Enron
Enron Creditors Recovery Corporation
Type
Defunct / Asset-less Shell
Founded
Omaha, Nebraska, 1985
Headquarters Houston, Texas, United States
Key people
Kenneth Lay, Founder, former
Chairman and CEO
Jeffrey Skilling, former
President, CEO and COO
Andrew Fastow, former CFO
Rebecca Mark-Jusbasche,
former Vice Chairman,
Chairman and CEO of Enron
International
Stephen F. Cooper, Interim
CEO and CRO
John J. Ray, III, Chairman
Industry
formerly Energy
Revenue
$101 billion (in 2000)
Employees
approx. 22,000 in 2000
approx. 4 as of 2008.
Website
http://www.enron.com/
Enron Creditors Recovery Corporation
(formerly Enron Corporation, former NYSE
ticker symbol ENE) was an American energy
company based in Houston, Texas. Before its
bankruptcy in late 2001, Enron employed ap-
proximately 22,000 (McLean & Elkind, 2003)
and was one of the world’s leading electri-
city, natural gas, pulp and paper, and com-
munications companies, with claimed reven-
ues of nearly $101 billion in 2000.[1] Fortune
named Enron "America’s Most Innovative
Company" for six consecutive years. At the
end of 2001 it was revealed that its reported
financial condition was sustained substan-
tially by institutionalized, systematic, and
creatively planned accounting fraud, known
as the "Enron scandal". Enron has since
become a popular symbol of willful corporate
fraud and corruption. The scandal was also
considered a landmark case in the field of
business fraud and brought into question the
accounting practices of many corporations
throughout the United States.
Enron filed for bankruptcy protection in
the Southern District of New York in late
2001 and selected Weil, Gotshal & Manges as
its bankruptcy counsel.
It emerged from
bankruptcy in November 2004 after one of
the biggest and most complex bankruptcy
cases in U.S. history. On September 7, 2006,
Enron sold Prisma Energy International Inc.,
its last remaining business, to Ashmore En-
ergy International Ltd. Following the scan-
dal, lawsuits against Enron’s directors were
notable because the directors settled the
suits by paying very significant sums of
money personally. The scandal also caused
the dissolution of the Arthur Andersen ac-
counting firm, affecting the wider business
world.[2]
In early 2007, Enron changed its name to
Enron Creditors Recovery Corporation, to re-
flect its status as a (largely) asset-less shell
corporation. Its current goal is to liquidate all
remaining assets of the company. For most of
2007, Enron continued to operate under the
name Enron Corp. by filing a Doing Business
As, or "dba" certificate in Harris County,
Texas.
Early history
Enron Complex in Downtown Houston
From Wikipedia, the free encyclopedia
Enron
1
Enron traces its roots to the Northern Nat-
ural Gas Company, which was formed in
1932 in Omaha, Nebraska. It was reorgan-
ized in 1979 as the leading subsidiary of a
holding company, InterNorth. In 1985, it
bought the smaller Houston Natural Gas.[3]
The merged company initially named itself
"HNG/InterNorth Inc.", even though Inter-
North was the nominal survivor. It built a
large headquarters complex
in Omaha.
However, the departure of ex-InterNorth
CEO Samuell Segnar six months after the
merger allowed former HNG CEO Kenneth
Lay to become CEO of the newly merged
company. Lay soon moved Enron’s headquar-
ters to Houston and began to thoroughly re-
brand the business. Lay originally favored
the name "Enteron" (possibly spelled in
camelcase as "EnterOn"); but when it was
pointed out that the term approximated a
Greek word referring to the intestines, it was
quickly shortened to "Enron." The final name
was decided upon only after business cards,
stationery, and other items had been printed
reading Enteron, reflecting the confused
state of affairs in the company at the time.
Enron’s "crooked E" logo was designed in the
mid-1990s by the late American graphic de-
signer Paul Rand.
