13 Things You Should Know About the Fall of Enron, America’s Corporate Megastar
1, With an turnover sometimes north of $100b, Enron was once one of America’s leading corporations playing in energy (power & gas) and telcoms sectors.
2, Awarded “America’s Most Innovative Company” for 6 consecutive times by Fortune magazine
3, CEO Jeffrey Skilling had a way of hiding the financial losses of the trading business and other operations of the company.
4, The company would build an asset, such as a power plant, and immediately claim the projected profit on its books, even though it hadn’t made one dime from it. If the revenue from the power plant was less than the projected amount, instead of taking the loss, the company would then transfer the asset to an off-the-books corporation, where the loss would go unreported.
5, This practice led to schemes that were designed to hide the losses and make the company appear to be more profitable than it really was. To cope with the mounting liabilities, Andrew Fastow, a rising star who was promoted to CFO in 1998, came up with a deliberate plan to make the company appear to be in sound financial shape, despite the fact that many of its subsidiaries were losing money.
6, After deceiving SEC for many years, the bubble later began to bust around 20001 as a series of suspicious activities began to unfold.
7, After SEC & American Justice ministry investigation, Enron crumbled, and filed for bankruptcy in 2001.
8, Enron’s former star CFO Andrew Fastow pleaded guilty to two counts of fraud for facilitating Enron’s corrupt business practices. He ultimately cut a deal for cooperating with federal authorities and served a four-year sentence, which ended in 2011.
9, Former Enron CEO Jeffrey Skilling received the harshest sentence.. In 2006, Skilling was convicted of conspiracy, fraud, and insider trading. Skilling originally received a 24-year sentence, but in 2013 it was reduced by 10 years. As a part of the new deal, Skilling was required to give $42 million to the victims of the Enron fraud and to cease challenging his conviction. Skilling remains in prison and is scheduled for release on Feb. 21, 2028.
10, Enron’s founder and former CEO Kenneth Lay was convicted of six counts of fraud and conspiracy and four counts of bank fraud. Prior to sentencing, though, he died of a heart attack in Colorado.
11, It was not only the company and its execs that fell, its auditor, Arthur Andersen, also fell with it for signing the accounts of a company with such fraudulent concealment. The conviction was later upturned on appeal, but the stigma never went away. A group of former partners have however bought the name in 2014, creating a firm named Andersen Global.
12, Enron’s fall was the biggest corporate fall in the world as at that time. It is now 4th behind WorldCom, Lehman Brothers, and Washington Mutual.
13, Till today, some companies are still reeling from the damage caused by Enron. Most recently, in March 2017, a judge granted a Toronto-based investment firm the right to sue former Enron CEO Jeffery Skilling, Credit Suisse Group AG, Deutsche Bank AG and Bank of America’s Merrill Lynch unit over losses incurred by purchasing Enron shares.
Material for this piece largely sourced from Investopedia
For more discussions on careers, join our forum, HOTPROFORUM
Subscribe free to JarusHub for more tips on careers and education
[subscribe2]
