Notes on Enron

by Terry Hogan

I spent nearly 25 years working in the environmental field for an electric utility company. But I wasn't an engineer. And electricity scared me. There was much about electricity and electric utility companies that I just didn't understand. One of those things had to do with ''VARs''. I had no idea what a VAR was, but it has something to do with the ability to transport electricity on wires. Having electric generating stations near your service territory helped with VARs and further away, hurt. I asked many electrical engineers to explain to me what a VAR was, but none could. I never figured out if it reflected on them, or me.

As nature and the human mind both abhor a vacuum, I finally concluded that a VAR was a minute creature, somewhat like a gnome that either hammered or otherwise intimidated electrons to flow along wires. After coming to this conclusion, I was visited by a little VAR from time to time. He, in fact, looked quite like a minute gnome, except he had the habit of vibrating at about 60 cycles per second, varying in frequency when excited or bored. I found that he was invisible to others, but not so to me. He made up for his minute size by having strong views on the electric utility industry.

This is what the VAR told me about Enron. But keep in mind, they are only views from a VAR, and may or may not reflect my own views. However, I should note that the VAR seemed well connected and his comments certainly sparked my interest. (But I was never sure if he was close to Enron, or only ''studied it from a VAR''.)

The VAR, leaning back on a soft dust ball, and started his observation on Enron by saying that we got what we deserved. Enron, he noted, was a creature of deregulation. It was quickly formed and jumped into the energy market business. VAR observed that it started with gas trading and then expanded into electricity trading. VAR asked if I understood the danger of the uncontrolled mixing of natural gas with an electrical spark. (He liked to make fun of my ignorance of all things electrical.)

Enron was created overnight by the merger of Houston Natural Gas and InterNorth in July 1985. Early years made it look like a wedding made in heaven, but recent events suggest something out of wedlock, according to VAR.

In 1989, Enron began trading natural gas commodities and in 1994, it expanded into trading electricity. ''Enron Online'' was given birth in November 1999. This allowed for ''on-line'' trading. It became a major success. According to Enron, Enron Online executed 548,000 transactions with a ''$336 billion notional value'' in 2000 and became ''the world's largest web-based eCommerce system.''1

Enron pushed the envelope in energy trading. It was much admired in the industry according to VAR. Enron was always there first with innovation and risk taking. It was led by Mr. Kenneth Lay. At this point, VAR digressed into one of his frequent tangents and asked me if I knew how much Mr. Kenneth Lay earned for leading Enron into bankruptcy. I, of course, did not know. VAR merely vibrated with annoyance, and in his most disdainful manner, informed me that Kenneth L. Lay earned (or at least was paid) $8.3 million in salary and bonus in 2000. He was ranked second among the utility executive CEOs for salary and bonus, being second only to the CEO of WorldCom who earned $11 million.2 VAR, with a certain degree of smugness, also recalled that Enron was the top North American power marker in the third quarter of 2001.2According to VAR, Enron owed both its success and its failure to online energy trading. VAR claims that many attribute the online trading aspect as what drove Enron stock to a high of $90 a share in August 2001 and to about 25 cents a share in November 2001.

But VAR than retraced and jumped on his timeline again. He seems to get his energy from timelines. VAR jumped to December 2000 where Enron stock climbed to over $84 a share. In February 2001, Jeffery Skilling became CEO and Mr. Lay remained as chairman. But Mr. Skilling resigned ''for personal reasons'' in August 2001 and Mr. Lay resumed his position as CEO. In October 2001, VAR observed, with a noticeable increase in vibration, the Security and Exchange Commission began investigating a possible conflict of interest involving Enron's dealings with partnerships set up by Enron's Chief Financial Officer, Mr. Andrew Fastow. Also in October, Enron's third quarter report revealed a $638 million loss. Within about two weeks, VAR (almost becoming a blur due to his excited vibrating state) noted that the Chief Financial Officer, Mr. Fastow, departed Enron. Enron then sought financing in November and Enron's stock plummeted to less than $10 a share. Enron also revised its PAST FIVE-YEARS of financial statements to reflect $586 million in losses.

