Ken Lay & Enron: Trials begin (1.31.2006) - Page 2 - U2 Feedback

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Old 01-30-2006, 08:17 PM   #16
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Originally posted by deep
Ennon bought many successful companies
where people worked for years and had vested retirements
they basically gutted these people lives and threw them in the gutter to rot.

I think that it will depend on whether the intention to defraud was there or not - I guess the court will have to decide on that.

Empire building, rampant greed, delusions of grandeur - yes all of that happened.

Actual fraud - that's a matter for the court to decide
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Old 01-30-2006, 08:20 PM   #17
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well, Lay and the chief execs are the focus here. They built a real house of cards there. They cooked the books with their accounting firm and it had everybody fooled, including investment firms. They told people to keep buying stock publicly, Lay purportedly borrowed $70 million cash and repaying it with stocks that he knew would be worthless within three days. These execs made off with tens of million of dollars while the employees lost their livelihoods and their pentions. Regardless of who created those jobs the point here is that these guys took advantage of their positions in the know to escape with millions, while investors, creditors and employees lost everything.
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Old 01-30-2006, 08:23 PM   #18
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Originally posted by 2numb2feel
well, Lay and the chief execs are the focus here. They built a real house of cards there. They cooked the books with their accounting firm and it had everybody fooled, including investment firms. They told people to keep buying stock publicly, Lay purportedly borrowed $70 million cash and repaying it with stocks that he knew would be worthless within three days. These execs made off with tens of million of dollars while the employees lost their livelihoods and their pentions. Regardless of who created those jobs the point here is that these guys took advantage of their positions in the know to escape with millions, while investors, creditors and employees lost everything.
that may be so...but who is richer now?
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Old 01-30-2006, 09:12 PM   #19
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Well my father also worked in the same job for most of his life but that's a different generation. Most of the Enron employees were relatively young I'd gather. Personally I'd find it excruciating to work in the same job all my life, but again that's just me.

You say 4000 people lost their jobs - fair enough.

Who created those jobs in the first place?
From a criminology POV, your answer isn't surprising. That's the reason they cite that white collar crime is not taken as seriously as violent crime, even though some white collar cases cause more long-term harm to more people than your run-of-the-mill violent robbery. The latter will usually give you a longer prison term.

The long-term effects to younger employees? You're right...that's probably dubious. However, if you're a 40-50 year old Enron employee with a wiped out 401K plan, you're not going to look at this situation so optimistically. Chances are, retirement is no longer an option for you, and terminal cancer before you run out of money starts looking like the best-case scenario.

Had Enron not cooked the books, it would have gradually risen and fallen, with its employees probably more apt to have diversified their investments. Instead, a multi-billion dollar corporation dropped the bomb, and many people's lives were ruined. Considering the defendents can afford $20 million of legal counsel tends to tell me that they haven't learned their lesson.

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Old 01-30-2006, 10:01 PM   #20
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Remember, a "wiped out 401K plan" means those who invested their entire investment in Enron, enjoying above market returns before the crash.

To some degree, greed kept many from diversifing.
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Old 01-30-2006, 10:08 PM   #21
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Remember, a "wiped out 401K plan" means those who invested their entire investment in Enron, enjoying above market returns before the crash.

To some degree, greed kept many from diversifing.
I think some of it is ignorance too, which is why I think it's a recipe for disaster expecting the bulk of America to gamble with their savings to retire.

When yuppies are inconvenienced en masse, that's when revolutions occur, even if it's only on a non-violent, "cultural" level. But cultural revolutions are no less dramatic.

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Old 01-30-2006, 10:12 PM   #22
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as long as they got Martha. What happens to these guys is inconsequential now...as long as they showed Martha!
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Old 01-30-2006, 10:24 PM   #23
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Originally posted by nbcrusader
Remember, a "wiped out 401K plan" means those who invested their entire investment in Enron, enjoying above market returns before the crash.

To some degree, greed kept many from diversifing.


but it's important to look back at enron's business culture -- employees were strongly encouraged not to diversify, to put all of their eggs in the Enron basket, that this was a sign of company loyalty and faith in Enron ... and let's not forget that much of this was going on in the go-go late 1990s. should people have been smarter? ultimately, yes. big lesson learned here, obviously. but the company and it's leadership were heavily, heavily influential in the investing decisions of their employees.
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Old 01-30-2006, 10:34 PM   #24
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but it's important to look back at enron's business culture -- employees were strongly encouraged not to diversify, to put all of their eggs in the Enron basket, that this was a sign of company loyalty and faith in Enron ... and let's not forget that much of this was going on in the go-go late 1990s. should people have been smarter? ultimately, yes. big lesson learned here, obviously. but the company and it's leadership were heavily, heavily influential in the investing decisions of their employees.
I think a lot of that was the burned employee's retelling of the situation.

