Dodgy broadband dealing behind Enron fall

"This is like another Barings..."

Defunct energy supplier Enron has been accused of using its broadband business to hide its perilous financial state in an attempt to mislead investors. The company fell from the top of the US business tree to sub-zero in six months. US lawyers claim Enron's broadband division participated in dark fibre trading to make it look successful, while it made no money and cost over $2bn to create and maintain. Dark fibre trading, or a 'dark swap', occurs when two companies buy equal amounts of dark fibre - surplus capacity in a fibre optic network - from each other to make balance sheets appear healthy for investors. Therese Torris, group director of strategy research from Forrester, said: "Dark swapping is a very famous trick for shifting surplus capacity in the broadband industry. Operators sell this surplus to each other." One US lawyer suing the company, Bill Lerach, said in a federal court hearing on Friday that Enron made the dark trades to generate interest and make a quick buck. Telecommunications analyst Bernt Ostergaard from Giga Web said after Enron set up the Bandwidth Exchange Forum after it had laid 15,000 miles of fibre in the US and realised just how much was unused. It was supposed to enable broadband operators to exchange excess fibre capacity to even out broadband delivery. Ostergaard said: "Enron hasn't been brokering this bandwidth as it was supposed to, it's just been switching capacity between itself and other companies to bump up its value in the eyes of investors. "This is like another Barings. Someone has been doing some serious fiddling."