VAR, laughing, then offered that at about this point, Dynegy (the parent company of Illinois Power) announces a plan to purchase Enron for about $8 billion in stock on November 9. But then Dynegy reversed course and backed out of the deal before the end of November when Enron's credit rating was downgraded to junk bond status. Enron stock broke through the $1 a share level. VAR asked me why Dynegy offered to buy Enron. I conceded that once again I didn't understand the electric utility industry. VAR said that he didn't know why Dynegy made the offer either. (I felt a little better.)

On December 2, Enron filed for Chapter 11 reorganization and promptly filed a suit against Dynegy for the offer termination. VAR, off on another tangent, asked me if I knew how Enron could file for Chapter 11 bankruptcy when it had about $31 billion in liabilities and about $50 billion in assets. (I assumed it was a rhetorical question, so I didn't answer. But of course, I don't know the answer, either.). VAR didn't explain. Perhaps he was puzzled too. Or perhaps he was only considering his options under Chapter 11.

VAR, showing a marked decrease in rate of vibration, observed philosophically, that the Dynegy offer appears to be another example of ''no good deed goes unpunished''. But then, perhaps not. VAR said that he's had his ears to the wire, and the hum is that other, more conservative energy trading companies, including Dynegy, look to profit from Enron's failure. Companies like Dynegy might pick up some of the market, because Dynegy, unlike Enron, owns lots of power plants than can be used to ''back up'' energy transactions. VAR, noting my failure to comprehend, used this analogy: ''If you want to be sure you are going to get milk next month that you are paying for today, do you want to buy from a farmer that owns dairy cattle, or one who doesn't?''

I countered that I might very well buy milk from the farmer without dairy cattle if he was known to me and a reputable sort of guy, and if the price was less. VAR vibrated intensely and uttered a quote from the New York Times that said Enron ''dripped contempt for the regulators and consumer groups that stood between it and fully deregulated markets-for electricity, water and everything else.''2 VAR looked at me knowingly, and said not more. But he may have softly muttered something about greed, fools and money, and something about ''soon parted.''

But back to the timeline. The VAR asked me if I had checked the recent news releases on Enron. I admitted that I had not. The VAR, like a teacher to a student, recited that on January 3, 2002, Enron announced the settlement of one dispute with Dynegy concerning Dynegy's exercise of an option to acquire Enron's Northern Natural Gas pipeline business. But Enron is continuing to go after Dynegy in the amount of $10 billion in damages arising from Dynegy's termination of the merger agreement with Enron. The VAR only smiled.

So, I asked the apparent all-knowing VAR, ''How could Enron happen?'' VAR, in his best cynical look, asked me if I was running for Congress. Said VAR, ''You've been listening to Senator Daschle or Representative Dingell.'' ''Do you plan to start your own too little, too late, inquisition of the accounting firm and the management of Enron?'' The VAR told me to check out Enron's Internet homepage. At, I found what Enron was saying about Enron- ''Most of the things we do have never been done before.'' (I guess I can't find fault with that statement.) Enron also notes ''No wonder Fortune surveys have named Enron the most innovative company in America for six years in a row.''3 (Yep, there are those who seem to suggest that some of Enron's practices were innovative.) The VAR smiled.

VAR laughed and observed that the Enron chairman made millions of dollars in bonus money as the company approached its death spiral. Now elected officials plan to make political capital by investigating Enron's death. Smirking, VAR asked me how much money I lost in Enron stock. I didn't answer. (I wondered if he knew that I had owned Enron stock, or just guessed.)

VAR said it was time for me to take a look at what has happened since deregulation: California power shortages and skyrocketing energy prices, Enron's failure, and energy company mergers and acquisitions too numerous to count. VAR asked me if I remembered my mother calling in a power outage to Dynegy and the Dynegy representative telling Mom that there was no such place as Lake Bracken. VAR, smugly asked, ''Is she being better served?''

