Josh Marshall

Josh Marshall is editor and publisher of

Articles by Josh

One of the most telling details of the Enron saga is the way that nearly everyone agrees that 'aggressive' (as in 'aggressive accounting') should serve as a synonym for 'deceptive.'

'Aggressive accounting' means massaging the numbers so they'll yield a deceptive impression of a company's financial health.

'Overly aggressive accounting' is bad because that's too deceptive.

But 'aggressive accounting' is okay because that's only deceptive, not too deceptive.

Is this the attitude that's at the root of the problem?

As we noted Tuesday evening, one key question now is who the 'investors' were in the debt-concealing outside partnerships overseen by Andrew Fastow.

This and other articles in Wednesday's Times seem to imply that the partners were all Enron employees. The Post, meanwhile, seems more agnostic on this question.

Yet the authors of the Powers Report (as I try to explain here) seem not to have been able to determine precisely who the investors were. Indeed, the authors of the Report say that they were not able to get access to the "the materials in the possession of the Fastow partnerships or their limited partners." These papers, I would imagine, are where you find out precisely who the partners were. Finally, the Times profile of Fastow notes the incentives that existed to recruit partners who were either not employees of Enron or employees who were of low enough rank not to need to show up in SEC filings.

By 1999, there were small fissures in Mr. Fastow's labyrinthine financing empire. As early as 1997, Enron had difficulty finding a partner to buy out Calpers's interest. So, apparently to skirt disclosure rules, Mr. Fastow proposed listing his wife's family as outside investors. When he was rebuffed, Michael Kopper, who worked under Mr. Fastow at Enron, was selected. Because he was a lower-level employee, Enron would not have to disclose his interest in S.E.C. filings. Mr. Kopper would eventually make at least $10 million in profit from the venture.
To recap, 'investors' in the partnerships reaped immense profits by investing little money and assuming no risk. If people outside the company were getting these sweetheart deals, who were they?

LATE UPDATE! Does TPM get results or what!?

Last week, we noted how America's Ambassador to Spain, George Argyros, was embarrassing the United States by using the US Embassy in Madrid website to post a biography with a pitiful "Partial List of Awards Received" numbering twenty-five in all.

This included such honors as his induction "into the Horatio Alger Association of Distinguished Americans, perhaps the single most coveted award given in American (sic) to non-military, non-show business individuals."

As we noted earlier this evening, Argyros' hometown newspaper The Orange County Register picked up TPM's razzing yesterday in the paper's 'buzz' section and gave Argyros another whack.

Well, when we returned to the ambassador's website this evening, we found (surprise, surprise) that at some point between the 29th and today the offending biography had been removed and replaced with a new one which is at least slightly less injurious to the dignity and reputation of self-respecting Americans.

Talking Points Memo: bringing shameless dorks to heel in North America and the Iberian Peninsula.

Late Late Update: You can still see the original list in the archived version available from Google. Plus, our reputation among web-savvy Spaniards may still be suffering because Argyros' show-boating list is still online in the Spanish language version of his biography. Special thanks to TPM reader A. for the Google catch.

Excitement continues to grow for the upcoming Talking Points relaunch, especially at Talking Points world headquarters! Or, well, at least at Talking Points world headquarters. Anyway, the big date is Friday, February 15th.

Also, remember George Argyros? As TPM noted last week, he's the high-rolling slumlord from Newport Beach, California. He bought an ambassadorship from the Bush administration. And now he's making America look bad in Madrid with his comical, show-boating ways.

Well, now Argyros' hometown newspaper The Orange County Register has picked up TPM's comments in its 'Buzz' section. Clearly Argyros can run but he cannot hide from the long arm of TPM's satire and mockery.

Coming up soon, details on Argyros' whacky, boondogglian plan to convert the former El Toro Marine Air Station into a passenger airport even though the main take-off path flies right into a mountain.

If you're looking to see where the Enron story might get explosive, this might be the place to look.

Consider the following: the Powers Report describes how Enron's outside partnerships (controlled by Enron CFO Andrew Fastow) allowed Fastow and others to make millions of dollars for transactions which had no other purpose than to obscure Enron's true financial health and make money for "Fastow and others."

Who were the "others"?

The partnerships were paper companies which made large sums of money for transactions which involved no risk. They were, in other words, perfect vehicles for sweetheart deals political or otherwise, for helping friends 'make' tons of money. Fastow was key to each of the partnerships. The report discusses other Enron employees who were "partners." So, again, who were the other partners?

Footnote 65, on page 149 of the report, says ...

We have not seen any evidence that any member of the Board of Directors had a financial interest in any of the partnerships that are discussed here.
Let's unpack what this means.

According to the report, the board's investigators had "no access to the materials in the possession of the Fastow partnerships or their limited partners." This and the quote above imply that the investigators didn't have access to records detailing who all the partners in the partnerships were. Otherwise, why use the phrasing "have not see any evidence that..."? If you have the list in front of you, there's no need to say you haven't seen any evidence, etc. You either know or you don't, period. (One also assumes, since this was the board's committee, that the board members cooperated with the investigation and said they weren't partners.)

So we know there were multiple partners in the partnerships. Some are named Enron employees. None of them, according to the report, were members of the Enron board. But the investigators assumed that there were, or at least could be, other unnamed partner/profiteers out there.

Again, who are they?

Yesterday I noted how the Enronians were acting like five year olds.

But I didn't know the half of it.

As expected, congressional committees are now subpoenaing Ken Lay. But now they can't find him to serve the subpoena. He's on the lam.

Like a five year old, indeed!

Where's Kenny-Boy? In the pantry? Behind the door? In the tree-house?

Is this guy for real?

