Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. It was founded in 1985 as a merger between Houston Natural Gas and InterNorth, both relatively small regional companies. Before its bankruptcy on December 3, 2001, Enron employed approximately 29,000 staff and was a major electricity, natural gas, communications and pulp and paper company, with claimed revenues of nearly $101 billion during 2000. Fortune named Enron "America's Most Innovative Company" for six consecutive years.
At the end of 2001, it was revealed that Enron's reported financial condition was sustained by institutionalized, systematic, and creatively planned accounting fraud, known since as the Enron scandal. Enron has since become a well-known example of willful corporate fraud and corruption. The scandal also brought into question the accounting practices and activities of many corporations in the United States and was a factor in the enactment of the Sarbanes–Oxley Act of 2002. The scandal also affected the greater business world by causing the dissolution of the Arthur Andersen accounting firm, which had been Enron's main auditor for years.
Enron filed for bankruptcy in the Southern District of New York in late 2001 and selected Weil, Gotshal & Manges as its bankruptcy counsel. It ended its bankruptcy during November 2004, pursuant to a court-approved plan of reorganization. A new board of directors changed the name of Enron to Enron Creditors Recovery Corp., and emphasized reorganizing and liquidating certain operations and assets of the pre-bankruptcy Enron. On September 7, 2006, Enron sold Prisma Energy International Inc., its last remaining business, to Ashmore Energy International Ltd. (now AEI).
Logo (designed by Paul Rand) used from 1996 to 2001. This was Rand’s final major logo before his death in November 1996.
|Traded as||NYSE: ENE|
|Founded||1985 in Omaha, Nebraska, United States|
1400 Smith Street,
|United States, India, Caribbean,|
|Total assets||$67.503 billion|
Number of employees
|Divisions||Enron Energy Services (EES) Enron Xcelerator|
One of Enron's primary predecessors was the Northern Natural Gas Company, which was formed in 1930, in Omaha, Nebraska just a few months after Black Tuesday. The low cost of natural gas and cheap labor supply during the Great Depression helped to fuel the company's early beginnings. The company doubled in size by 1932 and was able to bring the first natural gas to Minnesota. Over the next 50 years, Northern expanded even more as it acquired many energy companies and created new divisions within. It was reorganized in 1979 as the main subsidiary of a holding company, InterNorth, which was a diversified energy and energy-related products company. Although most of the acquisitions conducted were successful, some ended poorly. InterNorth competed with Cooper Industries over a hostile takeover of Crouse-Hinds Company, an electrical products manufacturer. InterNorth was ultimately unsuccessful as Cooper bought out Crouse-Hinds. Cooper and InterNorth feuded over numerous suits during the course of the takeover that were eventually settled after the transaction was completed. The subsidiary Northern Natural Gas operated the largest natural gas pipeline company in North America. By the 1980s, InterNorth became a major force for natural gas production, transmission, and marketing as well as for natural gas liquids, and was an innovator in the plastics industry. In 1983, InterNorth merged with the Belco Petroleum Company, a Fortune 500 oil exploration and development company founded by Arthur Belfer.
The Houston Natural Gas (HNG) corporation was initially formed from the Houston Oil Co. in 1925 to provide gas to customers in the Houston market through the building of gas pipelines. Under the leadership of CEO Robert Herring from 1967 to 1981, the company became a large dominant force in the energy industry with a large pipeline network as a result from a prosperous period of growth in the early to mid-1970s. This growth was largely a result of the exploitation of the unregulated Texas natural gas market and the commodity surge in the early 1970s. Toward the end of the 1970s, HNG's luck began to run out with rising gas prices forcing clients to switch to oil. In addition, with the passing of the Natural Gas Policy Act of 1978, the Texas market was more difficult to profit from and as a result, HNG's profits fell. After Herring's death in 1981, M.D. Matthews briefly took over as CEO in a 3-year stint with initial success, but ultimately, a big dip in earnings led to his exit. In 1984, Kenneth Lay succeeded Matthews and inherited the troubled, but large diversified energy conglomerate.
InterNorth, in its conservative success became a target of corporate takeovers, the most prominent being corporate raider Irwin Jacobs. InterNorth CEO Sam Segnar, in searching for a company to merge with to fend off takeover attempts as a poison pill, discovered HNG. In May 1985, Internorth acquired HNG for $2.3 billion, 40% higher than the current market price, in order to avoid the corporate takeover attempt. The combined assets of the two companies would create the second largest gas pipeline system at the time in the United States. Internorth’s north-south pipelines that served Iowa and Minnesota complemented HNG’s Florida and California east-west pipelines well.
The company was initially named "HNG/InterNorth Inc.", even though InterNorth was technically the parent. At the outset, Segnar was CEO for a short time, before he was fired by the Board of Directors whereupon Lay was tapped to be the new CEO. Lay moved the headquarters of the new company back to energy capital Houston. The company then set out to find a new name, spent upwards of $100,000 in focus groups and consulting before "Enteron" was suggested. The name was eventually dismissed over its apparent likening to an intestine and shortened to "Enron." (The distinctive logo was one of the final major projects of legendary graphic designer Paul Rand before his death in 1996.) Enron still had some lingering problems left over from its merger, however. The company had to pay Jacobs, who was still a threat, over $350 million and reorganize the company. Lay sold off any parts of the company that he believed didn't belong in the long-term future of Enron. Lay consolidated all the gas pipeline efforts under the Enron Gas Pipeline Operating Company. In addition, the company began to ramp up its electric power and natural gas efforts. In 1988 and 1989, the company began adding power plants and cogeneration units to its portfolio. In 1989, Jeffrey Skilling, then a consultant at McKinsey & Co., came up with the idea to link natural gas to consumers in more ways, effectively turning natural gas into a commodity. Enron adopted the idea and called it the "Gas Bank." The division's success prompted Skilling to join Enron as the head of the Gas Bank in 1991. Another major development inside Enron was the beginning of the company's pivot to overseas that was expanded upon in the 1990s. Starting in 1989, the company received a $56 million loan from the Overseas Private Investment Corporation (OPIC) for a power plant in Argentina.
