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Enron Corporation
Traded asNYSE: ENE
Founded1985 (1985) in Omaha, Nebraska, United States
FounderKenneth Lay
Defunct2001 (2001)
1400 Smith Street
Houston, Texas
United States
Area served
United States, India, Caribbean, Brazil
Key people
Revenue$100.789 billion
$979 million
Total assets$67.503 billion
Number of employees
29,000 (2001)
DivisionsEnron Energy Services (EES) Enron Xcelerator

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.[1] 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 an institutionalized, systemic 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.[2]

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.[3] On September 7, 2006, Enron sold Prisma Energy International Inc., its last remaining business, to Ashmore Energy International Ltd. (now AEI).[4]


Pre-merger origins (1925–1985)[edit]


One of Enron's primary predecessors was InterNorth, 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. 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.[5] In 1983, InterNorth merged with the Belco Petroleum Company, a Fortune 500 oil exploration and development company founded by Arthur Belfer.[6]

Houston Natural Gas[edit]

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.[7]


InterNorth, in its conservative success, became a target of corporate takeovers, the most prominent being corporate raider Irwin Jacobs.[8] 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,[9] 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.[10] Internorth’s north-south pipelines that served Iowa and Minnesota complemented HNG’s Florida and California east-west pipelines well.[9]

Post-merger rise (1985–1991)[edit]

The company was initially named "HNG/InterNorth Inc.", even though InterNorth was technically the parent.[10] 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".[8][9] (The distinctive logo was one of the final major projects of legendary graphic designer Paul Rand before his death in 1996.)[11][12][13] 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.[8] 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 & Company, 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.[10] 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.

Timeline (1985–1992)[edit]

  • New regulations gradually create a market-pricing system for natural gas. Federal Energy Regulatory Commission (FERC) Order 436 (1985) provides blanket approval for pipelines that choose to become common carriers transporting gas intrastate. FERC Order 451 (1986) deregulates the wellhead, and FERC Order 490 (April 1988) authorizes producers, pipelines, and others to terminate gas sales or purchases without seeking prior FERC approval. As a result of these orders, more than 75% of gas sales are conducted through the spot market, and unprecedented market volatility exists.[14]
July 1985[edit]
November 1985[edit]
  • Lay is appointed Chairman and Chief Executive of the combined company. The company chooses the name "Enron" after rejecting "Enteron"[15]
  • Company moves headquarters to Houston, where Ken Lay lives. Enron is both a natural oil and gas company.
  • Enron's vision: To become the premier natural-gas pipeline in America[16]
  • Enron Oil, Enron's flourishing petroleum marketing operation, reports loss of $85 million in 8-K filings. True loss of $142 – $190 million is concealed until 1993. Two top Enron Oil executives in Valhalla, New York plead guilty to charges of fraud and filing false tax returns. One serves time in prison.[14]
  • The Company's major strategy shift - to pursue unregulated markets in addition to its regulated pipeline business- is decided in a gathering that became known as the Come to Jesus meeting.[15]
  • Enron enters the UK energy market following privatization of the electricity industry there. It becomes the first U.S. company to construct a power plant, Teesside Power Station, in Great Britain.[14]
  • Enron launches Gas Bank, that will be run by CEO Jeff Skilling in 1990, which allows gas producers and wholesale buyers to purchase firm gas supplies and hedge the price risk at the same time.[15]
  • Enron begins offering financing to oil and gas producers.[14]
  • Transwestern Pipeline Company, owned by Enron, is the first merchant pipeline in the United States to stop selling gas and become a transportation only pipeline.[14]
  • Enron adopts mark-to-market accounting practices, reporting income and value of assets at their replacement cost[14]
  • Rebecca Mark becomes Chairman and CEO of Enron Development Corp., a unit formed to pursue international markets[16]
  • Andy Fastow forms the first of many off-balance-sheet partnerships for legitimate purposes. Later, off-balance-sheet partnerships and transactions will become a way for money losing ventures to be concealed and income reporting to be accelerated.[14]
  • Enron acquires Transportadora de Gas del Sur[14]


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.[8]

Operations as a trading firm[edit]

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.

