Reborn Industrial Tycoon

Chapter 630 Enron incident

The so-called information written by Li Weidong is still some hindsight analysis about Enron.

The post-event summary is naturally much more accurate and more reasonable than the pre-prediction. So when Situ Jian saw the information provided by Li Weidong, he immediately believed 50% of it.

In addition, Li Weidong once accurately predicted Japan's economic bubble and the Asian financial crisis. He even predicted the entire incident accurately. This made Situ Jian believe Li Weidong's prediction six times.

Seventy percent.

As a top economist, being able to believe 60-70% is almost equivalent to trusting Li Weidong's judgment.

In 2001, the "911 Incident" occurred in the United States that shocked the world and directly changed the world structure.

What Americans didn't expect was that more than a month after the "911" incident, the Enron Company's accounting fraud scandal broke out.

At that time, Enron was one of the top ten companies in the United States and the largest natural gas company in the world. With Enron’s size and status, this was undoubtedly the 911 incident in the economic world for the United States, and the collapse of Enron also

Changed the world's energy landscape.

Moreover, after Enron's problems were exposed, it filed for bankruptcy in just twenty-five days, which is also very rare.

The larger the company, the stronger its ability to resist risks. Enron ranked among the top ten in the United States and among the top 20 in the Fortune Global 500, but it only lasted a short twenty-five days!

Many Japanese companies that are not as large as Enron have also experienced various fraud scandals. Some of them falsified production data, and some, like Enron, falsified business data. But under normal circumstances, as long as they bow to apologize and say "Simi Marseille", it will be enough.

It's okay, only a handful of them have actually gone bankrupt.

Some internationally renowned large companies have experienced serious debt crises, but they can survive by tightening their belts to increase revenue and cutting expenditures, or gritting their teeth and selling off some assets, and they will never go bankrupt like Enron.

When some top large companies encounter a crisis, the government will step in to help restructure their assets or provide funds to partially nationalize them to save the company.

There are precedents for these, including in the United States. For example, the U.S. government sold to rescue General Motors, rescued Citibank, and rescued Freddie Mac and Fannie Mae, all of which included some nationalization methods.

However, Enron did not apologize to settle the matter, did not tighten its belt to increase revenue and reduce expenditure, and did not receive help from the government, so it went bankrupt. For a company of such a large scale, it is absolutely incredible.

Therefore, there have always been some conspiracy theories about Enron's bankruptcy, believing that someone deliberately allowed Enron to go bankrupt.

The reason why Enron, a company of such a large scale, went bankrupt was not just one reason, but a combination of many bad factors, which ultimately led to Enron's bankruptcy.

Rome was not built in a day, and these bad factors were not built in a day or two. Instead, after decades of fermentation, small ailments accumulated and eventually turned into serious illnesses that were ultimately incurable.

There were two oil crises in the 1970s. One was the Fourth Middle East War in 1973. Although the United States did not directly participate this time and even sold a wave of weapons, the oil crisis that broke out caused American industrial production to drop by 14%.

%

The second time was the political coup in Iran in 1978. This time the United States was a direct participant, which caused greater harm to American industrial production.

Therefore, throughout the 1970s, the United States implemented energy price controls in order to ensure stable industrial operations.

In the 1980s, the United States deregulated energy prices, and then energy prices in the United States began to be adjusted according to the market, which prompted energy companies to compete with each other.

Immediately afterwards, this competition led to mergers and reorganizations among enterprises. It was also during this period that Enron transformed from a company that laid natural gas pipelines to a real energy company.

However, for Americans, it is easier to make money by doing business than by playing finance.

When producing natural gas, how can one make money by doing natural gas hedging transactions?

So "Enron Capital" was established, and soon replaced "Enron Natural Gas" and became Enron's most important industry. This was also the first step on Enron's path to bankruptcy.

In order to be able to thrive in the financial market, more investors, Enron CEO Kenneth, spent a lot of effort to persuade the U.S. Securities Commission to agree to Enron's implementation of "mark-to-market pricing."

Natural gas is not easy to store for a long time, so natural gas is basically extracted and sold now, and everyone uses fresh natural gas.

If you go to a restaurant to eat, there may be Lafite made in 1982, ham made in 1982, and a cook made in 1982, but you will never use 82-year-old natural gas for cooking, because natural gas cannot be stored for that long.

The more difficult it is to store a commodity, the more unstable its price will be. Products that cannot be stored mean that the price changes every day. Therefore, as a commodity, natural gas can only be priced in real time and cannot be priced on a market basis.

