ENRON: Skilling and Lay guilty (1 Viewer)

[blue_chameleon]

If this needs to be moved to news, then sobeit.

Guilty verdict for Ken Lay and Jeff Skilling. They will be appealing the decision.
Given the massive impact this companies collapse had on thousands of peoples lifes, it would seem fair to assume that they will be receiving quite hefty sentences. Any thoughts on what sort of a sentence they might receive?
Did anybody watch the news when this was on and see the clips of Skilling and Lay outside the court?

Personally I think that the perception of Ken Lay having as much involvement in the whole downfall of the company as Skilling did seems a bit sus. I have no doubt that Skilling was a major orchaestrator of the events which led to ENRON's collapse, but if Lay knew as much as Skilling, why would he let Skilling jump ship before him and allow himself to be left with the company crumbling around him?

Not long after hearing of their vedict, I went and watched (for the first time) Fun with Dick and Jane. Anybody that has seen the movie will understand that it was quite an ironic movie to watch after hearing about the ENRON case. I had a laugh at the credits when it said:

Special thanks to:
Enron
WorldCom
Adelphia
Cendant
HealthSouth
Tyco

Dick - Wow you're really moving up in the world.
Guy in Car - Yeah, im with this new company. Great benefits.
Dick - Awh
Guy in Car - They trade energy. They're called enron.
Dick - (Blank Face, nothing said)

Haha.

 

[turtleface]

I feel sad for those blokes, bloody murderers get like 10 years and they're possibly up for like 150 years or so and 40 something years in jail or something, effectively=life.

I can understand why people would be crying for their blood, but still...

 

[blue_chameleon]

Yeah, life will always be more precious than money, although I think the amount of people who were immensely affected, and will never see any of the money they invested ever again, we are talking billions of dollars lost, then the people will always want justice in potential life sentences.
Lots of people worked very hard for the money they invested in the company, but then again......ultimately, it is only money.

 

[absolution*]

I hope they never get out of jail. As a matter of principle, greed should always be condemned, particularly when it infringes on the wealth of others less fortunate, and especially when it is perpetrated in a clandestine manner, so as to most fully exact the greatest degree of suffering possible on everyone other them themselves.

 

[Minai]

They should be lucky that fraud/insider trading is not a capital offence over there

 

[absolution*]

It wasnt just speculative gambling that led to their demise though. Attempting to diversify into markets where there was no demand, the Indian venture etc. Speculative markets are a fine way to make money, after all of all the companies that take part in it, only a fairly small percentage have collapsed like Enron. The problem lies in management of such practises, risk management etc.

 

[absolution*]

I think youre the one missing the point buddy. And yeah, i really cant be bothered either.

Enron’s experience with financial risk management is instructive. The firm maintained a risk management function staffed with capable employees. Lines of reporting were reasonably independent in theory, but less so in practice. The group’s mark-to-market valuations were subject to adjustment by management. The group had few career risk managers. Enron maintained a fluid workforce. Employees were constantly on the lookout for their next internal transfer. Those who rotated through risk management were no different. A trader or structurer whose deal a risk manager scrutinized one day might be in a position to offer that risk manager a new position the next. Astute risk managers were careful to not burn bridges. Even worse, risk mangers were subject to Enron’s “rank and yank” system of performance review. Under that system, anyone could contribute feedback on anyone, and the consequences of a bad review were draconian. Risk managers who blocked deals could expect to suffer in “rank and yank.”

Despite the sophistication of individual employees, financial risk management at Enron was hollow. The result: The entities that were set up to help Enron manage its risk exposed Enron's shareholders to even more risk because of the trigger mechanisms. Rather than serving the company proper, they ultimately destroyed it.

I am not asserting that the traders didnt fuck up, but rather, that it was moreso a product of bad managerment and risk mechanisms then any sort of defeat of market speculation as a legitimate market for profit-making. As the company sunk deeper, due to the above noted Indian venture and the failed broadband venture, the stakes were higher, and thats where the risks became out of control, because the appropriate mechanisms were not in place to stop them.

 

[turtleface]

i think one day the financial system will blow up and then we'd all be f*cked

 

[pete_mate]

i dont think anyone in this thread has seen the movie

enron: the smartest guys in the room

there's really alot more to the companies collapse than "bad trades"

for example, skilling approved the building of a massive powerplant in india, when there wasnt even demand for it. It lost them a billion dollars.