Over the course of the 1990s, Enron made a few changes to its business plan that greatly improved the perceived profitability of the company. First, Enron invested heavily in overseas assets, specifically energy. Another major shift was the gradual transition of focus from a producer of energy to a company that acted more like an investment firm and sometimes a hedge fund, making profits off the margins of the products it traded. These products were traded through the Gas Bank concept, now called the Enron Finance Corp. headed by Skilling.
With the success of the Gas Bank trading natural gas, Skilling looked to expand the horizons of his division, Enron Capital & Trade. Skilling hired Andrew Fastow in 1990 to help with this.
Starting in 1994 under the Energy Policy Act of 1992, Congress allowed states to deregulate their electricity utilities, allowing them to be opened for competition. California was one such state to do so. Enron, seeing an opportunity with rising prices, was eager to jump into the market. In 1997, Enron acquired Portland General Electric (PGE). Although an Oregon utility, it had potential to begin serving the massive California market since PGE was a regulated utility. The new Enron division, Enron Energy, ramped up its efforts by offering discounts to potential customers in California for switching their electric supplier to Enron from their previous supplier, starting in 1998. Enron Energy also began to sell natural gas to customers in Ohio and wind power in Iowa. However, in 1999, the company ended its retail endeavor, only offering wholesale energy as it was revealed it was spending upwards of $100 million a year.
As fiber optic technology progressed in the 1990s, multiple companies, including Enron, attempted to make money by "keeping the continuing network costs low", which was done by owning their own network. In 1997, FTV Communications LLC, a limited liability company formed by Enron subsidiary FirstPoint Communications, Inc., Williams Communications Group, Inc. and Touch America. FTV constructed a 1,380 mile fiber optic network between Portland and Las Vegas. In 1998, Enron constructed a building in a rundown area of Las Vegas near E Sahara, building right over the "backbone" of fiber optic cables providing service to technology companies nationwide. The location had the ability to send "the entire Library of Congress anywhere in the world within minutes" and could stream "video to the whole state of California". The location was also more protected from natural disasters than areas such as Los Angeles or the East Coast. According to Wall Street Daily, "Enron had a secret," it "wanted to trade bandwidth like it traded oil, gas, electricity, etc. It launched a secret plan to build an enormous amount of fiber optic transmission capacity in Las Vegas ... it was all part of Enron’s plan to essentially own the internet." Enron sought to have all US internet service providers rely on their Nevada facility to supply bandwidth, which Enron would sell in a fashion similar to other commodities.
In January 2000, Kenneth Lay and Jeffrey Skilling announced to analysts that they were going to open trading for their own "high-speed fiber-optic networks that form the backbone for Internet traffic". Investors quickly bought Enron stock following the announcement "as they did with most things Internet-related at the time", with stock prices rising from $40 per share in January 2000 to $70 per share in March, peaking at $90 in the summer of 2000. Enron executives obtained windfall gains from the rising stock prices, with a total of $924 million of stocks sold by high-level Enron employees between 2000 and 2001. Head of Enron Broadband Services, Kenneth Rice, sold 1 million shares himself, earning about $70 million in returns. As prices of existing fiber optic cables plummeted due to the vast oversupply of the system, with only 5% of the 40 million miles being active wires, Enron purchased the inactive "dark fibers", expecting to buy them at low cost and then make a profit as the need for more usage by internet providers increased, with Enron expecting to lease its acquired dark fibers in 20 year contracts to providers. However, Enron's accounting would use estimates to determine how much their dark fiber would be worth when "lit" and apply those estimates to their current income, adding exaggerated revenue to their accounts since transactions were not yet made and it was not known if the cables would ever be active. Enron's trading with other energy companies within the broadband market was its attempt to lure large telecommunications companies, such as Verizon Communications, into its broadband scheme to create its own new market.
By the second quarter of 2001, Enron Broadband Services was reporting losses. On March 12, 2001, a proposed 20-year deal between Enron and Blockbuster Inc. to stream movies on demand over Enron's connections was cancelled, with Enron shares dropping from $80 per share in mid-February 2001 to below $60 the week after the deal was killed. The branch of the company that Jeffrey Skilling "said would eventually add $40 billion to Enron's stock value" added only about $408 million in revenue for Enron in 2001, with the company's broadband arm closed shortly after its meager second-quarter earnings report in July 2001.
Following the bankruptcy of Enron, telecommunications holdings were sold for "pennies on the dollar". In 2002, Rob Roy of Switch Communications purchased Enron's Nevada facility in an auction attended only by Roy. Enron's "fiber plans were so secretive that few people even knew about the auction." The facility was sold for only $930,000. Following the sale, Switch expanded to control "the biggest data center in the world".
