Enron Corporation





Enron Corporation is an energy trading and communications company based in
Houston, Texas employing around 21,000 people (mid-2001). Careful accounting
allowed it to be listed as the seventh largest company in America, and it
was expected to dominate the trading it had virtually invented in
communications, power and weather securities. Instead it became the biggest
corporate failure in history.

After a series of scandals involving irregular accounting procedures
bordering on fraud involving it and its accounting firm Arthur Andersen,
Enron stood at the verge of undergoing the largest bankruptcy in history by
mid November 2001. A white knight rescue attempt by a much smaller energy
company, Dynegy, was not viable.

The fall of the value of investors' equity per share in Enron during 2001
was from $85 to 30 cents. As Enron was considered a blue chip stock, this is
an unprecedented and disastrous event in the financial world. Enron's plunge
in value occurred after it was revealed that many of its profits and revenue
were the result of deals with limited partnerships which it controlled. The
result of this is that many of the losses that Enron encountered were not
reported in its financial statements.

The firm's European operations filed for bankruptcy on November 30, 2001 and
sought Chapter 11 protection in the US. The long term implications of
Enron's collapse are unclear, but there is considerable political fall-out
both in the US and in the UK relating to the monies Enron gave to political
figures (around $6m since 1990).

Enron was formed in 1985 with the merger of Houston Natural Gas and
InterNorth, engineered by Houston Natural Gas CEO Kenneth Lay. It was
originally involved in the transmission and distribution of electricity and
gas throughout the United States and the development, construction and
operation of power plants, pipelines, etc. worldwide.

Enron grew wealthy through its pioneering marketing and promotion of power
and communications bandwidth commodities, and related risk management
derivatives as tradable securities, including exotic items such as weather
derivatives.

As a result Enron was named "America's Most Innovative Company" by Fortune
magazine for five consecutive years, from 1996-2000. It was on Fortune's
"100 Best Companies to Work for in America" list of 2000, and was legendary
even amongst the elite workers of the financial world for the opulence of
its offices.

Its global reputation was undermined, however, by persistent rumours of
bribery and political pressure to secure contracts in Central and Southern
America, in Africa and in the Philippines. Especially controversial was the
$30bn contract with the Indian MSEB (Maharashtra State Electricity Board),
where it is alleged that Enron officials used political connections within
the Bush administration to pressure the Indians. On January 9, 2002 the
United States Department of Justice announced it was going to pursue a
criminal investigation of Enron and Congressional hearings began on January 24.

Former Enron CFO Andy Fastow, alleged mastermind behind Enron's complex
network of offshore partnerships and questionable accounting practices, was
indicted on November 1, 2002 by a Federal grand jury in Houston on 78 counts
including fraud, money laundering, and conspiracy.