enron mentions - 11 - 05 - 01 enron transaction raises new questions - - - a company executive ran entity that received $ 35 million in march
the wall street journal , 11 / 05 / 01
what enron ' s financial reports did - - and didn ' t - - reveal - - - enron short seller detected red flags in regulatory filings
the wall street journal , 11 / 05 / 01
what enron ' s financial reports did - - and didn ' t - - reveal - - - auditor could face scrutiny on clarity of financial reports
the wall street journal , 11 / 05 / 01
enron offers only questions
realmoney . com , 11 / 05 / 01
companies & finance international - unions seek reform at enron .
financial times , 11 / 05 / 01
usa : enron made $ 35 mln purchase from co run by officer - wsj .
reuters english news service , 11 / 05 / 01
enron made 35 mln usd purchase from entity run by officer of company - report
afx news , 11 / 05 / 01
enron transaction with entity run by executive raises questions
dow jones business news , 11 / 05 / 01
enron may have to sell assets
national post , 11 / 05 / 01
enron ' s indian unit serves asset transfer notice to mseb
dow jones international news , 11 / 05 / 01
uk : u . s . stocks edge higher in europe , futures firm .
reuters english news service , 11 / 05 / 01
bg : technically qualified to operate enron india fields
dow jones energy service , 11 / 05 / 01
uk press : us unions call for corp reform at enron
dow jones international news , 11 / 05 / 01
india : enron ' s india lenders to discuss $ 2 . 9 bln project .
reuters english news service , 11 / 05 / 01
enron starts valuing india unit , claim for canceled power pact
bloomberg , 11 / 05 / 01
enron in talks to sell 50 % stake in korean gas unit ( update 3 )
bloomberg , 11 / 05 / 01
enron transaction raises new questions - - - a company executive ran entity that received $ 35 million in march
by john r . emshwiller
staff reporter of the wall street journal
11 / 05 / 2001
the wall street journal
a 3
( copyright ( c ) 2001 , dow jones as of june 30 , it had $ 63 . 4 billion .
messrs . kopper and fastow had " extensive involvement in the organization , investment activity and operations " of jedi , according to the 1999 ljm 2 private - offering memorandum . jedi invested $ 2 . 1 billion in 63 separate transactions , the document said . after accounting for jedi ' s $ 500 million in equity , this indicates the partnership borrowed as much as $ 1 . 6 billion .
in 1997 , calpers sold its interest in jedi back to enron for about $ 375 million . at about the same time , calpers put $ 500 million into a new enron partnership , known as jedi ii .
at this point , enron could have held on to all of jedi , but that probably would have entailed consolidating the partnership and its debts into the company ' s financial statements .
that , apparently , is where chewco came in . ( chewco got its name , says one person familiar with the matter , from the character chewbacca in the " star wars " movies , where jedi warriors also roamed . ) chewco bought from enron the jedi interest formerly held by calpers , according to documents and interviews . it couldn ' t be determined what the terms of that transaction were . however , the fact that chewco shows up as a debtor to jedi in the texas state filing suggests that money for the purchase was borrowed from jedi itself .
the available information on the chain of transactions raises questions about how separate jedi and chewco really were from enron and whether jedi ' s assets and liabilities should have been folded into the company ' s financial statements .
in a march 2000 sec filing , enron makes a brief reference to its new jedi partner , which enron doesn ' t identify but presumably is chewco . the filing said " an officer of enron has invested in the limited partner of jedi and from time to time acts as agent on behalf of the limited partner ' s management . " while the officer isn ' t named , the description is similar to that given for mr . kopper in relation to chewco in the ljm 2 offering memorandum .
in march of this year , enron moved to purchase the balance of jedi that it didn ' t already own . in an sec filing earlier this year , enron said it acquired for $ 35 million " the limited partner ' s interests " in jedi . again , the partner wasn ' t named , but presumably was chewco .
enron consolidated jedi ' s assets and liabilities into the company . the sec filing said jedi ' s holdings included 12 million shares of enron stock . enron said it also paid off about $ 620 million of jedi " third - party debt . " the third party or parties weren ' t named .
- - - a jedi ' s journey
- - 1993 : enron and california public employees ' retirement system , or
calpers , form jedi limited partnership and each commit $ 250 million to
make energy investments .
- - 1997 : enron purchases calpers ' share in jedi for about $ 375
million and then resells it to an entity , believed to be chewco
investments . chewco formed with $ 400 million in capital commitments
and run by enron officer to purchase enron assets .
- - 2001 : enron repurchases all of jedi and consolidates it into the
company .
copyright ? 2000 dow jones & company , inc . all rights reserved .
heard on the street
what enron ' s financial reports did - - and didn ' t - - reveal - - - enron short seller detected red flags in regulatory filings
by cassell bryan - low and suzanne mcgee
staff reporters of the wall street journal
11 / 05 / 2001
the wall street journal
cl
( copyright ( c ) 2001 , dow jones it had no immediate comment friday .
enron shares were trading at about six times the company ' s book value in late 2000 . by comparison , wall street brokerage firms typically trade at two or three times book value and hedge funds in effect are priced at book value .
among the pages of the 1999 report that mr . chanos marked with yellow post - it notes and scribbled comments was one detailing the related - party transactions . he underlined a sentence stating that one of enron ' s senior officers is the " managing member " of a private investment company with which enron had entered into a series of transactions . " we read the disclosure over and over and over again , and we just didn ' t understand it - - and we read footnotes for a living . " he says . but at the time , he concedes , " it was just an odd footnote to us . "
he started telephoning analysts at wall street firms to determine what aspects of the bulls ' case he was missing . what he heard excited him further . part of the bullishness focused on enron ' s strategy of trading broadband - network capacity . mr . chanos , who already had placed bearish bets on some telecommunications bandwidth providers , was convinced that the industry already suffered from overcapacity and that the situation would only get worse . his conclusion : if enron " couldn ' t see the looming train wreck coming in telecom , what else were they missing ? maybe they weren ' t as infallible in the energy area as people had thought . "
another warning signal was insider stock sales through the second half of 2000 , he says . that sat awkwardly with the common refrain from wall street analysts that investors had to just trust management given the difficulty of analyzing how earnings were derived . the company didn ' t immediately comment on the sales on friday .
" you look for patterns in my business , " says mr . chanos . " the fact that this was a ` trust me ' story , while management was voting with its feet was another check . while we didn ' t have a smoking gun , we certainly saw a reason to perhaps not trust management at its word that these earnings were what they said they were . "
those factors led mr . chanos to begin shorting the stock in late november of last year , when it was fluctuating between $ 65 and $ 80 ; he won ' t provide details . overall , the level of short interest , or short - selling positions not yet closed out , on enron shares jumped 2 . 2 million shares to 7 . 9 million shares for the month through mid december , from the same period in the previous month .
as other red flags surfaced , in february mr . chanos and other short sellers significantly ramped up the bearish positions . mr . chanos first discussed his view of enron with those outside the firm that month in miami , where he hosted his annual " bears in hibernation " conference . attendees bring two ideas to present , and one of his was enron .
with enron ' s stock trading at $ 72 at that time , or roughly 40 times 2001 ' s per - share earnings estimates , " the market is priced for perfection here , " mr . chanos told the 25 or so attendees , " whereas it looks like things may be anything but . "
back in new york , mr . chanos arranged a second round of sessions with bullish analysts . " here ' s our thesis , " he told them . " what are we missing ? "
mr . chanos came out of those meetings with a " heightened conviction that we were right . " for one thing , he sensed frustration brewing about the level of trust required with enron .
as the spring progressed , mr . chanos became increasingly confident , adding to his short position . on a widely reported conference call in april , jeffrey skilling , then enron ' s chief executive , responded to another short seller ' s criticism that enron hadn ' t provided a balance sheet by calling him an " ah . " for the first time , " i got a sense that the company was now getting tough questions and was not happy about it , " mr . chanos says .