''So, where does it go from here?'' I asked. VAR shrugged and said that he was not my financial advisor. But he said that there were some other creatures of deregulation that may make a splash or two down the road. I asked ''Who? How? What?'' But VAR only smiled like the famous cat and said,

The faster they climb to an innovator be,

The quicker their fall may be.

Look and you shall see.

It's as simple as ABC.

VAR then disappeared, but his smile was the last to leave.

Some have an invisible rabbit named Harvey.

Others have guardian angels.

I have a VAR.And this is what he said to me.


1''The Power of Enron'' at

2VAR referenced the December 2001 issue of ''Utility Business'' (Volume 4, Issue 12) as the source of the cited figures and as the indirect source of the New York Times quote. (He seemed to think I doubted him.)

3 ''Who We Are'' at

Uploaded to The Zephyr Online January 16, 2002

Enron's end runs

by Terry Hogan

I was visited by the VAR1 again yesterday evening.He was just a blur of excitement. In his minute, gnome-like manner, he appeared on my coffee table. I was flipping channels back and forth between C-SPAN, CNN, and CNBC, trying to track what each was saying about Enron and its auditing firm, Arthur Andersen & Co. I could tell by his (little) body language that I was in for a stern lecture.

He began by chastising me for watching this mind-numbing mush of folks interviewing and arguing with one another. He offered his opinion that none of these folks knew anything about energy generation, energy marketing, or accounting practices. Given recent revelations, he asked me if I had the foresight to invest in paper shredding companies. VAR predicts this sector will show growth in the near-term. He had a smart-aleck grin.

The VAR asked me if I saw the testimony of the Andersen executive that was run on C-SPAN. -- VAR's frequency of vibration picked up at this point. -- He said that the media training company who worked with him should receive a bonus. Within a few minutes, the executive had ''staked out the moral high ground'' and appeared to be as surprised and disconcerted about the disclosures of his company's practice as our elected officers also professed to be. Shredding documents, oh my. Why, the VAR observed, you could almost see him slide his chair around to the investigators side of the table. VAR said ''He's slick. He's presidential material.'' But it does make you wonder where this guy was when the same company had similar big-time problems with its Waste Management auditing practices. In fact, the VAR named several similar events in which Andersen paid significant money to resolve problems. In a remarkably ironic move, Enron fired Anderson as its auditing firm.

The VAR, chuckling now, observed that not all accountants are as drab and boring as we think they are. Some must be quite imaginative. It seems that Enron is now being investigated for not paying federal taxes. It is alleged that Enron had set up numerous offshore companies in tax friendly countries where, perhaps, creative accounting helped shelter profits from taxes. VAR suggested that the IRS look for Enron tax accountants with unusually good tans and sand in their shoes.

The VAR also pointed to the silly move to regulate 401(k)s to force employees to diversify. The VAR noted this is treating the symptoms, not the disease. The disease was greed and arrogance resulting in senior management disregarding the rules -- both legal and ethical, VAR observed. (I could tell that this Enron affair is not helping the VAR's perception of the human race.)

Then the VAR turned even more serious. He said that Congress was screwing up ''big time.'' The money lost to investors through Enron's civil and perhaps criminal violations is trailed with so many zeroes that Americans can't understand the size of the crime. Enron employees not only lost money -- and jobs -- but innocent investors who relied on the assertions and reports of Enron's performance also lost money. Trust funds, retirement funds, IRAs, were all at risk by the arrogant, self-serving, greed of a relatively few decision-makers. The VAR observed that thousands of small investors lost thousands of dollars. If someone had robbed them at gunpoint but were caught, he'd have jail time. Rhetorically, the VAR asked the likelihood of the ''Board Room Gang'' serving a lifetime sentence as repeat offenders for robbing thousands of investors. I had never seen VAR change color with increased frequency of vibration. During this monolog, he positively turned, dare I say, an ''electric blue.'' (Prudently, I offered no response to the VAR, but simply wrote down a few notes.)

