use the information and answer( 39, 40, 54, 55) questions below in detail. Thank you. Dear Mr. Lay. Has Enron become a risky place to work? For those of ue who didn't get rich over the last few years, can we afford to stay? Skilling's abrupt departure will raise suspicions of ac- counting improprieties and valuation issues. Enron has been very aggressive in its accounting-most notably the Raptor transactions and the Condor vehicle. We do have valuation issues with our international assets and possibly some of our EES MTM positions. The spotlight will be on us, the market just can't ac- cept that Skilling is leaving his dream job. I think that the valuation issues can be fixed and reparted with other goodwill write-downs to occur in 2002. How do we fix the Raptor and Condor deals? They unwind in 2002 and 2003, we will have to pony up Enron stock and that won't go unnoticed. To the layman on the street, it will look like we recog- nized funds flow of $800 mm from merchant asset sales in 1999 by selling to a vehicle (Condor) that we capital- paz ized with a promise of Enron stock in later years. Is that really funds flow or is it cash from equity issuance? We have recognized over $550 million of fair value gains on stocks via our swaps with Raptor, much of that stock has declined significantly-Avici by 98 percent, cent, from $20/share to $6/share. The value in the swaps from $178 mm to $5 mm, The New Power Co by 70 per- won't be there for Raptor, so once again Enron will issue stock to offset these losses. Raptor is an LJM entity. It Sure looks to the layman on the street that we are hiding losses in a related company and will compensate that company with Enron stock in the future. I am incredibly nervous that we will implode in a wave of accounting scandals. My 8 years of Enron work history will be worth nothing on my resume, the business world will consider the past successes as nothing but an elaborate accounting hoax, Skilling is resigning for 'personal reasons'but I think he wasn't having fun, loched down the road and krew this stull was unfivable and would rather abarndon ship now than resign in shame in 2 years . Is there a way our accounting guru's (sic can unwind these deals now? have thought and thought about how to do this, but I keep bumping into one big problem booked the Condor and Raptor deals in 1999 and 2000, we enjoyed a wonderfully high stock price, many execu- tives sold stock, we then try and reverse or fix the deais in 2001 and it's a bit like robbing the bank in one year and trying to pay it back 2 years later Nice try. but investors were hurt, they bought at 570 and $80/share looking for $120/share and now they're at $38 or worse We are un- der too much scrutiny and there are probably one or two disgruntled 'redeployed' employees who know enough about the funny accounting to get us in trouble . 39. Check Internet descriptions about the $18 mil- lion McKesson Robbins fraud. Summarize the fraud scheme and describe how it was uncovered. 40. Read about the $100 million Equity Funding rein- surance fraud using the Internet. Summarize the fraud scheme. What current fraud is similar? 54. Explain why backdating the grant date of a stock op- tion to a lower price cheats the corporation. 55. Search the Internet about the Apple stock option backdating scandal and decide whether CEO Steve Jobs should have gone to jail. Why did other execu- tives go to jail and not Steve? Is politics sometimes involved with who is prosecuted