Someone who is this unhinged sounds like the type who might turn on his benefactors. Of course, when you're that high up on the ladder there aren't that many available to flip on.

Thank God we're in the responsibility era.

You know things are really, really bad when grown men and women with advanced degrees and six-figure salaries start making excuses which, in the normal course of things, you wouldn't accept from a five year old.

That's Enron today, in spades.

(Mom: Who ate the cookies?! Johnny: Umm, Mom, I've gotta say I was out of the loop on the decision-making on that one.)

The clearest explanation I've yet heard of what Enron was doing is found in this paragraph from today's Times, quoting the so-called 'Powers Report' ...

If the Raptor accounting was correct, the committee concluded, then "a company with access to its outstanding stock could place itself on an ascending spiral: an increasing stock price would enable it to keep losses on its investments from public view; which, in turn, would spur further increases in its stock price; which, in turn, would increase its capacity to keep losses from its investments from public view."
And who's to blame?

Ken Lay's wife says her husband, the founder, longtime CEO and Chairman of the Board of Enron was just 'out of the loop' when it came to the accounting shenanigans that swindled millions of Americans out of billions of dollars.

Jeff Skilling, Lay's longtime number two who briefly served as CEO in 2001, told the Enron Board's investigating committee that he too didn't have much sense of what was going on.

The upshot of the Board's investigating committee report is that the members of the board just didn't keep a close enough eye on all the inappropriate and/or criminal acts the company's executives were committing, i.e., they didn't know what was going on either!

If these bozos still don't know what was going on they should definitely pick up the Monday New York Times, which provides a nice timeline of the hidden events which led to Enron's collapse.

The aforementioned 'raptors', the paper vehicles used to hide Enron's losses, began to buckle and strain a bit more than a year ago. They had to be reorganized first at the end of 2000 and then again in March 2001. This provided Enron executives and insiders the window of time necessary to cash out their stocks. Things apparently began to hemorrhage again about three months later. But this time the problem couldn't be papered over and the fireworks began.

As I mentioned today on MSNBC, what is now coming into focus is that the work of the Cheney Energy Task Force, the California energy crisis, and Enron's desperate efforts to save itself were all happening at roughly the same time -- with many of the most important developments taking place in the late Spring. As Henry Waxman no doubt realizes, this makes the Energy Task Force records more important than anyone could have imagined six months ago.

And speaking of things that were taking place at the same time, I continue to be interested in the sequence of events taking place at Enron at the end of last summer, many of which at the time must have appeared unconnected, but now merge into a larger whole.

Consider a few ...

August 8th: On August 8th Enron board member Frank Savage leaves Alliance Capital to form Savage Partners, LLC. Backstory: Alliance Capital, the largest institutional holder of Enron stock, instructed the Florida state pension fund, among others, to buy Enron stock after the end of October. Savage was the Chairman of Alliance Capital International, a division of the firm handling investments in the Middle East and Africa, until leaving Alliance on August 8th.

August 14th: Jeff Skilling unexpectedly resigns as Enron CEO after only a few months.

August 21st (on or about): Sherron S. Watkins sends whistlblower letter, anonymously, to newly-returned CEO Ken Lay.

September 4th: Senator Phil Gramm, husband of Enron board member Wendy Gramm, announces his retirement from the Senate. Gramm's name was on the list of potential Senate retirees; but his announcement came as a surprise.

I mean, hell, I can wait on the Cheney Energy Task Force notes. But the minutes and papers of the members of the Enron board during July and August are what you just really want to see.

These two sentences from today's New York Times provide the telling summary of Enron's seemingly damning internal review.

Lawyers not involved in any [Enron-related] lawsuits said the report appeared to support an argument that Enron's directors did not recklessly or willfully participate in fraud. That is the conclusion the board, which appointed the investigators, might want a bankruptcy court to reach in deciding whether to leave the company under its control instead of naming a special trustee ...
This other article in the Times, by Kurt Eichenwald, paints a slightly different picture of the report, describing it as an effective road map to a number of indictments. But the key point here is not how damning the report is, but who it was damning of. The report squarely places the blame on key executives, not the board, even though such a distinction may be difficult to sustain given what we now know of the board's close involvement with Enron's inner-workings.

Also worth noting is the membership of Enron's investigating committee. Two of the members, William Powers Jr. and Raymond S. Troubh are new members of the Enron Board. They signed on after the current crisis was already underway. But the third, Herbert S. Winokur Jr., has been on the Board since at least 1986.

I'm wondering if Winokur's utility was as something on the order of an expert witness. So, for instance, when the authors of the report said that the board had "failed . . . in its oversight duties," perhaps Winokur was able to detail all the screw-ups he and fellow board members had been responsible for? It sounds like he could be really helpful with that.

I'm unclear on this. But maybe some TPM reader who's down with corporate management practices could help me out with this one?

If you'd like your Talking Points delivered live to your office TV, you're in luck. Talking Points will be pundit-in-residence from 1 PM to 6 PM EST Monday on MSNBC. You know the drill, one on the right, one on the left -- there to provide commentary as needed on Enron, the budget, and whatever else comes up during the afternoon news churn.

I'm always amazed at how these things work. Ken Lay was dead set on testifying tomorrow and setting the record straight. But this morning his lawyer Earl J. Silbert, watched the Sunday shows and saw that Reps and Senators really take a dim view of his client. And he "instructed Mr. Lay to withdraw his prior acceptance" of the congressional invitation.

Obviously, Ken Lay is just bustin' at the seams to get in that chair and clear things up. But the hyper-cautious Silbert won't let him. Lay is like the hothead spoiling for a fight whose friends keep holding him back, even as he flails his arms trying to get into the melee.

Lay must be giving Silbert an earful tonight: Don't hold me back! Don't hold me back! Lemme at 'em!