The same is true for natural gas contracts signed internationally. When the contract is signed, the price is only an estimate, but when the contract is completed, the price must be calculated in real time. At most, it is to set an upper and lower limit for a transaction amount.

There is a futures market for commodities, such as oil trading. The contract price is 100 US dollars per barrel, but later the international market price dropped to 30 US dollars per barrel, but I still bought it according to the contract price of 100 US dollars per barrel. This is absolutely not true.

possible.

Let’s not talk about the loss aspect. If you dare to trade like this, the futures market will be in chaos first. OPEC dares to chop you with a knife!

Unless there are some special circumstances, such as international sanctions, financial sanctions, etc. that hinder the seller's transaction, or some local currency exchange agreements are implemented, transactions like this that are outside the normal international system can buy bulk items at relatively low prices.

, otherwise in normal international transactions, it would be difficult to buy products that are very different from real-time pricing.

Enron adopted market pricing for natural gas, which obviously violated the educational principles of natural gas.

This means that Enron can record transaction profits completed in the next few years based on its estimated transaction volume in one day.

In other words, Enron could settle the unfinished transactions in the contract when natural gas prices were relatively high, and more profits would appear on the books, but in fact it did not make so much money.

.

This is just like if you make one thousand a day, it doesn't mean you make thirty thousand a month, nor does it mean you make three hundred and sixty thousand a year. But if you just use the day when you make the most money to calculate your annual income, the data is definitely not true.

.

Enron used this method to falsely report profits, causing investors to pour in. Enron also took a more tenacious step on the road to bankruptcy.

Letting a natural gas company mark its prices to market is a crazy policy in itself.

There are top-notch economists on the U.S. Securities and Exchange Commission, and there is no shortage of economic advisers around U.S. congressmen. It is impossible for them not to see the impact this policy will have.

However, no one from Congress to the Securities Commission stopped this crazy move, which shows how powerful political funding and corporate lobbying are in the United States.

Even after they began to falsely report profits, Enron was still not satisfied. They still felt that making money was too slow!

As an Enron company, how many natural gas contracts can I sign and how much profit can I falsely report?

If we could control the natural gas trading in the United States, wouldn't our profits be doubled dozens of times!

So Enron started to act as a natural gas middleman, but the middleman made more than just the price difference.

Enron, as a natural gas intermediary, also used its own "mark-to-market" method in natural gas transactions. This was tantamount to borrowing money to lay eggs, and the falsely reported profits increased exponentially.

Seeing Enron's strong profitability, investors also flocked to it. Chase, Goldman Sachs, Citigroup, Deutsche Bank, etc., almost all investment banks, held Enron's stocks and bonds on a large scale.

Many Americans regard Enron as a capital-guaranteed financial product and invest all their wages and retirement funds in Enron stocks.

However, Enron is a listed company after all, and its financial reports must be made public on a regular basis. False profits can easily be detected in the accounts.

So Enron used another trick, they used special purpose entities (SPE).

A special purpose entity is a legal entity established for a special purpose. It is a financial services business that emerged in the United States in the 1970s and 1980s. Its purpose is mainly to isolate financial risks in financing.

To put it simply, it means to set up a separate company, divest one of its assets, and then use the company's assets as collateral to issue bonds to obtain butterfly financing. This is similar to the principle of a company's spin-off and listing.

This method greatly lowers the threshold for corporate financing and can better control risks. Therefore, in the financial field, special purpose entities are called the greatest financial innovation of the twentieth century.

When companies use special purpose entities, they divest assets to facilitate financing.

Enron, on the other hand, did the opposite. They stripped off debt so that the special purpose entity could be independent of the original company's financial reports. Therefore, Enron's financial reports are always very beautiful, and investors have always been full of confidence in Enron.

confidence.

The help of Arthur Andersen Accounting Firm is also indispensable.

As one of the five largest accounting firms in the United States, Andersen has been serving Enron. Without Andersen's help, Enron would not have had such outstanding "profits."

The above are all related to Enron's financial fraud. In addition, investment power, blind expansion, management corruption, etc. are also the reasons for Enron's collapse.

In the final analysis, there are still two words, that is "greed"!

…

Two days later, Situ Jian took Li Weidong to the National Planning Commission, the predecessor of the National Development and Reform Commission.

"The Director Wang we are going to meet later is the leader of the leading group of the Engineering Construction Committee." Situ Jian introduced.

