Energy and Commerce committee chairman Billy Tauzin, a Republican from Louisiana. ---
**Author:** ![pantom](https://avatars.discourse-cdn.com/v4/letter/p/34f0e0/32.png) [@pantom](https://boards.straightdope.com/u/pantom)\ **Post date:** [November 30, 2001, 4:29am UTC](https://boards.straightdope.com/t/the-tragic-collapse-of-enron/95953/31 "2001-11-30T04:29:43Z")
From Yahoo Finance, Research page on Enron (symbol ENE): ```auto Strong Buy 6 (!) Buy 2 Hold 6 Sell 0 (!!!!!) Strong Sell 1 ``` ---
**Author:** ![City\_Gent](https://avatars.discourse-cdn.com/v4/letter/c/a87d85/32.png) [@City\_Gent](https://boards.straightdope.com/u/City_Gent)\ **Post date:** [November 30, 2001, 4:46am UTC](https://boards.straightdope.com/t/the-tragic-collapse-of-enron/95953/32 "2001-11-30T04:46:00Z")
The California state government has been in a tizzy the past few months because it signed long-term contracts with the likes of Enron to ensure a power supply during the energy crisis (remember the energy crisis?) While the long-term price was good compared to the gougings Enron et al were giving the utilities at the height of the energy crunch, it’s still much higher than the historical price of energy. Now that Enron has gone belly up, does that mean California is released from its long-term contracts, or will they be that much harder to wriggle out of since Enron’s creditors are now going to be circling like vultures? ---
**Author:** ![Una\_Persson](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/una_persson/32/346_2.png) [@Una\_Persson](https://boards.straightdope.com/u/Una_Persson)\ **Post date:** [November 30, 2001, 4:57am UTC](https://boards.straightdope.com/t/the-tragic-collapse-of-enron/95953/33 "2001-11-30T04:57:35Z")
Jesus Christ. This is something I could talk **a lot** about - but nondisclosure agreements prevent me from doing so any more. That having been said - I’d like to see an answer to **IzzyR** ’s question too, please. ---
**Author:** ![ShibbOleth](https://avatars.discourse-cdn.com/v4/letter/s/848f3c/32.png) [@ShibbOleth](https://boards.straightdope.com/u/ShibbOleth)\ **Post date:** [November 30, 2001, 5:09am UTC](https://boards.straightdope.com/t/the-tragic-collapse-of-enron/95953/34 "2001-11-30T05:09:43Z")
A couple of observations: 1. Someone mentioned about diversification and 401Ks. It’s possible that Enron’s retirement plan was a self funded profit sharing plan but erroneously reported as their 401K in the press. Our plan was like that but has been modified since the last big stock market dip (too late to save me $100K, but thems the breaks). 2. When the CEO and/or company officers sell their investors down the road, the law should come down as hard as possible on them. This means that their personal assets are liquidated to repay creditors and they are put in prison. If they seek bankruptcy protection during this then the judge presiding should not allow them to keep more than the small investor most severely damaged by these crooks. Besides feeling “right”, steps like these need to be taken if small investors are to feel like they have protection against these sorts of ghouls in the market. Otherwise the small investor will not put their money in the markets; they’ll go back to banks and other vehicles with guaranteed revenue streams. In other words they’ll become risk averse. There are too many “regular joe” investors in the market to allow this to happen. The current recession will take a lot of time to climb out of without both consumer and investor confidence on solid terms. ---
**Author:** ![edwino](https://avatars.discourse-cdn.com/v4/letter/e/35a633/32.png) [@edwino](https://boards.straightdope.com/u/edwino)\ **Post date:** [November 30, 2001, 5:21am UTC](https://boards.straightdope.com/t/the-tragic-collapse-of-enron/95953/35 "2001-11-30T05:21:20Z")
> [@](#): > > \*Originally posted by jab1 \* > **Does this mean the Houston Astros’ ballpark has to be re-named?