The losses were in the SPE balance sheet...which is exactly where they belonged under the scheme that Skilling invented. Enron operated that SPE under the standard rules used by companies who use such vehicles for legitimate investments.
You keep ignoring the essential point: Enron was reporting gains from investments and no one ever bothered to ask where that money was coming from. No one cared because such gimmicks are only "illegal" when people are losing money.
When SPEs are used legitimately, the parent company has to follow certain guidelines in order to justify deconsolidation. In the case of Enron, those guidelines were not followed. Lay and Fastow were secretly controlling those SPEs and also siphoning funds into them from Enron, creating a consolidation requirement. So, losses were hidden.
But, you're right in that the investment accounts should have raised eyebrows, but didn't.
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When SPEs are used legitimately, the parent company has to follow certain guidelines in order to justify deconsolidation. In the case of Enron, those guidelines were not followed. Lay and Fastow were secretly controlling those SPEs and also siphoning funds into them from Enron, creating a consolidation requirement. So, losses were hidden.
But, you're right in that the investment accounts should have raised eyebrows, but didn't.
http://forums.pearljam.com/showthread.php?t=272825