Enron, seeing stability after the merger, began to look overseas for new possible energy opportunities in 1991. Enron's first such opportunity was a natural gas power plant utilizing cogeneration that the company built in Teesside, UK. The power plant was so large it could produce up to 3% of the United Kingdom's electricity demand with a capacity of over 1,875 megawatts. Seeing the success in England, the company developed and diversified its assets worldwide under the name of Enron International (EI), headed by former HNG executive Rebecca Mark. By 1994, EI's portfolio included assets in The Philippines, Australia, Guatemala, Germany, France, India, Argentina, the Caribbean, China, England, Colombia, Turkey, Bolivia, Brazil, Indonesia, Norway, Poland, and Japan. The division was becoming a large share of earnings for Enron, contributing 25% of earnings in 1996. Mark and EI believed the water industry was the next market to be deregulated by authorities and seeing the potential, searched for ways to enter the market, similar to PGE.
In 1998, Enron International acquired Wessex Water for $2.88 billion. Wessex Water became the core asset of a new company, Azurix, which expanded to other water companies. After Azurix's promising IPO in June 1999, Enron "sucked out over $1 billion in cash while loading it up with debt", according to Bethany McLean and Peter Elkind, authors of The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron.:250 Additionally, British water regulators required Wessex to cut its rates by 12% starting in April 2000, and an upgrade was required of the utility's aging infrastructure, estimated at costing over a billion dollars.:255 By the end of 2000 Azurix had an operating profit of less than $100 million and was $2 billion in debt.:257 In August 2000, after Azurix stock took a plunge following its earnings report,:257 Mark resigned from Azurix and Enron. Azurix assets, including Wessex, were eventually sold by Enron.
In 1990, Enron's Chief Operating Officer Jeffrey Skilling hired Andrew Fastow, who was well acquainted with the burgeoning deregulated energy market that Skilling wanted to exploit. In 1993, Fastow began establishing numerous limited liability special purpose entities (a common business practice in the energy industry); however, it also allowed Enron to transfer liability so that it would not appear in its accounts, allowing it to maintain a robust and generally increasing stock price and thus keeping its critical investment grade credit ratings.
Enron was originally involved in transmitting and distributing electricity and natural 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 coast to coast and border to border including Northern Natural Gas, Florida Gas Transmission, Transwestern Pipeline company and a partnership in Northern Border Pipeline from Canada. The states of California, New Hampshire, and Rhode Island had already passed power deregulation laws by July 1996, the time of Enron's proposal to acquire Portland General Electric corporation. During 1998, Enron began operations in the water sector, creating the Azurix Corporation, which it part-floated on the New York Stock Exchange during June 1999. Azurix failed to become successful in 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 marketing, promoting power, and its high stock price. Enron was named "America's Most Innovative Company" by the magazine Fortune for six consecutive years, from 1996 to 2001. It was on the Fortune's "100 Best Companies to Work for in America" list during 2000, and had offices that were 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, benefits for its workers and extremely effective management until the exposure of its corporate fraud. The first analyst to question the company's success story was Daniel Scotto, an energy market expert at BNP Paribas, who issued a note in August 2001 entitled Enron: All stressed up and no place to go, which encouraged investors to sell Enron stocks, although he only changed his recommendation on the stock from "buy" to "neutral".
As was later discovered, many of Enron's recorded assets and profits were inflated or even wholly fraudulent and nonexistent. One example of fraudulent records was during 1999 when Enron promised to repay Merrill Lynch & Co.'s investment with interest in order to show a profit on its books. Debts and losses were put into entities formed "offshore" that were not included in the company's financial statements, and other sophisticated and arcane financial transactions between Enron and related companies were used to eliminate unprofitable entities from the company's books.
The company's most valuable asset and the largest source of honest income, the 1930s-era Northern Natural Gas company, was eventually purchased by a group of Omaha investors, who relocated its headquarters back to Omaha; it is now a unit of Warren Buffett's Berkshire Hathaway Energy. NNG was established as collateral for a $2.5 billion capital infusion by Dynegy Corporation when Dynegy was planning to buy Enron. When Dynegy examined Enron's financial records carefully, they repudiated the deal and dismissed their CEO, Chuck Watson. The new chairman and CEO, the late Daniel Dienstbier, had been president of NNG and an Enron executive at one time and was forced out of Enron by Ken Lay. Dienstbier was an acquaintance of Warren Buffett. NNG continues to be profitable now.
During 2001, after a series of revelations involving irregular accounting procedures bordering on fraud perpetrated throughout the 1990s involving Enron and its accounting company Arthur Andersen, Enron suffered the largest Chapter 11 bankruptcy in history (since surpassed by those of Worldcom during 2002 and Lehman Brothers during 2008).
As the scandal progressed, Enron share prices decreased from US $90.56 during the summer of 2000, to just pennies. Enron had been considered a blue chip stock investment, so this was an unprecedented event in the financial world. Enron's demise occurred after the revelation that much of its profits and revenue were the result of deals with special purpose entities (limited partnerships which it controlled). This meant that many of Enron's debts and the losses that it suffered were not reported in its financial statements.
A rescue attempt by a similar, smaller energy company, Dynegy, failed during late November due to concerns about an unexpected restatement of earnings. 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 "Big Five" - the world's foremost accounting firms. The company was found guilty of obstruction of justice during 2002 for destroying documents related to the Enron audit. Since the SEC is not allowed to accept audits from convicted felons, Andersen was forced to stop auditing public companies. Although the conviction was dismissed during 2005 by the Supreme Court, the damage to the Andersen name has prevented it from reviving as a viable business even on a limited scale.
Enron also withdrew a naming-rights deal with the Houston Astros Major League Baseball club to have its name associated with their new stadium, which was known formerly as Enron Field (now Minute Maid Park).
