Chapter 1091 – This is the evidence
After Feng Yu’s statements, Nasdaq shares plunged. Many people start to investigate which blue-chip company Feng Yu is talking about.
At the same time, Enron’s higher management start to panic. Others might not know which company Feng Yu is referring to, but they know.
These higher management staff had received insider information to speculate their company’s shares and profit from it. Some of them even took loans to speculate on their shares because the return is very high.
Enron’s Chief Financial Officer even set up an investment company with his friends and used over 100 million USD they got from investors to speculate Enron’s shares. Anyway, this is a sure-win investment.
Those investors that had bought Enron’s shares are going to pay for their mistakes.
Enron’s executive thought no one will know about what is going on in the company. How did Feng Yu know about this?
Enron was voted the most innovative company for several years by . It was even awarded as one of the top 100 companies to work for. Their offices are well renovated, and many people envied them.
No one expected Enron had fabricated their financial report under the beautiful packaging. Even magazine did not notice anything, how did Feng Yu find out?
Feng Yu must not be talking about Enron. Maybe he is referring to Microsoft, as he was previously a Director and shareholder there. Maybe he was kicked out of the board because he discovered Microsoft had fabricated their accounts?!
Yes! Feng Yu must be talking about Microsoft!
…….
When the reporters cannot reach Feng Yu, Jack called and asked for an exclusive interview again.
To Jack’s surprise, Feng Yu agreed!
The TV station immediately announced they had scored an exclusive interview again and will release the phone interview recording for other media to download for a fee.
“Mr. Feng, I’m Jack. Do you still remember me?”
“Of course. It’s only a few days after our previous conversation.” Feng Yu laughed.
“It’s an honor for one of the top tyc.o.o.ns and the most genius investor to remember me. Mr. Feng, the main purpose of this interview is to talk about the blue-chip company you mentioned previously. Is it true that one of the blue-chip companies had fabricated their financial reports?”
Jack is screaming in his heart. Hurry up and answer me!
“That’s right.”
Jack controlled his excitement and asked. “Can I ask which company are you referring to?”
“Sure. It’s Enron.” Feng Yu replied.
Feng Yu had ordered his men to short Enron’s shares, and he will profit if Enron’s share prices crash now. Enron’s accounting scandal will trigger a tsunami in the US stock market. Even a blue-chip company can have such a serious problem, let alone other smaller companies.
Once the investors do not trust the market, there will be no way to stop the crisis.
The higher management of the TV station was stunned. Which company did Feng Yu say? Enron?! How is this possible?!
Enron had just announced that their share prices will double yesterday, and their shares will give their investors high returns. But Feng Yu is saying that Enron is the company that had fabricated their financial reports.
“Mr. Feng, do you have any proof to back up your claim?” Jack’s voice is trembling.
“Do you all know about finance? Do you all know about Benford’s law? From a set of data, the probability of numbers starting with 1 is 30%, and the probability of numbers starting with 2 is 17.6%… The numbers starting with 3 is 12.5%… Based on Enron’s financial report, the figures are not in line with this law. So, their financial report must be fake!”
Jack and the rest of the higher management of the TV station exchanged looks. What is Feng talking about? Benford’s law? What probability is he talking about?
The TV Station’s Chief immediately get his men to call the station’s CFO over to get him to explain Benford’s law, and if it is reliable. He does not want to be a laughing stock when they release this report.
“Alright. I still have some work. Let’s end the interview now.”
After Feng Yu hangs up, everyone in the TV station gathered around their station’s CFO. The CFO had heard about Benford’s law, but this cannot be used as evidence.
So, the TV station asked a few professionals and an auditing firm. They learned that Benford’s law is not commonly used in audits, but it is an effective way to check if anyone had changed the figures during the audit.
After the interview is over, the TV station contacted other media to sell broadcasting rights. They will prepare to make a show with this telephone interview and earn from the advertis.e.m.e.nts.
……
“Feng Yu claims Enron is the company that had fabricated their financial reports!”
“Enron is suspected of financial fraud, and Feng Yu claims he has evidence!”
“Enron’s financial report is not in line with Benford’s law. This is the evidence!”
……
Feng Yu hogged the headlines of several major newspapers, and his telephone interview had been played by several media.
Some people believed what Feng Yu said, but the majority does not believe him, as most people had not heard of Benford’s law. Can numeric data really have frequency probability?
If Feng Yu is the only one who says this, he will not convince everyone, as he is not a professional auditor. But Feng Yu hired two professors from Harvard to back up his claims on what he said about Enron’s financial reports!
After these two professors’ articles are published, they were immediately picked up by the media. The professors swore that what they said are true, and Enron had indeed fabricated their financial reports!
This immediately causes an uproar.
Enron’s shares start to plummet. All investors, including Enron’s higher executives, start to dump their Enron’s shares.
The Enron’s higher management knew this news is true, and once an investigation started, everything will be exposed.
Citibank, which has lots of financial dealings with Enron, also start to panics. They knew about Enron’s financial issues well.