for their part , wall street analysts argue that they have limited time and resources for the in - depth research that mr . chanos prefers . many cover dozens of companies . still , some say they have learned lessons from enron ' s fall from grace . salomon smith barney analyst raymond niles , for one , says he will " pursue warning signs relentlessly and go by gut instinct " when he senses a looming problem . says mr . niles , who covers enron : " i think shorts play a very valuable role in the market , reminding us of what can go wrong . "
( see related article : " auditor could face scrutiny on clarity of financial reports " - - wsj nov . 5 , 2001 )
copyright ? 2000 dow jones & company , inc . all rights reserved .
what enron ' s financial reports did - - and didn ' t - - reveal - - - auditor could face scrutiny on clarity of financial reports
by jonathan weil
staff reporter of the wall street journal
11 / 05 / 2001
the wall street journal
cl
( copyright ( c ) 2001 , dow jones & company , inc . )
as enron corp . ' s independent auditor , arthur andersen llp has the job of making sure the houston energy trader ' s financial statements not only are accurate and complete in all material respects , but also are understandable .
now for the really tricky part : understandable to whom ?
for andersen , this isn ' t just an academic question . once again , the accounting practices of one of the big five firm ' s most prized clients have come under intense scrutiny from regulators and shareholders . questions could well turn to whether andersen fulfilled its obligation to protect investors ' interests . and an important focus is likely to be whether andersen should have required enron to better explain its dealings with partnerships run by former chief financial officer andrew s . fastow before agreeing to bless the company ' s financial statements .
enron revealed last month , in a conference call , that its shareholder equity had fallen by $ 1 . 2 billion during the third quarter as a result of transactions in which a partnership controlled by mr . fastow was at least at times involved , fueling a steep dive in the stock price amid growing concerns about the company ' s financial health . many wall street analysts , including die - hard enron bulls , long have grumbled that parts of enron ' s financial statements are indecipherable .
" the heart of disclosure is intelligibility , " says alan bromberg , a professor of securities law at southern methodist university in dallas . " if the people to whom it ' s addressed can ' t understand it , it hasn ' t been adequately disclosed . there ' s clearly a qualitative , as well as a factual , component to disclosure . "
under generally accepted accounting principles , the rules for disclosing related - party transactions seem straightforward enough . among other things , companies must describe the " information deemed necessary to an understanding of the effects of the transactions on the financial statements . " but the nation ' s accounting - standard setters never have offered any clear guidance on whether companies ' disclosures should be understandable to a broad audience or merely to financially sophisticated individuals with specialized training . and even sophisticated investors are prone to being stumped now and then .
to be sure , the adequacy of a company ' s related - party disclosures can be determined only when all the information about the transactions is out in the open . for its part , enron - - which is hardly the only large energy company with complex partnership dealings - - maintains its off - balance - sheet transactions were legal and properly disclosed . " they comply with reporting requirements , " says enron spokeswoman karen denne , adding that andersen was aware of the transactions and reviewed them . " to the extent that an investor doesn ' t understand them , they are able to ask questions . " and in the end , she notes , investors who didn ' t understand the transactions didn ' t have to buy enron stock .
enron ' s disclosure practices stand out , however , because they have been a source of complaints for so long . even some top - flight accounting professors say they can ' t make heads or tails of the company ' s transactions with mr . fastow or enron ' s motives for entering them . if they can ' t figure them out , it raises the question of whether any outsider could .
one thing is certain : the stakes for andersen could be high . since enron ' s disclosure of the reduction in shareholder equity , its stock has plunged 67 % to $ 11 . 30 as of 4 p . m . in new york stock exchange composite trading friday - - a drop that wipes $ 20 billion off the company ' s market value and potentially exposing enron and andersen to massive shareholder liability . already , enron ' s dealings with the partnerships are the subject of a formal investigation by the securities and exchange commission . that creates the possibility that andersen itself could become a focus of the probe at some point , should regulators find enron ' s accounting and disclosure practices deficient . meanwhile , the law firm for a special committee set up by enron ' s board has hired accounting firm deloitte & touche llp to help review the partnerships ' activities .
an andersen spokesman , david tabolt , says the firm " will continue to cooperate with [ enron ' s ] special committee , lawyers and accounting advisers " and " will also cooperate with other official investigations as requested . " so far , he says , the sec hasn ' t told andersen it is a subject of the enron probe . beyond that , he declines to comment on enron , citing client - confidentiality obligations .
how murky are the related - party disclosures in enron ' s audited financial statements ? here is a summary of a section in enron ' s 2000 year - end financial statements describing certain transactions with the fastow - operated partnerships . the company said it transferred assets valued at $ 1 . 2 billion , including $ 150 million in notes payable , 3 . 7 million restricted enron shares and the right to receive as many as 18 million enron common shares in march 2003 , subject to certain conditions . it also transferred to the partnerships other assets valued at $ 309 million , including a $ 50 million note payable and " an investment in an entity that indirectly holds warrants convertible into common stock of an enron equity method investee . "
in return , enron said it received " economic interests in the entities , " $ 309 million in notes receivable and an additional $ 1 . 2 billion in notes receivable as part of a " special distribution . " the disclosure went on to mention a series of purchases by enron of " share - settled options from the entities " on shares of enron common stock .
the raw numbers may all be there . but " any objective person would be hard pressed to understand the effects of these disclosures on the financial statements , " says douglas carmichael , an accounting professor at baruch college in new york . " the quality of the disclosure is low , which creates uncertainty about the quality of their accounting . "
further , he says , enron ' s explanation of why it entered the transactions " seems to defy imagination . " in the year - end financial statement , enron said the purpose was " to hedge certain merchant investments and other assets , " a category that includes energy assets whose values are prone to wide price fluctuations . yet the disclosure shows that enron chose to use shares and options of its own stock as its chief hedging instrument , even though their price movements wouldn ' t appear to be directly related to the value of the investments enron was trying to hedge .
" i don ' t see how that possibly hedges any of enron ' s risks or assets , " mr . carmichael says . indeed , the disclosures have given rise to widespread speculation that enron ' s actual purpose was to use its off - balance - sheet transactions to shift losses off its books to avoid running them through its income statement . asked whether that was enron ' s purpose , ms . denne declines to comment . she says enron stands by its earlier statement that enron was trying to hedge certain investments .
to date , andersen hasn ' t been named as a defendant in any of the numerous shareholder lawsuits filed against enron , which paid andersen $ 52 million last year , including $ 25 million in audit fees . enron ' s woes come during a year already filled with embarrassments for andersen . in june , the sec fined andersen and three partners $ 7 million over their audits of waste management inc . ' s financial statements , the largest sec fine ever against an accounting firm . andersen , which neither admitted nor denied the sec ' s fraud allegations , paid $ 75 million in 1998 to settle its portion of a shareholder lawsuit over the houston - based garbage hauler . also this year , without admitting wrongdoing , andersen agreed to pay $ 110 million to settle a shareholder lawsuit over audits it conducted for sunbeam corp .
( see related article : " heard on the street : enron short seller detected red flags in regulatory filings " - - wsj nov . 5 , 2001 )
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron offers only questions
by james j . cramer
realmoney . com
11 / 05 / 2001 08 : 10 am est
url :
the journalists on this enron ( ene : nyse - news - commentary ) story seem oblivious to the big issue here : why did enron need to do the partnerships in the first place ?
that , to me , is the issue - - because the only reason you would set up all of these " perfectly legal " partnerships , as they keep calling them down there , is to hide something .
what would they be trying to hide ? let ' s step aside for a second and ask a few hypotheticals .
if you had information about how a market was doing , you might want to do something with that information that you didn ' t want anyone to know about . for example , let ' s say you had access to all of the trading information about where electricity was going - - you had access to the grid - - you might be able to take advantage of that information with an off - book partnership . you would need that off - book partnership because you wouldn ' t want any of those people from whom you took the data thinking that you were taking advantage of those data .
or if you knew that a market was about to be squeezed upward and you wanted to facilitate that squeeze , you could buy electricity and keep it from , say , california , until rates went up , and then dump it in california once the squeeze was complete .
or you might just want to make a few bucks on the side that you didn ' t want to share with shareholders and you needed to have something special , something hidden from shareholders , to make those few bucks .
or the parent company didn ' t know anything about these partnerships , and the people running them were just living large without much oversight .
or the parent company was worried about its credit rating , so it wanted to hide debt .
i don ' t know , can someone come up with better reasons you would do this ? i can ' t . can someone come up with something that ' s not nefarious ?
please email me .
i want to know why anyone would do this , a good reason that we would all appreciate as shareholders .
companies & finance international - unions seek reform at enron .
by sheila mcnulty .
