The Perfect Sales Pitch: No Debt, No Worries

At Enron Corp. (ENE ), debt avoidance wasn't merely a strategy for managing its own balance sheet. It was a way of life that pervaded the company's dealmaking culture. Consider Enron Energy Services, which managed energy needs and equipment for big corporate customers. The company held regular seminars to teach EES employees how to use complex financial vehicles to woo customers, manage earnings, and, naturally, keep debt off balance sheets at Enron and its clients. Former Enron executive Michael R. Boutcher recalls a class on structured finance that described the financings as "accounting nirvana"--able to not only get debt off the books but even out of accounting footnotes.

No one is claiming that these structures were akin to the off-balance-sheet partnerships at the heart of Enron's accounting scandal. These deals gave tax and other benefits to customers who outsourced their energy management to Enron. But they certainly highlight Enron's aggressive philosophy of leveraging its financial acumen. Boutcher, manager of business development at EES until Enron's December collapse, says that creating complex financings with clients was standard practice. And, he says, Enron used them far more aggressively than its rivals. "We could always sweeten the pot, and the objective was to beat out anybody that was competing against us," says Boutcher. An Enron spokeswoman says such equipment financing was common in the industry. But several rivals disagree.

In a presentation on Nov. 9, 2000, to some 60 employees in Houston, Boutcher says, a company lawyer explained how structured-finance deals could manage and accelerate earnings for Enron and take debt "off credit" for customers, so that it wouldn't be reflected in credit ratings. The objective laid out in one page of the presentation couldn't have been clearer: "Off credit: Difficult to achieve. ...Must make it look like the company has no financial obligation at all under any circumstances, including default by them."

EES says it never actually did one of the "off-credit" deals. There were some things even Enron couldn't peddle.

By Wendy Zellner in Dallas and Michael Arndt in Chicago

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