Enron was originally involved in transmit-
ting and distributing electricity and gas
throughout the United States. The company
developed, built, and operated power plants
and pipelines while dealing with rules of law
and other infrastructures worldwide. Enron
owned a large network of natural gas
pipelines which stretched ocean to ocean and
border to border including Northern Natural
Gas, Florida Gas Transmission, Transwestern
Pipeline company and a partnership in North-
ern Border Pipeline from Canada. NNG was
the cash cow that made all of the other Enron
companies, ventures and investments pos-
sible. It was the only part of Enron that made
significant profits. In 1998, Enron moved into
the water sector, creating the Azurix Corpor-
ation, which it part-floated on the New York
Stock Exchange in June 1999. Azurix failed to
break into the water utility market, and one
of its major concessions, in Buenos Aires,
was a large-scale money-loser.
Enron grew wealthy due largely to mar-
keting, promoting power and the fraudulently
inflated stock price. Enron was named
"America’s Most Innovative Company" by
Fortune magazine for six consecutive years,
from 1996 to 2001. It was on the Fortune’s
"100 Best Companies to Work for in America"
list in 2000, and had offices that were, in
hindsight, stunning in their opulence. Enron
was hailed by many, including labor and the
workforce, as an overall great company,
praised for its large long-term pensions, be-
nefits for its workers and extremely effective
management until its exposure in corporate
fraud. The first analyst to publicly disclose
Enron’s financial flaws was Daniel Scotto
who in August 2001 issued a report entitled
"All Stressed up and no place to go" which
encouraged investors to sell Enron stocks
and bonds at any and all costs.
As was later discovered, many of Enron’s
recorded assets and profits were inflated, or
even wholly
fraudulent and nonexistent.
Debts and losses were put into entities
formed "offshore" that were not included in
the firm’s financial statements, and other
sophisticated and arcane financial transac-
tions between Enron and related companies
were used to take unprofitable entities off the
company’s books.
Its most valuable asset and the largest
source of honest
income, the 1930s-era
Northern Natural Gas, was eventually pur-
chased back by a group of Omaha investors,
who moved its headquarters back to Omaha,
and is now a unit of Warren Buffett’s Mid-
American Energy Holdings Corp. NNG was
put up as collateral for a $2.5 billion capital
infusion by Dynegy Corporation when Dynegy
was planning to buy Enron. When Dynegy
looked closely at Enron’s books, they backed
out of the deal and fired their CEO, Chuck
Watson. The new chairman and head CEO,
the late Daniel Dienstbier, had been presid-
ent of NNG and an Enron executive at one
time and an acquaintance of Warren Buffett.
NNG continues to be profitable today.
Products
Enron traded in more than 30 different
products, including the following:
• Products traded on EnronOnline
• Petrochemicals
• Plastics
• Power
• Pulp and paper
• Steel
• Weather Risk Management
• Oil & LNG Transportation
• Broadband
From Wikipedia, the free encyclopedia
Enron
2
• Principal Investments
• Risk Management for Commodities
• Shipping / Freight
• Streaming Media
• Water & Wastewater
It was also an extensive futures trader, in-
cluding sugar, coffee, grains, hog, and other
meat futures. At the time of its bankruptcy
filing in December 2001, Enron structured in-
to seven distinct business units.
Online marketplace services
• EnronOnline (commodity trading platform)
• ClickPaper (transaction platform for pulp,
paper, and wood products)
• EnronCredit (the first global online credit
department to provide live credit prices
and enable business-to-business
customers to hedge credit exposure
instantly via the Internet.)
