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Enron transferred to "Raptor I-IV", four LJM-related special purpose entities named after the velociraptors in Jurassic Park, more than "$1.2 billion in assets, including millions of shares of Enron common stock and long-term rights to purchase millions more shares, plus $150 million of Enron notes payable" as disclosed in the company's ...
Special-purpose entities were created to mask significant liabilities from Enron's financial statements. These entities made Enron seem more profitable than it was, and created a dangerous spiral in which, each quarter, corporate officers would have to perform more and more financial deception to create the illusion of billions of dollars in ...
Special-purpose entities were one of the main tools used by executives at Enron, in order to hide losses and fabricate earnings, resulting in the Enron scandal of 2001. They were also used to hide losses and overstate earnings by executives at Towers Financial Corporation , which declared bankruptcy in 1994.
FIN 46, Consolidation of Variable Interest Entities, was an interpretation of United States Generally Accepted Accounting Principles (U.S. GAAP) published on January 17, 2003 by the U.S. Financial Accounting Standards Board (FASB) [1] that made it more difficult to remove assets and liabilities from a company's balance sheet if the company retained an economic exposure to the assets and ...
In 1999, the early days of the Dot-com boom, Enron invested in a Broadband Internet start-up, Rhythms NetConnections.In a desire to hedge this substantial investment (they owned at one point 50% of Rhythms' stock) and several others, Fastow met with Kenneth Lay and Jeffrey Skilling on June 18 to discuss the establishment of an SPE called LJM Cayman L.P. (LJM1) that would perform specific ...
The post-Enron rules of the Financial Accounting Standards Board, which require some measure of independence of a special purpose entity from the operating company, and genuine economic substance to the transaction in which the SPE is a party, made it difficult or impossible to structure a synthetic lease SPE, so synthetic leases have ...
Special purpose entities (SPE): These are legal entities often created as part of the securitization process, to essentially remove certain assets and liabilities from bank balance sheets, theoretically insulating the parent company from credit risk. Like corporations, SPE are required to revalue their mortgage assets based on estimates of ...
Fastow was one of the key figures behind the complex web of off-balance-sheet special purpose entities (limited partnerships which Enron controlled) used to conceal Enron's massive losses in their quarterly balance sheets. By unlawfully maintaining personal stakes in these ostensibly independent ghost-entities, he was able to defraud Enron out ...