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. Last Updated: 07/27/2016

Enron Concedes Assets Overstated By $24Bln

HOUSTON --Enron Corp. said Monday the value of its assets might have been overstated by as much as $24 billion because of accounting errors and the effects of its Chapter 11 bankruptcy filing last December.

The company, which disclosed the information in a filing with the U.S. Securities and Exchange Commission, also said its financial statements going back to 1997 should not be relied upon because of doubts about their accuracy.

Last November, the last time Enron filed a quarterly profit statement, it listed assets of about $62 billion. Now, after one of the largest bankruptcy-protection filings in corporate history and a number of federal investigations into potential financial and accounting fraud at the company, Enron is putting the value of its assets closer to $38 billion. It is also offering further evidence that the way its finances were managed and reported in recent years was questionable or erroneous.

Enron, which is largely under new management, offered few details today about the current value of its assets. Some of the write-down in the value of its assets came about with the Chapter 11 filing, the company said in the filing. But a significant part of the write-down was because of "possible accounting errors or irregularities," it said.

The write-down will almost certainly mean that Enron stockholders, who once held stock valued at about $90 a share, will receive nothing out of the bankruptcy case. Secured debtholders and other creditors have priority, and Enron seems to be worth a little less every day.

Shares of Enron closed at 24 cents in over-the-counter trading today, up half a cent. Enron said in its filing today that the stock was virtually worthless and that shareholders would not receive any interest in the reorganized company.

Bankruptcy and securities law experts said the Enron filing was unusual because the company had abandoned the idea of trying to figure out what happened last year. Enron said today that it did not intend to file any financial statements for 2001 and that the company had not retained an auditor to replace Arthur Andersen. But some bankruptcy experts say companies that file for Chapter 11 often end up with their books in disarray.

"When companies get into financial difficulty, record-keeping is one of the first things to go," said Lynn LoPucki, a professor of law at the University of California at Los Angeles. "Sometimes it's intentional, and sometimes it's just difficult to keep track of things."

In Enron's case, the company that is struggling to emerge from bankruptcy protection under Stephen Cooper, the acting chief executive and a corporate restructuring specialist, is also trying to distance itself from the financial and accounting quagmire that unfolded last year. Enron officials want a new start for a company that would be much smaller and rely on pipelines and utilities.

"We are disclosing what information we know today in an effort to restore financial credibility," said Mark Palmer, an Enron spokesman. "We want to get the issues of the past behind this company as we meet with creditors on a global plan for moving forward."

Enron had intended to restate its financial statements going back to 1997, but the company said today that that was nearly impossible because of the bankruptcy case, a number of lawsuits and a rash of federal investigations.

If such a review was undertaken, though, the company estimated that the value of its assets would have to be sliced by at least $14 billion. Enron also said there could be a write-down of an additional $8 billion to $10 billion related to hedges on its trading activities.

Widespread reports, from federal investigators, former Enron employees and analysts, have said Enron inflated revenue, profit and even assets as it sold investors on a magnificent growth story in the late 1990's. Some securities experts think the company's ability to book long-term trading profits may have been part of a game that masked a less rosy financial picture.

"Some of this could be derivatives positions that were mismarked," said Henry Hu, a professor of corporate and securities law at the University of Texas at Austin. "That was one of the easiest things to do to inflate your assets."

Enron warned in its filing, though, that the estimates had not been reviewed by an independent auditor and had not been checked with former Enron executives or Andersen, the company's former auditor.

Stephen Blauner, a spokesman for Milbank Tweed Hadley & McCloy, the primary law firm representing Enron's creditors, declined to comment.

Andrew Entwistle, a lawyer who represents one creditor, the Florida State Pension Fund, said the filing was further proof that Enron executives could not have acted alone.

"It would be absolutely impossible to perpetrate a fraud of this magnitude without the assistance of analysts, lawyers and accountants," he said, referring to some creditors' efforts to go after a broad range of others for liability in the Enron collapse.

"The message is: there will be nothing left after everyone is paid," Bala Dharan, a professor of accounting at Rice University in Houston, said, referring to stockholders. "It conveys something that was expected in a very firm way: 'Don't expect anything out of this case. We are really bankrupt.'"