enron mentions sec seeks information on enron dealings with partnerships recently run by fastow
the wall street journal , 10 / 23 / 01
where did the value go at enron ?
new york times , 10 / 23 / 01
front page - first section : sec probes enron over financial dealings
financial times ; oct 23 , 2001
companies oct 23 , 2001
enron discloses sec inquiry
the washington post , oct 23 , 2001
enron suffers after unclear disclosure , new york times says
bloomberg , 10 / 23 / 01
sec asks enron for investing data
houston chronicle , 10 / 23 / 01
minnesota mining and gm climb in a rally that builds late in day
the wall street journal , 10 / 23 / 01
world stock markets : wall st bargain hunters counter earnings gloom americas
financial times ; oct 23 , 2001
milberg weiss announces class action suit against enron corp .
business wire , 10 / 22 / 01
enron to host conference call tues 9 : 30 am edt
dow jones news service , 10 / 22 / 01
janus had biggest enron stake at end of 2 nd - quarter ( updatel )
bloomberg , 10 / 22 / 01
enron says sec asks about related - party transactions ( update 9 )
bloomberg , 10 / 22 / 01
trusts keeping enron off balance
thestreet . com , 10 / 22 / 01
why enron ' s writedown unnerves some investors
thestreet . com , 10 / 22 / 01
sec seeks information on enron dealings with partnerships recently run by fastow
by rebecca smith and john r . emshwiller
staff reporters of the wall street journal
10 / 23 / 2001
the wall street journal
a 3
( copyright ( c ) 2001 , dow jones & company , inc . )
enron corp . said it has been contacted by the securities and exchange commission seeking information on the energy giant ' s controversial dealings with partnerships that were set up and run until recently by its chief financial officer , andrew s . fastow .
following enron ' s announcement yesterday morning of the sec inquiry , the company ' s stock took another big slide , falling more than 20 % in new york stock exchange trading . as of 4 p . m . , enron shares were trading at $ 20 . 65 , off $ 5 . 40 , knocking about $ 4 billion off enron ' s market capitalization . volume topped the big board ' s most - active list at about 36 million shares . a week ago , enron stock was trading at about $ 33 a share . subsequently , the company announced a $ 1 . 01 billion third - quarter write - off that produced a $ 618 million loss .
analysts also voiced concerns yesterday about possible other bad news lurking amid enron ' s vast and extremely complex operations . the company has dealings with a number of related entities . under certain circumstances , if enron ' s credit rating and stock price fall far enough , the company would be obligated to issue tens of millions of additional shares to these entities , diluting the holdings of current shareholders .
enron has previously acknowledged the provisions but said its business is strong and it feels confident that there will be no defaults .
in a statement , enron chairman and chief executive kenneth lay said the company " will cooperate fully " with the sec inquiry and " look ( s ) forward to the opportunity to put any concern about these transactions to rest . " enron has consistently said that it believes its dealings with the fastow - related partnerships were proper and properly disclosed . the company has said it put billions of dollars of assets and stock into partnership - related transactions as a way to hedge against fluctuating market conditions .
the sec inquiry came from the agency ' s fort worth , texas , regional office . according to a person familiar with the matter , this would indicate that the inquiry comes from the sec ' s enforcement arm , as opposed to its corporate - finance section . the participation of the enforcement branch would indicate that the agency is looking into whether there were possible violations of securities law . however , enforcement - branch inquiries often don ' t produce any allegations of wrongdoing . it also appears that the sec hasn ' t yet taken the step of launching a formal investigation , which would be a sign that the agency believes securities laws might have been violated . the sec declined to comment .
certainly , there have been questions and concerns about those partnership transactions , which contributed to a $ 1 . 2 billion reduction in shareholder equity last week as part of enron ' s efforts to unwind the deals . mr . fastow , who has declined repeated interview requests , resigned from the partnerships , known as ljm cayman lp and ljm 2 co - investment lp , in late july in the face of rising conflict - of - interest concerns by wall street analysts and major company investors .
since then , internal partnership documents have shown that mr . fastow and perhaps a handful of enron associates made millions of dollars last year in fees and capital increases as general partner of the ljm 2 , the larger of the two partnerships .
mr . fastow ' s partnership arrangement caused some unhappiness inside enron , according to people familiar with the matter . for instance , these people say , sometime after the creation of the partnerships in 1999 , enron treasurer jeffrey mcmahon went to company president jeffrey skilling and complained about potential conflicts of interest posed by mr . fastow ' s activities . mr . skilling didn ' t share mr . mcmahon ' s concern , these people say , and mr . mcmahon requested and received reassignment to another post .