Entrance into the retail energy market[edit]

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.[5][8][10]

Data management[edit]

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.[17] In 1997, FTV Communications LLC, a limited liability company formed by Enron subsidiary FirstPoint Communications, Inc., Williams Communications Group, Inc. and Touch America.[18] FTV constructed a 1,380 mile fiber optic network between Portland and Las Vegas.[18] 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.[19] 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".[19] The location was also more protected from natural disasters than areas such as Los Angeles or the East Coast.[19] 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."[20] 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.[21]

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.[22]

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.[22]

Following the bankruptcy of Enron, telecommunications holdings were sold for "pennies on the dollar".[19] 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.[19][20] Following the sale, Switch expanded to control "the biggest data center in the world".[20]

Overseas expansion[edit]

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.[5][9] 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.[23] 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.[24] 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.[25]: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.[25]:255 By the end of 2000 Azurix had an operating profit of less than $100 million and was $2 billion in debt.[25]:257 In August 2000, after Azurix stock took a plunge following its earnings report,[25]:257 Mark resigned from Azurix and Enron.[26][27] Azurix assets, including Wessex, were eventually sold by Enron.[28]

Misleading financial accounts[edit]

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.[citation needed] In 1993, Fastow began establishing numerous limited liability special-purpose entities, a common business practice in the energy industry. However, this also allowed Enron to transfer some of its liabilities so that they 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.[citation needed]

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.[citation needed] 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.[citation needed] 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.[29] 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.[citation needed]

Enron grew wealthy due largely to marketing, promoting power, and its high stock price.[citation needed] Enron was named "America's Most Innovative Company" by the magazine Fortune for six consecutive years, from 1996 to 2001.[30] 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".[31]

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'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.[citation needed]

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.[citation needed] Dienstbier was an acquaintance of Warren Buffett. NNG continues to be profitable now.[relevant? ]

2001 Accounting scandals[edit]

In 2001, after a series of revelations involving irregular accounting procedures perpetrated throughout the 1990s involving Enron and its auditor Arthur Andersen that bordered on fraud, Enron filed for the then largest Chapter 11 bankruptcy in history (since surpassed by those of Worldcom during 2002 and Lehman Brothers during 2008), resulting in $11 billion in shareholder losses.[32]

Stock Price of Enron from August 2000 to January 2002

As the scandal progressed, Enron share prices decreased from US $90.56 during the summer of 2000, to just pennies.[33] 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 profit 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.[34]

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.[35] 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 in 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. Also, the court ruling was little comfort to the thousands of now unemployed Andersen employees.[36]

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).[37]

Accounting practices[edit]

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.[38] 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.[citation needed]

Arthur Andersen Witnesses

During 1999, Enron initiated EnronOnline, an Internet-based trading operation, which was used by virtually every energy company in the United States. By promoting the company's aggressive investment strategy, Enron president and chief operating officer Jeffrey Skilling 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.[39] 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,[40] 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.[41][42]


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 [43] and later sold other assets to Vulcan Capital Management.[44]

Enron sold its last business, Prisma Energy, during 2006, leaving Enron asset-less.[45] 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.[46]

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.[47] 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".

Insider trading scandal[edit]

Peak and decline of stock price[edit]

During August 2000, Enron's stock price attained its greatest value of $90.56.[25] 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.[48] In March 2001 an article by Bethany McLean appeared in Fortune magazine noting that no one understood how the company made money and questioning whether Enron stock was overvalued.[49]

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.[50] 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.[48]

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.[51] 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.[52] 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.[53] 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.[54]

California's deregulation and subsequent energy crisis[edit]

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.[55] Five months later, Pacific Gas & Electric (PG&E) was forced into bankruptcy. Republican Senator Phil Gramm, husband of Enron Board member Wendy Gramm and also the second largest recipient of campaign contributions from Enron,[56] 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."[57]

After passage of the deregulation law, California had a total of 38 Stage 3 rolling blackouts declared, until federal regulators intervened during June 2001.[58] These blackouts occurred as a result of a poorly designed market system that was manipulated by traders and marketers, as well as from 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.[59][60] 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.

