Enron's Business Risks Is When They Entered Into A Number Of Aggressive Transactions

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Enron’s business risks is when they entered into a number of aggressive transactions involving “special purpose entities” SPEs. The underlying account was questionable and/or fraudulent. Some of the transactions essentially involved Enron receiving borrowed funds without recording the liabilities on the company’s balance sheet. Instead, the inflow of funds were made to look like it came from the sale of assets. This risk made the liabilities on the financial misleading to investors and customers because it made Enron look like they were making more than what they actually were making in profit. SPEs are separate legal entities set up to accomplish specific company objective. They become a synonymous with Enron’s collapse because these entities were at the center of Enron’s aggressive accounting methods. SPEs were used by Enron to sell off assets. The SPE would pay for the contributed assets through a new debt or equity issuance. SPEs can serve as a legitimate business purpose, it is apparent the Enron used a large network of SPEs, with complicated speculations and hedges all conceal in heavy legal language to keep an massive amount of debt off the company’s balance sheet. Enron had hundreds of SPEs. Three of the Enron’s SPEs were made prominent throughout the legal process. Chewco, LJM2, and Whitewing. Chewco was established in 1997 by Enron executives in connection with a complicated investment in another Enron partnership with interest in natural gas pipelines. The LJM2

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