Enron innocent?
Posted on January 26, 2007 by Richard Beddard
Filed Under Investing |
There’s a tumultuous row about Enron on Malcolm Gladwell’s blog. Mr Gladwell, the author of The Tipping Point, is one of my favourite writers. I don’t know about his grasp of accounting. In an article he wrote for the New Yorker earlier this month, he argued that Enron disclosed the Special Purpose Entities in which it tucked away its debt, and that it laid out its parlous financial state in its annual reports. Investers were not blind-sided by ‘transmitter error’ (Enron hiding the facts), but ‘receiver error’ (investors not analysing them correctly).
Having read the article, and as many of the comments as I could before security arrived to lock up the office, I think the truth, as usual, lies somewhere in between. If you’re tempted to follow the trail of hyperlinks I’ve just left, here are a couple more to help you decide:
- Enron’s annual report (2000)
- The exception that proves the rule: a ’sell’ note written by students at Cornell University in 1998, two years before Enron’s share price peaked. The students said Enron was taking more risks than its peers and might have been manipulating its earnings.
If, like me, you’ve been avoiding Enron for fear that studying its complexities might not leave you any the wiser, I suggest you put an hour aside one evening, sit down with a cup of tea and a packet of Hob Nobs, and work your way through that lot. 
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