-----Original Message-----
From: Schwieger, Jim 
Sent: Tuesday, November 13, 2001 10:42 AM
To: Brawner, Sandra F.
Subject: FW: Sanders Morris analyst piece on Enron




-----Original Message-----
From: Mrha, Jean 
Sent: Tuesday, November 13, 2001 10:12 AM
To: Schwieger, Jim
Subject: FW: Sanders Morris analyst piece on Enron



Jim,

Do you remember Rob Lloyd?  He know works at AIM Funds here in town.  Please read the piece below - I think it is well written and summarizes our sad situation succinctly.

Regards, Jean
-----Original Message-----
From: Lloyd, Robert J [mailto:Robert_Lloyd@AIMFUNDS.COM]
Sent: Tuesday, November 13, 2001 9:41 AM
To: Mrha, Jean
Subject: Sanders Morris analyst piece on Enron


Jean, 

Thought you'd find this interesting.  It's an excerpt from an analyst's note
out this AM.

A Perspective: R.I.P. Enron:
It took sixteen years to build Enron into a $63 billion asset powerhouse,
but only 24 days for it to disintegrate.

The fatal flaw was the aggressive accounting and leveraging done in various
off balance sheet partnerships (Special Purpose Entities), which apparently
became too aggressive to fully disclose. Wall Street had no idea of their holdings,
their leverage or their derivative exposures. The SPEs mutated into
something beyond the pale, becoming a company within a company. This evidently began
30 months ago when the new management regime (Skilling, Fastow, et al)
sanctioned their evolution. Make no mistake: they were cleverly contrived. They
involved conventional asset & debt transfers off the books, coupled with fair value
(asset mark-to-market) accounting and synthetic equity financing. This
allowed for considerable earnings management and the appearance of cost-free equity.

If nothing else, they now appear in hindsight to have been vanity deals: very
New Economy, very Virtual and very aggressive. But no clients ever complained,
to our knowledge. Yet ENE clearly crossed the GAAP reporting lines, as the
latest 8-K attests, and the dual role of the CFO (sitting on both sides of the
table in the LJM transactions), profiting highly in the process, created in the LJM
partnership natural conflicts of interest now being investigated by the SEC.
Because of this elementary mistake in any seasoned judgment, which passed
muster at every level, the most successful energy company of the 90s was vaporized
in the marketplace. The main thing that brought ENE down was hubris. It had
used up all of its credibility when the partnerships were brought to light. If these
were fully revealed two years ago, a collapse would have been very unlikely.

Rob Lloyd
AIM Management
713-214-4355