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Enron and the Two Cows

Issue 2 and Volume 106.

Feudalism
You have two cows.
Your lord takes some of the milk.

Captilalism
You have two cows.
You sell one and buy a bull.
Your herd multiplies, and the economy grows.
You sell them and retire on the income.

Enronism
You have two cows.

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You borrow 80 percent of the forward value of the two cows from your bank, then buy another cow with 5 percent down and the rest financed by the seller on a note callable if your market cap goes below $20 billion at a rate two times prime.

You now sell three cows to your publicly listed company, using letters of credit opened by your brother-in-law at a second bank, then execute a debt/equity swap with an associated general offer so that you get four cows back, with a tax exemption for five cows.

The milk rights of six cows are transferred via an intermediary to a Cayman Island company secretly owned by the majority shareholder who sells the rights to seven cows back to your listed company.

The annual report says the company owns eight cows, with an option on one more. The transaction process is upheld by your independent auditor, which does not provide a balance sheet.

A press release is issued announcing that Enron, as a major owner of cows, will begin trading cows via the Internet site COW (cows on web).

Editor’s note: Corporate communications has evolved to the point where it seems the highest and most common use of e-mail is the dissemination of jokes and humor stories to business acquaintances around the world. Power Engineering has collected a number of such communications from many anonymous e-mail sources and will present them in this space for your enjoyment. We welcome your contributions of engineering, technology or business related humorous pieces to [email protected], but please do not send copyrighted material.