Chapter 630 Enron Incident

The so-called materials written by Li Weidong are still some post-mortem analysis of Enron Corporation.

The post-event summary is naturally much more accurate than the ex-ante prediction, and it is also more reasonable and well-founded. So when Situjian saw the information provided by Li Weidong, he immediately believed 50%.

In addition, Li Weidong once accurately predicted Japan's economic bubble, and also accurately predicted the Asian financial crisis, and even the entire incident was accurate, which made Situjian believe Li Weidong's prediction for six. Seventy percent.

As a top economist, being able to believe 60-70% is almost equivalent to believing Li Weidong's judgment.

In 2001, the September 11 Incident that shocked the world occurred in the United States, which directly changed the world pattern.

What Americans did not expect was that, more than a month after the 911 Incident, the scandal of accounting fraud broke out in Enron.

At the time, Enron was one of the top ten companies in the United States and the largest natural gas company in the world. Considering the size and status of Enron Corporation, this is undoubtedly a 9/11 incident in the economic world for the United States, and the collapse of Enron Corporation has also changed the pattern of world energy.

And it is very rare for Enron to file for bankruptcy just 25 days after it was revealed that there was a problem.

The larger the company, the stronger the ability to resist risks. Enron ranks in the top ten in the United States and the top twenty in the world's top 500, but it only lasted for 25 days!

Many Japanese companies that are not as large as Enron have also experienced various fraud scandals, some of which are production data fraud, and some, like Enron, are business data fraud. It's okay, there are only a handful of real failures.

Some world-renowned large companies have experienced serious debt crises, but they can survive just by tightening their belts, or by gritting their teeth and selling some of their assets.

And some of the top big companies, in times of crisis, the government will step in to help with asset restructuring, or provide funds to partially nationalize them to save the company.

These are precedents, including within the United States. Such as the US government's sale to save General Motors, save Citibank, save Freddie Mac and Fannie Mae, all include some means of nationalization.

However, Enron didn't apologize, and it didn't tighten its belt to increase income and reduce expenditure, and it didn't get help from the government, so it went bankrupt abruptly. It is absolutely incredible for a company of this size.

Therefore, there have always been some conspiracy theories about the bankruptcy of Enron Corporation, that someone deliberately allowed Enron Corporation to go bankrupt.

Enron Corporation went bankrupt because of such a large scale, there was more than one reason, but a combination of many bad factors, which eventually led to the bankruptcy of Enron Corporation.

Rome was not built in a day, and these unhealthy factors were not a day or two, but after decades of fermentation, the accumulation of small lesions turned into serious diseases, and ultimately there was no cure.

In the 1970s, there were two oil crises, one was the fourth Middle East war in 1973. Although the United States did not directly participate in this time and sold a wave of weapons, the oil crisis that broke out caused the industrial production of the United States to drop by 14%. %

The second time was the political coup in Iran in 1978. This time, the United States was a direct participant, causing greater damage to American industrial production.

Therefore, throughout the 1970s, the United States implemented energy price controls to ensure stable industrial operations.

In the 1980s, when the United States deregulated energy prices, energy prices in the United States began to be adjusted according to the market, which prompted energy companies to compete with each other.

Immediately afterwards, this competition led to mergers and reorganizations among enterprises. During this period, Enron also transformed from a company that laid natural gas pipelines to a real energy company.

However, for Americans, how can it be easy to make money by playing finance?

How can you make money from natural gas hedging transactions when producing natural gas?

As a result, Enron Capital was established, and quickly replaced Enron Natural Gas as the most important industry of Enron. This was also Enron's first step on the road to bankruptcy.

In order to be able to operate like a duck in the water in the financial market, more investors of Sheena, Enron's CEO Kenneth, spent a lot of effort to persuade the US Securities Commission to agree to Enron's implementation of mark-to-market.

Natural gas is not easy to store for a long time, so natural gas is basically mined and sold now, and everyone uses fresh natural gas.

You go to a restaurant and you might have '82 Lafite, there's '82 ham, there's an '82 cook, but you definitely don't cook with '82 gas, because gas doesn't last that long.

The more difficult the commodity to store, the more volatile the price. Products that cannot be stored mean one price per day, so natural gas, as a commodity, can only be priced in real time, not market-based.

