The conspiracy of fools

[HHAYD]

The deadline for the annual financial statement was approaching fast, and EnFu's balance sheet was a complete wreak. Drastic actions had to be done to show Chicago Board of Trade's analysts that they're worth being invested in. They need their stock prices to be boosted as it was hovering at a low $50 and can not afford to lose any investors or banks.


PIC was a disaster from the start. EnFu's board of directors allowed PIC to be transferred to JEI, thus, they can avoid booking the $800 million purchase cost and the $600 million debt. EnFu also contacted their banks to dress up many of the loans as trading profits.

Then there's also the Greyhawk entities. Despite the fact that EnFu only managed to shift their assets around and ended up losing some of the value of the assests when the stock prices fell, they marked them as profits.


At the end of committing dozens of "accidental" accounting errors and a few crimes, EnFu managed to inflate their yearly $3 million loss to over $400 million total profit.

Edited August 5, 2011 by HHAYD

[HHAYD]

Six months later:

Everything was falling apart. MRFT had published a very detailed investigation of EnFu's investments a few weeks ago, using open sources. It gave a rough estimate of how much EnFu paid for its dozens of projects, many of them completely unrelated to utility, and how it didn't add up even when taking in account of EnFu's suspicious total profits. To make the matter worse, MRFT managed to decipher EnFu's last year's balance sheet, but made numerous mistakes that resulted in an overstatement of expenses.

Unsurprisingly, EnFu accused MRFT of being biased and how they overstated the expenses. MRFT responded by asking EnFu to decipher the number mess, EnFu refused to comment.



EnFu's stock prices, including their child companies' stocks' prices, tumbled. This resulted in banks in becoming edgy and demanding their money back. EnFu attempted to raise the capital by selling one-month bonds...

Nobody bought them...

Desperate, EnFu lowered the repayment date from a month to two weeks and the investors purchased some of the bonds, but as the stock prices fell, less of them bought the bonds.

-------------------------------
In EnFu's Financial Crisis meeting:


Billy: "Alright, do we have a loan maturity schedule?"

Ted: "I'll get that in a week."

Billy: "We... don't... have... a... week..."

Ned: "We'll try and put one together."

Billy: "Try? You guys were suppose to have an up-to-date one for every day! Everyone, split up and start hunting for all loan information so we can put a schedule together, now!"
-----------------------------------------------------
Few hours later, after they managed to put together the schedule:


Ned: "Oh dear."

Billy: "So, we managed to land ourselves in a total of $30 billion worth of debt, and two-third of them is due this year. That's not including the $1.6 billion interest payments. What's our reserve and projected annual cash flow?"

Ned: "The uninflated actual one, no idea, ask Ted."

Ted: "I don't know."

Billy: "You're the CFO! You're suppose to know!"

Ted: "..."

Billy: "Alright, time to hunt for information, again."

Ted: "Wait, the debt should be less than $12 billion."

Billy: "I'm taking in consideration of the entities' loss as well. The, what was it? Greyhawks? Yeah, anyways, the Greyhawks failed miserably."

Ned: "I thought I rejected them. Ted, you didn't..."

Ted: "I did."

Ned: "Those Greyhawk entities are so irrational that a elementary school child could see what was wrong with them!"

Ted: "They're meant for hedging and they're doing a good job! They only need a few more cash injections!"

Ned: "Hedging my ass, you used our assets to hedge against our other assets. All you did was shift them around and that resulted in a very high vulnerability to stock price drops, which is occurring right now! It doesn't take a Sherlock Homes to figure out why they need more cash, because they can't repay the losses with devalued stocks, stocks that are ours in the first place!"

Billy: "Enough arguing, let' go on another paper hunt before EnFu becomes even more unstable."
-----------------------------------------------------
Another few hours later, in the evening:


Billy: "!@#$."

Ned: "Reserve, $156.1 million. Projected cash flow, negative $2.6 million."

Ted: "We can ride this out by selling bonds."

Ned: "The investors are refusing to buy one-month bonds, they would only buy two-weeks bonds. Just two months ago, they were more than happy to buy one-year bonds."

Billy: "And nobody else noticed this trainwreak?"

Ned: "I doubt they noticed it except for the folks who are managing the bonds."

Billy: "Debt and interest payments that far exceed our reserves and cash flow. I think we just lighted a stick of TNT under our feet quite a while ago..."

Ted: "We could find someone else who has a healthier budget and merge."

Billy: "Nobody would ever merge with the world's largest money shredding machine. Ted, wasn't your department responsible for keeping track of our finances."

Ted: "Um..."

Billy: "Oh, I remember, you turned it from a support into a profit department. Isn't that correct?"

Ned: "That is very true."

Billy: "We've been flying blind financially for more than two years. My gawd, I can only hope the banks are more than happy to agree to restructuring plans..."

Edited August 5, 2011 by HHAYD

[Biohazard]

OOC: Garbage.

Forgot OOC tags...

also,


FREEZE.

TOSERS.