11 / 05 / 2001
financial times
( c ) 2001 financial times limited . all rights reserved
the afl - cio , a federation of us trade unions , is calling for sweeping governance reform measures at enron , the embattled energy trader , to restore investor confidence amid a probe by federal regulators into its finances .
" america ' s working families are significant shareholders of enron stock through their pension , health and welfare benefit funds , " said the afl - cio , which is the american federation of labor and congress of industrial organizations .
the union - sponsored funds under the afl - cio , which represents 13 m americans , hold 3 . 1 m enron shares . the amalgamated bank , the trustee of long view funds , which holds 251 , 304 enron shares , has also joined in the call for corporate reform . those funds are investment trusts managing equity assets on behalf of workers ' pension funds .
the two were the first big shareholders to make demands on enron since the crisis of confidence in the company began on october 16 with the surprise disclosure of a $ 1 . 2 bn balance sheet adjustment .
they said the mandate of the special committee , created by enron ' s board to examine the transactions in question and liaise with the securities and exchange commission during its investigation , was too narrow .
they want the committee to examine all transactions with entities in which enron employees or directors have an interest , adopt procedures for reviewing insider participation in investments , start an extraordinary review of executive compensation , adopt a stricter definition of director independence and , finally , disclose director conflicts of interest .
( c ) copyright financial times ltd . all rights reserved .
http : / / www . ft . com .
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : enron made $ 35 mln purchase from co run by officer - wsj .
11 / 05 / 2001
reuters english news service
( c ) reuters limited 2001 .
new york , nov 5 ( reuters ) - enron corp . made a $ 35 million purchase from an entity run by a company officer , raising new questions about financial dealings with its management , the wall street journal reported in its online edition on monday .
the report comes as the former wall street high flyer faces a full - scale probe by u . s . regulators into questionable financial dealings and as the company ' s market value has fallen by more than $ 17 billion in less than three weeks .
the journal said the enron officer involved in the transaction was michael kopper , a former managing director of the company ' s enron north america unit , and that the company receiving the money was chewco investments lp .
it said that kopper was an associate of andrew fastow , the company ' s former chief financial officer who has been linked to transactions now under investigation by government regulators .
in 1999 , the two set up a private partnership known as ljm 2 co - investment lp , which was involved in billions of dollars of transactions with enron , according to private - partnership documents and company sec filings , the paper said .
chewco is mentioned in a brief biography of kopper that is part of a 1999 offering memorandum for the ljm 2 partnership , the journal said .
the document said kopper , besides being a " principal " of ljm 2 , " manages the general partner of chewco , an investment fund with approximately $ 400 million in capital commitments that was established in 1997 to purchase from enron an interest in a defined pool of enron assets . "
the paper said kopper didn ' t return phone calls seeking comment . enron officials wouldn ' t discuss the transaction , the paper said .
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron made 35 mln usd purchase from entity run by officer of company - report
11 / 05 / 2001
afx news
( c ) 2001 by afp - extel news ltd
washington ( afx ) - enron corp in march made a 35 mln usd purchase from an entity run by a company officer , the wall street journal reported .
the payment appears to have been the last step in a series of transactions that allowed the company to keep hundreds of millions of dollars of debt off its balance sheet for the past three years , the newspaper said .
based in interviews with others familiar with the matter , extracts from enron sec filings and private partnership documents , the enron officer involved in the transaction was michael kopper , a former managing director of the enron north america unit .
the entity receiving the 35 mln usd was chewco investments lp . it wasn ' t clear from the available information what form the payment took or what , if any , gain chewco or kopper realized .
kopper , who a company spokesman says left enron in july , was an associate of andrew fastow , the company ' s chief financial officer until last month .
they set up and subsequently ran the ljm 2 co - investment lp private partnership , which was involved in billions of dollars of transactions with enron , according to official filings .
enron officials , who have said repeatedly that all their actions were legal and properly disclosed , declined to discuss the 35 mln usd transaction .
jms for more information and to contact afx : www . afxnews . com and www . afxpress . com
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron transaction with entity run by executive raises questions
11 / 05 / 2001
dow jones business news
( copyright ( c ) 2001 , dow jones as of june 30 , it had $ 63 . 4 billion .
messrs . kopper and fastow had " extensive involvement in the organization , investment activity and operations " of jedi , according to the 1999 ljm 2 private - offering memorandum . jedi invested $ 2 . 1 billion in 63 separate transactions , the document said . after accounting for jedi ' s $ 500 million in equity , this indicates the partnership borrowed as much as $ 1 . 6 billion .
copyright ( c ) 2001 dow jones & company , inc .
all rights reserved .
copyright ? 2000 dow jones & company , inc . all rights reserved .
financial post : news
enron may have to sell assets
reuters
11 / 05 / 2001
national post
national
fp 3
( c ) national post 2001 . all rights reserved .
new york - struggling energy giant enron corp . may have to sell power plants , pipelines and even some of its energy trading assets as it seeks to head off a credit crunch and restore investor confidence , investment bankers said yesterday .
while houston - based enron lined up us $ 1 - billion of new credit last thursday , it still suffered a second credit rating cut amid concerns about questionable financial transactions that have triggered an investigation by the u . s . securities and exchange commission .
the deteriorating picture , including a drop of almost 70 % in its share price in less than a month , has close watchers of the company saying it will probably have to break itself up if it is to stay independent .
" it will have to refocus on its core strengths and get out of other businesses , " said one investment banker close to enron .
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron ' s indian unit serves asset transfer notice to mseb
11 / 05 / 2001
dow jones international news
( copyright ( c ) 2001 , dow jones 91 - 11 - 461 - 9426 ; himendra . kumar @ dowjones . com
copyright ? 2000 dow jones & company , inc . all rights reserved .
uk : u . s . stocks edge higher in europe , futures firm .
11 / 05 / 2001
reuters english news service
( c ) reuters limited 2001 .
london , nov 5 ( reuters ) - u . s . shares edged higher in european trade on monday and index futures pointed to a higher opening on wall street amid expectations of a rate cut this week .
the december futures of the tech - heavy nasdaq composite rose 14 points to 1 , 446 . 5 by 1200 gmt and the equivalent s & p 500 contract was up 4 . 9 points 1 , 094 . 4 .
" we have seen some buying interest this morning , the futures are higher and we are looking for a higher opening on wall street , " said one dealer in london .
investors were betting the federal reserve would cut interest rates by another half a point at its meeting on tuesday in a bid to support the weakening economy .
struggling energy giant enron corp . stood at $ 11 . 65 , having fallen six percent on friday to $ 11 . 27 . on sunday , the uk ' s independent reported that energy giant royal dutch / shell group may mount an $ 11 billion bid for enron .
investment bankers said enron may have to sell power plants , pipelines and even some of its energy trading assets as it seeks to head off a credit crunch and restore investor confidence .
cisco systems inc . , which makes the networking gear which helps power the internet , rose to $ 17 . 75 from a close of $ 17 . 26 .
sun microsystems inc . edged up to $ 11 . 65 from $ 11 . 44 .
stocks were little changed in after - hours trading on friday amid a dearth of earnings news , after blue - chip stocks rose in the regular session as investors looked past huge job losses and bet on a recovery next year .
stericycle inc . rose to $ 49 . 90 after - hours from a close at $ 49 . 01 on the nasdaq after the medical waste management provider reported a rise in its third - quarter net profit .
networking equipment makers such as juniper networks had dropped sharply on news that the voice and data services firm qwest communications international inc . halted work on its network , analysts said .
the dow jones industrial average rose 0 . 64 percent to end at 9 , 323 . 54 . the tech - heavy nasdaq composite fell 0 . 03 percent to 1 , 745 . 73 .