The same is true for international natural gas contracts. The signed contract is only an estimated price, but when the contract is completed, it will be priced in real time. At most, it is to set an upper and lower limit for a transaction amount.

Commodities all have a futures market, such as oil trading, the contract is $100 a barrel, but then the international market price dropped to $30 a pass, and I still buy it according to the contract for $100 a barrel, which is absolutely not. possible.

Not to mention the loss-making aspect, if you dare to trade like this, the futures market will be disrupted first, and OPEC will dare to slash you with a knife!

Unless it is some special circumstances, such as international sanctions, financial sanctions, etc. that hinder the seller's transaction, or implement some local currency exchange agreements, such transactions outside the normal international system, you can buy bulk items at relatively low prices. Otherwise, in normal international transactions, it is difficult to buy products that are far from real-time pricing.

Enron's mark-to-market pricing for natural gas clearly violated natural gas education principles.

This means that Enron can record the profits of transactions completed in the next few years according to its estimated transaction value in one day.

In other words, when the price of natural gas is relatively high, Enron can settle the transaction amount that has not been completed on the contract, and there will be more profits on the book, but in fact he does not make so much money. .

This is like earning 1,000 a day, it does not mean that you earn 30,000 a month, nor does it mean that you earn 360,000 a year. But you take the most profitable day to calculate your annual income, the data is definitely not true.

Enron's misrepresentation of earnings in this way prompted an influx of investors. Enron also took a tougher step on the road to failure.

Getting a gas company to mark-to-market is pretty crazy policy in itself.

Some of the top economists in the SEC, and members of the U.S. Congress are surrounded by staff who study the economy. It is impossible for them to fail to see what impact this policy will have.

However, from Congress to the Securities Commission, no one has stopped this crazy move, which shows how powerful political sponsorship and corporate lobbying are in the United States.

Even if they began to falsely report their profits, Enron was still not satisfied, and they felt that making money was too slow!

My own Enron company, how many natural gas contracts can I sign, and how much profit can I falsely report?

If you can control the natural gas transactions in the United States, won't you earn dozens of times!

So Enron began to act as a middleman for natural gas, but the middleman earned more than just the difference.

As a natural gas intermediary, Enron also used its own mark-to-market method in natural gas transactions.

Investors flocked to see Enron's strong profitability. Chase, Goldman Sachs, Citigroup, Deutsche Bank, etc., almost all investment banks held Enron's stocks and bonds on a large scale.

Many Americans regard Enron as a capital-guaranteed financial product, and put their wages and pensions into Enron stocks.

However, Enron is a listed company after all, and its financial reports must be published regularly, and falsely reported profits can easily be detected in the accounts.

So Enron used another trick, they used the means of special purpose entities (SPE).

A special purpose entity is a legal entity established for a special purpose. It is a financial service business that emerged in the United States in the 1970s and 1980s. Its purpose is mainly to isolate financial risks in financing.

To put it simply, it is to set up a separate company, spin off one of its assets, and then use the company's assets to issue bonds, thereby butterfly financing. This is similar to the principle of corporate spin-off and listing.

In this way, the threshold for corporate financing can be greatly lowered, and risks can be better managed. Therefore, in the financial field, special purpose entities are called the greatest financial innovation of the twentieth century.

When a company uses a special purpose entity, it strips off its assets to facilitate financing.

Enron, on the other hand, did the opposite. They spun off the debt so that the special purpose entity could be independent of the original company's financial report. Therefore, Enron's financial report is always very beautiful, and investors have always been full of confidence in Enron.

This also includes the help of Arthur Andersen Accounting Firm.

As one of the top five accounting firms in the United States, Arthur Andersen has been serving Enron. Without the help of Arthur Andersen, Enron would not be able to have such an excellent profit.

All of the above are related to Enron's financial fraud. In addition, investment power, blind expansion, management corruption, etc., are also the reasons for Enron's collapse.

In the final analysis, there are still two words, that is greed!

...

Two days later, Situjian brought Li Weidong to the State Planning Commission, the predecessor of the National Development and Reform Commission.

Director Wang, who we are going to see in a while, is the leader of the leading group of the Engineering Construction Committee, Situjian said.

Li Weidong nodded, he had also heard the name of Director Wang.