• ePowerOnline (customer interface for
Enron Broadband Services)
• Enron Direct (sales of fixed-price
contracts for gas and electricity; Europe
only)
• EnergyDesk (energy-related derivatives
trading; Europe only)
• NewPowerCompany (online energy
trading, joint venture with IBM and AOL)
• Enron Weather (weather derivatives)
• DealBench (online business services)
• Water2Water (water storage, supply, and
quality credits trading)
• HotTap (customer interface for Enron’s
U.S. gas pipeline businesses)
• Enromarkt (business to business pricing
and information platform; Germany only)
Broadband services
• Enron Intelligent Network (broadband
content delivery)
• Enron Media Services (risk management
services for media content companies)
• Customizable Bandwidth Solutions
(bandwidth and fiber products trading)
• Streaming Media Applications (live or on-
demand Internet broadcasting
applications)
Energy and commodities
services
• Enron Power (electricity wholesaling)
• Enron Natural Gas (natural gas
wholesaling)
• Enron Pulp and Paper, Packaging, and
Lumber (risk management derivatives for
forest products industry)
• Enron Coal and Emissions (coal
wholesaling and CO2 offsets trading)
• Enron Plastics and Petrochemicals (price
risk management for polymers, olefins,
methanol, aromatics, and natural gas
liquids)
• Enron Weather Risk Management
(Weather Derivatives)
• Enron Steel (financial swap contracts and
spot pricing for the steel industry)
• Enron Crude Oil and Oil Products
(petroleum hedging)
• Enron Wind Power Services (wind turbine
manufacturing and wind farm operation)
• MG Plc. (U.K. metals merchant)
Capital and risk management
services
Commercial and industrial out-
sourcing services
• Commodity Management
• Energy Asset Management
• Energy Information Management
• Facility Management
• Capital Management
• Azurix Inc. (water utilities and
infrastructure)
Project development and manage-
ment services
• Energy Infrastructure Development
(developing, financing, and operation of
power plants and related projects)
• Enron Global Exploration & Production
Inc. (oil and natural gas field services)
• Elektro Electricidade e Servicos SA
(Brazilian electric utility)
Energy transportation and upstream
services
• Natural Gas Transportation
• Northern Border Pipeline
• Houston Pipeline
• Transwestern Pipeline
• Florida Gas Transmission
• Northern Natural Gas Company
• Natural Gas Storage
• Compression Services
• Gas Processing and Treatment
• Engineering, Procurement, and
Construction Services
From Wikipedia, the free encyclopedia
Enron
3
• EOTT Energy Inc. (oil transportation)
Enron manufactured gas valves,
circuit
breakers, thermostats, and electrical equip-
ment in Venezuela through INSELA SA, a
50-50 joint venture with General Electric. En-
ron owned three paper and pulp products
companies: Garden State Paper, a newsprint
mill; as well as Papiers Stadacona and St.
Aurelie Timberlands. Enron held a con-
trolling stake in the Louisiana-based petro-
leum exploration and production company
Mariner Energy. However, recently after the
major debacle concerning the company, Pad-
mini made many of their overseas locations
dialate.
EnronOnline
In November 1999, Enron launched En-
ronOnline. Conceptualized by the company’s
Global Finance department under Nick
Rhinehart, it was the first web-based transac-
tion system that allowed buyers and sellers to
buy, sell, and trade commodity products glob-
ally. It allowed users to do business only with
Enron. Due to the huge cash needs of Enron
Online, and the firm wasting money in other
areas such as broadband, Azurix, Enron En-
ergy Services, and shutting down the original
pipeline service which generated cash flow,
Enron virtually drained itself of cash. The En-
ron Global Finance department had to keep
working up more creative financing moves to
keep the company running.
EnronOnline went live on November 29,
1999. The site allowed energy users to do
business in a previously unseen way. Until
this point a trader who wanted to buy an en-
ergy contract talked with another energy
trader who wanted to sell a contract, and
from there, terms were agreed. EnronOnline
allowed market participants to see prices on
their screen just like a stock ticker, and could
do business far more simply.
The main commodities offered on En-
ronOnline were natural gas and electricity,
although there were 500 other products in-
cluding credit derivatives, bankruptcy swaps,
pulp, gas, plastics, paper, steel, metals,
freight, and TV commercial time.
EnronOnline was seen as an impressive
tool, but because Enron was either buying,
selling, or trading in every transaction, the
costs increased over time, and the systems
were involved in the financial misreporting
and other questionable financial behavior
that eventually
led
to Enron’s demise.