GET ON THE !@#$@#$ GROUND.

Edited August 5, 2011 by Biohazard

[HHAYD]

[quote name='Biohazard' timestamp='1312517440' post='2772389']
Garbage.
[/quote]
OOC: I guess you haven't read the actual "Conspiracy of Fools" book. And I do have plans for this RP with someone else other than RPing EnFu's collapse.

[Captain Enema]

Private
From: Legion's Ministry of Economic Affairs
To: EnFu

Expect a full investigation team from our offices to arrive shortly. Full compliance is needed to prevent your company from having all its assets seized.

The outcomes of this investigation are as follows:

1) Criminal charges being filed and PIC being allowed to stay in business under new management provided by the company.

2) Criminal charges being filed and PIC being put out of business and the customers being refunded.

3) Criminal charges being filed and the PIC being put under the direct supervision of the Ministery of Economic Affairs until they've proven they are able to conduct themselves in a responsible manner.

Do be known, any attempt to try and deceive the investigators would be most unwise.

Minister of Economic Affairs, some African guy.


The Legion's Port Sudan Special Weapons and Tactics Team was given orders to descend on PIC's office and secure them. The entire team of 96 Operators, trained by Legion's Special Operations Command, enters the premises and places everyone in handcuffs. All of the staff are placed in a common holding area, and all of the computers and records placed under armed guards.

Investigators from the Ministry of Economic Affairs arrive shortly after and begin examining the financial records of PIC.


OOC: I'll leave it up to you to decide what I find.

[HHAYD]

[quote name='Tidy Bowl Man' timestamp='1312517932' post='2772396']
Private
From: Legion's Ministry of Economic Affairs
To: EnFu

Expect a full investigation team from our offices to arrive shortly. Full compliance is needed to prevent your company from having all its assets seized.

The outcomes of this investigation are as follows:

1) Criminal charges being filed and PIC being allowed to stay in business under new management provided by the company.

2) Criminal charges being filed and PIC being put out of business and the customers being refunded.

3) Criminal charges being filed and the PIC being put under the direct supervision of the Ministery of Economic Affairs until they've proven they are able to conduct themselves in a responsible manner.

Do be known, any attempt to try and deceive the investigators would be most unwise.

Minister of Economic Affairs, some African guy.
[/quote]

Fredrick slowly read the email sent by Legion. EnFu was still battling the two criminal and civil cases regarding their failed domestic internet and water divisions, facing potential investigation by the SERC, experiencing a massive financial instability, and now this?


While the board and the executives argued with each other what they should do, Legion's MEA's investigators would find numerous evidences backing up the customers' complaints. Almost all of the evidences predates the purchase by EnFu, though it was evident that EnFu had turned blind-eye to PIC's problems with their customers.

Edited August 5, 2011 by HHAYD

[Captain Enema]

To: EnFu
From: Minister Engralia

We've found evidence supporting a wide array of customer complaints. Would you care to offer explanations for the lack of movement to rectify these complaints?

As of now your executives for PIC are being detained in a military prison. The lower ranking staff members have been told to keep showing up for work every single day until told otherwise by my department.

We see quite a bit of evidence for gross incompetence, but not so much evidence for criminal incompetence. You have to realize Legion's business laws a quite liberal, hence quite difficult to criminally defraud people.

However, as I have the power to interpret those laws and make decisions in individual cases, I suggest you think very carefully before answering.

-Engralia

[HHAYD]

[quote name='Tidy Bowl Man' timestamp='1312518991' post='2772412']
To: EnFu
From: Minister Engralia

We've found evidence supporting a wide array of customer complaints. Would you care to offer explanations for the lack of movement to rectify these complaints?

As of now your executives for PIC are being detained in a military prison. The lower ranking staff members have been told to keep showing up for work every single day until told otherwise by my department.

We see quite a bit of evidence for gross incompetence, but not so much evidence for criminal incompetence. You have to realize Legion's business laws a quite liberal, hence quite difficult to criminally defraud people.

However, as I have the power to interpret those laws and make decisions in individual cases, I suggest you think very carefully before answering.

-Engralia
[/quote]

[quote]To: Minister Engralia
From: EnFu Corporation

We sold PIC to Joint Energy Investment six months ago, PIC is no longer ours. Before the sale, we asked PIC why their profits were so low a few months ago when they were under our ownership. They only mentioned it was from competition and debt repayment. We did not investigate further as we had larger problems to tackle.

-Fredrick Andrew, CEO of EnFu Corporation[/quote]


Should Minister Engralia attempt to contact JEI, he/she quickly realize that there was no way to contact JEI. PIC's management wouldn't know about the change of ownership since EnFu always send them some cash to repay the debt even when JEI supposedly took ownership.


What Engralia didn't know was that EnFu actually has full ownership of PIC since JEI was an EnFu's entity that only existed on paper. EnFu was unwilling to admit that they own PIC as they would be forced to report the $1.4 billion loss, plus operating losses on their balance sheet.

