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Mark-to-Market, the SPEs, and the Architecture of Enron's Fraud
Audio is available on Spreaker — see link below.
Enron's mark-to-market accounting and 500 special-purpose entities didn't just obscure the truth — they were the truth's replacement. This chapter breaks down exactly how CFO Andy Fastow and Arthur Andersen built a financial hall of mirrors that fooled Wall Street for nearly a decade.
Audio is available on Spreaker — see link below.
On paper, Enron looked like the future. By the late nineteen nineties, it was the seventh-largest company in America.
Start with the accounting. Because everything else follows from it.
Enron created roughly five hundred special-purpose entities. The technical term matters less than the function.
The Raptor structures are where the scheme becomes almost self-defeating to describe. They were SPEs created specifically to absorb mark-to-market losses from Enron's equity investments.
While all of this was building inside the company's financials, Enron's trading desk was causing a different kind of damage outside. California had deregulated its electricity market in nineteen ninety-nine.
In August of two thousand and one, a vice president named Sherron Watkins sent a memo to Ken Lay. Lay was Enron's chairman and founder.
On October sixteenth, two thousand and one, Enron announced its third-quarter earnings. Buried in the release was a non-recurring charge of just over one billion dollars.
The legal aftermath moved slowly by the standards of what had happened. Arthur Andersen was convicted of obstruction of justice in two thousand and two for the document destruction.
Here's what the record shows, stripped of the complexity. Enron wasn't primarily a company that made bad bets.
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