mr . skilling resigned as enron president and chief executive in mid - august , citing personal reasons and the fall in enron ' s stock price , which peaked at about $ 90 a share last year . mr . mcmahon and mr . skilling haven ' t responded to repeated interview requests .
investors are also concerned about potential problems arising in enron ' s dealings with other related entities . in some cases , enron could be required to issue large amounts of stock to noteholders in some of the entities if certain so - called double trigger provisions occur .
for example , last july enron helped create the marlin water trust ii , which sold $ 915 million in notes that are due july 15 , 2003 . however , enron can be considered in default , in advance of that date , if its stock price falls below $ 34 . 13 for three trading days and its senior debt is downgraded to below investment grade by either moody ' s investors service or standard & poor ' s .
currently , enron debt is still investment - grade at both ratings agencies and would have to be lowered by several notches to fall into a noninvestment grade category . last week , moody ' s put enron on review for a possible downgrade . however , observers believe that even if moody ' s lowers enron ' s rating , the company will still be investment - grade .
copyright ? 2000 dow jones & company , inc . all rights reserved .
october 23 , 2001
where did the value go at enron ?
by floyd norris
new york times
what really went on in some of the most opaque transactions with insiders ever seen ?
wall street has been puzzling over that since enron ( news / quote
senior columnist
thestreet . com
10 / 22 / 2001 07 : 15 am edt
url :
enron is trying to improve disclosure to investors , but its decision to reduce equity by $ 1 . 2 billion in the third quarter has created dismay and confusion in the market .
the action was disclosed in a dubiously discreet manner . more important , investors are struggling to pinpoint how the shrinkage will affect enron ' s balance sheet , profits and earnings guidance .
enron didn ' t provide answers to questions submitted on the equity reduction .
enron doesn ' t include a balance sheet in its earnings release , so the equity decrease couldn ' t be spotted in numbers supplied tuesday . and even though enron did break out $ 1 billion in earnings charges in its release , the company didn ' t feel it necessary to mention the equity write down anywhere in the text .
instead , the public first heard about it on a tuesday conference call . ceo kenneth lay said enron had shrunk its equity as a result of terminating a so - called " structured finance arrangement . " the wall street journal later reported that enron ' s counter - party in this transaction was an investment partnership called ljm 2 co - investment , which has set up and run by enron ' s finance chief , andrew fastow .
this is what lay said on the tuesday call about the equity move : " in connection with the early termination , shareholders ' equity will be reduced approximately $ 1 . 2 billion , with a corresponding significant reduction in the number of diluted shares outstanding . " according to the journal , lay then said wednesday on another call that enron had repurchased 55 million shares .
enron ' s supporters count lay ' s mention of a reduction in the share count as bullish , because it should boost earnings per share numbers in the future .
but there are two possible problems with this theory .
first , enron affirmed its previous earnings guidance that it expects to make $ 2 . 15 per share in operating earnings next year . critically , the company did not say whether its guidance was given using a share count without the 55 million shares or not . if the forecast does assume the exclusion of the 55 million shares , the company should have upped its 2002 per - share earnings forecast by around 6 % , since that ' s the amount by which the share count will be reduced . enron needs to say what share count it ' s using in its guidance .
second , it ' s almost impossible to determine where these shares were ever recorded , casting a certain amount of doubt on lay ' s assertion that the share count will come down .
why question the ceo ? well , in its 2000 annual report , enron included some disclosure of the 55 million shares connected with ljm 2 . it reads : " at december 31 , 2000 , enron had derivative instruments . . . on 54 . 8 million shares of enron common stock . " the derivative instruments appear to be types of options , or agreements that give the counterparty the right to buy or sell stock at agreed prices .
but these derivatives - linked shares don ' t show up where they should in the annual report : in the table that breaks out the difference between the basic and diluted share counts . the line item in this table that shows options - related shares totals only 43 million shares , which is close to the amount of employee pay options that qualified for inclusion . therefore , that number almost certainly doesn ' t include the 55 million ljm 2 - related shares . the fact is , at least some of the 55 million derivatives - linked shares should be included if the derivatives were like normal options . that ' s because the ljm 2 derivatives appear to have been " in the money " , or profitable for the holders . typically , all in - the - money options - based stock has to be included in the diluted share count . and these ljm 2 derivatives did appear to have that status at the end of 2000 . back then , enron stock was trading around $ 80 , way above the average $ 68 level at which these derivatives made money for ljm 2 .
maybe these weren ' t simple options and had other conditions attached that excluded them from the diluted share count . that ' s what disclosure elsewhere in the annual report appears to imply . alternatively , the options were embedded somewhere else in the share count table or equity disclosure , though it ' s hard think where .
presumably , investors will get a full explanation in enron ' s quarterly financial results filing with the securities and exchange commission , due by the middle of november .