Company loyalty is usually promoted through employee stock purchase plans
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Old 01-30-2006, 11:29 PM   #25
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I think a lot of that was the burned employee's retelling of the situation.

Company loyalty is usually promoted through employee stock purchase plans


i did a lot of reserach into this a few years ago, it was much, much more than a few burned employees. enron's gung-ho god-and-texas-and-the-free-market company ethos was legendary, as was the arrogance of the executives, their exorbitant lifestyles, and was their aggressive promotion of company stock to everyone, from executives to secretaries -- enron would match however much enron stock you chose to place in your 401K.

talk about offers that can't be refused.
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Old 01-30-2006, 11:37 PM   #26
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Originally posted by Irvine511




i did a lot of reserach into this a few years ago, it was much, much more than a few burned employees. enron's gung-ho god-and-texas-and-the-free-market company ethos was legendary, as was the arrogance of the executives, their exorbitant lifestyles, and was their aggressive promotion of company stock to everyone, from executives to secretaries -- enron would match however much enron stock you chose to place in your 401K.

talk about offers that can't be refused.
yeah, but who's fault is it really, irvine. we must take personal responsibility for our actions!
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Old 01-31-2006, 10:35 PM   #27
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Enron employees weren't the only people who held Enron stock, and the collapse of Enron affected lots other companies and institutions that did business with Enron. Surely the officers of a publicly traded company have some responsibility to act in an ethical manner when their actions affect so many other people. I agree that individual investors are ultimately responsible for the decisions they make - but those decisions would have been based on the financial picture that Enron was portraying to the public, which was totally misleading. How can that not be 'intent to defraud'?
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Old 02-01-2006, 07:42 AM   #28
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Opening Arguments in the Trial of Ex-Enron Chiefs


By ALEXEI BARRIONUEVO
Published: February 1, 2006

HOUSTON, Jan. 31 — On the opening day of the much-anticipated trial of Kenneth L. Lay and Jeffrey K. Skilling, lawyers for the government and the defense on Tuesday told a tale of two Enrons, portraying starkly different versions of why the energy company collapsed in late 2001.

That Enron blazed a path to the summit of the energy world was not in dispute. In the 1990's, it was a Wall Street darling, the pride of an energy city and the creator of an industry that bought and sold natural gas, electricity and anything else its ambitious employees could dream up. But since its bankruptcy, Enron has come to symbolize the corporate malfeasance that infected so many American corporations in the 1990's.

After nearly six hours of opening statements, it was clear that Enron's sudden failure — and the reasons behind it — were as much on trial here as Mr. Skilling and Mr. Lay.

In its statement, the government painted a picture of a company whose stunning rise in profits was accounting "hocus pocus." It said that two of Enron's trumpeted businesses were in bad shape and that its chief executives chose to lie about the company's true condition to the investing public out of personal greed. In the end, the government said, the comments of Mr. Skilling and Mr. Lay contributed to investors and employees losing millions when Enron's share price cratered in 2001.

"This is a simple case," John Hueston, an assistant United States attorney, told the jury of eight women and four men. "It is not about accounting. It is about lies and choices."

Mr. Hueston, who spoke for 90 minutes, said the government would focus not on the Byzantine accounting that many have attributed to the criminal activity inside Enron, but on the purportedly misleading statements that Mr. Skilling and Mr. Lay gave to investors in 2000 and 2001 — lies, the government said, that hurt Enron and gave the two men insider knowledge about when to sell stock.

The defense countered with its own portrait of a pioneering company built by Mr. Skilling, a former management consultant, and Mr. Lay, a poor Missouri farm boy, that grew rapidly through risk-taking. What ultimately killed Enron, the defense said, was a "death spiral" that began when the market panicked and creditors pulled their support for Enron's trading operation.

"Ken Lay has, does and will continue to accept responsibility for the fall of Enron," Michael Ramsey, Mr. Lay's lead lawyer, said. "He was the man at the controls. But failure is not a crime."

Mr. Ramsey and Daniel Petrocelli, Mr. Skilling's lead lawyer, vowed to attack the government's case by defending the allegedly fraudulent accounting that the government now says it will not focus on. But Mr. Lay's lawyer also laid out a case that will blame outsiders, including short-sellers, The Wall Street Journal and Enron's own over-reliance on trading to produce profits , for stoking the crisis of confidence that led to the company's descent to the largest bankruptcy filing in history at the time.