However, EnronOnline
spawned several
other
e-commerce
websites
including
www.DealBench.com. DealBench is an ac-
quisition and divestiture tool still operating
today. As of 2007, Enron still operates the
DealBench code under the name EnronAs-
sets. Other Enron developed technologies in-
clude Commodity Logic, ClickPaper and
EnronCredit.
EnronOnline closed down for online trad-
ing on the morning of November 28, 2001,
with Enron filing for bankruptcy four days
later.
Principal assets
At the time of bankruptcy, Enron owned all of
or interests in the following major assets:
Power plants
Enron owned or operated 38 electric power
plants worldwide:
• Teesside (United Kingdom)—at the time of
commission in 1992, at 1750 MW, was the
largest Natural Gas Co-Gen plant in the
world. Its on-time and under-budget
completion put Enron Power on the map
as an international developer, owner and
operator.
• Bahia Las Minas (Panama)- largest
thermal power plant in Central America,
355 MW
• Puerto Quetzal Power Project
(Guatemala)—110 MW
• PQP LLC (Guatemala)—holding company
for 124 MW Power Barge named
"Esperanza"
• Empresa Energetica Corinto
(Nicaragua)—holding company for
"Margarita II" 70.5 MW power barge,
Enron held 35% share
• EcoElectrica (Puerto Rico, USA)—507 MW
natural gas cogeneration plant, with
adjacent LNG import terminal- supplied
20% of island’s electricity
• Puerto Plata Power Project (Dominican
Republic)—185 MW power barge named
"Puerto Plata"
• Modesto Maranzana Power Plant
(Argentina)—70 MW
• Cuiaba Integrated Project (Brazil)—480
MW combined cycle power plant
From Wikipedia, the free encyclopedia
Enron
4
• Nowa Sarzyna Power Plant (Poland)—116
MW, first privately developed post-
Communist electricity project in Poland
• Sarlux Power Project (Italy)—551 MW
combined cycle power plant, converted
residue from Italy’s largest oil refinery
into synthetic gas for fuel
• Trakya Power Project (Turkey)—478 MW
• Chengdu Cogen Project (China)—284 MW,
joint venture with Sichuan Electric
Company
• Northern Marianas Power Project (Guam,
USA)—80 MW slow speed diesel oil plant
• Batangas Power Project (Philippines)—110
MW
• Subic Bay Power Project
(Philippines)—116 MW
• Dabhol Power Project (India)—2,184 MW
combined cycle plant, generally
considered one of Enron’s most
controversial and least successful projects
• Storm Lake Wind Generation Project
(Iowa, USA)—193 MW wind farm
• Lake Benton II Wind Generation Facility
(Minnesota, USA)—104 MW wind farm
• Lake Benton I Wind Generation Facility
(Minnesota, USA)—107 MW wind farm
• Cabazon Wind Generation Facility
(California, USA)—40 MW wind farm
• Green Power I Wind Generation Facility
(California, USA)—16.5 MW wind farm
• Indian Mesa I Wind Generation Facility
(Texas, USA)—25.5 MW wind farm
• Clear Sky Wind Power Generation Facility
(Texas, USA)—135 MW wind farm
• Mill Run Wind Wind Power Generation
Facility (Pennsylvania, USA)—15 MW
wind farm
• Trent Mesa Wind Generation Facility
(Texas, USA)—150 MW wind farm
• Montfort Wind Generation Facility
(Wisconsin, USA)—30 MW wind farm
• 8 hydroelectric plants in Oregon with a
combined capacity of 509 MW, owned
through Portland General Electric
• 4 additional thermal plants in Oregon and
Montana with a combined capacity of
1,464 MW, owned through Portland
General Electric
Pipelines
• Centragas (Colombia)—357 miles, natural
gas
• Promigas (Colombia)
• Transportadora de Gas del Sur
(Argentina)—largest pipeline system in
South America, 5,005 km
• CEG (Brazil)—1,368 miles, natural gas
• CEGRio (Brazil)
• Transredes (Bolivia)—3,000 km natural
gas pipeline and 2,500 km oil & liquids
pipeline
• Bolivia-to-Brazil Pipeline (Bolivia/
Brazil)—3,000 km, natural gas
• Northern Natural Gas (Upper Midwestern
USA)—16,500 miles, included share in
Trailblazer Pipeline
• Transwestern Pipeline (Texas, Arizona,
New Mexico, Colorado)—2,554 miles
• Florida Gas Transmission (Texas,
Louisiana, Alabama, Mississippi,
Florida)—4,800 miles
• Northern Border Pipeline (Indiana,
Illinois, Iowa, South Dakota, North
Dakota, Montana )—1,249 miles
Electric utilities/distributors
• Portland General Electric Company
(USA)—serving 775,000 customers in
Oregon
• Elektro Electricidade e Servicos S.A.
