[ALBSA-Info] Fwd: Enron Explained

[Agron Alibali]

Enron explained 

Under feudalism, you have two cows. Your lord takes some of the milk. 

Under fascism, you have two cows. The government seizes both, hires you to 
take care of them and sells you the milk. 

Under communism, you have two cows. You must take care of them, but the 
government owns all the milk. 

Under capitalism, you have two cows. You sell one and buy a bull. Your herd 
multiplies; you sell out, invest the money and retire on the income. 

With 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, bearing interest at twice the prime, 
callable if the market cap of your publicly listed company, whose stock you 
put up as collateral, goes below $20 billion. You sell the three cows to 
your publicly listed company, using letters of credit opened by your 
brother-in-law at a second bank, then execute a debt/equity swap with an 
associated unit, so that you get four cows back, plus a tax exemption for 
five cows. 

To continue: The milk rights of six cows are transferred via an intermediary 
to a Cayman Islands firm secretly owned by a majority shareholder, who sells 
the rights to seven cows back to your listed company. The annual report 
trumpets that the company owns eight cows, with an option on one more. 

All of the above transactions are cheerfully blessed by your independent 
auditors, who, of course, served as consultants on said transactions, but 
only after the fact.  You're all set now to disclose, via press release and 
conference call with analysts, that Enron, a major owner of cows, will begin 
trading cows over the Web. Analysts proclaim Enron the prototypical New 
Economy company, bull the shares to the moon, enabling you to sell huge gobs 
of the stock and use the proceeds to buy a top-of-the-line shredding 
machine. 

Barron's 28th January 2002 




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