Enron used a variety of deceptive, bewildering, and fraudulent accounting practices and tactics to cover its fraud in reporting Enron's financial information. Special Purpose Entities were created to mask significant liabilities from Enron's financial statements. These entities made Enron seem more profitable than it actually was, and created a dangerous spiral in which, each quarter, corporate officers would have to perform more and more financial deception to create the illusion of billions of dollars in profit while the company was actually losing money. This practice increased their stock price to new levels, at which point the executives 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 losses for the company; the investors, however, did not. Chief Financial Officer Andrew Fastow directed the team which created the off-books companies, and manipulated the deals to provide himself, his family, and his friends with hundreds of millions of dollars in guaranteed revenue, at the expense of the corporation for which he worked and its stockholders.
During 1999, Enron initiated 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 advocating a novel idea: the company didn't really need any "assets". By promoting the company's aggressive investment strategy, he helped make Enron the biggest wholesaler of gas and electricity, trading over $27 billion per quarter. The corporation's financial claims, 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 currently real. Thus, Enron could record gains from what over time might turn out to be losses, as the company's fiscal health became secondary to manipulating its stock price on Wall Street during the so-called Tech boom. But when a company's success is measured by undocumented financial statements, actual balance sheets are inconvenient. Indeed, Enron's unscrupulous actions were often gambles to keep the deception going and so increase the stock price. An advancing price meant a continued infusion of investor capital on which debt-ridden Enron in large part subsisted (much like a financial "pyramid" or "Ponzi scheme"). Attempting to maintain the illusion, Skilling verbally attacked Wall Street Analyst Richard Grubman, who questioned Enron's unusual accounting practice during a recorded conference telephone call. When Grubman complained that Enron was the only company that could not release a balance sheet along with its earnings statements, Skilling replied, "Well, thank you very much, we appreciate that ... asshole." Though the comment was met with dismay and astonishment by press and public, it became an inside joke among many Enron employees, mocking Grubman for his perceived meddling rather than Skilling's offensiveness. When asked during his trial, Skilling declared that industrial dominance and abuse was a global problem: "Oh yes, yes sure, it is."
Enron initially planned to retain its three domestic pipeline companies as well as most of its overseas assets. However, before emerging from bankruptcy, Enron sold its domestic pipeline companies as CrossCountry Energy for $2.45 billion  and later sold other assets to Vulcan Capital Management.
Enron sold its last business, Prisma Energy, during 2006, leaving Enron asset-less. During early 2007, its name was changed to Enron Creditors Recovery Corporation. Its goal is to repay the old Enron's remaining creditors and end Enron's affairs.
Azurix, the former water utility part of the company, remains under Enron ownership, although it is currently asset-less. It is involved in several litigations against the government of Argentina claiming compensation relating to the negligence and corruption of the local governance during its management of the Buenos Aires water concession during 1999, which resulted in substantial amounts of debt (approx. $620 million) and the eventual collapse of the branch.
Soon after emerging from bankruptcy during November 2004, Enron's new board of directors 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 institutions, ending with Citigroup. Enron was able to obtain nearly $7.2 billion to distribute to its creditors as a result of the megaclaims litigation. As of December 2009, some claim and process payments were still being distributed.
Enron has been featured since its bankruptcy in popular culture, including in The Simpsons episodes That '90s Show (Homer buys Enron stocks while Marge chooses to keep her own Microsoft stocks) and Special Edna, which features a scene of an Enron-themed amusement park ride. The 2007 film Bee Movie also featured a joke reference to a parody company of Enron called "Honron" (a play on the words honey and Enron). The 2017 book Bittersweet Symphony by Rebecca McNutt featured main character Bailey Kane discussing Enron while remarking, "in devastation there is opportunity, you know." The book also mentions in passing that deceased Enron executive J. Clifford Baxter "tried to complain, he tried to live with it, he tried to do the right thing but nobody heard him…" The 2003 documentary The Corporation (2003 film) made frequent references to Enron post-bankruptcy, calling the company a "bad apple." Season 1, episode #20 of the CBS crime drama television series Cold Case features a main character briefly mentioning that another character, Randy Price, is wanted by the U.S. Securities and Exchange Commission for an "Enron-type scandal".
During August 2000, Enron's stock price attained its greatest value of $90.56. At this time Enron executives, who possessed inside information 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 increase until it attained possibly the $130 to $140 range, while secretly unloading their shares.
As executives sold their shares, the price began to decrease. Investors were told to continue 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 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 doing well. In February 2001 an article by Bethany McLean appeared in Fortune magazine questioning whether Enron stock was overvalued.
By August 15, 2001, Enron's stock price had decreased to $42. Many of the investors still trusted Lay and believed that Enron would rule the market. They continued to buy or retain their stock as the equity value decreased. As October ended, the stock had decreased to $15. Many considered this a great opportunity to buy Enron stock because of what Lay had been telling them in the media.
Lay was accused of selling more than $70 million worth of stock at this time, which he used to repay cash advances on lines of credit. He sold another $29 million worth of stock in the open market. Also, Lay's wife, Linda, was accused of selling 500,000 shares of Enron stock totaling $1.2 million on November 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 made the sale order sometime between 10:00 and 10:20 am. News of Enron's problems, including the millions of dollars in losses they hid, became public about 10:30 that morning, and the stock price soon decreased to less than one dollar.
Former Enron executive Paula Rieker was charged with criminal insider trading and sentenced to two years probation. Rieker obtained 18,380 Enron shares for $15.51 a share. She sold that stock for $49.77 a share during July 2001, a week before the public was told what she already knew about the $102 million loss. In 2002, after the tumultuous fall of Enron's external auditor, and management consultant, Andersen LLP, former Andersen Director, John M. Cunningham coined the phrase, "We have all been Enroned."