Infact, it was mainly the trading which kept enron afloat for so long. With the deregulation of the electricity market in florida, enron placed forward contracts on the price of electricity, and then made calls to energy producers to switch off the machines = $$$

Analysts were wondering how enron was making such abnormal profits

 

[turtleface]

what i don't understand is how a proper audit would have made much difference? If the audit forced Enron to restate its books, so what? People would probably start recalling their loans and it'd have gone down anyway. The only possible explanation I've thought of is by identifying liquidity issues they probably would have been forced to go into administration or restructure some of their crappy instruments, possibly minimising losses. And also Shareholders and employees get a bit of notice that their money was about to be lost.

anybody know? I'm clueless

 

[pete_mate]

what i don't understand is how a proper audit would have made much difference? If the audit forced Enron to restate its books, so what? People would probably start recalling their loans and it'd have gone down anyway. The only possible explanation I've thought of is by identifying liquidity issues they probably would have been forced to go into administration or restructure some of their crappy instruments, possibly minimising losses. And also Shareholders and employees get a bit of notice that their money was about to be lost.

anybody know? I'm clueless

a proper audit would have made the shareprice plummet anyway, yes. But maybe this would have happened before a complete bankrupcy, if this was done early on, the damage would have been minimised.

Instead employees and all investors in enron were taken for a ride.

The financing is really quite complicated, but basically fastow the CFO hid enron's debts using structured finance.

 

[redruM]

I'd have to like to have seen a bit more about their Mark-to-Market accounting system.

I mean surely they'd have to show some kind of reasoning to come to their projections....Unless Arthur Anderson were more dodgy than I am thinking.

 

[Rafy]

Former Enron chief Ken Lay dead
July 6, 2006 - 1:15AM

FORMER Enron chairman and chief executive Kenneth Lay, awaiting sentencing after being convicted of fraud and conspiracy charges, has died, US media has reported.

"Ken Lay passed away early this morning in Aspen," said a family statement read out on CNN.

"... Out of respect for the family we will release no further details at this time."

CNBC television said Lay died of a heart attack at a family home in Aspen, Colorado.

Lay, 64, and former CEO Jeffrey Skilling, 52, were convicted in May of setting up an elaborate scheme to deceive investors over Enron's crumbling finances prior to what was then the largest corporate bankruptcy in US history.

Lay and Skilling's sentencing had been set for October 23.

A prominent Republican fundraiser, Lay was found guilty of six fraud and conspiracy charges, and federal bank fraud charges in a separate trial. He faced a maximum of 165 years in jail.
http://www.smh.com.au/news/world/former-enron-chief-ken-lay-dead/2006/07/06/1151779023343.html

"As a result of Lay's death prior to exhausting his appeals, his conviction is abated, and Lay is legally considered never to have been indicted or convicted of criminal charges"

 

[seremify007]

Yeh I just saw the death thing too. Couldn't help but think of Rene Rivkin after hearing the news on TV.

 

[pete_mate]

Yeh I just saw the death thing too. Couldn't help but think of Rene Rivkin after hearing the news on TV.

Rene did one little bit of insider trading, which plenty of people do, yet its very difficult to prove.

Kenny lay did far worse things. If we consider insider trading as essentially; "having an unfair advantage in a market" then the enron traders predicting the price of energy would rise (via futures/forward contracts) and then bribing companies to shut down their powerplants, is
like bending the market over and anally raping it. They made 7 billion dollars off of it and pensioners and poor people couldnt afford electricity.

Poor Rene only bought 50,000 worth of shares, which would have little or no effect on the market (or anyone) at all. People say he just pissed off powerful people.

 

[jpr333]

Um Rene did more than that, I remember one of my mates had a chat with some of the people working on cases against him at ASIC. He did things such as buying shares then recommending them in his investor magazine and subsequently selling them. The people on the tail end of those up and down swings got hurt... Those cases never made it to court i guess.

Edit- so more sensical.

 

[blue_chameleon]

With Lay now gone, there is only one guy left. Skilling.

Id prefer to see Skilling last out until he is sentenced, before he necks himself.

 

[Minai]

With Lay now gone, there is only one guy left. Skilling.

Id prefer to see Skilling last out until he is sentenced, before he necks himself.

The prospect of an 185 year sentence might make him do it sooner..