Anthony Scilipoti

And it's a very sad thing what happened.

What did happen at Enron?

They essentially had a number of off-balance sheet exposures.

So they would enter into derivative type contracts that were tied to an energy price, for example, or even the company's own stock price.

And it'd be like, this debt only comes due if the stock price falls to X. This debt only comes due, or this derivative transaction we'd entered into and run was an energy trader.

You know, so if the price of electricity in kilowatt hours rises to a certain amount, well, then this debt is no longer due.

If it falls to this level, then they have to pay some counterparty.

And so those risks were essentially off balance sheet.

So those were not sitting on the company's liabilities whatsoever.

They were all contingent.

And at the time, the accounting rules were such that these numbers were not included on the liabilities.

They were just in the notes.

And so all of a sudden, so people weren't paying attention because nobody reads the notes.

And so then all of a sudden things started to happen.

There was a change in movement in commodity prices.

Okay, this is now we're dealing with the dot-com.

There was a lot of changes that happened in the economy.

We had a recession in the early 2000s, right?

And so that led to a lot of movements in commodity prices that triggered the derivatives.

surprise, surprise, they can't make the payments, it's done.