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

384. A few weeks later, Enron revealed that it was restating its 97, 98, 99 and 00 financial
results to eliminate $600 million in previously reported profits and approximately $1.2 billion in
shareholders' equity as detailed below:
Recurring Net Income
Amount of
Overstatement
Debt
Amount of
Understatement
Shareholders Equity
Amount of
Overstatement
ENRON ACCOUNTING RESTATEMENTS
1997 1998 1999 2000
$ 96,000,000 $113,000,000 $250,000,000 $ 132,000,000
$711,000,000 $561,000,000 $685,000,000 $ 628,000,000
$313,000,000 $448,000,000 $833,000,000 $1,208,000,000
385. The partnerships – Chewco, LJM1, and LJM2 – were used by Enron management
to enter into transactions that it could not, or would not, do with unrelated commercial entities.
Many of the most significant transactions were designed to accomplish favorable financial results,
i.e., not to achieve bona fide economic objectives or to transfer risk. Other transactions were
implemented improperly to offset losses. They allowed Enron to conceal from the market very large
losses resulting from Enron's merchant investments by creating an appearance that those
investments were hedged – that is, that a third party was obligated to pay Enron the amount of
those losses – when in fact that third party was simply an entity in which only Enron had a
substantial economic stake. These transactions resulted in Enron reporting earnings from the
3rdQ 00 through the 3rdQ 01 that were almost $1 billion higher than should have been reported!
386. As huge as the 11/01 restatements of Enron's 97-00 financial statements were, they
just scratched the surface of the true extent of the prior falsification of Enron's financial statements,
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