Now that I really comprehend the underlying cause of Enron’s bankruptcy, I’m starting to see things I really didn’t notice before. I had a quick discussion last night with one Enron executive who pointed out that when Enron collapsed, Enron management blamed the losses from the assets on the SPEs (and Andy Fastow). I am thinking specifically of the 3rd quarter press release announcing the $700 million loss. Enron didn’t say the assets lost value, they said they took “a $700 million loss in connection with unwinding Raptor.” That sounds like Raptor caused the loss. But Raptor didn’t cause it. Unwinding the Raptor swap, which hedged those losses with Enron stock, just caused Enron to have to recognize the losses, because there was no new stock issuance to offset it.
My support for Ken Lay as an executive and a defendant has been unwavering, and continues to be. But part of truly understanding someone or something is being truthful about them and the truth is, Ken Lay chose to keep the stock price high rather than issue equity and dilute the stock that hedged all of Enron’s investments.
It was a decision that would have catastrophic consequences.