It was, according to VAR, a crime of such magnitude that ''white collar crime'' fails to adequately describe it. VAR suggested a new phrase ''Board Room Rape.'' I was waiting for the VAR to offset this serious comment with a little levity (his normal behavior). There was none.

VAR went on to say that this is what happens when a regulated industry becomes unregulated, particularly when the commodity produced by the industry cannot be stored. When the product -- electricity -- is needed, it has to be supplied (generated) at that moment. There is no efficient, effective way of storing large amounts of electricity. Further, the VAR noted, electricity has become an essential item in America -- right in there with food, air, water and shelter. Like any essential, we take it for granted until we lose it, or are suddenly faced with paying exorbitant prices for it.

But why does electricity cost so much during peak energy times? VAR answers his own question two ways. First, it is an essential item. Second, it cannot be bought at cheaper prices and placed on the shelf for use during times of higher prices. Third, in an unregulated environment, the cost becomes a matter of supply and demand and since you cannot buy and store electricity like ''real commodities'' the marketplace is fraught with opportunities for abuse. The shorter answer from the VAR was ''Because the sellers have a short supply or an essential product not widely available elsewhere, they can charge what they want, subject only to encountering someone with the same product but with a slightly less pathological level of greed.''

This seemed a pretty strong statement by the VAR, but I had little to counter. There was a movie out a number of years ago, in which it was said, ''Greed is Good.'' Perhaps we need to remind the Board Rooms that there is another older saying ''Moderation in all things.'' The board of directors has specific responsibilities to the shareholders (owners) of the companies. Failure to diligently exercise those responsibilities can be a major contributor to board room abuse. The VAR further observed that all too often the CEO of Company A sits on the Board of Company B while the Company B CEO sits on the Board of Company A. In a similar approach, board members are frequently senior officers of firms who have major contracts with the company. Oddly enough, in each scenario, neither board member is inclined to seriously challenge the practice and decisions of the other, but will pocket the substantial fees paid for quietly attending a few meetings a year. (The VAR, it is clear, has some strong opinions on how the system works, or doesn't.)

VAR predicted numerous lawsuits by numerous entities, suing everyone but the janitor, in hopes of recovering some of the economic losses resulting from this classic ''free enterprise turned bad.'' (I think he felt bad for the janitors. They were stuck with hauling out all the shredded documents). Some of the lawsuits will likely be driven more by ''who has deeper pockets'' than how much or how close they were to the decisions that drove this mess. But the VAR was not optimistic that the tens of thousands of small, independent, investors will see any of their losses returned.

The VAR then -- moving to a new area of these Enron end runs -- asked me if I was following the ripple effects of Enron's bankruptcy. (I didn't answer; he already knew that answer, too.) Enron has numerous commercial and industrial customers with long-term contracts who are now scratching their heads. The Energy Services group provided a wide variety of energy management services to companies, ranging from energy asset management, performance monitoring, improvement of infrastructure, and general energy management contracts. Some of the clients included California's universities and college system (as if they didn't already have enough problems, the VAR chortled). J. C. Penney, it is reported, signed a $600 million contract in April 2001. Under the contract, Enron was to supply electricity for 1,250 Penney stores in all 50 states. The VAR observed that was a lot of Penney's pennies. (I didn't ask whether he was referring to the1,250 stores or the $600 million).

The VAR continued his recitation of facts. Owens-Illinois had a contract with Enron in which Enron was to provide a reported $2 billion in energy and management services for 53 factories in 20 states. The VAR cited ''Energy User News'', Vol. 27, No. l, dated January 2002, if I doubted his facts. (Who me? The VAR is ''plugged into'' the system, whereas, I'm just a former Enron investor.) The VAR asked me if I knew the title of the article he referenced (Of course not). Vibrating with a self-satisfied look, the VAR recited ''Enron's Abrupt Crash and Burn Stuns Energy Markets''.