the national association of purchasing management releases its october non - manufacturing index at 1500 gmt . economists in a reuters survey on average forecast a reading of 45 . 9 versus 50 . 2 in september .
copyright ? 2000 dow jones & company , inc . all rights reserved .
bg : technically qualified to operate enron india fields
11 / 05 / 2001
dow jones energy service
( copyright ( c ) 2001 , dow jones & company , inc . )
singapore - ( dow jones ) - u . k . oil and gas company bg group plc ( brg ) reiterated monday its claim for operator status of the indian upstream assets of enron corp . ( ene ) , saying it was best qualified due to its upstream technical experience .
bg paid us $ 388 million for enron ' s 30 % stake in oil and gas fields offshore western india in october , but the sale is subject to a number of consents and conditions including confirmation from enron and gas india ' s joint venture partners - oil 65 - 415 - 4066 ; sri . jegarajah @ dowjones . com
copyright ? 2000 dow jones & company , inc . all rights reserved .
uk press : us unions call for corp reform at enron
11 / 05 / 2001
dow jones international news
( copyright ( c ) 2001 , dow jones 44 ( 0 ) 20 7842 9320
copyright ? 2000 dow jones & company , inc . all rights reserved .
india : enron ' s india lenders to discuss $ 2 . 9 bln project .
11 / 05 / 2001
reuters english news service
( c ) reuters limited 2001 .
bombay , nov 5 ( reuters ) - lenders to an indian power plant that is majority - owned by troubled enron corp will meet in singapore with the u . s . energy giant to discuss the $ 2 . 9 billion project , a banking source said on monday .
houston - based enron is seeking to head off a credit crunch and restore investor confidence , damaged after its credit rating was cut and u . s . authorities began investigating its financial transactions .
the meeting in singapore this weekend will examine offers that two indian companies have put forward to buy enron ' s 65 percent stake in dabhol power company ( dpc ) , which is building the controversial project , the banking source told reuters .
" the meeting will gauge the interest of the two bidders , " the source said .
enron has been in talks with tata power , india ' s largest private electricity firm , and bses ltd about selling the stake , a deal in the works well before the recent crisis of confidence .
bses and tata power officials were not immediately available for comment .
enron ' s assets in dabhol are estimated to be worth $ 870 million , analysts said .
who blinks first
" it is a matter of who blinks first , " said one banker familiar with the negotiations . " but given enron ' s recent troubles , we expect them to sell at a substantial discount . "
sources at the lending banks told reuters enron was willing to sell its holding in dabhol power at a 10 to 15 percent discount .
an enron spokesman said he was unable to comment .
but in august , houston - based enron said it and its foreign partners were ready to sell their stakes in dabhol for no less than $ 1 . 0 billion , an amount said to be sufficient to cover their costs and direct financial investment in the project .
enron ' s deteriorating position , including a drop of almost 70 percent it is share price in less than a month , has close watchers of the company saying it will probably have to break itself up if it is to stay independent .
analysts say that while enron had lined up $ 1 billion in credit last thursday , it may have to sell power plants , pipelines and some of its energy trading assets . the company could also be the object of a takeover bid .
bitter dispute
the first phase of the controversial 2 , 184 mw dabhol power plant , india ' s largest foreign direct investment , has been completed . but work on the second phase was abruptly stopped in june following a bitter dispute between enron and the plant ' s sole buyer , a loss - making indian utility .
the meeting in singapore will take place a few days before the expiry of enron ' s six - month notice to the utility expressing its intention to terminate the power purchase agreement .
this contract governs the terms of the sale of power by dabhol to the state - run maharashtra state electricity board ( mseb ) , the nearly bankrupt power distribution monoply in the state where the plant is located .
after november 19 , enron will be entitled - under the terms of the contract - to submit the dispute to binding arbitration by the international court of arbitration in london .
u . s . conglomerate general electric and construction firm bechtel corp each own 10 percent in the project , with the remaining 15 percent held by mseb .
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron starts valuing india unit , claim for canceled power pact
2001 - 11 - 05 06 : 31 ( new york )
enron starts valuing india unit , claim for canceled power pact
mumbai , nov . 5 ( bloomberg ) - - dabhol power co . , which runs
enron corp . ' s $ 3 billion power plant , said it started valuing its
assets to assess a claim for cancellation of a sales contract with
the maharashtra state electricity board because of unpaid bills .
enron on may 19 issued the first notice to cancel the power
supply contract with the board in six months unless the bills were
paid . the deadline ends on nov . 19 .
enron owns 65 percent of dabhol power , india ' s biggest
foreign investment . it wants to exit the venture as it ' s owed $ 64
million by the board , its sole customer , in bills not paid for ten
months . the board in may stopped buying the power , saying it was
too expensive .
` ` dpc is left with little choice other than to serve the
transfer notice to mseb , which draws us closer to final
termination of the power purchase agreement and the ultimate
recovery of damages , ' ' the company said in a statement .
the so - called asset transfer notice starts a process of
valuing dabhol ' s assets and is followed by cancellation of the
power supply contract .
enron began looking to sell its stake after a government -
appointed panel of negotiators failed to get other buyers for the
plant ' s power . enron has invested $ 875 million in the project and
has offered to sell its stake to the government at cost .
industrial development bank of india and other local banks ,
which have lent $ 1 . 4 billion to the project , have begun looking
for a buyer for the plant . they are at greatest risk if enron
pulls out as their loans aren ' t guaranteed by the federal
government .
general electric capital and the closely held bechtel group
together own 20 percent of dabhol , while the electricity board
owns the remaining 15 percent .
- - ravil shirodkar in the mumbai newsroom ( 91 - 22 ) 233 - 9029
enron in talks to sell 50 % stake in korean gas unit ( update 3 )
2001 - 11 - 05 02 : 57 ( new york )
enron in talks to sell 50 % stake in korean gas unit ( update 3 )
( adds analyst ' s comments in fourth paragraph , closes shares
in final paragraph . )
seoul , nov . 5 ( bloomberg ) - - enron corp . , which has lost more
than 86 percent of its market value this year , is in talks to sell
its half stake in a natural gas joint venture with sk corp . , an
official of korea ' s top oil refiner said .
the official , who declined to be named , said talks had taken
place since at least august . he wouldn ' t give details . enron said
in 1998 the gas distribution venture with sk would have a
capitalization of about $ 450 million . enron officials weren ' t
immediately available to comment .
the world ' s largest energy trader is facing difficulties
raising cash after the u . s . securities and exchange commission
started investigating partnerships run by its former chief
financial officer and its long - term credit rating was cut by
standard & poor ' s to the second - lowest investment grade , or
` ` bbb , ' ' from ` ` bbb + . ' '
` ` enron will probably sell its korean operations at a loss
because of its financial problems , ' ' said lee kwang hoon , an
analyst at good morning securities co . in seoul . enron ' s
difficulties raising funds may prompt it to pull out of all of its
overseas ventures except for china , he said .
goldman sachs group inc . refused to participate in a $ 1
billion loan to enron because it was unwilling to risk its capital
on a client with falling credit ratings that has been using its
investment - banking services less often , according to people
familiar with the matter .
enron selected goldman sachs to manage negotiations to sell
its korean gas assets , and sent ` ` investment guide letters ' ' to
companies that may be interested , korea oil news reported today ,
citing people it didn ' t name . foreign companies that are
interested include el paso corp . , bp plc and exxon mobil corp . ,
the report said .
as sk has a preferential right to negotiate for the stake , it
may buy back enron ' s share , the report cited an unnamed sk
official as saying .
enron plans to receive letters of intent from interested
companies by the end of november , and conclude the sale by the end
of this year or early next year , the report said . korea oil news
is published by state - run korea national oil corp .
sk corp . shares rose 300 won , or 2 . 6 percent , to 12 , 000 .
enron ' s shares on friday fell 69 cents , or 5 . 6 percent , to $ 11 . 30 .
