Wednesday, March 22, 2006
Our apologies for the hiatus since the last update.
As Mary Flood reports in the Houston Chronicle, former Enron company treasurer Ben Glisan testified yesterday in the federal case against former Enron CEOs Ken Lay and Jeff Skilling.
Glisan testified that both Lay and Skilling knew of the financial troubles looming for the company, that they knew of the illegal methods being used to hide those troubles, and that they both misled investors as to the company's financial standing. These allegations are generally the crux of the government's case.
As a treasurer, Glisan might be expected to speak in nearly incoherent financio-babble, but he apparently provided one of the clearest explanations to date of three of the main methods by which Enron cooked the books.
1) Enron disguised loans it received as cash flow, making it appear that its revenues were much higher than they actually were.
2) Enron used several mechanisms (Andy Fastow's infamous Raptors fall into this category) to offload debt from the company, making the company appear much more profitable than it was.
3) Again to boost revenue, Enron pretended to sell its assets to third parties, although the third party was often Enron itself.
Glisan also testified that had the true state of Enron's finances been known, it would have lowered the company's credit rating, a crucial component of Enron's borrow and buy strategy. Had the credit rating slipped and it become more difficult for Enron to obtain loans, Glisan testified that the company would have gone bankrupt.
According to Flood's account, Skilling looked uncharacteristically nervous at points during Glisan's testimony.