The VAR recalled that the ''Energy User News'' article reported ''Šthe company was seen as a pioneer in creating marketplaces for deregulated commodities and was touted by many as a revolutionary power, bridging the dot-com world and the heretofore stodgy energy markets.'' Smugly, the VAR said that perhaps folks should have looked at the sinking ''dot-com'' business and considered what happens to a bridge built to a sinking ship. (The VAR often used analogies to try to make complex subjects simple enough for me to understand. I suppose I should be offended, but it appears I am more easily fooled than offended, at least as it relates to investments).

I asked the VAR ''Where will this all end?''The VAR said that it will end, when it stops. But before then, the tragedy will be used by many to further their own agendas.The Democrats will blame the Republicans.Many will cite Enron's political contributions for further evidence in support of their proposals for election reform.Others will advocate it as evidence to regulate mandatory diversification in 401(k)s as the employees obviously aren't smart enough to make their own decisions (The VAR digressed long enough to ask me what I think will happen to the proposal to let folks invest part of their Social Security funds -- again rhetorically). Some will point to the failure as evidence that deregulation has failed. Others will point at the failure as evidence that deregulation works (the lights stayed on). Lawyers will line up clients and sue. Lawyers will line up and defend those sued. Politicians will hold hearings to gain free TV exposure before their next election. The American public will quickly lose interest. The small investor will conclude that he's been ''screwed again.'' Deals will be struck and the ''Board Room Rape'' will be pleaded down to a misdemeanor.I asked the VAR if that wasn't an overly cynical attitude. He responded ''Perhaps cynical; perhaps experienced.'' I considered. The VAR is well-connected in the electrical energy sector and he keeps his ear to the hum of the wires. But then again, he is only a VAR, and I am only his reporter.

After this, the VAR disappeared, again, with his cynical smile, lingering slightly longer than the rest of him. It is quite a disconcerting thing to watch, not unlike the sudden demise of a multi billion dollar company, nearly over night.

Chastised by the VAR, I felt it necessary to go to the Internet to find the true answer for the Enron failure.It didn't take long. SatireWire proclaims, ''Enron Admits It's really Argentina, now massive ineptitude, corruption makes more sense, analysts say.''2 Even if it isn't true, a little humor helps to deal with the VAR and Enron's end runs.


1In case you missed the first Enron article, a brief explanation is in order. The VAR is a small gnome-like creature that is invisible to all except me. His occupation is to hammer on electric transmission lines to help pressure electrons to flow along them. He has the somewhat annoying habit of vibrating at about 60 cycles per second, increasing when he is excited or agitated. Because he is a VAR, he is well connected in the electric utility industry (or so he tells me), and often listens to the ''hum on the wires'' to keep track of what is happening in the industry. The VAR visits me from time to time, and tells me his view on industry activities. I dutifully record and report the events as the VAR sees them. For this reason, he seems to tolerate me, his slow, unimaginative student.

Part 3

The VAR showed up again at my house, uninvited. I may have to set up a small matchbox for him as a guesthouse. The little gnome-like creature apparently just rides the wires. I would have bet that he'd given up trying to tutor me, his slow student, on the ways of the deregulated energy industry. He asked me if I was going to take notes. His frequency of vibrations seemed less, perhaps even less than 60 cycles per second. (I wondered if my electric clocks were running slower.) His slower vibration usually is a hint of a more philosophical discussion. He asked me if I had heard the new nickname for Enron: ''The Crooked E''. ''It's funny how logos can come back and bite you,'' he mused.