enron mentions
sec seeks information on enron dealings with partnerships recently run by fastow
the wall street journal , 10 / 23 / 01
where did the value go at enron ?
new york times , 10 / 23 / 01
front page - first section : sec probes enron over financial dealings
financial times ; oct 23 , 2001
companies oct 23 , 2001
enron discloses sec inquiry
the washington post , oct 23 , 2001
enron suffers after unclear disclosure , new york times says
bloomberg , 10 / 23 / 01
sec asks enron for investing data
houston chronicle , 10 / 23 / 01
minnesota mining and gm climb in a rally that builds late in day
the wall street journal , 10 / 23 / 01
world stock markets : wall st bargain hunters counter earnings gloom americas
financial times ; oct 23 , 2001
milberg weiss announces class action suit against enron corp .
business wire , 10 / 22 / 01
enron to host conference call tues 9 : 30 am edt
dow jones news service , 10 / 22 / 01
janus had biggest enron stake at end of 2 nd - quarter ( updatel )
bloomberg , 10 / 22 / 01
enron says sec asks about related - party transactions ( update 9 )
bloomberg , 10 / 22 / 01
trusts keeping enron off balance
thestreet . com , 10 / 22 / 01
why enron ' s writedown unnerves some investors
thestreet . com , 10 / 22 / 01
sec seeks information on enron dealings with partnerships recently run by fastow
by rebecca smith and john r . emshwiller
staff reporters of the wall street journal
10 / 23 / 2001
the wall street journal
a 3
( copyright ( c ) 2001 , dow jones & company , inc . )
enron corp . said it has been contacted by the securities and exchange commission seeking information on the energy giant ' s controversial dealings with partnerships that were set up and run until recently by its chief financial officer , andrew s . fastow .
following enron ' s announcement yesterday morning of the sec inquiry , the company ' s stock took another big slide , falling more than 20 % in new york stock exchange trading . as of 4 p . m . , enron shares were trading at $ 20 . 65 , off $ 5 . 40 , knocking about $ 4 billion off enron ' s market capitalization . volume topped the big board ' s most - active list at about 36 million shares . a week ago , enron stock was trading at about $ 33 a share . subsequently , the company announced a $ 1 . 01 billion third - quarter write - off that produced a $ 618 million loss .
analysts also voiced concerns yesterday about possible other bad news lurking amid enron ' s vast and extremely complex operations . the company has dealings with a number of related entities . under certain circumstances , if enron ' s credit rating and stock price fall far enough , the company would be obligated to issue tens of millions of additional shares to these entities , diluting the holdings of current shareholders .
enron has previously acknowledged the provisions but said its business is strong and it feels confident that there will be no defaults .
in a statement , enron chairman and chief executive kenneth lay said the company " will cooperate fully " with the sec inquiry and " look ( s ) forward to the opportunity to put any concern about these transactions to rest . " enron has consistently said that it believes its dealings with the fastow - related partnerships were proper and properly disclosed . the company has said it put billions of dollars of assets and stock into partnership - related transactions as a way to hedge against fluctuating market conditions .
the sec inquiry came from the agency ' s fort worth , texas , regional office . according to a person familiar with the matter , this would indicate that the inquiry comes from the sec ' s enforcement arm , as opposed to its corporate - finance section . the participation of the enforcement branch would indicate that the agency is looking into whether there were possible violations of securities law . however , enforcement - branch inquiries often don ' t produce any allegations of wrongdoing . it also appears that the sec hasn ' t yet taken the step of launching a formal investigation , which would be a sign that the agency believes securities laws might have been violated . the sec declined to comment .
certainly , there have been questions and concerns about those partnership transactions , which contributed to a $ 1 . 2 billion reduction in shareholder equity last week as part of enron ' s efforts to unwind the deals . mr . fastow , who has declined repeated interview requests , resigned from the partnerships , known as ljm cayman lp and ljm 2 co - investment lp , in late july in the face of rising conflict - of - interest concerns by wall street analysts and major company investors .
since then , internal partnership documents have shown that mr . fastow and perhaps a handful of enron associates made millions of dollars last year in fees and capital increases as general partner of the ljm 2 , the larger of the two partnerships .
mr . fastow ' s partnership arrangement caused some unhappiness inside enron , according to people familiar with the matter . for instance , these people say , sometime after the creation of the partnerships in 1999 , enron treasurer jeffrey mcmahon went to company president jeffrey skilling and complained about potential conflicts of interest posed by mr . fastow ' s activities . mr . skilling didn ' t share mr . mcmahon ' s concern , these people say , and mr . mcmahon requested and received reassignment to another post .