The fallout resulted in both Lay and Skilling being convicted of conspiracy, fraud, and insider trading. Lay died before sentencing, Skilling got 24 years and 4 months and a $45 million penalty (later reduced). Fastow was sentenced to six years of jail time, and Lou Pai settled out of court for $31.5 million.
During October 2000, Daniel Scotto, the most renowned utility analyst on Wall Street, suspended his ratings on all energy companies conducting business in California because of the possibility that the companies would not receive full and adequate compensation for the deferred energy accounts used as the basis for the California Deregulation Plan enacted during the late 1990s. Five months later, Pacific Gas & Electric (PG&E) was forced into bankruptcy. Senator Phil Gramm, husband of Enron Board member Wendy Gramm and also the second largest recipient of campaign contributions from Enron, succeeded in legislating California's energy commodity trading deregulation. Despite warnings from prominent consumer groups which stated that this law would give energy traders too much influence over energy commodity prices, the legislation was passed during December 2000.
As the periodical 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."
After passage of the deregulation law, California had a total of 38 Stage 3 rolling blackouts declared, until federal regulators intervened during June 2001. These blackouts occurred as a result of a poorly designed market system that was manipulated by traders and marketers, as well as poor state management and regulatory oversight. Subsequently, Enron traders were revealed as intentionally encouraging the removal of power from the market during California's energy crisis by encouraging suppliers to shut down plants to perform unnecessary maintenance, as documented in recordings made at the time. 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 customers. This scattered supply increased the price, and Enron traders were thus able to sell power at premium prices, sometimes up to a factor of 20x its normal peak value.
|Corporate Leadership and Central Management|
|Board of Directors of Enron Corporation|
Enron traded in more than 30 different products, including the following:
It was also an extensive futures trader, including sugar, coffee, grains, hogs, and other meat futures. At the time of its bankruptcy filing during December 2001, Enron was structured into seven distinct business units.
Enron manufactured gas valves, circuit breakers, thermostats, and electrical equipment in Venezuela by means of INSELA SA, a 50–50 joint venture with General Electric. Enron owned three paper and pulp products companies: Garden State Paper, a newsprint mill; as well as Papiers Stadacona and St. Aurelie Timberlands. Enron had a controlling stake in the Louisiana-based petroleum exploration and production company Mariner Energy.
Enron opened EnronOnline, an electronic trading platform for energy commodities, on November 29, 1999. Conceptualized by the company's European Gas Trading team, it was the first web-based transaction system that allowed buyers and sellers to buy, sell, and trade commodity products globally. It allowed users to do business only with Enron. The site allowed Enron to transact with participants in the global energy markets. The main commodities offered on EnronOnline were natural gas and electricity, although there were 500 other products including credit derivatives, bankruptcy swaps, pulp, gas, plastics, paper, steel, metals, freight, and TV commercial time. At its maximum, more than $6 billion worth of commodities were transacted by means of EnronOnline every day.
After Enron's bankruptcy in late 2001, EnronOnline was sold to the Swiss financial giant UBS. Within a year, UBS abandoned its efforts to relaunch the division, and closed it in November 2002.
Enron International (EI) was Enron's wholesale asset development and asset management business. Its primary emphasis was developing and building natural gas power plants outside North America. Enron Engineering and Construction Company (EECC) was a wholly owned subsidiary of Enron International, and built almost all of Enron International's power plants. Unlike other business units of Enron, Enron International had a strong cash flow on bankruptcy filing. Enron International consisted of all of Enron's foreign power projects, including ones in Europe.
The company's Teesside plant was one of the largest gas-fired power stations in the world, built and operated by Enron from 1989, and produced 3 percent of the United Kingdom's energy needs. Enron owned half of the plant's equity, with the remaining 50 per cent split between four regional electricity companies.
Rebecca Mark was the CEO of Enron International until she resigned to manage Enron's newly acquired water business, Azurix, during 1997. Mark had a major role in the development of the Dabhol project in India, Enron's largest international endeavor.
Enron International constructed power plants and pipelines across the globe. Some are presently still operating, including the massive Teesside plant in England. Others, like a barge-mounted plant off Puerto Plata in the Dominican Republic, cost Enron money by lawsuits and investment losses. Puerto Plata was a barge-mounted power plant next to the hotel Hotelero del Atlantico. When the plant was activated, winds blew soot from the plant onto the hotel guests' meals, blackening their food. The winds also blew garbage from nearby slums into the plant's water-intake system. For some time the only solution was to hire men who would row out and push the garbage away with their paddles. Through mid-2000 the company collected a paltry $3.5 million from a $95 million investment. Enron also had other investment projects in Europe, South America, Argentina, Brazil, Bolivia, Colombia, Mexico, Jamaica, Venezuela, and across the Caribbean.
Around 1992 Indian experts came to the United States to find energy investors to help with India's energy shortage problems. During December 1993, Enron finalized a 20-year power-purchase contract with the Maharashtra State Electricity Board. The contract allowed Enron to construct a massive 2,015 megawatt power plant on a remote volcanic bluff 100 miles (160 km) south of Mumbai. Construction would be completed in two phases, and Enron would form the Dabhol Power Company to help manage the plant. The power project was the first step in a $20 billion scheme to help rebuild and stabilize India's power grid. Enron, GE (which was selling turbines to the project), and Bechtel (which was actually constructing the plant), each contributed 10% equity.
