[Fwd: FW: Enron's Accounting Explained for the Layperson.]

Jeff Barr jeff@vertexdev.com
Sat, 26 Jan 2002 10:01:28 -0800


Here's how the Enron accounting system worked...

Jeff;

-----Original Message-----

 > Enron, by way of comparison, to:
 >
 > Feudalism:
 > You have two cows.
 > Your lord takes some of the milk.
 >
 > Fascism:
 > You have two cows.
 > The government takes both, hires you to take care of them and sells
 > you
the
 > milk.
 >
 > Communism:
 > You have two cows.
 > You must take care of them, but the government takes all the milk.
 >
 > Capitalism:
 > You have two cows.
 > You sell one and buy a bull.
 > Your herd multiplies, and the economy grows.
 > You sell them and retire on the income
 >
 > Enron:
 > You have two cows.
 >
 > You borrow 80% of the forward value of the two cows from your bank
 > then
buy
 > another cow with 5% down and the rest financed by the seller on a note

 > callable if your market cap goes below $20B at a rate 2 times prime.
 > You
now
 > sell three cows to your publicly listed company, using letters of
 > credit opened by your brother-in-law at a 2nd bank, then execute a
 > debt/equity
swap
 > with an associated general offer so that you get four cows back, with
 > a
tax
 > exemption for five cows.
 >
 > The milk rights of six cows are transferred via an intermediary to a
Cayman
 > Island company secretly owned by the majority shareholder who sells
 > the rights to seven cows back to your listed company. The annual
 > report says
the
 > company owns eight cows, with an option on one more and this
 > transaction process is upheld by your independent auditor and no
 > Balance Sheet is provided with the press release that announces that
 > Enron, as a major
owner
 > of cows, will begin trading cows via the internet site COW (cows on
 > web).
 >