** When the Dynegy talk was all in the air, yes, they were going to rename it Dynegy Park. I don’t know what the current plan is. Maybe it will just be called “The Ballpark at Union Station” or some other big corporation will step in. Not bound to be Compaq (as in Compaq Center for the Rockets) as they are hurting now. Perhaps another oil/energy company or perhaps even our hometown furniture guru and sports fan, Jim McIngvale. I can just see it now, [galleryfurniture.com](http://galleryfurniture.com) Park, to go along with [galleryfurniture.com](http://galleryfurniture.com) Bowl. I’m in Houston right now. Course it is dominating the news but people here are really still quite in shock. There are a lot of oil companies in town, but Enron is really a hometown, past decade success story that really almost came out of nowhere. They made their money mostly on stuff that most people (myself included) really don’t understand, so I think there is a lot less incredulity when you talk about the company going out of business. Ya know, people rightly get attached to the premise that if a company still has factories, oil wells, stores, inventory, whatever, it can weather a storm or at least file Chapter 11 and batten down the hatches for a while. With Enron, (and correct me if I’m wrong), having so much debt and so little real capital means that they could be _poof_ gone by next year. It does make me sick how 1) the current administration all got rid of their substantial Enron holding this year before the troubles because of the “conflict of interest” and 2) how they are a darling of the Bush administration (the CEOs and top execs raised millions for the campaign) and will likely get away scot free. For 8000 Houstonians, the holidays will be about as cold as it gets in Texas. ---
**Author:** ![Zenster](https://avatars.discourse-cdn.com/v4/letter/z/cdc98d/32.png) [@Zenster](https://boards.straightdope.com/u/Zenster)\ **Post date:** [November 30, 2001, 6:45am UTC](https://boards.straightdope.com/t/the-tragic-collapse-of-enron/95953/36 "2001-11-30T06:45:10Z")
Stop, stop, you’re ripping my heart out! Let’s see. California usually ranks anywhere from number six to number twelve (on a bad day) in the _world’s_ economies. Not that California didn’t help dig itself into a ginormous pit with its idiotic deregulation policies, but Enron seemed all too glad to stick it to California when the chips were down. Wasn’t Enron involved with the wrongful death of employees or people from gas line explosions? Most of all, it is extremely difficult for me to escape the notion that Shrub was all too happy to let Enron bleed California white in retribution for California’s lack of support during the presidential elections. Way to go Shrub, allow your buddies to cripple the one state that helps shoulder a significant portion of the Union’s economic health. As speculative as this might be, I think it was supremely insane to allow such harm to come to one of the most powerful economies in the entire world. Now that the recession is howling at everyone’s door the supidity of this is only more obvious. ---
**Author:** ![Zenster](https://avatars.discourse-cdn.com/v4/letter/z/cdc98d/32.png) [@Zenster](https://boards.straightdope.com/u/Zenster)\ **Post date:** [November 30, 2001, 6:55am UTC](https://boards.straightdope.com/t/the-tragic-collapse-of-enron/95953/37 "2001-11-30T06:55:57Z")
> [@](#): > > _Originally posted by Zenster \* > Wasn’t Enron involved with the wrongful death of employees or people from gas line explosions?_\* I was thinking of Marathon. ---
**Author:** ![Tretiak](https://avatars.discourse-cdn.com/v4/letter/t/a88e57/32.png) [@Tretiak](https://boards.straightdope.com/u/Tretiak)\ **Post date:** [November 30, 2001, 7:01am UTC](https://boards.straightdope.com/t/the-tragic-collapse-of-enron/95953/38 "2001-11-30T07:01:52Z")
> [@](#): > > \*Originally posted by City Gent \* > \*\*The California state government has been in a tizzy the past few months because it signed long-term contracts with the likes of Enron to ensure a power supply during the energy crisis (remember the energy crisis?) While the long-term price was good compared to the gougings Enron et al were giving the utilities at the height of the energy crunch, it’s still much higher than the historical price of energy. Now that Enron has gone belly up, does that mean California is released from its long-term contracts, or will they be that much harder to wriggle out of since Enron’s creditors are now going to be circling like vultures? \*\* California has no long-term contracts with Enron. ---