- - youngsam cho at ycho 2 @ bloomberg . net in seoul ( 822 ) 3702 - 1639 / rb
enron mentions - 11 - 05 - 01
enron transaction raises new questions - - - a company executive ran entity that received $ 35 million in march
the wall street journal , 11 / 05 / 01
what enron ' s financial reports did - - and didn ' t - - reveal - - - enron short seller detected red flags in regulatory filings
the wall street journal , 11 / 05 / 01
what enron ' s financial reports did - - and didn ' t - - reveal - - - auditor could face scrutiny on clarity of financial reports
the wall street journal , 11 / 05 / 01
enron offers only questions
realmoney . com , 11 / 05 / 01
companies & finance international - unions seek reform at enron .
financial times , 11 / 05 / 01
usa : enron made $ 35 mln purchase from co run by officer - wsj .
reuters english news service , 11 / 05 / 01
enron made 35 mln usd purchase from entity run by officer of company - report
afx news , 11 / 05 / 01
enron transaction with entity run by executive raises questions
dow jones business news , 11 / 05 / 01
enron may have to sell assets
national post , 11 / 05 / 01
enron ' s indian unit serves asset transfer notice to mseb
dow jones international news , 11 / 05 / 01
uk : u . s . stocks edge higher in europe , futures firm .
reuters english news service , 11 / 05 / 01
bg : technically qualified to operate enron india fields
dow jones energy service , 11 / 05 / 01
uk press : us unions call for corp reform at enron
dow jones international news , 11 / 05 / 01
india : enron ' s india lenders to discuss $ 2 . 9 bln project .
reuters english news service , 11 / 05 / 01
enron starts valuing india unit , claim for canceled power pact
bloomberg , 11 / 05 / 01
enron in talks to sell 50 % stake in korean gas unit ( update 3 )
bloomberg , 11 / 05 / 01
enron transaction raises new questions - - - a company executive ran entity that received $ 35 million in march
by john r . emshwiller
staff reporter of the wall street journal
11 / 05 / 2001
the wall street journal
a 3
( copyright ( c ) 2001 , dow jones as of june 30 , it had $ 63 . 4 billion .
messrs . kopper and fastow had " extensive involvement in the organization , investment activity and operations " of jedi , according to the 1999 ljm 2 private - offering memorandum . jedi invested $ 2 . 1 billion in 63 separate transactions , the document said . after accounting for jedi ' s $ 500 million in equity , this indicates the partnership borrowed as much as $ 1 . 6 billion .
in 1997 , calpers sold its interest in jedi back to enron for about $ 375 million . at about the same time , calpers put $ 500 million into a new enron partnership , known as jedi ii .
at this point , enron could have held on to all of jedi , but that probably would have entailed consolidating the partnership and its debts into the company ' s financial statements .
that , apparently , is where chewco came in . ( chewco got its name , says one person familiar with the matter , from the character chewbacca in the " star wars " movies , where jedi warriors also roamed . ) chewco bought from enron the jedi interest formerly held by calpers , according to documents and interviews . it couldn ' t be determined what the terms of that transaction were . however , the fact that chewco shows up as a debtor to jedi in the texas state filing suggests that money for the purchase was borrowed from jedi itself .
the available information on the chain of transactions raises questions about how separate jedi and chewco really were from enron and whether jedi ' s assets and liabilities should have been folded into the company ' s financial statements .
in a march 2000 sec filing , enron makes a brief reference to its new jedi partner , which enron doesn ' t identify but presumably is chewco . the filing said " an officer of enron has invested in the limited partner of jedi and from time to time acts as agent on behalf of the limited partner ' s management . " while the officer isn ' t named , the description is similar to that given for mr . kopper in relation to chewco in the ljm 2 offering memorandum .
in march of this year , enron moved to purchase the balance of jedi that it didn ' t already own . in an sec filing earlier this year , enron said it acquired for $ 35 million " the limited partner ' s interests " in jedi . again , the partner wasn ' t named , but presumably was chewco .
enron consolidated jedi ' s assets and liabilities into the company . the sec filing said jedi ' s holdings included 12 million shares of enron stock . enron said it also paid off about $ 620 million of jedi " third - party debt . " the third party or parties weren ' t named .
- - - a jedi ' s journey
- - 1993 : enron and california public employees ' retirement system , or
calpers , form jedi limited partnership and each commit $ 250 million to
make energy investments .
- - 1997 : enron purchases calpers ' share in jedi for about $ 375
million and then resells it to an entity , believed to be chewco
investments . chewco formed with $ 400 million in capital commitments
and run by enron officer to purchase enron assets .
- - 2001 : enron repurchases all of jedi and consolidates it into the
company .
copyright ? 2000 dow jones & company , inc . all rights reserved .
heard on the street
what enron ' s financial reports did - - and didn ' t - - reveal - - - enron short seller detected red flags in regulatory filings
by cassell bryan - low and suzanne mcgee
staff reporters of the wall street journal
11 / 05 / 2001
the wall street journal
cl
( copyright ( c ) 2001 , dow jones it had no immediate comment friday .
enron shares were trading at about six times the company ' s book value in late 2000 . by comparison , wall street brokerage firms typically trade at two or three times book value and hedge funds in effect are priced at book value .
among the pages of the 1999 report that mr . chanos marked with yellow post - it notes and scribbled comments was one detailing the related - party transactions . he underlined a sentence stating that one of enron ' s senior officers is the " managing member " of a private investment company with which enron had entered into a series of transactions . " we read the disclosure over and over and over again , and we just didn ' t understand it - - and we read footnotes for a living . " he says . but at the time , he concedes , " it was just an odd footnote to us . "
he started telephoning analysts at wall street firms to determine what aspects of the bulls ' case he was missing . what he heard excited him further . part of the bullishness focused on enron ' s strategy of trading broadband - network capacity . mr . chanos , who already had placed bearish bets on some telecommunications bandwidth providers , was convinced that the industry already suffered from overcapacity and that the situation would only get worse . his conclusion : if enron " couldn ' t see the looming train wreck coming in telecom , what else were they missing ? maybe they weren ' t as infallible in the energy area as people had thought . "
another warning signal was insider stock sales through the second half of 2000 , he says . that sat awkwardly with the common refrain from wall street analysts that investors had to just trust management given the difficulty of analyzing how earnings were derived . the company didn ' t immediately comment on the sales on friday .
" you look for patterns in my business , " says mr . chanos . " the fact that this was a ` trust me ' story , while management was voting with its feet was another check . while we didn ' t have a smoking gun , we certainly saw a reason to perhaps not trust management at its word that these earnings were what they said they were . "
those factors led mr . chanos to begin shorting the stock in late november of last year , when it was fluctuating between $ 65 and $ 80 ; he won ' t provide details . overall , the level of short interest , or short - selling positions not yet closed out , on enron shares jumped 2 . 2 million shares to 7 . 9 million shares for the month through mid december , from the same period in the previous month .
as other red flags surfaced , in february mr . chanos and other short sellers significantly ramped up the bearish positions . mr . chanos first discussed his view of enron with those outside the firm that month in miami , where he hosted his annual " bears in hibernation " conference . attendees bring two ideas to present , and one of his was enron .
with enron ' s stock trading at $ 72 at that time , or roughly 40 times 2001 ' s per - share earnings estimates , " the market is priced for perfection here , " mr . chanos told the 25 or so attendees , " whereas it looks like things may be anything but . "
back in new york , mr . chanos arranged a second round of sessions with bullish analysts . " here ' s our thesis , " he told them . " what are we missing ? "
mr . chanos came out of those meetings with a " heightened conviction that we were right . " for one thing , he sensed frustration brewing about the level of trust required with enron .
as the spring progressed , mr . chanos became increasingly confident , adding to his short position . on a widely reported conference call in april , jeffrey skilling , then enron ' s chief executive , responded to another short seller ' s criticism that enron hadn ' t provided a balance sheet by calling him an " ah . " for the first time , " i got a sense that the company was now getting tough questions and was not happy about it , " mr . chanos says .
