11
Mary Chung, Walid El-Gabry, John Labate, and Sheila McNulty, “Earlier Scandal Pointed to Need for Controls,”
Financial Times,
January 16, 2002, p. 24.
12
Chung, El-Gabry, Labate, and McNulty, p. 24.
13
Russell Hubbard, “Enron Used Partnerships to Mask Debt, Holders Charge,”
Bloomberg News,
November 6, 2001.
14
Loren Steffy, “Enron Ex-CFO Fastow Set Up Partnerships That Led to Failure,”
Bloomberg News,
December 19, 2001.
15
Kurt Eichenwald, “Enron's Collapse; Audacious Climb to Success Ended in a Dizzying Plunge,”
New York Times,
January 13, 2002, p. A1.
16
Jamie Dettmer, “Damaging Limitation,”
Business A.M.,
January 25, 2002; Nick Cohen, “Influent, Affluent, Mostly Effluent; Hold on a Minute,”
Observer,
September 6, 1998, p. 27.
18
“In the City,”
Private Eye,
February 21, 2002.
19
Ronald Fink, “Partnerships within Partnerships,”
CFO Magazine,
January 1, 2002, p. 16.
20
“SEC No-Action Letter,” April 26, 1994.
21
“Corporate Governance Failure at Enron,”
Business Line,
March 4, 2002.
22
Dan Morgan and Kathleen Day, “For Gramms, Enron Is Hard to Escape,”
Washington Post,
January 25, 2002, p. A18.
23
“Power Marketers Kick Off Campaigns to Become Household Word in Energy,”
Energy Report,
January 20, 1997.
24
Enron 2000 Annual Report, p. 45.
25
Enron 2000 Annual Report, p. 44.
26
Charles Gasparino, Susanne Craig, and Randall Smith, “Salomon Faces Questions on IPO,”
Wall Street Journal,
July 10, 2002, p. C1.
27
Steffy, “Enron Ex-CFO Fastow Set Up Partnerships That Led to Failure.”
28
Steffy, “Enron Ex-CFO Fastow Set Up Partnerships That Led to Failure.”
29
Since 1982, Financial Accounting Standard No. 57, entitled Related Party Disclosures, had required that companies disclose the nature of relationships they have with related parties, and describe transactions with them.
30
Report of Investigation by the Special Investigative Committee of the Board of Directors of Enron Corp., February 1, 2002, pp. 54-55.
31
Enron Form 8-K Filing, November 8, 2001, p. 9.
32
Enron Form 8-K Filing, November 8, 2001, p. 9.
33
April Witt and Peter Behr, “Losses, Conflicts Threaten Survival; CFO Fastow Ousted in Probe of Profits,”
Washington Post,
July 31, 2002, p. A1; Michael A. Hiltzik and David Streitfeld, “Ex-Enron Employees Suggest Andersen Helped Veil Deals,”
Los Angeles Times,
January 17, 2002, p. A1.
34
Tom Fowler, “Enron Hedging Web at Scandal's Core,”
Houston Chronicle,
June 28, 2002, p. 2.
35
William Roberts and Jeff Bliss, “Merrill Executive Denies Firm Helped Enron Mask Its Liabilities,”
Bloomberg News,
July 30, 2002; Otis Bilodeau, “In Eye of Enron Storm, A Partnership Is Rocked,”
Delaware Law Weekly,
February 27, 2002, p. D4; Laurie Cohen and Flynn McRoberts, “Enron Scandals Crucial Recruit,”
Chicago Tribune,
February 24, 2002, p. C1.
36
“Powers Report,” p. 91.
37
“Powers Report,” pp. 138-140.
38
Tom Fowler, “More Light May Be Shed on Enron,”
Houston Chronicle,
June 29, 2002, p. 1.
39
Peter Spiegel, “The Architect of Enron's Downfall,”
Financial Times,
May 20, 2002.
40
Loren Steffy, “What a Tangled Financial Web He Wove,”
National Post,
December 20, 2001, p. FP9.
41
Jonathan Weil, “Enron's Auditors Debated Partnership Losses,”
Wall Street Journal,
April 3, 2002, p. C1.
42
Enron 2000 Annual Report, p. 49, n.16.
43
Daniel Fisher, “Shell Game,”
Forbes,
January 7, 2002, p. 52.
44
Enron 2000 Annual Report, p. 44, note 11.
45
“Powers Report,” pp. 98-99.
