A brief introduction to

ENRON SCANDALStudent name: Olga BalzhinimaevaStudent ID: Ma3n0231

Content

Introduction

Scandal

Outcomes

IntroductionEnron was founded in Omaha, Nebraska in 1985 with the merger of Houston Natural Gas and Internorth.

The company headquarters were originally in Omaha but moved to Houston by Kenneth Lay, the new CEO of Enron. Enron was one of the worlds leading electricity, natural gas, pulp and paper, and communication companies.

Enron was involved in transmitting and distributing electricity and natural gas through the U.S. then as the company developed they built and operated power plants and pipelines.

Enron’s wealth grew due to its marketing and its high stock prices. In August 2000 the value of the stock hit its all time high of $90. From1996 to 2001 they were named “Americas Most Innovative Company” by Fortune magazine as well as “100 Best Companies to Work for in America” in 2001.

Enron’s line of business . Enron’s ProductsEnron traded in more than 30 different products, which included the following:

•Enron traded in more Products traded on EnronOnline : Petrochemical, Plastics, Power, Pulp & Paper, Steel, Weather Risk Management.

• Oil & LNG Transportation.

• Broadband.

•Principal Investments.

• Risk Management for Commodities.

• Energy transportation and upstream services.

• Capital and risk management services.

• Energy and commodities services

Investigative Findings … 1993-2001

: Enron also used complex & dubious accounting schemes

• to reduce Enron’s tax payments;• to inflate Enron’s income and profits;

• to inflate Enron’s stock price and credit rating;

• to hide losses in off-balance-sheet subsidiaries;

• to engineer off-balance-sheet schemes to funnel money to themselves, friends, and family;

• to fraudulently misrepresent Enron’s financial condition in public reports

What happened at Enron? - On December 2, 2001, Enron filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. With assets of $63.4 billion, it is the largest US corporate bankruptcy.

• The price of Enron’s stock, which had increased spectacularly over the 1990s from a low of about $7 to a high of $90 a share in mid-2000, declined to under $1 by year-end 2001.

Outcomes of the Scams • Enrons shareholders lost $74 billion in the four years before the company’s bankruptcy ($40 to $45 billion was attributed to fraud).

• Enron’s more than 20,000 former Employees lost $2 billion in pensions.

• Employees lost more than $1.2 billion in retirement funds.

• Enron’s top executives cashed in $116 million in stock.

• 20,000 employees lost their jobs and medical insurances.

The end of Enron Chief executive Ken Lay escaped justice, dying of a heart attack before he could be sentenced. Skilling, Fastow and another dozen executives went to prison. Skilling appealed his 24-year sentence to the U.S. Supreme Court; Fastow’s release was scheduled for December 2011