(Brazil)—1.5 million customers
• Compania Anonima Luz y Fuerza
Electricas de Puerto Cabello
(Venezuela)—50,000 customers
Natural gas-related businesses
• ProCaribe (Puerto Rico, USA)—LPG
storage terminal, only fully refrigerated
LPG storage facility in Caribbean
• San Juan Gas Company (Puerto Rico,
USA)—gas distribution, 400 industrial/
commercial customers
• Industrial Gases Ltd. (Jamaica)—8 filling
plants, industrial gas manufacturing &
LPG distribution, held 100% monopoly on
Jamaican industrial gas business and 40%
of LPG business
• Gaspart (Brazil)—consortium of 7 gas
distribution companies
• Vengas (Venezuela)—LPG transportation
and distribution
• SK-Enron Company Ltd. (South
Korea)—joint venture with SK
Corporation; included 8 city gas utilities,
an LPG distributor, and a steam and
electricity cogeneration facility
From Wikipedia, the free encyclopedia
Enron
5
Pulp and paper
• Garden State Paper Company Inc. (New
Jersey, USA)—paperboard and newsprint
recycling mill
• Papiers Stadacona Ltee. (Quebec,
Canada)—wood pulp & paper mill
• St. Aurelie Timberlands Company Ltd.
(Quebec, and New Brunswick, Canada &
Maine, USA)—timber company
Other
• Mariner Energy Inc. (Houston, Texas,
USA)—oil & gas exploration, development,
and production with operations in the Gulf
of Mexico
• Interruptores Especializados Lara
(Venezuela)—manufacturer of valves,
thermostats, and electrical breakers for
appliances
• Enron Wind—manufacturer of wind power
turbines and related systems, with
factories in USA, Spain, Portugal, and
Germany
Accounting scandal of
2001
After a series of revelations involving irregu-
lar accounting procedures bordering on fraud
perpetrated throughout the 1990s involving
Enron and its accounting firm Arthur Ander-
sen, Enron stood on the verge of undergoing
the largest bankruptcy in history by mid-
November 2001 (the largest Chapter 11
bankruptcy until that of the investment bank
Lehman Brothers on September 15, 2008). A
white knight rescue attempt by a similar,
smaller energy company, Dynegy, was not
viable.
As the scandal unraveled, Enron shares
dropped from over US$90.00 to just pennies.
Enron had been considered a blue chip stock,
so this was an unprecedented and disastrous
event in the financial world. Enron’s plunge
occurred after it was revealed that much of
its profits and revenue were the result of
deals with special purpose entities (limited
partnerships which it controlled). The result
was that many of Enron’s debts and the
losses that it suffered were not reported in
its financial statements.
Enron filed for bankruptcy on December
2, 2001. In addition, the scandal caused the
dissolution of Arthur Andersen, which at the
time was one of the world’s top accounting
firms. The firm was found guilty of obstruc-
tion of justice in 2002 for destroying docu-
ments related to the Enron audit and was
forced to stop auditing public companies. Al-
though the conviction was thrown out in
2005 by the Supreme Court, the damage to
the Andersen name has prevented it from re-
turning as a viable business.
Enron also withdrew a naming rights deal
with the Houston Astros Major League Base-
ball club to have its name associated with
their new stadium, which was formerly
known as Enron Field (it is now Minute Maid
Park.)