46
David Barboza and Barnaby J. Feder, “Enron's Many Strands: The Transactions; Enron's Swap with Qwest Is Questioned,”
New York Times,
March 29, 2002, p. C1.
47
David Barboza, “Former Officials Say Enron Hid Gains during Crisis in California,”
New York Times,
June 23, 2002, p. A1.
51
Jeff Manning, “Opportunism Part of Job, Former Enron Traders Say,”
Oregonian,
May 15, 2002, p. C1.
52
David Barboza, “Enron Trader Had a Year to Boast of, Even If . . . ,”
New York Times,
July 9, 2002, p. C1.
53
Burton Malkiel, “Watchdogs & Lapdogs,”
Wall Street Journal,
January 16, 2002, p. A16.
54
Jerry Hirsch, “Andersen Fires Executive Who Oversaw Enron Audit,”
Los Angeles Times,
January 16, 2002, p. A1.
55
Kurt Eichenwald, “Enron's Collapse; Audacious Climb to Success Ended in a Dizzying Plunge,”
New York Times,
January 13, 2002, p. A1.
56
Loren Steffy and Russell Hubbard, “Enron Letter Shows Executives Knew of Partnership Accounting,”
Bloomberg News,
January 17, 2002.
57
Enron 2000 Annual Report, p. 27.
58
Mark Pittman, “Enron's Fall Prompts Moody's to Focus on Triggers,”
Bloomberg News,
December 7, 2001.
59
Paul Chivers, “Empowering Enron,”
Project Finance,
June 1, 2000, p. 23.
60
Richard Oppel Jr., “Enron's Many Strands: The Hearings; Credit Raters to Explain Enron Role,”
New York Times,
March 20, 2002, p. C1; Alex Berenson, “Enron's Collapse; The Rating Agencies,”
New York Times,
November 29, 2001, p. C7.
61
James Higgins, “The Real Decade of Greed,”
Weekly Standard,
July 15, 2002, p. 27.
62
Enron Form 8-K Filing, November 8, 2001, p. 9.
63
Stephen Fidler and Vincent Boland, “Debt Mountains Threaten Avalanche,”
Financial Times,
May 31, 2002, p. 18.
64
Mark Lake and George Stein, “Dynegy Saved Enron Merger with Last Minute Pact,”
Bloomberg News,
November 13, 2001.
65
William Roberts, “Citigroup, J. P. Morgan Chase Offered Enron Packages,”
Bloomberg News,
July 23, 2002.
68
Richard A. Oppel Jr. and Kurt Eichenwald, “Citigroup Said to Mold Deal to Help Enron Skirt Rules,”
New York Times,
July 23, 2002, p. A1.
69
Oppel Jr. and Eichenwald, p. C4.
70
Richard A. Oppel Jr., “U.S. Studying Merrill Lynch in Enron Deal,”
New York Times,
July 27, 2002, p. C1.
71
Oppel Jr., “U.S. Studying Merrill Lynch in Enron Deal,” p. C1.
72
Jathon Sapsford and Paul Beckett, “Enron Rival Used Complex Accounting to Burnish Its Profile,”
Wall Street Journal,
April 3, 2002, p. A1.
73
Matt McGrath is not the trader's real name.
74
Jack Duffy, “Enron Collapse Destroyed Pensions, Prompts Calls for Change,”
Bloomberg News,
December 7, 2001.
75
Enron Form 8-K Filing, November 8, 2001, p. 10.
77
Loren Steffy, “Enron Insiders Sold More Than $1.2 Billion in Stock Since 1990,”
Bloomberg News,
December 3, 2001.
78
“
BusinessWeek
Digitization Conference,” Darden School of Business, December 16, 2001.
79
Richard W. Stevenson and Jeff Gerth, “Enron's Collapse: The System; Web of Safeguards Failed as Enron Fell,”
New York Times,
January 19, 2002, p. A1.
81
Enron 2000 Annual Report, p. 30.
82
Enron 2000 Annual Report, pp. 32-33. Assets from “price risk management activities” were $2.2 billion in 1999 and $12 billion in 2000. Liabilities from “price risk management activities” were $1.8 billion in 1999 and $10.5 billion in 2000.
83
Ronald H. Coase,
The Firm, the Market, and the Law
(University of Chicago 1988), pp. 5-9.