Edited August 5, 2011 by HHAYD

[Captain Enema]

To: Enfu
From: Minister Engralia


Very well as PIC is no longer one of your assets you'll have no problem with us imprisoning the executives and selling off the physical assets to compensate the customers.

Engralia


Th properties are sold to the Port of Sudan Imports and Exports who take over the PIC buildings and facilities with the intentions of operating it as a private sub-division of Port of Sudan Imports and Exports.

The PIC Executives are given 5 year sentences in a Legion Work Camp by the Minister of Economic Affairs . The employees discharged, those that are not Legion citizens are immediately deported without their property or funds, and those that are find themselves being rehired by PoS Communications after signing loyalty statements and being made to post loyalty bonds with the Ministry of Economics to the tune of 10,000 Legion Dollars.

A full audit of the company is conducted and special hires are made to rectify technical shortages. A special package deal is put together for former customers to entice them back to the fold based on the good, well at least colorful name of Port of Sudan Imports and Exports.

The proceeds from the sales are doled out to the jilted customers.

[HHAYD]

The board, seethed with rage after learning that Fredrick just gave a $800 million asset away. Despite Billy objection's explaining that PIC would've cost EnFu a lot more if they still held onto it, the board fired Fredrick.

When the news came out that EnFu fired their CEO, the investors and banks were surprised and assumed EnFu was unstable considering the fact that they fired two CEOs within two years.


Within hours, the verdicts of the cases regarding Interconnect and Midwest Water came out. Both divisions would have to pay a total of $2.2 billion in fines, $10.9 billion to the customers and other affected people and many of the executives along with other lower ranking employees thrown in prison.


EnFu would not book the massive losses as their two epically-failed divisions were "owned" by Utilities Corporation, an EnFu's entity that only existed on paper. However, it wouldn't save EnFu from bankrupcy.


-------------------------------------------------------
In EnFu's Financial Crisis meeting:

Billy: "We can't pay the $13.1 billion, and all of them are due in six months!"

Ted: "Our bond sales are doing fi-"

Ned: "No, no they aren't. Ever since the news of us firing Fredrick and our two failed divisions getting slapped with a massive fine came outand the CRA (Credit Rating Agency) dropped our bond's status from BB+ to B-. The Chicago Board of Trade's FRAB (Financial Risk Analysis Bureau) also dropped our BBB status to B. None of the investors are even poking the bonds with a 50 meter long pole. They aren't even touching the 12-hour bonds that we offered!"

Billy: "You're telling me that we have no short-term capital supply?"

Ned: "I'm afraid that's true."

Ted: "We can sell our stocks."

Ned: "You idiot! They're worth less than $20 now! Selling them would accelerate the stocks' devaluation!"

Billy: "There's nothing we can do. We either file bankruptcy now, or in Q2 after telling our investors and banks that we can't pay our debt. Either way, it's going to attract government attention when a company that was making record profits for years suddenly reports that they can't pay their debts."

Ted: "We can negotiate with the banks to delay payment until Q1 ends."

Billy: "Ted, if a man defaults on his loans, even if he negotiated with the banks to hold off reporting that he defaulted for three months, he still has defaulted. We're going to have to report our failure soon or later."

Edited August 7, 2011 by HHAYD

[HHAYD]

Ted did not listen to Billy, and managed to convince the board that they should hold off reporting bankruptcy by negotiating with their banks.


The problem was, the banks refused to budge as the deadline for the mass loan payments was only days away. They wanted their money ASAP and didn't want to gamble that EnFu would stand long enough to pay its debts.

In fact, one of them, Silverman Sachs, froze EnFu's bank account that held nearly one third of EnFu's cash reserve after EnFu missed loan payment worth a total of $80 million for nearly a week and issued an ultimatum. Pay up with late fees included, or say goodbye to your account.

EnFu did not complain to the LCB (Loans and Credits Bureau) in fears of attracting SERC's attention.



Within an about a week later, at the deadline of the $10 billion loans' payment date, EnFu filed for bankruptcy. It's stocks' prices plunged from $9.81 to $0.16 within hours and CBT removed EnFu from its listing as EnFu's stocks failed to meet the mandated minimal stock price of $1. CRA and FRAB dropped EnFu's bond credit rating down to CCC-, then to CC- when LCB reported that EnFu had a debt of over $40 billion.



It would only be the tip of the iceberg as EnFu wasn't the only one who cooked the books...


----------------------------
OOC: Link to continuation of this: http://forums.cybernations.net/index.php?showtopic=104281&pid=2773964&st=0&#entry2773964

Edited August 7, 2011 by HHAYD

[Generalissimo]

An independent investigation sponsored by Procinctia has determined that blatant mismanagement is responsible EnFu's bankruptcy.

Despite these findings Procinctia’s current temporary transitional authority has unilaterally determined that EnFu is too big to fail.

Procinctia can put forward $20 billion, with significant stipulations, towards EnFu’s outstanding debts.

Edited August 7, 2011 by Generalissimo