Accounting practices
Enron had created offshore entities, units
which may be used for planning and avoid-
ance of taxes, raising the profitability of a
business. This provided ownership and man-
agement with full freedom of currency move-
ment and the anonymity that allowed the
company to hide losses. These entities made
Enron look more profitable than it actually
was, and created a dangerous spiral in which
each quarter, corporate officers would have
to perform more and more contorted finan-
cial deception to create the illusion of billions
in profits while the company was actually los-
ing money. This practice drove up their stock
price to new levels, at which point the exec-
utives began to work on insider information
and trade millions of dollars worth of Enron
stock. The executives and insiders at Enron
knew about the offshore accounts that were
hiding of losses for the company; however
the investors knew nothing of this. Chief Fin-
ancial Officer Andrew Fastow led the team
which created the off-books companies, and
manipulated the deals to provide himself, his
family, and his friends with hundreds of mil-
lions of dollars in guaranteed revenue, at the
expense of the corporation for which he
worked and its stockholders.
In 1999, Enron launched EnronOnline, an
Internet-based trading operation, which was
used by virtually every energy company in
the United States. Enron president and chief
operating officer Jeffrey Skilling began ad-
vocating a novel idea: the company didn’t
really need any "assets." By pushing the com-
pany’s aggressive investment strategy, he
helped make Enron the biggest wholesaler of
gas and electricity, trading over $27 billion
From Wikipedia, the free encyclopedia
Enron
6
per quarter. The firm’s figures, however, had
to be accepted at face value. Under Skilling,
Enron adopted mark to market accounting, in
which anticipated future profits from any
deal were tabulated as if real today. Thus,
Enron could record gains from what over
time might turn out losses, as the company’s
fiscal health became secondary to manipulat-
ing its stock price on Wall Street during the
Tech boom. But when a company’s success is
measured by agreeable financial statements
emerging from a black box, a term Skilling
himself admitted, actual balance sheets
prove inconvenient. Indeed, Enron’s unscru-
pulous actions were often gambles to keep
the deception going and so push up the stock
price, which was posted daily in the company
elevator. An advancing number meant a con-
tinued infusion of investor capital on which
debt-ridden Enron in large part subsisted. Its
fall would collapse the house of cards. Under
pressure to maintain the illusion, Skilling
verbally attacked Wall Street Analyst Richard
Grubman[4], who questioned Enron’s unusual
accounting practice during a recorded con-
ference call. When Grubman complained that
Enron was the only company that could not
release a balance sheet along with its earn-
ings statements, Skilling replied "Well, thank
you very much, we appreciate that . . . as-
shole." Though the comment was met with
dismay and astonishment by press and pub-
lic, it became an inside joke among many En-
ron employees, mocking Grubman for his
perceived meddling rather than Skilling’s
lack of tact. When asked during his trial,
Skilling wholeheartedly admitted that indus-
trial dominance and abuse was a global prob-
lem: "Oh yes, yes sure, it is."[5]
Peak and decline of stock price
In August 2000, Enron’s stock price hit its
highest value of $90.[6] At this point Enron
executives, who possessed the inside inform-
ation on the hidden losses, began to sell their
stock. At the same time, the general public
and Enron’s investors were told to buy the
stock. Executives told the investors that the
stock would continue to climb until it reached
possibly the $130 to $140 range, while
secretly unloading their shares.
As executives sold their shares, the price
began to drop. Investors were told to contin-
ue buying stock or hold steady if they already
owned Enron because the stock price would
rebound in the near future. Kenneth Lay’s
strategy for responding to Enron’s continuing
problems was in his demeanor. As he did
many times, Lay would issue a statement or
make an appearance to calm investors and
assure them that Enron was headed in the
right direction.
By August 15, 2001, Enron’s stock price
had fallen to $42. Many of the investors still
trusted Lay and believed that Enron would
rule the market. They continued to buy or
hold their stock and lost more money every
day. As October closed, the stock had fallen
to $15. Many saw this as a great opportunity
to buy Enron stock because of what Lay had
been telling them in the media. Their trust
and optimism proved to be greatly misplaced.
