Resisting Corporate Corruption, 3rd Edition

Case 5Enron’s SPEs: A Vehicle too Far?

Will this still work? What else don’t I know here?

BEN GLISAN’S DESK WAS COVERED WITH DRAFT DOCUMENTS. It was December 17, 1997. Glisan, the lead accountant on a transaction to be known as Chewco, shifted uneasily in his chair. He had come across a document indicating that Michael Kopper was to transfer part of his ownership interest in the Chewco Investments partnership to Bill Dodson, his domestic partner. A question crossed Glisan’s mind, followed quickly by another: Will this still work? What else don’t I know here?

Glisan opened his collar and loosened his tie. It was 7:00 pm, and there was no prospect that he could leave any time soon. The pressure of this deal was building and was already unbelievably intense. Chewco was a deal that had to be closed by year end. The major building blocks of the deal were still not in place. Two weeks minus holidays did not seem to leave very much time for lining things up. Did it leave any time at all for making sure that all the pieces still worked?

Enron was no stranger to year-end deal closings. Indeed, each year end seemed to bring a cascade of transactions designed to boost reported net income, strengthen the look of the balance sheet, and/or dispose of underperforming assets. To a neutral observer, however, there was an increasingly problematic trajectory to recent deals. Successive deals seemed less substantive, more artificially crafted to satisfy the technical requirements of the accounting ...