Li Weidong nodded. He had also heard of Director Wang's name.

Director Wang is a master of mechanical engineering, a senior engineer, and a typical technical official. In the future, he will serve as deputy at the National Development and Reform Commission and be in charge of energy-related matters.

Reporting work for technical officials like this is actually a relatively pleasant thing, because others can understand what you say, and it is easier to communicate.

Director Wang didn't have much time to read the information in detail, so Li Weidong started explaining from the side.

After listening to Li Weidong's introduction, Director Wang asked: "Chairman Li, according to you, will Enron's stocks and bonds be subject to thunder?"

"It's not just a thunderstorm, the entire Enron company may go bankrupt!" Li Weidong replied.

Director Wang took a deep breath, and his expression suddenly became solemn. If others had said this, Director Wang might have scoffed, but when Li Weidong said this, it was completely different.

Director Wang knows that Li Weidong once predicted the Asian financial crisis and the Japanese economic bubble, so he still believes in Li Weidong's predictions.

If Enron Company really goes bankrupt, then Huafu Gas will no longer be able to receive technical support from Enron Company. By then, the part of the project that Huafu Gas is responsible for will also be suspended, and the construction of the entire West-East Gas Transmission Project will be suspended.

will all be affected.

After pondering for a moment, Director Wang said: "Chairman Li, your analysis is indeed reasonable, but it is just analysis after all. What I need is some more solid evidence."

For such a large-scale project at the national strategic level, it is obvious that decisions cannot be made based on a seemingly well-founded analysis.

Li Weidong replied: "Over in the United States, I have asked financial reporters to conduct an investigation. It is estimated that the results will be available in half a month. Before that, I hope to delay the signing of the contract with Huafu Gas as much as possible to avoid major consequences.

losses."

"It seems that Chairman Li has quite a lot of connections on the shores of the United States, and he is actually able to investigate a large company like Enron." Director Wang said with a smile.

Li Weidong knew that Director Wang was testing the waters and he had to explain clearly.

So Li Weidong said: "A large company like Enron has many eyes staring at it, and there are countless reporters who want to dig up dirt on Enron and become famous.

Moreover, Enron had many competitors, and they all wanted Enron to collapse. They would also send people to secretly investigate Enron's situation.

So I don’t need to hire anyone, I just need to disclose the direction of the investigation to those financial reporters and give them some sponsorship money so that they can verify the data.”

"That's it!" Director Wang nodded: "I'm afraid it will be difficult in just half a month. I still have to ensure the progress of the project, so I can buy you a week at most."

"That's okay!" Li Weidong paused and then said, "Anyway, some measurement and calculation work is still needed before the official start of construction. As long as the construction has not started, everything will be in time."

…

Huafu Gas, general manager Lin Mancang is sitting in the office, waiting for news.

Finally, the phone rang, and Lin Mancang answered the call: "Have you found it? Why did the engineering construction leadership office delay signing the contract for a week?"

"The reason given by the Engineering and Construction Office is that there are still some procedures to go through, but this is only a nominal reason. In fact, someone came to lobby." He answered on the phone.

"Who is it?" Lin Mancang asked.

"Li Weidong, chairman of Puppy Electric." The other party replied.

"Li Weidong? What does this matter have to do with him? Puppy Electric is not in the natural gas business. Also, how can he, a private owner, have such a great reputation that even the engineering construction office will listen to him?" Lin Mancang was puzzled.

question.

"It is said that it is because Li Weidong has successfully predicted the Japanese economic bubble and the Asian financial crisis before, and also personally reported this work to the leaders. Therefore, the Engineering Construction Office will seriously consider Li Weidong's suggestions." The other party said.

replied.

"But I haven't offended this Li Weidong! Why does he want to cause trouble for us?" Lin Mancang said puzzled.

"I think it's because of Huanghai Petrochemical. Huanghai Petrochemical has been supplying raw materials to Puppy Electric. The cooperation between them must have been almost ten years! This time Huanghai Petrochemical failed to win this project. Li Weidong should have helped Huanghai

Petrified." The other party replied.

"Hmph! Their Huanghai Petrochemicals couldn't get this project because their technology is behind the times! They're not as good as others and they didn't improve immediately. Instead, they resorted to dirty tricks behind the scenes. It's so mean!"

Lin Mancang snorted coldly, and then asked: "Do you know what slanders Li Weidong and the Engineering Construction Office have made?"

