Life never prepared me in my past life for what I found in my first week, in global finance. Being a lawyer I had been in Enron for the past four years working with the tax department. In October 2000, Andy Fastow summoned me and asked me to be the general counsel for global finance. This opportunity was enticing since it was a good place to be in thus I accepted the offer.
The first thing that I found in the new files was a deal between Enron and a company called LJM which was a special purpose company. I knew something little about LJM, and that it was set up for the purposes of expressing purchase of assets in Enron. There was a relationship between LJM and Andy, but this relationship was vetted and approved. During the learning period, I sought more about LJM and saw a memo about its origins. This memo was addressed to the board but sought exemption from the Enron Ethics policy for Andy Fastow. On reviewing the memo, I came across many questionable points. One of the points that were disturbing was how it was crafted to look like Fastows request on exemption was a sacrifice for the benefit of Enron. However, it was clear that Fastow would earn a profit from the transaction. The Enron shareholders were taking the big risk. This meant that any loss made by the partnership would be felt by the Enron stakeholders directly.
Another disturbing point was the scarcity on matters regarding the partners’ compensation. There were many answered questions about LJM yet the file contained very little in details. Such a transaction should have been evaluated by RAC yet no RAC assessment was in the files. Any analysis that had been provided before were now missing. Analysis opinion from Enron’s editor was also missing. There was poor documentation in general, and several approval signatures were missing. Near the end of 2000, I decided to find out what was happening by testing Fastow directly. Fastow asked me not to disclose his compensation. From this, I have now learned that there are certain things being hidden. I therefore, have to deal with the dilemma that I am now in.
End the dilemma in LJM is the vision of my strategic planning.
The mission is stop further legal violations in LJM and limit Damage already done.
The objectives fall in two main folds one being protection of Enron from continuing legal violations and limitation of damages that have already occurred. Secondly, ensure that I am not in any way a complicit in such law violations
Looking at what things were not handled in the correct manner raised my concern on Enron. The first driving force for an action to be taken is the missing signatures and documents that cannot even withstand audit or any serious investigation. Secondly the failure of disclosure of important facts to the board. The fact that Andy does not disclose his compensation, which evidently is a huge economic risk to the shareholders, is not right. Another driving force is the failure of conducting risk analysis. Since there is no RAC analysis the management lacks basis to assess’ consequences of any developments that affect LJM, as well as the basis of continuation of business with partnership.
Also, there are no controls or even monitoring carried out on Andy Fastow’s exception on ethics. The global finance has completely failed to propose ways of monitoring Fastow’s conflict of interest. Lastly I am concerned with the failure of provision of information adequately about LJM to Enron’s public filings. There needs to be an outline about the parties to transactions to show evidence that Enron management and the board had subsequently carried out their duties. To show that transactions made are substantive and any compensation paid to the investors are appropriate.
I assume that I will have the following as options if the reactions are of much resistance as I expect. One I will threaten to resign and be prepared to follow through, secondly I can ask for a back to tax transfer. A third option is back off for some time and then look for more opportunities to repress the issue at hand. The last option is a document that I have raised all the matters with the appropriate superiors, ensure I have created secures files with their backups and incase of any trouble arising produce them. My assumption is that all this tactics will help in working out things for me without any hindrances.
The strengths are that, by ensuring I am heard, I could create a better future for Enron, the weaknesses are that the management could choose to ignore my concerns altogether. The opportunities presented are that this could make me a hero in the presence of management and the board. I am faced with the threat of losing my job.
Analysis of strategic issues
For the success of the strategy, I will have to raise my objections to the respective targets as follows. For the documentation and procedure objection, my target contact will be Andy Fastow then chief legal counsel derrick. Second objection on risk analysis I will contact Andy Fastow then CEO Skilling. Thirdly on the objection on monitoring of Fastow exceptions, I will contact CEO Skilling then Counsel Derrick’s chairman. Concerning the inadequate disclosure about Enron public filings the persons to contact will be Andy Fastow first then Derrick and finally skilling and may consider leaking outside. Finally, about fully disclosing everything to the board I will contact CEO Skilling at first then the audit Cte chair.
Strategic alternatives pros and cons
There are pros and cons for the strategic alternatives. For the objection on documentation, the pros is appropriate concern for legal counsel and a low key for highlighting big issues while the cons is the lack of impact since it can be remedied without address of big issues. In risk analysis objection, the pros is the highlight of legitimate issues, production of new information and low personal risk whereas the cons is the assumption that the management wants to know, however it can say thank you and move on. On monitoring of Fastow’s ethics exception, the pros is it is a valid issue and could lead to a general reform however, the pros is that it puts the board in a bad light, and it is easy for the management to use the board as a reason for not taking any action. Concerning the disclosure to Enron about filings the pros is the fact that it is appropriate for legal counsel and that it will provide facts for action against Fastow. The cons are that it is a high personal risk, and I should be ready to resign or be fired. Concerning the issue on disclosure to board the pros is that it reopens big issues and gives the board basis to reverse decisions made earlier whereas the cons is it is a high personal risk.
Confront the management concerning the issues and make the best resolutions. Make it known about the earnings of Fastow and the ethics exception.
Making the objectives known to the board and Enron in general is the best way of implementation; ensure that the new guidelines are followed. Ensure no more legal violations are carried out and prevent future violations.
Evaluation and control
The organized strategy will help in the achievement of the organizational objectives and the organization must be kept in track. This includes anticipating for a feedback and good coordination of the tasks. The management also needs some evaluation to ensure good coordination. The strategy is bound to guide the organization towards its intended objectives. This will help in the general performance of the organization.