for their part , wall street analysts argue that they have limited time and resources for the in - depth research that mr . chanos prefers . many cover dozens of companies . still , some say they have learned lessons from enron ' s fall from grace . salomon smith barney analyst raymond niles , for one , says he will " pursue warning signs relentlessly and go by gut instinct " when he senses a looming problem . says mr . niles , who covers enron : " i think shorts play a very valuable role in the market , reminding us of what can go wrong . "
( see related article : " auditor could face scrutiny on clarity of financial reports " - - wsj nov . 5 , 2001 )
copyright ? 2000 dow jones & company , inc . all rights reserved .
what enron ' s financial reports did - - and didn ' t - - reveal - - - auditor could face scrutiny on clarity of financial reports
by jonathan weil
staff reporter of the wall street journal
11 / 05 / 2001
the wall street journal
cl
( copyright ( c ) 2001 , dow jones & company , inc . )
as enron corp . ' s independent auditor , arthur andersen llp has the job of making sure the houston energy trader ' s financial statements not only are accurate and complete in all material respects , but also are understandable .
now for the really tricky part : understandable to whom ?
for andersen , this isn ' t just an academic question . once again , the accounting practices of one of the big five firm ' s most prized clients have come under intense scrutiny from regulators and shareholders . questions could well turn to whether andersen fulfilled its obligation to protect investors ' interests . and an important focus is likely to be whether andersen should have required enron to better explain its dealings with partnerships run by former chief financial officer andrew s . fastow before agreeing to bless the company ' s financial statements .
enron revealed last month , in a conference call , that its shareholder equity had fallen by $ 1 . 2 billion during the third quarter as a result of transactions in which a partnership controlled by mr . fastow was at least at times involved , fueling a steep dive in the stock price amid growing concerns about the company ' s financial health . many wall street analysts , including die - hard enron bulls , long have grumbled that parts of enron ' s financial statements are indecipherable .
" the heart of disclosure is intelligibility , " says alan bromberg , a professor of securities law at southern methodist university in dallas . " if the people to whom it ' s addressed can ' t understand it , it hasn ' t been adequately disclosed . there ' s clearly a qualitative , as well as a factual , component to disclosure . "
under generally accepted accounting principles , the rules for disclosing related - party transactions seem straightforward enough . among other things , companies must describe the " information deemed necessary to an understanding of the effects of the transactions on the financial statements . " but the nation ' s accounting - standard setters never have offered any clear guidance on whether companies ' disclosures should be understandable to a broad audience or merely to financially sophisticated individuals with specialized training . and even sophisticated investors are prone to being stumped now and then .
to be sure , the adequacy of a company ' s related - party disclosures can be determined only when all the information about the transactions is out in the open . for its part , enron - - which is hardly the only large energy company with complex partnership dealings - - maintains its off - balance - sheet transactions were legal and properly disclosed . " they comply with reporting requirements , " says enron spokeswoman karen denne , adding that andersen was aware of the transactions and reviewed them . " to the extent that an investor doesn ' t understand them , they are able to ask questions . " and in the end , she notes , investors who didn ' t understand the transactions didn ' t have to buy enron stock .
enron ' s disclosure practices stand out , however , because they have been a source of complaints for so long . even some top - flight accounting professors say they can ' t make heads or tails of the company ' s transactions with mr . fastow or enron ' s motives for entering them . if they can ' t figure them out , it raises the question of whether any outsider could .
one thing is certain : the stakes for andersen could be high . since enron ' s disclosure of the reduction in shareholder equity , its stock has plunged 67 % to $ 11 . 30 as of 4 p . m . in new york stock exchange composite trading friday - - a drop that wipes $ 20 billion off the company ' s market value and potentially exposing enron and andersen to massive shareholder liability . already , enron ' s dealings with the partnerships are the subject of a formal investigation by the securities and exchange commission . that creates the possibility that andersen itself could become a focus of the probe at some point , should regulators find enron ' s accounting and disclosure practices deficient . meanwhile , the law firm for a special committee set up by enron ' s board has hired accounting firm deloitte & touche llp to help review the partnerships ' activities .
an andersen spokesman , david tabolt , says the firm " will continue to cooperate with [ enron ' s ] special committee , lawyers and accounting advisers " and " will also cooperate with other official investigations as requested . " so far , he says , the sec hasn ' t told andersen it is a subject of the enron probe . beyond that , he declines to comment on enron , citing client - confidentiality obligations .
how murky are the related - party disclosures in enron ' s audited financial statements ? here is a summary of a section in enron ' s 2000 year - end financial statements describing certain transactions with the fastow - operated partnerships . the company said it transferred assets valued at $ 1 . 2 billion , including $ 150 million in notes payable , 3 . 7 million restricted enron shares and the right to receive as many as 18 million enron common shares in march 2003 , subject to certain conditions . it also transferred to the partnerships other assets valued at $ 309 million , including a $ 50 million note payable and " an investment in an entity that indirectly holds warrants convertible into common stock of an enron equity method investee . "
in return , enron said it received " economic interests in the entities , " $ 309 million in notes receivable and an additional $ 1 . 2 billion in notes receivable as part of a " special distribution . " the disclosure went on to mention a series of purchases by enron of " share - settled options from the entities " on shares of enron common stock .
the raw numbers may all be there . but " any objective person would be hard pressed to understand the effects of these disclosures on the financial statements , " says douglas carmichael , an accounting professor at baruch college in new york . " the quality of the disclosure is low , which creates uncertainty about the quality of their accounting . "
further , he says , enron ' s explanation of why it entered the transactions " seems to defy imagination . " in the year - end financial statement , enron said the purpose was " to hedge certain merchant investments and other assets , " a category that includes energy assets whose values are prone to wide price fluctuations . yet the disclosure shows that enron chose to use shares and options of its own stock as its chief hedging instrument , even though their price movements wouldn ' t appear to be directly related to the value of the investments enron was trying to hedge .
" i don ' t see how that possibly hedges any of enron ' s risks or assets , " mr . carmichael says . indeed , the disclosures have given rise to widespread speculation that enron ' s actual purpose was to use its off - balance - sheet transactions to shift losses off its books to avoid running them through its income statement . asked whether that was enron ' s purpose , ms . denne declines to comment . she says enron stands by its earlier statement that enron was trying to hedge certain investments .
to date , andersen hasn ' t been named as a defendant in any of the numerous shareholder lawsuits filed against enron , which paid andersen $ 52 million last year , including $ 25 million in audit fees . enron ' s woes come during a year already filled with embarrassments for andersen . in june , the sec fined andersen and three partners $ 7 million over their audits of waste management inc . ' s financial statements , the largest sec fine ever against an accounting firm . andersen , which neither admitted nor denied the sec ' s fraud allegations , paid $ 75 million in 1998 to settle its portion of a shareholder lawsuit over the houston - based garbage hauler . also this year , without admitting wrongdoing , andersen agreed to pay $ 110 million to settle a shareholder lawsuit over audits it conducted for sunbeam corp .
( see related article : " heard on the street : enron short seller detected red flags in regulatory filings " - - wsj nov . 5 , 2001 )
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron offers only questions
by james j . cramer
realmoney . com
11 / 05 / 2001 08 : 10 am est
url :
the journalists on this enron ( ene : nyse - news - commentary ) story seem oblivious to the big issue here : why did enron need to do the partnerships in the first place ?
that , to me , is the issue - - because the only reason you would set up all of these " perfectly legal " partnerships , as they keep calling them down there , is to hide something .
what would they be trying to hide ? let ' s step aside for a second and ask a few hypotheticals .
if you had information about how a market was doing , you might want to do something with that information that you didn ' t want anyone to know about . for example , let ' s say you had access to all of the trading information about where electricity was going - - you had access to the grid - - you might be able to take advantage of that information with an off - book partnership . you would need that off - book partnership because you wouldn ' t want any of those people from whom you took the data thinking that you were taking advantage of those data .
or if you knew that a market was about to be squeezed upward and you wanted to facilitate that squeeze , you could buy electricity and keep it from , say , california , until rates went up , and then dump it in california once the squeeze was complete .
or you might just want to make a few bucks on the side that you didn ' t want to share with shareholders and you needed to have something special , something hidden from shareholders , to make those few bucks .
or the parent company didn ' t know anything about these partnerships , and the people running them were just living large without much oversight .
or the parent company was worried about its credit rating , so it wanted to hide debt .
i don ' t know , can someone come up with better reasons you would do this ? i can ' t . can someone come up with something that ' s not nefarious ?
please email me .
i want to know why anyone would do this , a good reason that we would all appreciate as shareholders .
companies & finance international - unions seek reform at enron .
by sheila mcnulty .