"Li Weidong said that there is a problem with Enron's financial report. They are likely to have a thunderstorm or even go bankrupt. At that time, they will no longer be able to provide us with technical support, and the projects we are responsible for will not be able to continue." He answered on the phone.

.

"Enron will go bankrupt? Hahaha, are you kidding me? They are Fortune 500 companies and the world's largest natural gas company! How could it possibly go bankrupt! Even the Engineering Construction Office would believe such deceptive lies!" Lin Mancang was furious.

He said with a hum.

"The main reason is that Li Weidong's previous predictions were too accurate." He replied on the phone.

"Then we can't rely on predictions to make decisions! If predictions work, then just find a fortune teller to build a natural gas pipeline! You really don't ask the people or ghosts and gods!" Lin Mancang said angrily.

"Mr. Lin, what should we do? Do we have to wait a week?" he asked on the phone.

"This time I have an excuse to delay for a week, next time I will have an excuse to delay for two weeks, and maybe it will be delayed for a month in the future!" Lin Mancang took a deep breath and continued, "I will report to the group now, so that

The group helps us put pressure!"

…

Huanghai Petrochemical, Song Jinlong is holding a decision-making meeting again.

"Director Song, this Li Weidong is really unreliable. He even said he could help us get the project back. What happened? Today is the day when Huafu Gas signs the contract!"

"Yes, you boasted so much back then that you even wanted to shut down Enron, making it seem like you were omnipotent! But now you can't even accomplish anything!"

"Director Song, we shouldn't have trusted this Li Weidong at that time. These private companies, nine out of ten are scammers!"

"That Li Weidong still wants our New Oriental Motor, but now he probably doesn't have the nerve to contact us! If I were that Li Weidong, I would really like to find a crack in the ground and crawl into it."

Song Jinlong also looked embarrassed. After all, he was the first person to believe in Li Weidong. Now, although his subordinates are talking about Li Weidong, they are also mocking Song Jinlong in disguise. Song Jinlong also feels very embarrassed.

At this moment, the secretary walked in, leaned into Song Jinlong's ear, and said, "Director Song, Li Weidong from Puppy Electrical Appliances called."

"Li Weidong still has the nerve to call?" Song Jinlong looked unhappy, and then said: "If you don't answer, just say I'm in a meeting and I'm very busy now."

"I guess he wants to apologize! Director Song, I think it's better to give him a chance to apologize!" Old Du, the eldest man next to him, said while showing a little gloating expression.

Lao Du is relying on his elders to sell his elders, and he makes it clear that he wants to see a joke.

This is both Li Weidong’s joke and Song Jinlong’s joke!

Song Jinlong suddenly couldn't get off the stage, so he said: "Put the phone into the conference room and put it on speakerphone. I want to see what Li Weidong has to say!"

Soon, the call was picked up and the speakerphone was turned on so that everyone in the conference room could hear it.

Li Weidong's voice rang from the phone: "Chairman Song, have you read the latest issue of Fortune magazine?"

"What Fortune magazine?" Song Jinlong asked subconsciously.

"It's the Fortune magazine in the United States. It is the most famous financial magazine in the world. It is this magazine that produces the Fortune 500." Li Weidong explained.

"I didn't look at it." Song Jinlong continued coldly: "We are not the top 500 in the world, let's see what that thing does!"

"But Enron is one of the top 500 companies in the world!" Li Weidong chuckled and continued, "Director Song, please quickly find the latest Fortune magazine and take a look. There is an article about Enron. Read it.

You will know later that I have been doing something these days!"

…

The parent company of Huafu Gas is Huafu Group, one of the top state-owned holding companies in China.

Lin Mancang asked Huafu Group for help. Huafu Group decisively came to help, and the Engineering Construction Office could only complete the contract with Huafu Gas.

At the signing ceremony, the contract was already in front of me, all I had to do was sign it.

Lin Mancang took the signature pen from his subordinates with a proud look on his face, signed his name on the contract, and then stamped his official seal on it.

Immediately afterwards, he handed the contract to Director Wang, and it was Director Wang's turn to sign and seal it.

The moment Director Wang picked up the pen, a secretary from the Engineering Construction Office hurried in.

However, another staff member stopped the secretary: "Director Wang is signing a contract. If you have anything to do, we'll talk about it later!"

"No, after all, report this matter to Director Wang immediately!" The secretary pointed to the Fortune magazine in his hand, and continued: "Something happened to Enron in the United States!"

Today's update is delivered, a 6,000-word chapter. Thank you all parents for subscribing. Please give me a guaranteed monthly ticket.