ARC's 1st Law: As a "progressive" online discussion grows longer, the probability of a nefarious reference to Karl Rove approaches one

Sunday, March 13, 2005

60 Minutes - Error of Omission

60 Minutes fact check session... all in all, a pretty decent show. The coverage of Theo Van Gogh's murder in the Netherlands was pretty good (although I was busy making dinner, so may have missed something).

However, with regard to the Enron/Ken Lay story, there are a couple of pieces of information that Scott "The Chin" Pelley left out (seems to be a pattern here, folks).

First, Enron was able to successfully hide its losses through the use of Special Purpose Entities (SPE) (which is a rather complex accounting trick that can be used for legitimate purposes). Andy Fastow was using the SPE to hide millions in losses, which isn't a legitimate use. However, the Federal Accounting Standards Board (FASB), which is an independent board established by the SEC to create accounting standards used by all SEC regulated companies, had been asked multiple times how SPEs should be accounted for. Until FASB rules on an issue, there is no clear indication as to how that particular issue should be handled - although accountants should use their best judgement. Pelley failed to mention the word SPE and how Fastow used it to hide the losses, or that FASB was slow to provide a ruling on the matter, leaving those in business to interpret as they saw fit. I'm no accountant, so don't get hyper-critical about what I've stated... these are broad brushes...

Pelley also failed to mention Enron's auditors, Arthur Andersen, had extremely close ties to Enron (one of their main corporate finance guys used to be a partner there).

Pelley briefly mentioned that Enron jumped into power plants in foreign countries, but failed to mention that one of the big money losers for Enron was a power plant in India which was a deal brokered and pushed by the Clinton administration.

Pelley also failed to mention exactly how Enron collapsed... it was just that investors started to get skittish and that other traders wouldn't talk to the Enron traders. It was that Enron's bond rating was on the verge of being downgraded to junk bond status. This leads to a crucial fact - former Clinton administration Secretary of the Treasury, Robert Rubin phoned up a senior Bush administration official in the Treasury (Peter Fisher), asking them to get in touch with the bond-rating agencies to pressure them to hold off on downgrading Enron's rating. This was extremely inappropriate and unethical.

When the Bush administration failed to bend to Rubin's wishes, Enron's bond rating was downgraded (appropriately) and then the investors started to notice that something was rotten in the state of Denmark Houston. At THAT point, the game was up.

Keep in mind that the Left throws Rubin's name out there as some master architect for the 90s economy. They fail to recognize or remember his unethical and potentially illegal calls on behalf of Enron.

***EDIT***
Ken Lay is a jack@ss and will probably have the book thrown at him (which is what I would do). Same for Skilling... Also, I forgot to mention that Ken Lay packed the Board of Directors with his cronies, creating the situation which allowed Fastow to play his accounting gimmicks.

Your Co-Conspirator,
ARC: St Wendeler