ON WALL STREET: It takes a lot to push the war in Afghanistan off the TV screens for a story about obscure accountancy practices, but Conor O'Clery writes that the Enron affair has all the ingredients of the classic Washington scandal, from the shredding of documents to a White House connection.

But just what were the accounting practices that precipitated the world's biggest corporate scandal? How were the books cooked?

Investigations centre on the 3,500 partnerships and other affiliates created by Enron to hide debt, inflate profits, push up share values and enrich top executives.

They had titles like Jedi, Chewco, Obi and Kenmobi, taken from the Star Wars trilogy, and Braveheart and Raptor, which could be military codenames.

And where the Clinton era had Whitewater, Enron has Whitewing. The workings of Whitewing go right to the heart of what was rotten in the Houston energy-trading company.

Whitewing was set up to buy assets from Enron and sell them on, according to documents obtained by the Washington Post.

These included power plants and pipelines around the world that Enron bought in the early 1990s and which the company wanted to divest.

It had decided to transform itself from an energy supplier into an energy broker, trading in energy and other financial contracts.

Whitewing was set up in 1997 as an Enron subsidiary but in 1999 Enron moved Whitewing off its books by ceding 50 per cent control to an unnamed investor.

Enron needed other private investors to supply at least 3 per cent of outside investment in Whitewing to allow Enron to decouple it as a subsidiary.

Any debt incurred by Whitewing could then be kept off Enron's balance sheet.

But Enron guaranteed the invited investors, such as banks, insurance companies, pension funds and wealthy individuals, that if the assets were sold at a loss, Enron would make up the difference with Enron shares or cash. Investors in the US and Europe coughed up $1.1 billion (£1.24 billion), with repayment guaranteed by interest bearing notes repayable in 2003 from Osprey, a Whitewing trust.

They were prohibited from disclosing the terms of the offer.

Nor could the companies handling the private placement - Lehman Brothers, Deutsche Bank, UBS Warburg and a fourth company now part of Credit Suisse First Boston - disclose the offering to their analysts who advised the public on whether to buy or sell Enron.

Shareholders in Enron were shocked to discover in November that, with its share value sliding in a general Wall Street slump, Enron was unable to pay $690 million to meet Whitewing obligations, which by then stood at a staggering $2 billion.

This triggered a loss of confidence that sent Enron shares crashing, and Wall Street realised that the switch from energy supplier to energy trader was not such a huge success after all and that Enron did not deserve its high credit rating.

Whitewing had enabled Enron to avoid reporting losses in the sale of assets which had depreciated over the years and there were 11 of these around the world, Chuck Watson told the Washington Post. Mr Watson is head of Dynegy, the company that examined Enron's books with a view to a takeover in October.

Other partnerships were apparently set up to produce inflated earnings through complicated financial transactions.

Braveheart was created to deliver home movies through Enron's high-speed fibre optic network and recorded $100 million in income over six months but, never got off the ground.

The partnerships also provided a lucrative source of income for the Enron executives who managed them, sometimes doing multi-million dollar transactions with Enron itself, thus raising questions about conflict of interest and "self-dealing".

Former chief financial officer Andrew Fastow made $30 million from two partnerships he ran with the obscure titles LJM and LJM2.

It is not abnormal for companies to set up partnerships to invest in specific projects to spread risk.

Enron's purpose was clearly to obfuscate and deceive.

Why else would there be massive shredding of documents by Enron's accountants, Arthur Andersen, and as we learned yesterday, by Enron executives?

Whitewater it turned out was a shabby deal of no consequence. In terms of major scandals, Whitewing is the real thing.