During 1996, when India's Congress Party was no longer in power, the Indian government assessed the project as being excessively expensive and refused to pay for the plant and stopped construction. The Maharashtra State Electricity Board (MSEB), the local state-owned utility, was required by contract to continue to pay Enron plant maintenance charges, even if no power was purchased from the plant. The MSEB determined that it could not afford to purchase the power (at Rs. 8 per unit kWh) charged by Enron. The plant operator was unable to find alternate customers for Dabhol power due to the absence of a free market in the regulated structure of utilities in India. From 1996 until Enron's bankruptcy during 2001 the company tried to revive the project and revive interest in India's need for the power plant without success.
During the summer of 2001, Enron made an attempt to sell a number of Enron International's assets, many of which were not sold. The public and media believed it was unknown why Enron wanted to sell these assets, suspecting it was because Enron was in need of cash. Employees who worked with company assets were told in 2000  that Jeff Skilling believed that business assets were an outdated means of company worth, and instead he wanted to build a company based on "intellectual assets".
Enron Global Exploration & Production Inc. (EGEP) was an Enron subsidiary that was born from the split of domestic assets via EOG Resources (formerly Enron Oil and Gas EOG) and international assets via EGEP (formerly Enron Oil and Gas Int'l, Ltd EOGIL). Among the EGEP assets were the Panna-Mukta and the South Tapti fields, discovered by the Indian state-owned Oil and Natural Gas Corporation (ONGC), which operated the fields initially. December 1994, a joint venture began between ONGC (40%), Enron (30%) and Reliance (30%). Mid year of 2002, British Gas (BG) completed the acquisition of EGEP's 30% share of the Panna-Mukta and Tapti fields for $350 million, a few months before Enron filed bankruptcy.
During the mid-1990s, Enron established an endowment for the Enron Prize for Distinguished Public Service, awarded by Rice University's Baker Institute to "recognize outstanding individuals for their contributions to public service". Recipients were:
Greenspan, because of his position as the Fed chairman, was not at liberty to accept the $10,000 honorarium, the $15,000 sculpture, nor the crystal trophy, but only accepted the "honor" of being named an Enron Prize recipient. The situation was further complicated because a few days earlier, Enron had filed paperwork admitting it had falsified financial statements for five years. Greenspan did not mention Enron a single time during his speech. At the ceremony, Ken Lay stated, "I'm looking forward to our first woman recipient." The next morning, it was reported in the Houston Chronicle that no decision had been made on whether the name of the prize would be changed. 19 days after the prize was awarded to Greenspan, Enron declared bankruptcy.
During early 2002, Enron was awarded Harvard's (in)famous Ig Nobel Prize for 'Most Creative Use of Imaginary Numbers.' The various former members of Enron management team all refused to accept the award in person, although no reason was given at the time.
1400 Smith Street (formerly Enron Complex) is a 691 ft (211 m) tall skyscraper located in downtown Houston, Texas, United States. The building has 50 floors and is the 11th tallest building in the city. Designed by architectural firm Lloyd Jones Brewer and Associates, the building was completed in 1983. The 1,200,000-square-foot (110,000 m2) office tower is situated on Houston's six-mile (10 km) pedestrian and retail tunnel system that links many of the city's downtown towers. It was formerly Four Allen Center, a part of the Allen Center complex.The building was the former headquarters of Enron, one of America's largest commodities trading companies during the 1990s and later infamous for its financial scandal in 2001. 1400 Smith Street was originally known as Four Allen Center prior to Enron relocating to Houston in 1985. Before Enron's collapse, the energy giant constructed a second, similar building across the street, connected to 1400 Smith Street by a circular skywalk.In 2006, Brookfield Properties acquired the 1,200,000-square-foot (110,000 m2) Four Allen Center for $120 million. At the same time, Brookfield announced that Chevron USA signed a lease for the entire building. Brookfield held 4 Allen Center in a joint partnership with the private equity group The Blackstone Group. As of 2006, the joint venture has 7,400,000 square feet (690,000 m2) of office space in Downtown Houston, making it the largest office owner in the central business district.Beginning in 2006, Chevron leased the entirety of the building. Earlier in 2011 Brookfield Properties, the owner of the building, searched for a prospective buyer. In June 2011, Chevron bought the building from Brookfield for $340 million. Brookfield confirmed the purchase on June 24, 2011. If Chevron had not fully occupied the building, Brookfield would have put the building on the market, and Holliday Fowler Fenoglio LP would have had the listing.1500 Louisiana Street
1500 Louisiana Street, formerly Enron Center South, is a 600 ft (183m) tall skyscraper in Houston, Texas. It was completed in 2002 and has 40 floors and a total building area of 1,284,013sq.ft. It is the 17th tallest building in the city and the tallest completed in the 2000s. It was designed by César Pelli.Andrew Fastow
Andrew Stuart Fastow (born December 22, 1961) is a convicted criminal and businessman who was the chief financial officer of Enron Corporation, an energy trading company based in Houston, Texas, until he was fired shortly before the company declared bankruptcy. Fastow was one of the key figures behind the complex web of off-balance-sheet special purpose entities (limited partnerships which Enron controlled) used to conceal Enron's massive losses in their quarterly balance sheets. By unlawfully maintaining personal stakes in these ostensibly independent ghost-entities, he was able to defraud Enron out of tens of millions of dollars. The U.S. Securities and Exchange Commission subsequently opened an investigation into his and the company's conduct in 2001. Fastow served a six-year prison sentence for charges related to these acts. His wife, Lea Weingarten, also worked at Enron, where she was an assistant treasurer; she pleaded guilty to conspiracy to commit wire fraud, money laundering conspiracy and filing fraudulent income tax returns, and served jail time before early release to a halfway house.Arthur Andersen
Arthur Andersen LLP, based in Chicago, was an American holding company. Formerly one of the "Big Five" accounting firms (along with PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young, and KPMG), the firm had provided auditing, tax, and consulting services to large corporations. By 2001, it had become one of the world's largest multinational companies.
