explaining Enron to kids
http://www.businessweek.com/magazine/content/06_24/b3988061.htm
The Lion, The Witch, And The Sale-Leaseback
How would you explain Enron to kids? We asked Jeff Sonnenfeld and
Bruce McCall
With the convictions of former Enron Corp. executives Kenneth L. Lay
and Jeffrey K. Skilling on May 24, the government closed the books on
one of the biggest financial scandals in U.S. history. But compared
with the Teapot Dome scandal of 1922, which was a straightforward
case of bribery, or the Hunt brothers’ attempt to corner the silver
market in 1980, Enron’s schemes were so convoluted that it’s a
challenge to describe them in simple language a child could
understand. How would you explain Lay’s and Skilling’s crimes to your
child? BusinessWeek asked two commentators to try. Here are their
stories:
JEFFREY A. SONNENFELD
Senior Associate Dean for Executive Programs at the Yale School of
Management
Once upon a time in the land of Enron, there was a king named Ken –
well, actually, he wasn’t a king, but he thought he was. He had a
friend, at least we think he was a friend, who was a prince named
Jeff. King Ken and Prince Jeff ruled over the land of Enron. In this
land they made…well, they made money for themselves. What else did
they make? Not much else.
However, this isn’t what they told the people of the land of Enron.
They told the people that they were making lots of electricity and
other invisible stuff. We don’t know how to make electricity and
other invisible stuff, and neither did they.
For a long time, everybody was very happy. King Ken and Prince Jeff
got very, very rich from other people’s money. The people wanted to
get rich, too, so they gave the gold they saved from their allowances
to King Ken and Prince Jeff. All of it. King Ken and Prince Jeff
promised they could turn little piles of gold into gigantic piles of
gold by selling invisible stuff to faraway islands.
Actually, shhhh: You know what they were really doing with the gold?
King Ken and Prince Jeff really used the gold to buy lots and lots of
toys — just for themselves! In fact, no one bought invisible stuff
in those faraway islands. Those faraway islands were really still
part of the land of Enron where no one lived. They told some of their
friends the secret. Then the friends also pretended to sell invisible
stuff for more gold. Some of the friends were famous people who told
other people to give their allowances to King Ken and Prince Jeff.
But then one day, Count Andrew, one of the friends, who was not
really a friend at all, told the secret to all the people. The people
were very sad. They wanted their gold allowances back, but it was too
late. It was all gone. The people cried and cried. The emperor asked
what happened. When the people told the emperor, he said King Ken is
not really a king and Prince Jeff is not really a prince. The emperor
made Ken and Jeff stand in his court, and in front of all the people
he told them they were very naughty. He sent them to the dungeon for
a long, long time.
And that is the story of the land of Enron. The lesson is that you
should not trust someone who pretends to be a king and promises he
can invisibly turn little piles of gold into gigantic piles of gold
using hocus-pocus, imaginary islands, and famous friends.
BRUCE McCALL Humorist, The New Yorker
Well, kids, amazingly enough, Enron worked just like the pie-baking
bee for the local charity bazaar. Jill bakes four pies, while another
Jill, who doesn’t actually exist, bakes 24 pies.
Once the first Jill’s four pies are delivered to the bazaar (minus
the two she “lost” on the way), the nonexistent Jill’s “mom” records
24 pies as delivered, buys them all back using a check drawn on a
fictitious account, then demands 24 full cash refunds because they
“taste funny.” Flustered, the nice bazaar ladies cough it up. With
each pie priced at $5, that’s $120 net, or a clear profit of $100.
The real Jill and her “mom” use the $100 to hire a hooligan to
“accidentally” knock Jill down with his car at a crosswalk on the way
home from the bazaar. They split the $15,000 insurance settlement
three ways and head for Vegas.
Your dad may have been that hooligan in the car, but I can’t
remember. So you see, the “mystery” about Enron is really no mystery
at all!
P.S. If anybody comes snooping around, I know you’ll know how to
handle it.
Love, Dad