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QUESTIONS ABOUT ENRON'S FINANCIAL BOOKS NOT NEW

How hard the mighty fall.

Enron Corp., once the darling in a new generation of energy companies, has not just crashed to the ground. It has bored a legal hole the depth of which no one yet knows.

The descent began with sour investments in a power plant in India, in a water business that didn't materialize, in a broadband market much smaller than what Enron and others expected.

Last month, the descent steepened into a plunge. Poor quarterly financial results brought attention to dealings of questionable propriety by a former financial director. The guy got rich while working for Enron and also serving as managing director of limited partnerships Enron had set up to lay off the risks of new businesses.

The Securities and Exchange Commission is investigating. And Enron's own investigation disclosed that the company had overstated earnings over 4 years by $600 million.

Things have unraveled fast since then. The stock price plummeted. Credit ratings followed.

Former rival Dynegy has moved in to take over the battered company for $9 billion in stock and assumption of $13 billion in debt.

Enron, meanwhile, has uncovered further accounting errors necessitating restatement of earnings for the first and third quarters of this year. And collapse of its credit ratings is forcing it to pay off debts before it expected to have to do so.

The pain radiates. Enron's auditing firm, Anderson, now draws fire. At least one Enron shareholder has sued. And Rep. John Dingell (D-Mich.) has requested an investigation of Anderson's audits of Enron and another Houston company.

It's a messy legal situation. And it's getting messier every week.

There's blame all around. There can be no question that oversight at some level failed.

But something in all this needs to be remembered. It's something that says much about a suddenly changed mood of the investment markets.

That Enron operated with mystifying financial books is nothing new. People in the oil and gas industry have murmured for years that assessing Enron's financial health has been next to impossible. Too many of its ventures occur off the books. There are too many purchases, sales, repurchases, complex equity arrangements.

Enron's recent restatements strongly indicate that even company managers didn't know what was going on.

Yet investors loved Enron while it was innovating and while they were in the mood for innovation.

Prudent investors check a company's financial accounts before risking money with it. Knowledgeable investors know fog when they see it.

Investors could have steered clear of Enron's mists, which have been there all along.

But many of them didn't. They liked the risk-taking. They liked the penchant for new business. They liked Enron.

Now, flash and innovation are out of favor, gone the way of dot-com exuberance. Now, the murkiness of Enron's books matters to investors.

It should matter. But it should have mattered before. It was certainly no secret.

Enron's investors have reason to gripe. They just shouldn't pretend that questions about Enron's bookkeeping arose only a month or even a year ago. They didn't. They've been around a long time.


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