In 2002, the firm voluntarily surrendered its licenses to practice as Certified Public Accountants in the United States after being found guilty of criminal charges relating to the firm's auditing of Enron, an energy corporation based in Texas, which filed for bankruptcy in 2001. In 2005, the Supreme Court of the United States unanimously reversed Arthur Andersen's conviction due to serious errors in the trial judge's instructions to the jury that convicted the firm.The former consultancy and outsourcing practice of the firm separated from the firm's accountancy practice in 1987, split from Andersen Worldwide in 2000 and renamed itself Accenture. It continues to operate.California electricity crisis
The California electricity crisis, also known as the Western U.S. Energy Crisis of 2000 and 2001, was a situation in which the U.S. state of California had a shortage of electricity supply caused by market manipulations, and capped retail electricity prices. The state suffered from multiple large-scale blackouts, one of the state's largest energy companies collapsed, and the economic fall-out greatly harmed Governor Gray Davis' standing.
Drought, delays in approval of new power plants, and market manipulation decreased supply. This caused an 800% increase in wholesale prices from April 2000 to December 2000. In addition, rolling blackouts adversely affected many businesses dependent upon a reliable supply of electricity, and inconvenienced a large number of retail consumers.
California had an installed generating capacity of 45 GW. At the time of the blackouts, demand was 28 GW. A demand supply gap was created by energy companies, mainly Enron, to create an artificial shortage. Energy traders took power plants offline for maintenance in days of peak demand to increase the price. Traders were thus able to sell power at premium prices, sometimes up to a factor of 20 times its normal value. Because the state government had a cap on retail electricity charges, this market manipulation squeezed the industry's revenue margins, causing the bankruptcy of Pacific Gas and Electric Company (PG&E) and near bankruptcy of Southern California Edison in early 2001.The financial crisis was possible because of partial deregulation legislation instituted in 1996 by the California Legislature (AB 1890) and Governor Pete Wilson. Enron took advantage of this deregulation and was involved in economic withholding and inflated price bidding in California's spot markets.The crisis cost between US$40 to $45 billion.Donkey punch
Donkey punch is the sexual practice of inflicting blunt force trauma to the back of the head or lower back of the receiving partner during anal or vaginal sex as an attempt by the penetrating partner to induce involuntary tightening of internal or external anal sphincter muscles or vaginal passage of the receiving partner. According to Dr. Jeffrey Bahr of Medical College of Wisconsin, there is no reflex in humans that would cause such tensing in response to a blow on the head, although striking a partner on the back of the neck or head could cause severe, even lethal injury.Enron (play)
Enron (stylised as ENRON) is a 2009 play by the British playwright Lucy Prebble, based on the Enron scandal.Enron Corpus
The Enron Corpus is a large database of over 600,000 emails generated by 158 employees of the Enron Corporation and acquired by the Federal Energy Regulatory Commission during its investigation after the company's collapse.Enron scandal
The Enron scandal, publicized in October 2001, eventually led to the bankruptcy of the Enron Corporation, an American energy company based in Houston, Texas, and the de facto dissolution of Arthur Andersen, which was one of the five largest audit and accountancy partnerships in the world. In addition to being the largest bankruptcy reorganization in American history at that time, Enron was cited as the biggest audit failure.Enron was formed in 1985 by Kenneth Lay after merging Houston Natural Gas and InterNorth. Several years later, when Jeffrey Skilling was hired, he developed a staff of executives that – by the use of accounting loopholes, special purpose entities, and poor financial reporting – were able to hide billions of dollars in debt from failed deals and projects. Chief Financial Officer Andrew Fastow and other executives not only misled Enron's Board of Directors and Audit Committee on high-risk accounting practices, but also pressured Arthur Andersen to ignore the issues.
Enron shareholders filed a $40 billion lawsuit after the company's stock price, which achieved a high of US$90.75 per share in mid-2000, plummeted to less than $1 by the end of November 2001. The U.S. Securities and Exchange Commission (SEC) began an investigation, and rival Houston competitor Dynegy offered to purchase the company at a very low price. The deal failed, and on December 2, 2001, Enron filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. Enron's $63.4 billion in assets made it the largest corporate bankruptcy in U.S. history until WorldCom's bankruptcy the next year.Many executives at Enron were indicted for a variety of charges and some were later sentenced to prison. Andersen was found guilty of illegally destroying documents relevant to the SEC investigation, which voided its license to audit public companies and effectively closed the firm. By the time the ruling was overturned at the U.S. Supreme Court, the company had lost the majority of its customers and had ceased operating. Enron employees and shareholders received limited returns in lawsuits, despite losing billions in pensions and stock prices.
As a consequence of the scandal, new regulations and legislation were enacted to expand the accuracy of financial reporting for public companies. One piece of legislation, the Sarbanes–Oxley Act, increased penalties for destroying, altering, or fabricating records in federal investigations or for attempting to defraud shareholders. The act also increased the accountability of auditing firms to remain unbiased and independent of their clients.Jeffrey Skilling
Jeffrey Keith Skilling (born November 25, 1953) is a former American businessman best known as the CEO of Enron Corporation during the Enron scandal. In 2006, he was convicted of federal felony charges relating to Enron's collapse and eventually sentenced to 14 years in prison. The Supreme Court of the United States heard arguments in the appeal of the case March 1, 2010. On June 24, 2010, the Supreme Court vacated part of Skilling's conviction and transferred the case back to the lower court for resentencing.
