How did Enron use SPE's to hide large amounts of debt?
339648
A special purpose entity is a company that is created by a parent company, usually to carry out a specific, limited purpose, such as the securitization of a set of assets.  An SPE may be set up as a corporation, partnership, LLC, or trust.  Enron created lots and lots of SPEs.  As long as Enron technically controlled no more than 50% of an SPE, Enron was not required by accounting rules to consolidate the SPE’s assets and liabilities, so any debts belonged to the SPE and did not show up on Enron’s books.  The simplest way Enron hid debt in the SPEs was by selling assets to the SPEs, which had borrowed money in order to purchase the assets.  The problem was that Enron was liable to repay the loans taken out by the SPEs.  So, basically, Enron was making a sale to itself, showing a profit on its books, and hiding the corresponding loss in the SPE.  These false profits (sorry) covered up Enron’s actual business losses.
141660
Checkout this site\n\nhttp://www.securities.com/search_campaign.html?ui_lang=EN&how_hear=110&spage=10266
523844
that is what www.wikipedia.com is for.\n\nEnron Corporation was an energy company based in Houston, Texas. Prior to its bankruptcy in late 2001, Enron employed around 21,000 people and was one of the world's leading electricity, natural gas, and communications companies, with claimed revenues of $101 billion in 2000. Fortune magazine named Enron "America's Most Innovative Company" for six consecutive years. It became most famous at the end of 2001 when it was revealed that it was sustained mostly by institutionalized, systematic, and well-planned accounting fraud. Its European operations filed for bankruptcy on November 30, 2001, and it sought Chapter 11 protection in the U.S. two days later, on December 2. It still exists, operating a handful of key assets, and making preparations for the sale or spin off of remaining businesses. Enron emerged from bankruptcy in November of 2004 after one of the biggest and most complex cases in US history. It has since entered the zeitgeist as a symbol of willful corporate fraud and corruption.\n\nGrowth\nEnron, founded in 1930 as Northern Natural Gas Company, was a consortium of Northern American Power and Light Company, Lone Star Gas Company, and United Lights and Railways Corporation. The consortium ownership was gradually dissolved between 1941 and 1947 through a public stock offering. In 1979, Northern Natural Gas was restructured under the ownership of a new holding company, InterNorth Inc., which replaced Northern Natural Gas on the New York Stock Exchange.\n\nIn 1985, InterNorth acquired competitor Houston Natural Gas Company in a transaction engineered by HNG CEO Kenneth Lay. Although InterNorth was the purchaser, Lay emerged as CEO and promptly renamed InterNorth as Enron Corporation, with headquarters in Houston rather than InterNorth/Northern Natural Gas's base in Omaha. Initially, the company was to be named Enteron, chosen for the positive connotations of "enter" and "on", but when it was pointed out that the term meant "intestine", it was quickly shortened.\n\nEnron was originally involved in the transmission and distribution of electricity and gas throughout the United States and the development, construction, and operation of power plants, pipelines, and other infrastructure worldwide. In 1998 it moved into the water sector, creating the Azurix Corporation, which it part-floated on the NYSE in June 1999. Azurix failed to break into the water utility market, with its only major concession, in Buenos Aires, Argentina, a large-scale money loser. In April 2001 Enron announced its intention to break up Azurix and sell its assets.\n\nEnron grew wealthy, it claimed, through its pioneering marketing and promotion of power and communications bandwidth commodities and related derivatives as tradable financial instruments, including exotic items such as weather derivatives. As a result, Enron was named "America's Most Innovative Company" by Fortune magazine for six consecutive years, from 1996 to 2001. It was on the Fortune's "100 Best Companies to Work for in America" list in 2000, and was legendary even among the elite workers of the financial world for the opulence of its offices. However, as was later discovered, many of these recorded profits were inflated or even wholly fraudulent and totally nonexistent, by the use of sophisticated and arcane financial transactions between Enron and related companies formed to take unprofitable entities off the company's books.\n\nProducts\nEnron traded more than 800 different products including the following.\n\nAdvertising Risk Management \nBandwidth* \nBroadband Services \nBuilding Services \nCredit Risk Management* \nCrude Oil & Products* \nElectricity / Power \nEmission Allowances* \nEnergy Outsourcing \nEnergy Asset Management \nEnron Intelligent Network \nFacility Management \nForest Products* \nFreight \nMedia Risk Management \nMetals* (also see Steel) \n
580633
YES! He stole the first with the help of Jebber in Florida and with Enron's finances. Do some research on the latter. It is the truth.\n\nThe second he stole as well. Two words: Ohio. Florida.