The courtroom was packed for opening arguments. Family members of Mr. Lay and Mr. Skilling filled one row. Mr. Skilling smiled and, during breaks, touched the heads of his three children and his wife, Rebecca Carter, a former Enron corporate secretary. Mr. Lay sometimes left the courtroom with his arm around the shoulders of his wife, Linda.

The jurors focused intently; several took notes on yellow legal pads.

Lawyers said the trial would be a pitched battle. "It is going to be extremely difficult for this jury to sit in judgment," said Philip Hilder, a lawyer representing Sherron S. Watkins, a likely government witness. "Both sides made very compelling cases. You can see it is going to be a real slugfest between the parties."

The government has accused Mr. Skilling of 31 counts of conspiracy, fraud and insider trading; Mr. Lay is accused of 7 counts of conspiracy and fraud.

To make its point, the government told the judge, Simeon Lake III, that the first witness on Wednesday would be Mark E. Koenig, the former head of investor relations. Kenneth D. Rice, the former head of the broadband unit and once a close friend of Mr. Skilling, will be the second witness, prosecutors said. Mr. Koenig is expected to testify about purportedly misleading statements both men made to analysts and large investors about Enron.

Mr. Hueston, in his opening statement, said that by the middle of 2001 Enron had grown to the seventh-largest company in the country with 28,000 employees, profit growth of 15 to 20 percent a year and stock that "seemed to defy gravity." But inside the company, the true conditions of Enron's broadband unit and the retail energy unit, which handled the energy needs of large-scale businesses like J. C. Penney department stores, were far worse than Mr. Skilling was telling investors.

Mr. Hueston played for jurors a series of audio tapes and videos that contrasted Mr. Skilling's apparently truthful statements about the units to employees, where he seemed to lay out the problems, and then quite different statements he made to investors just days later. On March 15, 2001, Mr. Skilling told employees in Portland, Ore., that Enron would be redeploying about 240 people out of the broadband unit. "The whole revenue opportunity we saw in this marketplace is gone," he said. Eight days later he told investors on a conference call that broadband was "looking good" and that the redeployment of the employees was "good news."

In addition to Mr. Koenig and Mr. Rice, Mr. Hueston said other witnesses include the former chief financial officer, Andrew S. Fastow; Paula Rieker, who worked under Mr. Koenig; Ben Glisan, the former treasurer; and David W. Delainey, the former head of Enron Energy Services, the retail unit.

Mr. Petrocelli portrayed Mr. Skilling as a visionary who helped Enron transform itself into an energy-trading powerhouse. But he stressed that, for Mr. Skilling, the chief executive job was never a dream job and that Mr. Skilling never would have left the company had Mr. Skilling known that the company was in trouble.

Mr. Petrocelli said that Mr. Skilling would definitely take the stand in the trial, which is expected to last at least four months.

Mr. Ramsey portrayed Mr. Lay as a risk-taker who rose to be a civic leader and philanthropist who rubbed elbows with world leaders, including the family of President George H. W. Bush.

"Ken Lay did not try to kill his own child, which was Enron," Mr. Ramsey said. "The panic is what killed Enron."

Mr. Ramsey blamed articles in The Wall Street Journal about off-the-books partnerships controlled by Mr. Fastow, as well as short-sellers who Mr. Ramsey said were sources for the stories, for starting a panic on Oct. 22, 2001, that led to a sharp drop in Enron's stock price.

Mr. Ramsey said that Rebecca Smith, a reporter for The Journal, had hurt Enron by failing to listen to a conference call on Oct. 16, 2001, where Mr. Lay revealed a $1.2 billion equity reduction. The paper reported two days later that Enron had failed to disclose the reduction in its earnings press release. Paul Steiger, The Journal's managing editor, said the paper was "proud" of the work Ms. Smith and others at the paper did in "uncovering questionable accounting at Enron."


Mr. Ramsey said the only fraud committed at Enron was the minor thievery by Mr. Fastow, Mr. Glisan and former executive Michael Kopper, all of whom have pleaded guilty to carrying out schemes to help Enron manipulate its books while skimming millions for themselves.

Ultimately, Mr. Ramsey said, Enron was vulnerable because of the way wholesale trading dominated its profits by October of 2001. At the time 92 percent of Enron's quarterly profits, or $2.18 billion, came from energy trading, he said.

nytimes.com/2006/02/01/business/businessspecial3/01enron.html
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