In April 2011, a three-judge panel of the Fifth Circuit Court of Appeals ruled that the verdict would have been the same despite the legal issues being discussed, and Skilling's conviction was confirmed; however, the court ruled Skilling should be resentenced. Skilling appealed this new decision to the Supreme Court, but the appeal was denied. In 2013, the United States Department of Justice reached a deal with Skilling, which resulted in ten years being cut from his sentence. He was released to a halfway house in August 2018.John Wakeham
John Wakeham, Baron Wakeham, PC, DL (born 22 June 1932) is a British businessman and Conservative Party politician. Between 1998 and 2012, he was chancellor of Brunel University, and since then has been its chancellor emeritus.He was a director of Enron from 1994 until its bankruptcy in 2001.Kenneth Lay
Kenneth Lee Lay (April 15, 1942 – July 5, 2006) was an American businessman best known for his involvement in the Enron scandal. He was founder, CEO and Chairman of Enron Corporation for most of its existence which reached a value of $63 billion. Enron used misleading and illegal practices to hide, embezzle and mislead funds from its auditor Arthur Andersen, which was the fifth largest such company in the world. When the deception was discovered in 2000, the Enron scandal was the largest bankruptcy in the world and destroyed Arthur Andersen for not having discovered the fraud. Lay was indicted by a grand jury and was found guilty of 10 counts of securities fraud. Lay died while vacationing, three months before his October 23 sentencing. A preliminary autopsy reported Lay had died of a heart attack caused by coronary artery disease and his conviction was vacated.Minute Maid Park
Minute Maid Park, previously known as The Ballpark at Union Station, Enron Field, and Astros Field, is a ballpark in Downtown Houston, Texas, United States, that opened in 2000 to house the Houston Astros of Major League Baseball (MLB). The ballpark is Houston's first retractable-roofed stadium, and features a natural grass playing field. The ballpark was built as a replacement of the Astrodome, the first domed sports stadium ever built, which opened in 1965. It is named for beverage brand Minute Maid, a subsidiary of The Coca-Cola Company, which acquired naming rights in 2002 for $100 million over 30 years. As of 2016, Minute Maid Park has a seating capacity of 41,168, which includes 5,197 club seats and 63 luxury suites.NatWest Three
The NatWest Three, also known as the Enron Three, are three British businessmen – Giles Darby, David Bermingham and Gary Mulgrew. In 2002 they were indicted in Houston, Texas on seven counts of wire fraud against their former employer Greenwich NatWest, at the time a division of National Westminster Bank.After a high-profile battle in the British courts they were extradited from the United Kingdom to the United States in 2006. On 28 November 2007, each pleaded guilty to one count of wire fraud in exchange for the other charges being dropped. On 22 February 2008 they were each sentenced to 37 months in prison. Initially they were jailed in the US, but were later repatriated to UK prisons to serve out the rest of their sentences and released from custody in August 2010.Portland General Electric
Portland General Electric (PGE) is a Fortune 1000 public utility based in Portland, Oregon. It distributes electricity to customers in parts of Multnomah, Clackamas, Marion, Yamhill, Washington, and Polk counties - 44% of the inhabitants of Oregon. Founded in 1888 as the Willamette Falls Electric Company, the company has been an independent company for most of its existence, though was briefly owned by the Houston-based Enron Corporation from 1997 until 2006 when Enron divested itself of PGE during its bankruptcy.
Notably, PGE does not serve all of Portland. Its service territory comprises most of Portland west of the Willamette River, sharing most of the city east of the river with Pacific Power.
PGE produces and purchases energy primarily from coal and natural gas plants, as well as hydroelectric power from dams on the Clackamas, Willamette and Deschutes rivers. Between 1976 and 1993, PGE operated Trojan, the only nuclear power plant in Oregon. Trojan was the subject of three Oregon initiatives to shut it down. The company won all three, but elected to close the plant twenty years early.Pump and dump
"Pump and dump" (P&D) is a form of securities fraud that involves artificially inflating the price of an owned stock through false and misleading positive statements, in order to sell the cheaply purchased stock at a higher price. Once the operators of the scheme "dump" sell their overvalued shares, the price falls and investors lose their money. This is most common with small cap cryptocurrencies and very small corporations, i.e. "microcaps". See Microcap stock fraud.
While fraudsters in the past relied on cold calls, the Internet now offers a cheaper and easier way of reaching large numbers of potential investors through spam email, bad data, social media, and false information.Sherron Watkins
Sherron Watkins (born August 28, 1959) is an American former Vice President of Corporate Development at the Enron Corporation. Watkins was called to testify before committees of the U.S. House of Representatives and Senate at the beginning of 2002, primarily about her warnings to Enron's then-CEO Kenneth Lay about accounting irregularities in the financial statements.In August 2001, Watkins alerted then-Enron CEO Kenneth Lay of accounting irregularities in financial reports. However, Watkins has been criticized for not reporting the fraud to government authorities and not speaking up publicly sooner about her concerns, as her memo did not reach the public until five months after it was written. Ms. Watkins was represented by Houston attorney Philip H. Hilder.
Watkins was selected as one of three "Persons of the Year 2002" by Time. (The two other whistleblowers who joined her as "People of the Year" were Cynthia Cooper of WorldCom and Coleen Rowley of the FBI.)Thomas E. White
Thomas Eugene White Jr. (born December 14, 1943 in Detroit, Michigan) is an American businessman and former United States Army officer who served as senior executive at the now collapsed Enron and as the United States Secretary of the Army from May 31, 2001 until April 25, 2003.