Director Wang is a master of mechanical engineering, a senior engineer, and a typical technical officer. In the future, he will serve as a deputy in the National Development and Reform Commission and be in charge of energy-related matters.

It is actually quite pleasant for such a technical official to report to work, because people can understand what you say, and it is easier to communicate.

Director Wang didn't have so much time to read the information in detail, so Li Weidong explained it from the side.

After listening to Li Weidong's introduction, Director Wang asked, Chairman Li, according to what you said, will Enron's stocks and bonds be thundered?

It's not just a thunderstorm, the entire Enron company may go bankrupt! Li Weidong replied.

Director Wang took a deep breath, and his expression suddenly became solemn. If others said that, Director Wang might sneer, but when Li Weidong said that, it would be completely different.

Director Wang knew that Li Weidong had predicted the Asian financial crisis and the Japanese economic bubble, so he still believed in Li Weidong's prediction somewhat.

If Enron really goes bankrupt, then Huafu Gas will not be able to continue to receive technical support from Enron. At that time, the part of the project that Huafu Gas is responsible for will also be suspended, and the construction of the entire West-East Gas Pipeline will be suspended. will be affected.

After pondering for a while, Director Wang said, Chairman Li, your analysis is indeed justified, but after all, this is just an analysis. What I need is some more solid evidence.

For such a large-scale project at the national strategic level, it is obvious that a decision cannot be made based on a piece of analysis that seems to be well-founded.

Li Weidong replied: In the United States, I have already asked a financial reporter to conduct an investigation. It is estimated that the results will be available in half a month. Before that, I hope to delay the signing of the contract with Huafu Gas as much as possible to avoid major incidents. Loss.

It seems that Chairman Li is on the shore of the United States, and he is quite well connected. He can actually investigate a big company like Enron. Director Wang said with a smile.

Li Weidong knew that Director Wang was trying to talk, and he had to explain it clearly.

So Li Weidong said, A big company like Enron originally had many eyes staring at it, and there are countless reporters who wanted to dig Enron's black material and become famous.

Moreover, Enron has many competitors, and they all hope that Enron will collapse, and they will also send people to investigate the situation of Enron secretly.

So I don't need to hire a special person, I just need to reveal the direction of the investigation to those financial reporters, and give them some sponsorship fees by the way, so that they can verify the data.

So it is! Director Wang nodded: But it may be difficult for half a month. I still have to ensure the progress of the project, so I can buy you a week at most.

That's okay! Li Weidong paused, then continued; Anyway, before the official start of construction, some measurement and calculation work is still needed. As long as the construction has not started, everything will be in time.

...

Huafu Gas, general manager Lin Mancang is sitting in the office, waiting for news.

Finally, the phone rang, and Lin Mancang picked up the phone: Did you find it? Why do you delay signing the contract for a week at the Engineering Construction Leadership Office?

The reason given by the Engineering Construction Office is that there are still some procedures to go through, but this is only a nominal reason. In fact, someone came to lobby. The phone answered.

Who is it? Lin Mancang asked.

Li Weidong, chairman of Puppy Electric, the other party replied.

Li Weidong? What does this have to do with him? Puppies Electric doesn't do natural gas business. Also, as a private owner, how can he have such a big face, and even the engineering and construction office will listen to him? Lin Mancang was puzzled. 's question.

It is said that Li Weidong has successfully predicted the Japanese economic bubble and the Asian financial crisis before, and has personally reported this work to the leaders. Therefore, the Engineering Construction Office will seriously consider Li Weidong's suggestion. The other party said replied.

But I didn't offend this Li Weidong! Why did he bother us? Lin Mancang said inexplicably.

I think it's because of Huanghai Petrochemical. Huanghai Petrochemical has been supplying raw materials to Puppy Electric, and they have been working together for almost ten years! This time Huanghai Petrochemical failed to win this project. Li Weidong should be helping Huanghai. Petrochemical shot. The other party replied.

Humph! They couldn't get this project at Huanghai Petrochemical because of their backward technology! They didn't hurry to improve their skills if they weren't as good as others. Instead, they used sly tricks behind the scenes.

Lin Mancang snorted coldly, and then asked, Do you know what slander Li Weidong has made with the Engineering Construction Office?

