Word: enronization
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Their passion is modern art, and they donated $25,000 to the Menil Collection, one of the city's contemporary-art museums. They were accumulating edgy contemporary art--not just for themselves but also for Enron's new 40-story Cesar Pelli skyscraper. Lea took charge of the firm's art purchases, which included sculptures by Claes Oldenburg and Martin Puryear. The Fastows had plans to be big givers; they channeled $4.5 million, reaped from a $25,000 investment in one of his deals, to the Fastow Family Foundation...
There is nothing inherently sinister about special-purpose entities, and Enron's initial investors did well because the deals were straightforward. CalPERS, the California state pension system and one of the nation's largest institutional investors, put $250 million into an spe called jedi i, which invested in natural gas projects. CalPERS got back $433 million, a spiffy 73% return over four years...
...Fastow and his investors got spe-deep in trouble. As the volume of deals increased to meet Skilling's aggressive growth targets, the returns got thinner and thinner, and the hard assets behind the first partnerships were later supplanted by stock or guarantees from Enron...
Fastow worked hard to enrich himself and others who could be of use to him. One was Enron lawyer Kristina Mordaunt, who in March 2000 was invited into a Fastow venture called Southampton Place. She put down $5,800, expecting to make a little money over time, her lawyer Hayden Burns tells TIME. Only a few weeks later, she got a call from Michael Kopper, a Fastow associate, who said the deal was winding down. When Mordaunt opened her bank statement in April, she saw a deposit for $1 million. The Powers report of Enron's special directors committee suggests...
...natural gas projects had been replaced by unspecified energy projects. CalPERS pulled out of jedi ii in October 2000 to invest in something simpler and more transparent, and Fastow scrambled to set up an entity to take its place. Known as Chewco, it was a partnership controlled by Enron employees, including Kopper. According to the Powers report, Chewco and similar partnerships were engaged in shuffling assets to cover losses and create illusory profits. As a result, Enron overstated earnings by $1 billion from the third quarter of 2000 through the third quarter...