The VAR floated out a proposition that the Enron bankruptcy was only one dead canary in the cage. Everyone in the coal mine is looking at that dead Enron canary, and hasn't noticed the other canaries, in the other cages, dropping over, one by one. (The VAR does like his analogies). The VAR pulled out a tiny, tiny, piece of paper and read me a quotation: ''Rather than the competitive, low-cost electricity industry promised by privatization advocates, we've seen frightening volatility in power prices, transmission systems strained to the point of collapse, threats of rolling blackouts, the financial ruin of two of the largest utilities in the country, and in December the bankruptcy filing of the nation's leading energy-trading company.'' He asked me if I knew the source. (Of course, I didn't). He asked me if I could speculate the nature of the source -- a regulatory agency, an environmental group, a citizens ''activist group'', perhaps? (No, I didn't know; didn't want to guess. I smelled a trap. For once I was right.) The VAR said ''It came from ''Speaking of Power'' in the electric industry's trade press magazine ''Power''.2

The VAR, looking smug, said it seems some folks are starting to point out that the King is less than fully clothed. Deregulation is being acknowledged as bringing a number of problems to the table. The prodigal son not only has fleas, but perhaps a social disease or two. The article reported an increasing rate of ''forced outage rates'' (generating unit has to be taken out of service because of a problem, i.e. ''it broke'') and a rise in ''catastrophic accidents''. OSHA records showed 1999 was a record year for human fatalities for the industry according to this report. According to the authors of the article ''Contributing to this industry blight are deregulation incentives to push equipment to extremes, keep [electric generating] units on line longer, and reduce O&M [operation and maintenance] cost.'' The VAR seemed pleased that at least some humans were beginning to see his view of the world. (I think he was disappointed in me, however).

The VAR also attributed deregulation as the primary cause of the over-abundance of new electric generation construction programs that have been announced in recent years. Simple cycle combustion turbines (used as ''peakers'' to meet peak energy demand and usually burning natural gas), combined cycle combustion turbines (used as base-load generation- operating day after day, usually burning natural gas) and even new coal-fired generation (base load generation) have been announced throughout the Midwest. Most, but not all, are announced by ''IPPs'' (unregulated, independent power producers). These IPPs are self financed and sell the power on the wholesale market. Being ''unregulated,'' they have no assurance of recovery of the costs to build their facilities, but on the other hand, they have the ability to sell on the wholesale market for whatever price the demand will support. If too much generation is built by IPPs, the marketplace may become too competitive and IPPs could ''drop like flies'' creating more bankruptcies. (I believe the VAR said, ''tsk tsk'', but it was so softly spoken (if it was spoken), that I may have only imagined it. That's a problem with little VARs).

The VAR began to look introspective- perhaps he was only listening to the hum on the wires, but he began to cite facts and figures. There was a reported 77 percent increase in new electric generating capacity in 2001 compared to the previous year. Further, it is anticipated that 2002 and 2003 new capacity will surpass that installed in 2001. To look at it another way, the VAR said, ''the hum'' (on the wires) is that there will be, on the average, a new energy project starting up about every three days for the next couple of years. The total projected costs of the 367,007 MW projected to be constructed between 1998 and 2007 is estimated to be around $168 billion.3

Because the IPP's are not the same folks who are responsible for the electrical transmission system, this ''disconnect'' (no pun intendedŠ well maybe a little) raises the risk of too much power being pushed onto the distribution system at the wrong place. This creates a risk of transmission line failures and black outs. Remember New York City's blackout and subsequent riots?

The VAR, picking up his frequency of vibration, and smiling in a devilish-sort-of way, said that Enron was the ''Superman'' of the deregulated industry. It was what the deregulated industry proponents pointed to as what could be done with unfettered free enterprise. The VAR observed, philosophically, that every Superman has his kryptonite. (I guess he didn't figure I'd heard of Achilles, so he kept it simple).

But then faster than a speeding bullet, the VAR changed to a fire-red hue and said ''But some 'still don't get it'.'' The VAR pointed out that in a January 2002 electric utility trade press magazine4, under the caption of ''Executive Insights'' (the VAR noted a likely oxymoron here) the writer noted that the federal government did nothing to prevent the destruction of Enron. The author went on to note that the government had come to the aid of airlines following September 11th. The author suggests that Enron was allowed to fail and suggested a possible reason: opponents to deregulation. ''Perhaps this development was quietly greeted with sighs of relief in the boardrooms of regulated utilities across the country'' he wrote. The VAR asked me if I saw any difference between the behavior of Enron that brought its own failure, and the airlines caught as a victim in international terrorism. The VAR shook his head and muttered something about ''None being so blind as those whoŠ'' but I couldn't make out the rest.

