Enron Corporation (former NYSE The New York Stock Exchange is a stock exchange located at 11 Wall Street in lower Manhattan, New York City, USA. It is the world's largest stock exchange by market capitalization of its listed companies at US$12.25 trillion as of May 2010. Average daily trading value was approximately US$153 billion in 2008 ticker symbol ENE) was an American energy In physics, energy is a quantity that is often understood as the ability to perform work. This quantity can be assigned to any particle, object, or system of objects as a consequence of its physical state company based in the Enron Complex 1400 Smith Street is a 691 ft tall postmodern 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 (111,000 m2) office tower is situated on in Downtown Downtown Houston is the largest business district of Houston, Texas, United States. Downtown Houston, the city's central business district, contains the headquarters of many prominent companies. There is an extensive network of pedestrian tunnels and skywalks connecting the buildings of the district. The tunnel system is home to many fast food Houston Houston is the fourth-largest city in the United States of America and the largest city in the state of Texas. As of the 2009 U.S. Census estimate, the city had a population of 2.3 million within an area of 579 square miles (1,500 km2). Houston is the seat of Harris County and the economic center of the Houston–Sugar Land–Baytown metropolitan, Texas. Before its bankruptcy Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay its creditors. Creditors may file a bankruptcy petition against a business or corporate debtor in an effort to recoup a portion of what they are owed or initiate a restructuring. In the majority of cases, however, bankruptcy is initiated by in late 2001, Enron employed approximately 22,000^[1] staff and was one of the world's leading electricity Electricity is a general term that encompasses a variety of phenomena resulting from the presence and flow of electric charge. These include many easily recognizable phenomena, such as lightning and static electricity, but in addition, less familiar concepts, such as the electromagnetic field and electromagnetic induction, natural gas Natural gas is a gas consisting primarily of methane. It is found associated with other fossil fuels, in coal beds, as methane clathrates, and is created by methanogenic organisms in marshes, bogs, and landfills. It is an important fuel source, a major feedstock for fertilizers, and a potent greenhouse gas, communications and pulp Pulp is a dry fibrous material prepared by chemically or mechanically separating fibres from wood, fibre crops or waste paper and paper Paper is a thin material mainly used for writing upon, printing upon or for packaging. It is produced by pressing together moist fibers, typically cellulose pulp derived from wood, rags or grasses, and drying them into flexible sheets companies, with claimed revenues of nearly $101 billion in 2000.^[2] Fortune Fortune is a global business magazine published by Time Inc.'s Fortune|Money Group. Founded by Henry Luce in 1930, the publishing business, consisting of Time, Life, Fortune, and Sports Illustrated, grew to become Time Warner. In turn, AOL grew as it acquired Time Warner in 2000 when Time Warner was the world's largest media conglomerate. Fortune' named Enron "America's Most Innovative Company" for six consecutive years. At the end of 2001, it was revealed that its reported financial condition was sustained substantially by institutionalized, systematic, and creatively planned accounting fraud Accounting scandals, or corporate accounting scandals, are political and business scandals which arise with the disclosure of misdeeds by trusted executives of large public corporations. Such misdeeds typically involve complex methods for misusing or misdirecting funds, overstating revenues, understating expenses, overstating the value of, known as the "Enron scandal The Enron scandal, revealed in October 2001, eventually led to the bankruptcy of the Enron Corporation, an American energy company based in Houston, Texas, and the 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". Enron has since become a popular symbol of willful corporate fraud and corruption In criminology, corporate crime refers to crimes committed either by a corporation , or by individuals that may be identified with a corporation or other business entity (see vicarious liability and corporate liability). Note that some forms of corporate corruption may not actually be criminal if they are not specifically illegal under a given. The scandal also brought into question the accounting practices and activities of many corporations throughout the United States and was a factor in the creation of the Sarbanes–Oxley Act of 2002. The scandal also affected the wider business world by causing the dissolution of the Arthur Andersen Arthur Andersen LLP, based in Chicago, was once one of the "Big Five" accounting firms among PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young and KPMG, providing auditing, tax, and consulting services to large corporations. In 2002, the firm voluntarily surrendered its licenses to practice as Certified Public accounting firm.^[3]

Enron filed for bankruptcy Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay its creditors. Creditors may file a bankruptcy petition against a business or corporate debtor in an effort to recoup a portion of what they are owed or initiate a restructuring. In the majority of cases, however, bankruptcy is initiated by protection in the Southern District of New York The United States District Court for the Southern District of New York is a federal district court. Appeals from the Southern District of New York are taken to the United States Court of Appeals for the Second Circuit (except for patent claims and claims against the U.S. government under the Tucker Act, which are appealed to the Federal Circuit) in late 2001 and selected Weil, Gotshal & Manges Weil, Gotshal & Manges is an international law firm headquartered in New York City. It is one of the largest law firms in the world, with approximately 1,300 lawyers and gross annual revenue in excess of $1.7 billion. It has grown to become a top tier law firm whose revenue places it as one of the ten highest earning firms in the world. The as its bankruptcy counsel. It emerged from bankruptcy in November 2004, pursuant to a court-approved plan of reorganization, after one of the biggest and most complex bankruptcy cases in U.S. history. A new board of directors changed the name of Enron to Enron Creditors Recovery Corp., and focused on reorganizing and liquidating certain operations and assets of the pre-bankruptcy Enron.^[4] On September 7, 2006, Enron sold Prisma Energy International Inc. Prisma Energy International Inc., was a former subsidiary of Enron Corporation, formed in 2003 to own and manage the majority of Enron's overseas assets, formerly known as "Enron International". Prior to its official organization, Prisma was referred to within Enron as "InternationalCo". Enron's original bankruptcy, its last remaining business, to Ashmore Energy International Ltd. (now AEI).^[5]

