I certainly don't know all the convoultions of SEC rules, but advising
other people to buy Enron stock when he himself was borrowing money from
Enron to buy optioned stock and immediately selling it, strikes me as
extremely fraudulent.


Dave wrote:
Depends entirely on how much he knew of the fraudulent accounting.


Well, by the letter of the law, you're right, but golly gee didn't he
ever scan a statement of cash flows? Here he was borrowing money from a
company that was sinking... no, plummeting... so he could buy
underpriced stock to sell... while requiring his employees to buy it...
and publicly urging everyone else to buy also.

It may be that my "fraud-o-meter" is a bit too sensitive, but if I were
fool enough to have been burned by his shenanigans, I'd be thinking
about vigilante justice.


Some fault lies also in the U.S. accounting system that relies on rigid
rules to determine who is "at risk" for an asset, and the way those rules
are applied, rather than relying on the auditors to step back make some
judgment calls.

Sure, but that's why a lot of audit companies also have management
consulting contracts (a conflict of interest in many cases).

... Many of the problems would have occurred even if Enron's
partnership transactions had complied fully with the rules, because Enron's
"investment" in the Enron partnerships consisted entirely of Enron's own
stock.

Yep. I spotted that even before the crash, a friend of mine was riding
that train and thanks to my advice he didn't get burned as badly as he
might have.

... If the auditors had taken a big picture look at the entire structure
instead of focusing on technical rules, they should have concluded that the
structure was unsound.


Of course not... instead they were busy helping Enron flout the rules,
up to & including shredding documents after the crash finally came.

IMHO the accounting profession has to tighten things up quite a lot,
preferably within the context of professional behavior rather than laws.

DSK