The VAR said that regulators, politicians, and lawyers sensing the opportunity, are moving in for ''prime time'' exposure. Already, the VAR observes:

1. Justice Department has initiated criminal investigations into Enron's activities;2. Perhaps not to be out done, both the Labor Department and the Securities and Exchange Commission have initiated civil investigations;

3. Senators Fritz Hollings (D-NC) and Byron Dorgan (D-ND), members of the Senate Commerce Committee, have asked the Federal Trade Commission to determine whether Enron was involved in fraud or deception prior to the company's failure;

4. Enron's former CEO (he resigned on January 23) , Mr. Ken Lay, is due to appear before Senator Dorgan's subcommittee on February 4;

5. Two Senators have proposed federal legislation to require more diversification in pension plans.

6. Mr. Ken Lay has already been named in more than 50 lawsuits.

7. Lawyers suing Enron officials have asked a federal judge to bar Arthur Andersen & Co. from shredding any more documents related to Enron audits.

8. The FBI is now investigating allegations of document shredding by Enron employees at the Houston headquarters.

9. The Senate Finance Committee has asked Enron to release its tax returns to the public. There is an increasing interest in Enron's ability to avoid paying taxes.

10. An Enron executive has committed suicide.

11. The media, looking for a hero, has picked a female Enron employee who wrote a memo expressing alarm about the business practices. The result of the memo was she was promoted to vice president (probably given stock options) and moved out of that specific business practice area. Her lawyer has declined to disclose how much stock she sold, and when. She never ''went public'' with her concerns. (Some hero, VAR commented).

But the VAR observed that the investigative committees might not result in much new information. He slipped a copy of a newspaper before me. It proclaimed that the fired David Duncan -- former Andersen employee and former Enron auditor -- is refusing to testify before the House Energy and Commerce Committee unless he is granted immunity. ''I didn't know that 'pleading the fifth' was part of GAAP [Generally Accepted Accounting Principles]'' the VAR offered sarcastically. But the VAR, a fan of analogies, seemed to like the quote of Representative Jim Greenwood (R-PA) at the hearing. Addressing David Duncan, Greenwood read his quotable quote for the media: ''Enron robbed the bank, Arthur Andersen provided the getaway car, and they say you were at the wheel.'' (The media dutifully recorded it, seemingly relieved that someone had the foresight to ''keep it simple'' and short). Greenwood got his face time and it was the quote heard round the world.

The VAR also offered up his opinion that Andersen's performance auditing Enron and its subsequent behavior must be making other energy firms nervous who relied on Andersen. He said, ''This is especially a possibility for those energy companies who are into energy transactions similar to Enron's.'' The VAR, with a devilish look, and a tint of red, ask me if I knew who Dynegy used as an auditor in its Year 2000 Annual Report. (He must have been listening to the hum on the wires, or checking the Internet). The VAR looked at me, his slow student, and gave me a slow pitch, easy question, I thought. He asked me if I knew Enron was buying power. I said, yes that even I knew than. Enron OnLine was an energy marketing system. The VAR looked disappointed again. The VAR looked at me, pitifully. Enron, he informed me, had made nearly $5.8 million in campaign contributions since 1990. Most of it to Republicans, and had continued making donations as late as 1 week prior to declaring bankruptcy -- a cool $100,000 to the Democrats on December 2nd. The VAR said, ''That's buying power.''

