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

price triggers which created obligations on Enron's part once its price dropped to a certain level.
These transactions were a significant part of the reason Enron failed. Osprey was an investor in
Whitewing with which Enron did numerous sales transactions to generate income. Whitewing itself
had 75 subsidiaries which were used by Enron to generate income and conceal debt.
498. These transactions, which occurred throughout 00, permitted Enron to not only report
sales revenue but also to conceal debt. Enron, with the participation of CitiGroup, CS First Boston
and Deutsche Bank arranged the partnerships which made Enron appear more profitable than it was.
Enron promised to issue stock if the partnerships assets of Osprey and Marlin turned out to be worth
less than promised. These guarantees were a huge liability, which Enron did not report on its balance
sheet. These guarantees also involved triggers which would require additional shares to be used if
Enron's stock dropped below a certain point. The put or trigger insured the SPE underwriters and
securities holders that if Enron stock declined to the trigger price the credit of the SPE would be
restored by a new infusion of Enron stock (or equivalent cash). If Enron did not shore up the amount
of its stock in the SPE to cover the decline in value of Enron stock, the SPE would be liquidated and
the contents would return to the Enron balance sheet. The trigger prices read like a scaled or tiered
device whereby CS First Boston and the other banks which participated in the SPEs would have their
risks hedged as Enron's stock price declined.
499. The assets and investments which were transferred to Whitewing were the product
of Enron’s day-to-day businesses, including energy, natural gas, electricity, oil, coal, paper and pulp,
interests in power plants, interest in pulp and paper plants, interests in gas pipelines, electricity
transmission and distribution lines, and unlit (dark) fiber-optic cable and conduit.
500. According to former Enron employees, it was well known within Enron that many
of these assets decreased in value by the second half of 00. Furthermore, top management, including
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