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Enron did lots of cool stuff.  Some of which was probably legal.

I have no actual knowledge of Enron or its partnerships, but from the press, I think they did something like this.

They formed a partnership, let's call it Partnership A. They went around to investors and sold units in Partnership A.  Partnership A then took that money and lent it to Enron.

Partnership A was considered an Enron subsidiary because Partnership A was either owned 50% or more by Enron or was substantially controlled by Enron, therefore, the debt between Partnership A and Enron didn't need to be explicitly listed on the Enron balance sheet. This is called consolidating and is a great way to hide debt.  Instead, Enron's accountants could internally match off the Partnership A debt with Enron's equity ownership in Partnership A and simply not report it, kind of like if your mother lent you $5,000 and then someone asked you if you had any debt, you'd say no since the intra-familial rule of accounting is that you don't have to report money your mother lends you.

However, to make things better, Enron agreed to repay Partnership A by offering Enron shares as collateral.  If Enron shares declined, Partnership A would simply receive more of them.

Since this worked well in 1999, they did it again, bigger in 2000. And so on.

Apparently, by the time Enron declared bankruptcy, the number of shares the Partnership was entitled to was a significant percentage of Enron.

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