11 / 05 / 2001
financial times
( c ) 2001 financial times limited . all rights reserved
the afl - cio , a federation of us trade unions , is calling for sweeping governance reform measures at enron , the embattled energy trader , to restore investor confidence amid a probe by federal regulators into its finances .
" america ' s working families are significant shareholders of enron stock through their pension , health and welfare benefit funds , " said the afl - cio , which is the american federation of labor and congress of industrial organizations .
the union - sponsored funds under the afl - cio , which represents 13 m americans , hold 3 . 1 m enron shares . the amalgamated bank , the trustee of long view funds , which holds 251 , 304 enron shares , has also joined in the call for corporate reform . those funds are investment trusts managing equity assets on behalf of workers ' pension funds .
the two were the first big shareholders to make demands on enron since the crisis of confidence in the company began on october 16 with the surprise disclosure of a $ 1 . 2 bn balance sheet adjustment .
they said the mandate of the special committee , created by enron ' s board to examine the transactions in question and liaise with the securities and exchange commission during its investigation , was too narrow .
they want the committee to examine all transactions with entities in which enron employees or directors have an interest , adopt procedures for reviewing insider participation in investments , start an extraordinary review of executive compensation , adopt a stricter definition of director independence and , finally , disclose director conflicts of interest .
( c ) copyright financial times ltd . all rights reserved .
http : / / www . ft . com .
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : enron made $ 35 mln purchase from co run by officer - wsj .
11 / 05 / 2001
reuters english news service
( c ) reuters limited 2001 .
new york , nov 5 ( reuters ) - enron corp . made a $ 35 million purchase from an entity run by a company officer , raising new questions about financial dealings with its management , the wall street journal reported in its online edition on monday .
the report comes as the former wall street high flyer faces a full - scale probe by u . s . regulators into questionable financial dealings and as the company ' s market value has fallen by more than $ 17 billion in less than three weeks .
the journal said the enron officer involved in the transaction was michael kopper , a former managing director of the company ' s enron north america unit , and that the company receiving the money was chewco investments lp .
it said that kopper was an associate of andrew fastow , the company ' s former chief financial officer who has been linked to transactions now under investigation by government regulators .
in 1999 , the two set up a private partnership known as ljm 2 co - investment lp , which was involved in billions of dollars of transactions with enron , according to private - partnership documents and company sec filings , the paper said .
chewco is mentioned in a brief biography of kopper that is part of a 1999 offering memorandum for the ljm 2 partnership , the journal said .
the document said kopper , besides being a " principal " of ljm 2 , " manages the general partner of chewco , an investment fund with approximately $ 400 million in capital commitments that was established in 1997 to purchase from enron an interest in a defined pool of enron assets . "
the paper said kopper didn ' t return phone calls seeking comment . enron officials wouldn ' t discuss the transaction , the paper said .
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron made 35 mln usd purchase from entity run by officer of company - report
11 / 05 / 2001
afx news
( c ) 2001 by afp - extel news ltd
washington ( afx ) - enron corp in march made a 35 mln usd purchase from an entity run by a company officer , the wall street journal reported .
the payment appears to have been the last step in a series of transactions that allowed the company to keep hundreds of millions of dollars of debt off its balance sheet for the past three years , the newspaper said .
based in interviews with others familiar with the matter , extracts from enron sec filings and private partnership documents , the enron officer involved in the transaction was michael kopper , a former managing director of the enron north america unit .
the entity receiving the 35 mln usd was chewco investments lp . it wasn ' t clear from the available information what form the payment took or what , if any , gain chewco or kopper realized .
kopper , who a company spokesman says left enron in july , was an associate of andrew fastow , the company ' s chief financial officer until last month .
they set up and subsequently ran the ljm 2 co - investment lp private partnership , which was involved in billions of dollars of transactions with enron , according to official filings .
enron officials , who have said repeatedly that all their actions were legal and properly disclosed , declined to discuss the 35 mln usd transaction .
jms for more information and to contact afx : www . afxnews . com and www . afxpress . com
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron transaction with entity run by executive raises questions
11 / 05 / 2001
dow jones business news
( copyright ( c ) 2001 , dow jones as of june 30 , it had $ 63 . 4 billion .
messrs . kopper and fastow had " extensive involvement in the organization , investment activity and operations " of jedi , according to the 1999 ljm 2 private - offering memorandum . jedi invested $ 2 . 1 billion in 63 separate transactions , the document said . after accounting for jedi ' s $ 500 million in equity , this indicates the partnership borrowed as much as $ 1 . 6 billion .
copyright ( c ) 2001 dow jones & company , inc .
all rights reserved .
copyright ? 2000 dow jones & company , inc . all rights reserved .
financial post : news
enron may have to sell assets
reuters
11 / 05 / 2001
national post
national
fp 3
( c ) national post 2001 . all rights reserved .
new york - struggling energy giant enron corp . may have to sell power plants , pipelines and even some of its energy trading assets as it seeks to head off a credit crunch and restore investor confidence , investment bankers said yesterday .
while houston - based enron lined up us $ 1 - billion of new credit last thursday , it still suffered a second credit rating cut amid concerns about questionable financial transactions that have triggered an investigation by the u . s . securities and exchange commission .
the deteriorating picture , including a drop of almost 70 % in its share price in less than a month , has close watchers of the company saying it will probably have to break itself up if it is to stay independent .
" it will have to refocus on its core strengths and get out of other businesses , " said one investment banker close to enron .
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron ' s indian unit serves asset transfer notice to mseb
11 / 05 / 2001
dow jones international news
( copyright ( c ) 2001 , dow jones 91 - 11 - 461 - 9426 ; himendra . kumar @ dowjones . com
copyright ? 2000 dow jones & company , inc . all rights reserved .
uk : u . s . stocks edge higher in europe , futures firm .
11 / 05 / 2001
reuters english news service
( c ) reuters limited 2001 .
london , nov 5 ( reuters ) - u . s . shares edged higher in european trade on monday and index futures pointed to a higher opening on wall street amid expectations of a rate cut this week .
the december futures of the tech - heavy nasdaq composite rose 14 points to 1 , 446 . 5 by 1200 gmt and the equivalent s & p 500 contract was up 4 . 9 points 1 , 094 . 4 .
" we have seen some buying interest this morning , the futures are higher and we are looking for a higher opening on wall street , " said one dealer in london .
investors were betting the federal reserve would cut interest rates by another half a point at its meeting on tuesday in a bid to support the weakening economy .
struggling energy giant enron corp . stood at $ 11 . 65 , having fallen six percent on friday to $ 11 . 27 . on sunday , the uk ' s independent reported that energy giant royal dutch / shell group may mount an $ 11 billion bid for enron .
investment bankers said enron may have to sell power plants , pipelines and even some of its energy trading assets as it seeks to head off a credit crunch and restore investor confidence .
cisco systems inc . , which makes the networking gear which helps power the internet , rose to $ 17 . 75 from a close of $ 17 . 26 .
sun microsystems inc . edged up to $ 11 . 65 from $ 11 . 44 .
stocks were little changed in after - hours trading on friday amid a dearth of earnings news , after blue - chip stocks rose in the regular session as investors looked past huge job losses and bet on a recovery next year .
stericycle inc . rose to $ 49 . 90 after - hours from a close at $ 49 . 01 on the nasdaq after the medical waste management provider reported a rise in its third - quarter net profit .
networking equipment makers such as juniper networks had dropped sharply on news that the voice and data services firm qwest communications international inc . halted work on its network , analysts said .
the dow jones industrial average rose 0 . 64 percent to end at 9 , 323 . 54 . the tech - heavy nasdaq composite fell 0 . 03 percent to 1 , 745 . 73 .