84
Michael Jensen and William Meckling, “Theory of the Firm: Management Behavior, Agency Costs and Ownership Structure,”
Journal of Financial Economics, Volume 3
(1976), p. 305.
Chapter 11: Hot Potato
1
Robert Lenzner, “Someone Knew,”
Forbes,
March 4, 2002, p. 78.
2
John Cassidy, “Comment: High Hopes,”
The New Yorker,
August 5, 2002, p. 21.
3
Simon Avery, “Global Crossing Head Shows Passion for Making Money, Bending Rules,”
Associated Press,
March 5, 2002.
5
Julie Creswell, “The Emperor of Greed,”
Fortune,
June 24, 2002, p. 106.
6
Edward J. Epstein, “Junk Bond King's Next Step,”
San Francisco Chronicle,
October 9, 1987, p. C4.
7
Laurie P. Cohen, “U.S. Appears to Intensify Campaign Against Milken,”
Wall Street Journal,
November 13, 1989, Sec. 2, p. 2.
8
“Business Briefs,”
Sydney Morning Herald,
December 13, 1989; Kurt Eichenwald, “Prosecutors Said to Shorten Milken's Pre-Sentencing Case,”
New York Times,
October 16, 1990, p. D1.
9
Anthony Bianco, “Little Drexels Are Popping Up All Over,”
BusinessWeek,
October 6, 1986, p. 79.
10
“One Man's Junk,”
Financial World,
March 10, 1987, p. 20.
14
Geraldine Fabrikant and Saul Hansell, “At Global Crossing, Deals with Son of Executive Raise Questions,”
New York Times,
February 18, 2002, p. C1.
15
Global Crossing Ltd. Form 10-K for the fiscal year ended December 31, 2000.
17
Paul Chivers, “Empowering Enron,”
Project Finance,
June 1, 2000, p. 23.
18
Simon Romero, “Memo Indicates Global Crossing Chief Knew of Troubles,”
New York Times,
October 1, 2002, p. C6.
19
David Barboza and Simon Romero, “Enron Is Seen Having Link with Global,”
New York Times,
May 20, 2002, p. C1.
20
Barboza and Romero, p. C5.
21
Barboza and Romero, p. C5.
22
Dennis K. Berman and Deborah Solomon, “Optical Illusion?: Accounting Questions Swirl around Pioneer in the Telecom World,”
Wall Street Journal,
February 13, 2002, p. A12.
23
Karen Kaplan and Elizabeth Douglass, “Global's Exec with the Inside Knowledge,”
Los Angeles Times,
February 20, 2002.
24
Berman and Solomon, p. A1.
25
Dennis K. Berman, “Global Crossing's Capacity Swaps Were of Little Value, Study Says,”
Wall Street Journal,
February 19, 2002, p. B6.
27
Berman and Solomon, p. A1.
28
Elizabeth Douglass and Tim Rutten, “Accounting Worried Global Crossing Exec.,”
Los Angeles Times,
January 30, 2002, p. A1.
29
Laura Pearlman and Paul Braverman, “Unbillable Time,”
American Lawyer,
May 2002.
30
Global Crossing Ltd. Form 10-Q for the quarter ended June 30, 2001.
31
Douglass and Rutten, p. A1.
32
Al Lewis, “Global Crossing's Revolving Door Pure Platinum,”
Denver Post,
February 17, 2002, p. K-1.
34
Specifically, Casey's employment agreement omitted October 11, 2001, as a vesting date. According to the terms of the agreement, 34 percent would vest in 2000, 22 percent in 2002, and 22 percent in 2003. The agreement should have included 22 percent vesting in 2001, but did not. I am grateful to Andrew Kimmel for spotting this mistake.
35
Elizabeth Douglass, “Global Eased Loan Terms,”
Los Angeles Times,
February 7, 2002, Part 3, p. 1.
36
Rebecca Blumenstein, Deborah Solomon, and Kathy Chen, “As Global Crossing Crashed, Executives Got Loan Relief, Pension Payouts,”
Wall Street Journal,
February 21, 2002, p. B1.
37
“Global Crossing Marine Unit Responds to Russian Submarine Rescue Effort,”
Cambridge Telecom Report,
August 21, 2000.
38
Tim Cook, “Ebbers Recalled As Just One of the Guys,”
Toronto Star,
June 30, 2002, p. C3.
39
Shane Holladay, “WorldCom Boss Recalled,”
Edmonton Sun,
July 28, 2002, p. 6.