Lay has been accused of selling over $70
million worth of stock at this time, which he
used to repay cash advances on lines of cred-
it. He sold another $20 million worth of stock
in the open market. Also, Lay’s wife, Linda,
has been accused of selling 500,000 shares of
Enron stock totaling $1.2 million on Novem-
ber 28, 2001. The money earned from this
sale did not go to the family but rather to
charitable organizations, which had already
received pledges of contributions from the
foundation. Records show that Mrs. Lay
placed the sale order sometime between
10:00 and 10:20 AM. News of Enron’s prob-
lems, including the millions of dollars in
losses they had been hiding went public
about 10:30 that morning, and the stock
price soon fell to below one dollar. Former
Enron executive Paula Rieker has been
charged with criminal insider trading. Rieker
obtained 18,380 Enron shares for $15.51 a
share. She sold that stock for $49.77 a share
in July 2001, a week before the public was
told what she already knew about the $102
million loss.
Post-bankruptcy
Enron initially planned to retain its three do-
mestic pipeline companies as well as most of
its overseas assets. However, before emer-
ging from bankruptcy, Enron spun off its do-
mestic pipeline companies as CrossCountry
Energy.
Enron sold its last business, Prisma En-
ergy, in 2006, leaving it as an asset-less shell.
In early 2007, it changed its name to Enron
Creditors Recovery Corporation. Its goal is to
From Wikipedia, the free encyclopedia
Enron
7
pay off the old Enron’s remaining creditors
and wind up Enron’s affairs.
Shortly after emerging from bankruptcy in
November 2004, Enron’s new board of direct-
ors sued 11 financial institutions for helping
Lay, Fastow, Skilling and others hide Enron’s
true financial condition. The proceedings
were dubbed the "megaclaims litigation."
Among the defendants were Royal Bank of
Scotland, Deutsche Bank and Citigroup. As of
2008, Enron has settled with all of the insti-
tutions, ending with Citigroup. Enron was
able to obtain nearly $20 million dollars to
distribute to its creditors as a result of the
megaclaims litigation.
California’s deregulation
and subsequent energy
crisis
See also: California electricity crisis
In October 2000, Daniel Scotto, the top
ranked utility analyst on Wall Street, suspen-
ded his ratings on all energy companies con-
ducting business in California because of the
possibility that the companies would not re-
ceive full and adequate compensation for the
deferred energy accounts used as the corner-
stone for the California Deregulation Plan en-
acted in the late 1990s. Five months later,
Pacific Gas & Electric (PG&E) was forced in-
to bankruptcy. Senator Phil Gramm, the
second largest recipient of campaign contri-
butions from Enron, succeeded in legislating
California’s energy commodity trading dereg-
ulation. Despite warnings from prominent
consumer groups which stated that this law
would give energy traders too much influ-
ence over energy commodity prices, the le-
gislation was passed in December 2000.
As Public Citizen reported, "Because of
Enron’s new, unregulated power auction, the
company’s
’Wholesale Services’
revenues
quadrupled—from $12 billion in the first
quarter of 2000 to $48.4 billion in the first
quarter of 2001."[7]
Before passage of the deregulation law,
there had been only one Stage 3 rolling
blackout declared. Following passage, Cali-
fornia had a total of 38 blackouts defined as
Stage 3 rolling blackouts, until federal regu-
lators intervened in June 2001. These black-
outs occurred mainly as a result of a poorly
designed
market
system
that
was
manipulated by traders and marketers. Enron
traders were revealed as intentionally en-
couraging the removal of power from the
market during California’s energy crisis by
encouraging suppliers to shut down plants to
perform unnecessary maintenance, as docu-
mented in recordings made at the time.[8][9]
These acts contributed to the need for rolling
blackouts, which adversely affected many
businesses dependent upon a reliable supply
of electricity, and inconvenienced a large
number of retail consumers. This scattered
supply raised the demand exponentially, and
Enron traders were thus able to sell power at
premium prices, sometimes up to a factor of
20x its normal peak value.
