Monday, December 05, 2005

Fool me once, shame on you. Fool me twice...

According to the Department of Justice: the indictment states that during August 2001, Lay participated in Management Committee meetings at which reports were presented showing earnings shortfalls in virtually every Enron business unit, totaling approximately $1 billion. During early September 2001, Lay attended a Management Committee retreat in the Woodlands, Texas, at which the serious problems besetting Enron, including underperforming business units and troubled assets, were further discussed. Among other things, executives discussed the need to take in the third quarter of 2001 at least a $1 billion charge and that Enron had committed an accounting error in the amount of $1.2 billion.

The indictment alleges that throughout the remainder of September 2001, Lay engaged in a series of high-level meetings to discuss the growing financial crisis at Enron and the likely impact on Enron’s credit rating. Among other things, Lay knew that the total amount of losses embedded in Enron’s assets and business units was, at a minimum, $7 billion. Lay also knew that Enron’s auditors had changed their position concerning the accounting treatment of four off-balance sheet vehicles called the Raptors, which required Enron to determine in short order whether an acceptable alternative methodology existed or whether, instead, Enron would have to restate its earnings and admit the error.

Despite this on Sept 26, 2001, in an intranet chat with employees, in response to a question asking how employees could increase the $25 share price, CEO Ken Lay suggested that employees "talk up the stock." He went on:

The company is fundamentally sound. The balance sheet is strong. Our financial liquidity has never been stronger.

On Dec. 2, 2001, Enron admitted it was bankrupt

One can correctly deduce from the Enron collapse that people who run large corporations will sometimes lie, cheat and steal even from those whom they are obliged to serve.

On Friday, Dec. 2, 2005, President Bush said:

Thanks to good, old-fashioned American hard work and productivity, innovation, and sound economic policies of cutting taxes and restraining spending, our economy continues to gain strength and momentum.

We have every reason to be optimistic about our economic future. I mean, when you think about the news that's come in, the jobs report, the recent report on strong economic growth, low inflation, strong productivity, lower gasoline prices, a strong housing market, increases in consumer confidence and business investment, our economic horizon is as bright as it's been in a long time.