1126596
1)  Not everything that should be accrued was accrued.\n\n2)  The estimates/formulas used to determine the accrual numbers end up being inaccurate.
22516
Unfortunately, all the accounting catches in the world don't prevent someone from having a duplicate set of data, which is the most common way to "cook the books".  If you could interface between their books and the actual stock price, and you had some serious computing power, you might be able to tell that something fishy was going on, but you'd have to have access to the data.
356413
There are two ways to do this. One is to actually go to the dow jones website where they break out the information or two, is to take an arithmeetic average of the P/E of all 30 components (IBM, MSFT, WMT, DELL, etc)
1030534
1) to create value for shareholders\n\nthis can be done by keeping tabs on the amount of and cost of debt (sometimes more debt is better, actually).  included in this is not only taking and paying loans, but also re-purchasing outstanding shares.  \n\nbeyond this, financial managers may buy insurance on the company's assets and operations and may also "hedge" to ensure stable cash-flows.
1103340
Somehow they used the signature from that check he wrote them and forged the papers to deposit all the money into that fake bank account, what they originally were trying to do. And they distributed all of that money to the employees with his signature. And you know how Enron fell in real life and it's funny that guy got a job with Enron not knowing what's going to happen in the future. It's a joke.
619753
ENRON WELL U KNOW WHAT HAPPENED TO THEM IF U MAKE THAT KIND OF MONEY SOMEONE IS GETTING CHEATED
750094
don't really know but the SEC had this on their site regarding PLFM
883892
Without looking at the financial statements this is a bit tricky, however I think that the answer is D (the first one) they issues bonds.  \n\nThe bonds exchange debt for cash.  The had large cash outflows, due to the dividend, equipment purchase and the repurchase of common stock, it would result in a cash deficit.  The amortization expense does not effect cash flow. If the cash balance went up, it is because the bond issue generated more cash than the cumulative deficit created by the operations (profits and losses adjusted for cash) or because they may have large payables due to the capital purchases (doubtful but possible)  It looks to me, from your description, that the company has determined that long term debt (bonds) is cheaper than equity, so it reduced equity through stock repurchase and dividends and replaced that cash, through a bond issue.
862392
In his book "Contrarian Investment Strategies: The Next Generation," David Dreman does a good job of explaining his rationale for a low P/E stock selection strategy.  On average, over long periods of time, low P/E stocks have outperformed high P/E stocks.  There has been much debate over why this is, but I'd summarize Mr. Dreman's theory of why this works as the following.  Analysts tend to be systematically too optimistic when forecasting companies' future growth rates.  Therefore, they are willing to pay a high multiple of current earnings for these stocks.  When it turns out they were wrong, the market strongly penalizes the prices of these high P/E stocks.  There appears to be an asymmetric payoff  between high P/E and low P/E stocks.  When high P/E stocks report a positive earnings surprise, they don't go up as much as they decline when they report a negative surprise.  The opposite is, on average, true of low P/E stocks.  It is this effect that may explain why value portfolios often outperform growth portfolios.  Turning to academia, a recent paper in the journal Review of Quantitative Finance and Accounting concludes, "Value portfolios outperform because of systematic errors in forecasting earnings growth rates."
980278
No way.  Biggest Scam on earth.  Much bigger than Enron.
726691
Neither is good or bad. You really need to get away from this shallow method of thinking.\n\nUnless you consider how the debts were incurred, what the economic and geopolitical conditions were, then you'll never have a clue as to understanding national debt.\n\nYou voted Democrat, didn't you? Obvious.
192046
By buying back its shares in the market and then cancelling them. Often done in UK and US as it then increases earnings per share
263687
In early 2000, Enron, the natural gas pipeline company\nturned online phenomenon, held a daylong conference in Houston for Wall\nStreet analysts and investors. The audience, packed with financial experts\non the natural gas and power industries, was wowed by all the talk of\nEnron's online capabilities, especially its rapidly growing business of\nelectronically matching buyers and sellers of numerous commodities like\nelectricity and even network bandwidth.\n\nThe analysts were particularly receptive when Jeffrey Skilling, then Enron's\npresident, suggested that the company's money-losing broadband network\nbusiness alone was worth $29 billion, or an extra $37 a share. He even had a\nnifty PowerPoint slide to explain his company's proper stock price.\n\nUnsurprisingly, Enron's shares skyrocketed by more than 50 percent in the\nfirst half of that year. Enron, it seems, had become an Internet company,\nand decidedly old-economy energy-industry analysts were loath to be left\nbehind. \n\nThe problem is that it was all a lie.  Company executives used inflated numbers and faked financial reports.  The stock price plummeted and investors, including retirement plans that had invested in Enron, lost tons of money.