**Author:** ![RTFirefly](https://avatars.discourse-cdn.com/v4/letter/r/c77e96/32.png) [@RTFirefly](https://boards.straightdope.com/u/RTFirefly)\ **Post date:** [November 30, 2001, 2:53pm UTC](https://boards.straightdope.com/t/the-tragic-collapse-of-enron/95953/39 "2001-11-30T14:53:26Z")
> [@](#): > > \*Originally posted by IzzyR \* > I wonder if I could ask you what you mean by posts of this sort? The facts you bring up were noted by me in an earlier post. I had somehow missed that as I was reading the thread. My apologies. > [@](#): > > Or are you trying to suggest somehow Bush was aware of the misdeeds by Enron executives, or party to them? I certainly don’t have any reason to believe that Bush had any _direct_ responsibility for Enron’s failure (altho his deregulation of areas where Enron operated, while governor, may have made it easier for their flim-flam artists to get away with what they did). I certainly don’t think he had any personal knowledge of the workings of their business. I just think he felt that corporations like Enron were the white hats, and if government only got out of their way, the world would be a better place. I doubt that this will change Bush’s views on the subject one iota, needless to say; he’s happy to believe what he believes, regardless of the evidence. I had heard that a number of Enron execs found their way into positions at the Bush White House this year, though I’ve been unable to track down names so far. I was hoping others here might know more in that regard than I. ---
**Author:** ![IzzyR](https://avatars.discourse-cdn.com/v4/letter/i/2acd7d/32.png) [@IzzyR](https://boards.straightdope.com/u/IzzyR)\ **Post date:** [November 30, 2001, 3:06pm UTC](https://boards.straightdope.com/t/the-tragic-collapse-of-enron/95953/40 "2001-11-30T15:06:26Z")
Re: California & Enron, see: [Californians Smirk at Enron Demise](http://dailynews.yahoo.com/h/ap/20011130/bs/enron_california_2.html) > [@](#): > > \*Originally posted by RTFirefly \* > I certainly don’t have any reason to believe that Bush had any _direct_ responsibility for Enron’s failure (altho his deregulation of areas where Enron operated, while governor, may have made it easier for their flim-flam artists to get away with what they did). I don’t think so. The flim-flam artists were practicing good old fashioned “accounting irregularities”. As I understand it, they transfered company losses to privately held companies owned by Enron execs, making Enron profits seem larger than they actually were. Eventually Enron had to restate their earnings for the previous 4 years, wiping out much of their profits for that time. What _is_ true is that the Enron books were extraordinarily complicated, and even after they “came clean” no one was able to get a good handle on exactly what was in them. This appears to be at least partially due to the nature of the business that they were in, which involved complex deals, but was likely used by the execs to throw the auditors off their trail. (See the article that **jk1245** linked to earlier). But I don’t think this can be connected to Bush. > [@](#): > > I certainly don’t think he had any personal knowledge of the workings of their business. I just think he felt that corporations like Enron were the white hats, and if government only got out of their way, the world would be a better place. I doubt that this will change Bush’s views on the subject one iota, needless to say; he’s happy to believe what he believes, regardless of the evidence. This may be true, but is unconnected to the relationship that he had to this specific company. Anyway, as it now appears that you did not intend to insinuate that Bush was involved in the Enron collapse, I apologize for having suggested otherwise. > [@](#): > > I had heard that a number of Enron execs found their way into positions at the Bush White House this year, though I’ve been unable to track down names so far. I was hoping others here might know more in that regard than I. [3 Bush Officials Sold Enron Stock](http://dailynews.yahoo.com/h/ap/20011129/bs/enron_administration_1.html) [Previous page](https://boards.straightdope.com/t/the-tragic-collapse-of-enron/95953.md?page=1) [Next page](https://boards.straightdope.com/t/the-tragic-collapse-of-enron/95953.md?page=3)