Former management and corporate governance[edit]

Corporate Leadership and Central Management
  • Kenneth Lay: Chairman, and Chief executive officer
  • Jeffrey Skilling: President, Chief operating officer, and CEO (February–August 2001)
  • Andrew Fastow: Chief financial officer
  • Richard Causey: Chief accounting officer
  • Rebecca Mark-Jusbasche: CEO of Enron International and Azurix
  • Lou Pai: CEO of Enron Energy Services
  • Forrest Hoglund: CEO of Enron Oil and Gas
  • Dennis Ulak: President of Enron Oil and Gas International
  • Jeffrey Sherrick: President of Enron Global Exploration & Production Inc.
  • Richard Gallagher: Head of Enron Wholesale Global International Group
  • Kenneth "Ken" Rice: CEO of Enron Wholesale and Enron Broadband Services
  • J. Clifford Baxter: CEO of Enron North America
  • Sherron Watkins: Head of Enron Global Finance
  • Jim Derrick: Enron General Counsel
  • Mark Koenig: Head of Enron Investor Relations
  • Joan Foley: Head of Enron Human Resources
  • Richard Kinder: President and COO of Enron (1990-December 1996);
  • Greg Whalley: President and COO of Enron (August 2001– Bankruptcy)
  • Jeff McMahon: CFO of Enron (October 2001-Bankruptcy)
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.

Online marketplace services[edit]

  • 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[edit]

  • 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[edit]

  • Enron Power (electricity wholesaling).
  • Enron Natural Gas (natural gas wholesaling).
  • Enron Clean Fuels (biofuel 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).
  • Enron Energy Services (Selling services to industrial end users).
  • Enron International (operation of all overseas assets).

Capital and risk management services[edit]

Commercial and industrial outsourcing services[edit]

  • Commodity Management.
  • Energy Asset Management.
  • Energy Information Management.
  • Facility Management.
  • Capital Management.
  • Azurix Inc. (water utilities and infrastructure).

Project development and management services[edit]

  • Energy Infrastructure Development (developing, financing, and operation of power plants and related projects).
  • Enron Global Exploration & Production Inc. (upstream oil and natural gas international development).
  • Elektro Electricidade e Servicos SA (Brazilian electric utility).
  • 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.
  • EOTT Energy Inc. (oil transportation).

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.[61][62] 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, but specialists questioned how Enron reported trades and calculated its profits, saying that the same fraudulent accounting that was rampant at Enron's other operations may have been used in trading.[63]

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.[61][63]

Enron International[edit]

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.[citation needed] 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.[64] Enron owned half of the plant's equity, with the remaining 50 per cent split between four regional electricity companies.[64]


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.[65]


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.[citation needed] 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.[citation needed] Through mid-2000 the company collected a paltry $3.5 million from a $95 million investment.[citation needed] Enron also had other investment projects in Europe, South America, Argentina, Brazil, Bolivia, Colombia, Mexico, Jamaica, Venezuela, and across the Caribbean.[citation needed]


Around 1992 Indian experts came to the United States to find energy investors to help with India's energy shortage problems.[citation needed] During December 1993, Enron finalized a 20-year power-purchase contract with the Maharashtra State Electricity Board.[citation needed] 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.[citation needed]

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.[citation needed] 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.[citation needed] 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.

Project summer[edit]

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.[66] Employees who worked with company assets were told in 2000 [67] 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.[edit]

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).[68] 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.[69] December 1994, a joint venture began between ONGC (40%), Enron (30%) and Reliance (30%).[69] 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.[70]

Enron Prize for Distinguished Public Service[edit]

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.[76] The situation was further complicated because a few days earlier, Enron had filed paperwork admitting it had falsified financial statements for five years.[77] Greenspan did not mention Enron a single time during his speech.[78] At the ceremony, Ken Lay stated, "I'm looking forward to our first woman recipient."[79] 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.[80] 19 days after the prize was awarded to Greenspan, Enron declared bankruptcy.[81]

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.

Enron's influence on politics[edit]

  • George W. Bush, sitting U.S. president at the time of Enron's collapse, received $312,500 to his campaigns and $413,800 to his presidential war chest and inaugural fund.[82]
  • Dick Cheney, sitting U.S. vice president at the time of Enron's collapse, met with Enron executives six times to develop a new energy policy. He refused to show minutes to Congress.[82]
  • John Ashcroft, attorney general at the time, recused himself from the DOJ's investigation into Enron due to receiving $57,499 when running for senate seat in 2000.
  • Lawrence Lindsay, White House Economic Advisor at the time, made $50,000 as a consultant with Enron before moving to the White House in 2000.[82]
  • Karl Rove, White House Senior Advisor at the time, waited five months before selling $100,000 of Enron stock.[82]
  • Marc F. Racicot, Republican National Committee Chairman Nominee at the time, was handpicked by George W. Bush to serve as a lawyer with Bracewell LLP, a firm that lobbied for Enron.[82][83]

See also[edit]


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External links[edit]