How to Explain Enron to Your Children

[Kirk Reiser]

Feudalism -  You have two cows.  Your lord takes some of the milk.

Fascism -   You have two cows. The government takes both, hires you to take
care of them, and sells you the milk.

Communism - You have two cows.  Your neighbors help take care of them and
you share the milk.

Totalitarianism - You have two cows.  The government takes them both and
denies they ever existed and drafts you into the army.  Milk is banned.

Capitalism - You have two cows.  You sell one and buy a bull.  Your herd
multiplies, and the economy grows.   You sell them and retire on the income.

Enron Venture Capitalism -   You have two cows. You sell three of them to
your publicly listed company, using letters of credit opened by your
brother-in-law at the bank, then execute a debt/equity swap with an
associated general offer so that you get all four cows back, with a tax
exemption for five cows.  The milk rights of  the six cows are transferred
via an intermediary to a Cayman Island company secretly owned by the
majority shareholder who sells the rights  to all seven cows back to your
listed company.  The annual report says the company owns eight cows, with an
option on one more.