Enron Corp. - University of California | Office of The President

firm, Andersen, Enron's general counsel, Vinson & Elkins and several banks, including J.P. Morgan
Chase & Co. ("JP Morgan"), CitiGroup, Inc. ("CitiGroup"), Credit Suisse First Boston ("CS First
Boston"), Merrill Lynch & Co. Inc. ("Merrill Lynch"), Canadian Imperial Bank of Commerce
("CIBC"), Deutsche Bank AG ("Deutsche Bank"), Bank of America Corp. ("Bank America"),
Barclays PLC ("Barclays") and Lehman Brothers Holding, Inc. ("Lehman Brothers"), who
collectively pocketed hundreds of millions of dollars a year from Enron – which by 97-98 had
become the golden goose of Wall Street – while Enron's insiders pocketed over 2 billion dollars
from sales of their Enron stock and bonuses due to Enron's reported record earnings and its
strong stock performance.
18. By 97-98, Enron was a hall of mirrors inside a house of cards – reporting hundreds
of millions of dollars of phony profits each year, while concealing billions of dollars of debt that
should have been on its balance sheet, thus inflating its shareholder equity by billions of dollars.
Enron had turned into an enormous Ponzi scheme – the largest in history – constantly raising money
from public offerings of its securities or those of related entities to sustain itself, while appearing to
achieve successful growth and profits. But, because most of Enron's reported profits were being
generated by phony, non-arm's-length transactions and improper accounting tricks – including the
misuse and abuse of "mark-to-market" accounting techniques to accelerate the recognition of
hundreds of millions of dollars of profits to current periods from transactions in which Enron was
only entitled to receive cash over many future years (if ever) – Enron was cash starved. Yet to
continue to report growing profits, Enron was forced to not only continue to engage in such phony
transactions and improper accounting tricks, but to accelerate the number and size of such
transactions it engaged in, which created a vicious cycle only further exacerbating Enron's need to
obtain cash financing from these transactions. To make matters worse, Enron had capitalized entities
- 15 -