Enron Restatements Don't Go Far Enough

Enron (ENE Quote) still hasn't come clean on the shadowy deals that led to many of the company's problems.

The battered power giant restated more than three years' worth of financials Thursday because previous numbers failed to take into account complex deals with a number of affiliated entities. As a result of the restatements, annual recurring earnings in the 1997-2000 period are now 10% to 25% lower than originally reported.

However, the picture could be even worse. The restatements of recurring earnings left out nearly $1 billion of losses suffered by a related entity called LJM2 in 2000 and 2001. Losses suffered by a similarly structured entity called LJM1 were factored into the restatement, while LJM2's were not. Enron didn't comment, but the press release detailing the restatements appears to argue that LJM1 was too thinly capitalized and, as such, it should always have been consolidated in Enron's core numbers. The inference, therefore, is that LJM2 losses weren't included because the entity was better capitalized than LJM1. ...