Academic's Concerns About Enron-Type Dealings Ignored

March 2002

FSU ACADEMIC'S CONCERNS ABOUT ENRON-TYPE DEALINGS IGNORED

TALLAHASSEE, Fla.--Eighteen months before the financial dealings that led to Enron's collapse came to light, Professor Donald Weidner, dean of the Florida State University College of Law and a national expert on partnerships, was publicly decrying such arrangements.

But just as the early warnings of some Wall Street analysts about Enron's financial structure went unheeded, academia's concerns about so-called "special purpose entities," which corporations use to legally hide billions of dollars worth of debt, also were ignored.

"Most simply, (the Financial Accounting Standards Board) currently permits enormous amounts of debt to vanish from a company's balance sheet," Weidner wrote in the Spring 2000 edition of The Journal of Corporation Law. "Corporations are permitted to appear far less leveraged than they are by recasting mortgages as leases. In a system that prides itself on transparency, this transactional sleight-of-hand should not be permitted."

Weidner is one of the nation's leading experts on partnerships and complex real estate finance. In addition, he is co-author of The Revised Uniform Partnership Act.

Weidner wrote the article in The Journal of Corporation Law in part to send a message to the Financial Accounting Standards Board and the Securities and Exchange Commission that the regulations concerning special purpose entities needed fixing. But no one from either agency ever contacted him.

Additional information about Professor Weidner can be found on the Internet at http://www.law.fsu.edu/.

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