Li Weidong said that there is a problem with Enron's financial report. They are likely to experience thunderstorms and even close down. At that time, there will be no way to provide us with technical support, and the project we are responsible for cannot continue. The phone answered. .

Enron will go bankrupt? Hahaha, what are you kidding? It's a Fortune 500 company, the world's largest natural gas company! How could it go bankrupt! The engineering and construction office would even believe this kind of deceitful nonsense! Lin Mancang gasped Hum said.

The main reason is that Li Weidong's previous predictions were too accurate. The phone answered.

Then you can't rely on predictions to make decisions! If predictions work, then just find a fortune-telling belt to build a natural gas pipeline! I really don't ask people to ask ghosts and gods! Lin Mancang said angrily.

Mr. Lin, what should we do? Are we going to wait a week? The phone asked.

This time I have an excuse to delay for a week, next time I have an excuse to delay for two weeks, and maybe it will be a month later! Lin Mancang took a deep breath and continued; I am reporting to the group now and let me The group helps us put pressure on us!

...

Huanghai Petrochemical and Song Jinlong are holding a meeting of the decision-making level again.

Song Dong, this Li Weidong is really unreliable. He also said that he can help us get the project back. What's the result? Today is the day when Huafu Gas signed a contract!

Yeah, back then, the bull was bragging so much, and the Enron Company was forced to close down, as if it were omnipotent! Now, nothing has been done!

Dong Song, we shouldn't have trusted this Li Weidong at that time. These private enterprises, nine out of ten cheat!

That Li Weidong still wants our New Oriental Motor. Now he probably doesn't have the face to contact us! If I were that Li Weidong, I would like to find a crack to get in.

Song Jinlong's face was also embarrassing. After all, he was the first person to believe in Li Weidong. Although his subordinates were saying that Li Weidong was wrong, they were also mocking Song Jinlong in disguise. Song Jinlong also felt ashamed.

At this moment, the secretary came in, leaned into Song Jinlong's ear, and said, Dong Song, Li Weidong from Puppy Electric is calling.

Li Weidong still has the face to call? Song Jinlong looked unhappy, and then said, If you don't answer, just say I'm in a meeting. I'm very busy now.

I guess he wants to apologize! Song Dong, I think it's better to give people a chance to apologize! The eldest old Du next to him said with a slightly gloating expression.

Lao Du is relying on the old to sell the old, and he made it clear that he wanted to see a joke.

This is both Li Weidong's joke and Song Jinlong's joke!

Song Jinlong was suddenly unable to get off the stage, so he said, Put the phone in the conference room, and turn on the speakerphone. I want to see what that Li Weidong has to say!

Soon, the call was picked up, and the speakerphone was turned on, and everyone in the conference room could hear it.

Li Weidong's voice rang from the phone: Chairman Song, have you read the latest issue of Fortune?

What Fortune magazine? Song Jinlong asked subconsciously.

Fortune magazine in the United States is the most famous financial magazine in the world. The Fortune 500 is the magazine that runs the Fortune 500. Li Weidong explained.

I didn't see it. Song Jinlong continued coldly: We are not the world's top 500, what do we do with that thing!

But Enron is one of the top 500 companies in the world! Li Weidong laughed and continued, Dong Song, quickly find a copy of the latest Fortune magazine. There is an article on Enron. I read it. You'll know later, I've been doing things these days!

...

The parent company of Huafu Gas is Huafu Group, which is one of the top state-owned holding companies in China.

Lin Mancang asked Huafu Group for help, Huafu Group decisively helped, and the Engineering Construction Office could only complete the contract with Huafu Gas.

At the scene of the signing ceremony, the contract was already in front of him, and the only thing left to do was to sign it.

Lin Mancang proudly took the pen from his subordinates, signed his name on the contract, and then stamped his official seal on it.

Immediately afterwards, he handed the contract to Director Wang, who then signed and sealed it.

The moment Director Wang picked up the pen, a secretary from the Engineering Construction Office hurried in.

However, another staff member stopped the secretary: Director Wang is signing a contract. I'll talk about it later!

No, after all, this matter will be reported to Director Wang immediately! The secretary pointed to the Fortune magazine on his hand, and then said, There is an accident at Enron Corporation in the United States!