the national association of purchasing management releases its october non - manufacturing index at 1500 gmt . economists in a reuters survey on average forecast a reading of 45 . 9 versus 50 . 2 in september .
copyright ? 2000 dow jones & company , inc . all rights reserved .
bg : technically qualified to operate enron india fields
11 / 05 / 2001
dow jones energy service
( copyright ( c ) 2001 , dow jones & company , inc . )
singapore - ( dow jones ) - u . k . oil and gas company bg group plc ( brg ) reiterated monday its claim for operator status of the indian upstream assets of enron corp . ( ene ) , saying it was best qualified due to its upstream technical experience .
bg paid us $ 388 million for enron ' s 30 % stake in oil and gas fields offshore western india in october , but the sale is subject to a number of consents and conditions including confirmation from enron and gas india ' s joint venture partners - oil 65 - 415 - 4066 ; sri . jegarajah @ dowjones . com
copyright ? 2000 dow jones & company , inc . all rights reserved .
uk press : us unions call for corp reform at enron
11 / 05 / 2001
dow jones international news
( copyright ( c ) 2001 , dow jones 44 ( 0 ) 20 7842 9320
copyright ? 2000 dow jones & company , inc . all rights reserved .
india : enron ' s india lenders to discuss $ 2 . 9 bln project .
11 / 05 / 2001
reuters english news service
( c ) reuters limited 2001 .
bombay , nov 5 ( reuters ) - lenders to an indian power plant that is majority - owned by troubled enron corp will meet in singapore with the u . s . energy giant to discuss the $ 2 . 9 billion project , a banking source said on monday .
houston - based enron is seeking to head off a credit crunch and restore investor confidence , damaged after its credit rating was cut and u . s . authorities began investigating its financial transactions .
the meeting in singapore this weekend will examine offers that two indian companies have put forward to buy enron ' s 65 percent stake in dabhol power company ( dpc ) , which is building the controversial project , the banking source told reuters .
" the meeting will gauge the interest of the two bidders , " the source said .
enron has been in talks with tata power , india ' s largest private electricity firm , and bses ltd about selling the stake , a deal in the works well before the recent crisis of confidence .
bses and tata power officials were not immediately available for comment .
enron ' s assets in dabhol are estimated to be worth $ 870 million , analysts said .
who blinks first
" it is a matter of who blinks first , " said one banker familiar with the negotiations . " but given enron ' s recent troubles , we expect them to sell at a substantial discount . "
sources at the lending banks told reuters enron was willing to sell its holding in dabhol power at a 10 to 15 percent discount .
an enron spokesman said he was unable to comment .
but in august , houston - based enron said it and its foreign partners were ready to sell their stakes in dabhol for no less than $ 1 . 0 billion , an amount said to be sufficient to cover their costs and direct financial investment in the project .
enron ' s deteriorating position , including a drop of almost 70 percent it is share price in less than a month , has close watchers of the company saying it will probably have to break itself up if it is to stay independent .
analysts say that while enron had lined up $ 1 billion in credit last thursday , it may have to sell power plants , pipelines and some of its energy trading assets . the company could also be the object of a takeover bid .
bitter dispute
the first phase of the controversial 2 , 184 mw dabhol power plant , india ' s largest foreign direct investment , has been completed . but work on the second phase was abruptly stopped in june following a bitter dispute between enron and the plant ' s sole buyer , a loss - making indian utility .
the meeting in singapore will take place a few days before the expiry of enron ' s six - month notice to the utility expressing its intention to terminate the power purchase agreement .
this contract governs the terms of the sale of power by dabhol to the state - run maharashtra state electricity board ( mseb ) , the nearly bankrupt power distribution monoply in the state where the plant is located .
after november 19 , enron will be entitled - under the terms of the contract - to submit the dispute to binding arbitration by the international court of arbitration in london .
u . s . conglomerate general electric and construction firm bechtel corp each own 10 percent in the project , with the remaining 15 percent held by mseb .
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron starts valuing india unit , claim for canceled power pact
2001 - 11 - 05 06 : 31 ( new york )
enron starts valuing india unit , claim for canceled power pact
mumbai , nov . 5 ( bloomberg ) - - dabhol power co . , which runs
enron corp . ' s $ 3 billion power plant , said it started valuing its
assets to assess a claim for cancellation of a sales contract with
the maharashtra state electricity board because of unpaid bills .
enron on may 19 issued the first notice to cancel the power
supply contract with the board in six months unless the bills were
paid . the deadline ends on nov . 19 .
enron owns 65 percent of dabhol power , india ' s biggest
foreign investment . it wants to exit the venture as it ' s owed $ 64
million by the board , its sole customer , in bills not paid for ten
months . the board in may stopped buying the power , saying it was
too expensive .
` ` dpc is left with little choice other than to serve the
transfer notice to mseb , which draws us closer to final
termination of the power purchase agreement and the ultimate
recovery of damages , ' ' the company said in a statement .
the so - called asset transfer notice starts a process of
valuing dabhol ' s assets and is followed by cancellation of the
power supply contract .
enron began looking to sell its stake after a government -
appointed panel of negotiators failed to get other buyers for the
plant ' s power . enron has invested $ 875 million in the project and
has offered to sell its stake to the government at cost .
industrial development bank of india and other local banks ,
which have lent $ 1 . 4 billion to the project , have begun looking
for a buyer for the plant . they are at greatest risk if enron
pulls out as their loans aren ' t guaranteed by the federal
government .
general electric capital and the closely held bechtel group
together own 20 percent of dabhol , while the electricity board
owns the remaining 15 percent .
- - ravil shirodkar in the mumbai newsroom ( 91 - 22 ) 233 - 9029
enron in talks to sell 50 % stake in korean gas unit ( update 3 )
2001 - 11 - 05 02 : 57 ( new york )
enron in talks to sell 50 % stake in korean gas unit ( update 3 )
( adds analyst ' s comments in fourth paragraph , closes shares
in final paragraph . )
seoul , nov . 5 ( bloomberg ) - - enron corp . , which has lost more
than 86 percent of its market value this year , is in talks to sell
its half stake in a natural gas joint venture with sk corp . , an
official of korea ' s top oil refiner said .
the official , who declined to be named , said talks had taken
place since at least august . he wouldn ' t give details . enron said
in 1998 the gas distribution venture with sk would have a
capitalization of about $ 450 million . enron officials weren ' t
immediately available to comment .
the world ' s largest energy trader is facing difficulties
raising cash after the u . s . securities and exchange commission
started investigating partnerships run by its former chief
financial officer and its long - term credit rating was cut by
standard & poor ' s to the second - lowest investment grade , or
` ` bbb , ' ' from ` ` bbb + . ' '
` ` enron will probably sell its korean operations at a loss
because of its financial problems , ' ' said lee kwang hoon , an
analyst at good morning securities co . in seoul . enron ' s
difficulties raising funds may prompt it to pull out of all of its
overseas ventures except for china , he said .
goldman sachs group inc . refused to participate in a $ 1
billion loan to enron because it was unwilling to risk its capital
on a client with falling credit ratings that has been using its
investment - banking services less often , according to people
familiar with the matter .
enron selected goldman sachs to manage negotiations to sell
its korean gas assets , and sent ` ` investment guide letters ' ' to
companies that may be interested , korea oil news reported today ,
citing people it didn ' t name . foreign companies that are
interested include el paso corp . , bp plc and exxon mobil corp . ,
the report said .
as sk has a preferential right to negotiate for the stake , it
may buy back enron ' s share , the report cited an unnamed sk
official as saying .
enron plans to receive letters of intent from interested
companies by the end of november , and conclude the sale by the end
of this year or early next year , the report said . korea oil news
is published by state - run korea national oil corp .
sk corp . shares rose 300 won , or 2 . 6 percent , to 12 , 000 .
enron ' s shares on friday fell 69 cents , or 5 . 6 percent , to $ 11 . 30 .
- - youngsam cho at ycho 2 @ bloomberg . net in seoul ( 822 ) 3702 - 1639 / rb