See also
• Enron: The Smartest Guys in the Room, an
award-winning 2004 documentary film
which examines the collapse of the Enron
Corporation.
References
[1] Mergent Online | Enron Company
Financials | Annual Income Statement
[2] BBC NEWS | Business | Andersen guilty
in Enron case
[3] BBC News | Enron: The rise and fall
[4] "Skilling comes out swinging". Money/
CNN. April 10, 2006.
http://money.cnn.com/2006/04/10/news/
newsmakers/enron_trial/index.htm.
[5] Beth MacLean and Peter Elkind,
Smartest Guys in the Room: The
Amazing Rise and Scandalous Fall of
Enron, 2003, ISBN 1591840082
[6] http://business.nmsu.edu/~dboje/papers/
ENRON_2.jpg, The Smartest Guys in the
Room, Bethany McLean and Peter
Elkind, 318
[7] Blind Faith: How Deregulation and
Enron’s Influence Over Government
Looted Billions from Americans
[8] http://www.cnn.com/2005/US/02/03/
enron.tapes/ Tapes: Enron plotted to
shut down power plant
[9] Tapes Show Enron Caused Rolling
Blackouts in California
From Wikipedia, the free encyclopedia
Enron
8
Bibliography
• Robert Bryce, Pipe Dreams: Greed, Ego,
and the Death of Enron (PublicAffairs,
2002) ISBN 1-58648-138-X
• Lynn Brewer, Matthew Scott Hansen,
House of Cards, Confessions of An Enron
Executive (Virtualbookworm.com
Publishing, 2002) ISBN 1-58939-248-5
ISBN 1-58939-248-5
• Kurt Eichenwald, Conspiracy of Fools: A
True Story (Broadway Books, 2005) ISBN
0-7679-1178-4
• Peter C. Fusaro, Ross M. Miller, What
Went Wrong at Enron: Everyone’s Guide
to the Largest Bankruptcy in U.S. History
(Wiley, 2002), ISBN 0-471-26574-8
• Loren Fox, Enron: The Rise and Fall.
(Hoboken, N.J.: Wiley, 2003)
• Judith Haney Enron’s Bust: Was it the
result of Over-Confidence or a Confidence
Game? USNewsLink/ December 13, 2001
• Marc Hodak, The Enron Scandal,
Organizational Behavior Research Center
Papers (SSRN), June 4, 2007
• Bethany McLean, Peter Elkind, Smartest
Guys in the Room: The Amazing Rise and
Scandalous Fall of Enron (Portfolio, 2003)
ISBN 1-59184-008-2
• Mimi Swartz, Sherron Watkins, Power
Failure: The Inside Story of the Collapse
of Enron (Doubleday, 2003) ISBN
0-385-50787-9
• Daniel Scotto "American Financial
Analyst: The First Analyst to recommend
the selling of Enron Stock"
External links
• All Enron emails released into the public
domain, archived and searchable
• Enron Corporation homepage
• CrossCountry Energy L.L.C.
• Portland General Electric Company
• Northern Natural Gas Company
• "Enron—Legal News Archives", Breaking
Legal News
• Enron’s Code of Ethics
Data
• Yahoo!: Enron Corp. Company Profile
• Hoovers: Enron Creditors Recovery Corp.
Profile
• Google Finance: Enron Creditors Recovery
Corp. Profile
• Enron Chronology
Retrieved from "http://en.wikipedia.org/wiki/Enron"
Categories: Defunct companies of the United States, Enron, Corporate scandals, Corporate
crime, Companies formerly listed on the London Stock Exchange, Companies that have filed
for Chapter 11 bankruptcy, Companies established in 1985, Defunct companies based in
Omaha, Nebraska, Companies based in Houston, Texas, 2001 crimes, Business ethics, Ac-
counting scandals, Fraud
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From Wikipedia, the free encyclopedia
Enron
9