Enron - You have two cows. You borrow 80% of the forward value of
the two cows from your bank, then buy another cow with 5% down and
the rest financed by the seller on a note callable if your market
cap goes below $20B at a rate 2 times prime. You now sell three
cows to your publicly listed company, using letters of credit
opened by your brother-in-law at a 2nd 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, this
transaction process is upheld by your independent auditor, and no
Balance Sheet is provided with the press release that announces
that Enron, as a major owner of cows, will begin trading cows via
the Internet site COW (cows on web).
I am sure you now fully understand what happened.
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