mr . skilling resigned as enron president and chief executive in mid - august , citing personal reasons and the fall in enron ' s stock price , which peaked at about $ 90 a share last year . mr . mcmahon and mr . skilling haven ' t responded to repeated interview requests .
investors are also concerned about potential problems arising in enron ' s dealings with other related entities . in some cases , enron could be required to issue large amounts of stock to noteholders in some of the entities if certain so - called double trigger provisions occur .
for example , last july enron helped create the marlin water trust ii , which sold $ 915 million in notes that are due july 15 , 2003 . however , enron can be considered in default , in advance of that date , if its stock price falls below $ 34 . 13 for three trading days and its senior debt is downgraded to below investment grade by either moody ' s investors service or standard & poor ' s .
currently , enron debt is still investment - grade at both ratings agencies and would have to be lowered by several notches to fall into a noninvestment grade category . last week , moody ' s put enron on review for a possible downgrade . however , observers believe that even if moody ' s lowers enron ' s rating , the company will still be investment - grade .
copyright ? 2000 dow jones & company , inc . all rights reserved .
october 23 , 2001
where did the value go at enron ?
by floyd norris
new york times
what really went on in some of the most opaque transactions with insiders ever seen ?
wall street has been puzzling over that since enron ( news / quote
senior columnist
thestreet . com
10 / 22 / 2001 07 : 15 am edt
url :
enron is trying to improve disclosure to investors , but its decision to reduce equity by $ 1 . 2 billion in the third quarter has created dismay and confusion in the market .
the action was disclosed in a dubiously discreet manner . more important , investors are struggling to pinpoint how the shrinkage will affect enron ' s balance sheet , profits and earnings guidance .
enron didn ' t provide answers to questions submitted on the equity reduction .
enron doesn ' t include a balance sheet in its earnings release , so the equity decrease couldn ' t be spotted in numbers supplied tuesday . and even though enron did break out $ 1 billion in earnings charges in its release , the company didn ' t feel it necessary to mention the equity write down anywhere in the text .
instead , the public first heard about it on a tuesday conference call . ceo kenneth lay said enron had shrunk its equity as a result of terminating a so - called " structured finance arrangement . " the wall street journal later reported that enron ' s counter - party in this transaction was an investment partnership called ljm 2 co - investment , which has set up and run by enron ' s finance chief , andrew fastow .
this is what lay said on the tuesday call about the equity move : " in connection with the early termination , shareholders ' equity will be reduced approximately $ 1 . 2 billion , with a corresponding significant reduction in the number of diluted shares outstanding . " according to the journal , lay then said wednesday on another call that enron had repurchased 55 million shares .
enron ' s supporters count lay ' s mention of a reduction in the share count as bullish , because it should boost earnings per share numbers in the future .
but there are two possible problems with this theory .
first , enron affirmed its previous earnings guidance that it expects to make $ 2 . 15 per share in operating earnings next year . critically , the company did not say whether its guidance was given using a share count without the 55 million shares or not . if the forecast does assume the exclusion of the 55 million shares , the company should have upped its 2002 per - share earnings forecast by around 6 % , since that ' s the amount by which the share count will be reduced . enron needs to say what share count it ' s using in its guidance .
second , it ' s almost impossible to determine where these shares were ever recorded , casting a certain amount of doubt on lay ' s assertion that the share count will come down .
why question the ceo ? well , in its 2000 annual report , enron included some disclosure of the 55 million shares connected with ljm 2 . it reads : " at december 31 , 2000 , enron had derivative instruments . . . on 54 . 8 million shares of enron common stock . " the derivative instruments appear to be types of options , or agreements that give the counterparty the right to buy or sell stock at agreed prices .
but these derivatives - linked shares don ' t show up where they should in the annual report : in the table that breaks out the difference between the basic and diluted share counts . the line item in this table that shows options - related shares totals only 43 million shares , which is close to the amount of employee pay options that qualified for inclusion . therefore , that number almost certainly doesn ' t include the 55 million ljm 2 - related shares . the fact is , at least some of the 55 million derivatives - linked shares should be included if the derivatives were like normal options . that ' s because the ljm 2 derivatives appear to have been " in the money " , or profitable for the holders . typically , all in - the - money options - based stock has to be included in the diluted share count . and these ljm 2 derivatives did appear to have that status at the end of 2000 . back then , enron stock was trading around $ 80 , way above the average $ 68 level at which these derivatives made money for ljm 2 .
maybe these weren ' t simple options and had other conditions attached that excluded them from the diluted share count . that ' s what disclosure elsewhere in the annual report appears to imply . alternatively , the options were embedded somewhere else in the share count table or equity disclosure , though it ' s hard think where .
presumably , investors will get a full explanation in enron ' s quarterly financial results filing with the securities and exchange commission , due by the middle of november .