Despite efforts to buy power, Enron did receive some frank words from Senator Barbara Boxer, (D-CA.) The VAR observed that deregulation and power companies are not really popular in California these days. Senator Boxer is attributed as saying, referring to Enron ''I personally think they broke many laws. I hope some of these people wind up in jailŠ and that extends to people who audited the books here.'' 5

These comments must have been hard for another Senator to hear. Senator Phil Gramm's (R TX) wife, Wendy, is on Enron's Board and is a member of Enron's audit committee. It's reported that Wendy Gramm earned (or was at least paid) from $915,000 to $1.25 million by Enron in the form of salary, fees, stock options and dividends during the period of 1993 to 2001. Meanwhile, Senator Gramm received about $100,000 from Enron over a 12-year period in the form of campaign contributions. The VAR observed that these critical comments and hopes of jail time must be, under the family circumstances, be driving the Gramm's ''crackers''.

The VAR observed that the Enron chief financial officer, Andrew Fastow, made millions of dollars from special partnerships with Enron. Shortly after the Securities and Exchange Commission began looking into these special partnerships, Enron replaced Fastow, shortly before Enron crashed and burned, becoming the poster child for what can go wrong under deregulation.

So, playing my role as the dumb student, I asked, ''Where do we go from here? Is deregulation dead? A bad idea?'' Smugly, the VAR said I was actually getting close to the right question. However, he cautioned me with a Yogi Berra-ism, ''It's hard to make predictions, especially about the future.''

VAR said The ''Power'' article got it right. The real question is ''If deregulation is the answer, what exactly was the question?'' He then dared me to ask our elected officials that question.

I may be the VAR's recorder, and I may also be his slow student. But I decided to pass on that opportunity. I'm not sure who should feel more foolish about deregulation: the politicians for passing deregulation legislation or the voters for allowing it. After all, do you like your airline service and your telephone service better now that they are deregulated?

Remember the old saying, ''Fool me once, shame on you. Fool me twice, shame on me.'' Unless I missed my count, we're now on thrice. (The VAR actually looked almost pleased with this observation).

I must admit that I think the Enron saga will end up like a Tolstoy novel. It will have too many details, too many characters, no heroes, and ultimately too many unanswered questions. But that is just my fear. Remember, I bought Enron stock, so what do I know. The VAR knows better. But on the ultimate outcome, he's not saying what the hum is on the wires.

The VAR dissolved away. I never had the opportunity to ask him if he knew the Superman Galesburg connection. It was probably a good thing. The VAR would likely have thought poorly of the question from his slow student.

He probably knew, anyway.


1. In case you missed the previous Enron articles, a brief explanation is in order. The VAR is a small gnome-like creature that is invisible to all except me. His occupation is to hammer on electric transmission lines to help pressure electrons to flow along them. He has the somewhat annoying habit of vibrating at about 60 cycles per second, increasing when he is excited or agitated. Because he is a VAR, he is well connected in the electric utility industry (or so he tells me), and often listens to the ''hum on the wires'' to keep track of what is happening in the industry. The VAR visits me from time to time, and tells me his view on industry activities. I dutifully record and report the events as the VAR sees them. For this reason, he seems to tolerate me, his slow, unimaginative student.

2. Rob Swanekamp and Robert Sansone. 2002. Speaking of Power: ''Re-regulation: Marching forward, while minding the past'', pages 4-5 in ''Power''. Volume 146, No.1. January/February 2002. Published by Platts. New York, New York.

3. Kathleen Davis. 2002. ''Projected new capacity MW soars'', page 4 in ''Electric Light & Power'' Volume 80, Number 1. January 2002. Published by PennWell. Tulsa, OK.

4. Jamie Biddle. 2002. Executive Insights. ''Out of the ashes of Enron: Where do utilities go from here?'', page 8 in ''Electric Light & Power'' Volume 80, Number 1. January 2002. Published by PennWell. Tulsa, OK.

5. Al Senia. 2002. ''Enron's Wake'', pages 14-18 in ''Utility Business'' Volume 5, Issue 1. January 2002. Primedia Business Magazines & Media. Overland Park, Kansas.

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