Early history

Enron traces its roots to the Northern Natural Gas Company, which was formed in 1932, in Omaha, Nebraska Omaha is the largest city in the state of Nebraska, United States, and is the county seat of Douglas County. It is located in the Midwestern United States on the Missouri River, about 20 miles (30 km) north of the mouth of the Platte River. Omaha is the anchor of the Omaha-Council Bluffs metropolitan area, which includes Council Bluffs, Iowa,. It was reorganized in 1979 as the leading subsidiary of a holding company A holding company is a company or firm that owns other companies' outstanding stock. It usually refers to a company which does not produce goods or services itself, rather its only purpose is owning shares of other companies. Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of, InterNorth. In 1985, it bought the smaller and less diversified Houston Natural Gas.^[6]

The separate company initially named itself "HNG/InterNorth Inc.", even though InterNorth was the nominal survivor. It built a large and lavish headquarters complex of pink marble in Omaha (dubbed locally as the "Pink Palace"), that was later sold to Physicians Mutual. However, the departure of ex-InterNorth and first CEO of Enron Corp Samuel Segnar six months after the merger allowed former HNG CEO Kenneth Lay Kenneth Lee "Ken" Lay was an American businessman, best known for his role in the widely reported corruption scandal that led to the downfall of Enron Corporation. Lay and Enron became synonymous with corporate abuse and accounting fraud when the scandal broke in 2001. Lay was the CEO and chairman of Enron from 1985 until his resignation to become the next CEO of the newly merged company. Lay soon moved Enron's headquarters to Houston Houston is the fourth-largest city in the United States of America and the largest city in the state of Texas. As of the 2009 U.S. Census estimate, the city had a population of 2.3 million within an area of 579 square miles (1,500 km2). Houston is the seat of Harris County and the economic center of the Houston–Sugar Land–Baytown metropolitan after swearing to keep it in Omaha and began to thoroughly re-brand the business. Lay and his secretary, Nancy McNeil, originally selected the name "Enteron" (possibly spelled in camelcase CamelCase —originally known as medial capitals—is the practice of writing compound words or phrases in which the elements are joined without spaces, with each element's initial letter capitalized within the compound and the first letter is either upper or lower case—as in "LaBelle", BackColor, "McDonald's" or "iPod& as "EnterOn"), but, when it was pointed out that the term approximated a Greek word referring to the intestines, it was quickly shortened to "Enron". The final name was decided upon only after business cards, stationery, and other items had been printed reading Enteron. Enron's "crooked E" logo was designed in the mid-1990s by the late American graphic designer A graphic designer is a professional within the graphic design and graphic arts industry who assembles together images, typography or motion graphics to create a piece of design. A graphic designer creates the graphics primarily for published, printed or electronic media, such as brochures and advertising. They are also sometimes responsible for Paul Rand Paul Rand (born Peretz Rosenbaum, was an American graphic designer, best known for his corporate logo designs, including the logos for IBM, UPS, Enron, Westinghouse, ABC, and Steve Jobs’ NeXT. He was one of the originators of the Swiss Style of graphic design.

Worst Case Scenario: Misleading Financial Accounts

In 1990, Enron CEO Jeffrey Skilling Jeffrey Keith "Jeff" Skilling is the former CEO of Enron Corporation in 2001. He was convicted in 2006 of multiple federal felony charges relating to Enron's financial collapse, and is currently serving a 24-year, 4-month prison sentence at the Federal Correctional Institution, Englewood in Lakewood, Colorado, a Harvard M.B.A., hired Andrew Fastow Andrew Stuart Fastow was the chief financial officer of Enron Corporation until the U.S. Securities and Exchange Commission opened an investigation into his conduct in 2001. 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 their who was well acquainted with the burgeoning deregulated energy market Skilling wanted to exploit. In 1993, Fastow set to work establishing numerous "Special Purpose Entitites" that would be able to absorb any liability by transfering it to an outside company so that it would not appear in the Enron's books to maintain a robust and generally growing stock price thus keeping its critical investment grade credit ratings. As future events would eventually prove, according to some Enron insider, Fastow was the kind of man who could talk the talk but could not walk the walk. However, by 1998, he was Enron's CFO The chief financial officer is a corporate officer primarily responsible for managing the financial risks of the corporation. This officer is also responsible for financial planning and record-keeping, as well as financial reporting to higher management. In some sectors the CFO is also responsible for analysis of data. The title is equivalent to.^[7]

Enron was originally involved in transmitting and distributing electricity and natural gas throughout the United States. The company developed, built, and operated power plants A power station is an industrial facility for the generation of electric power and pipelines Pipeline transport is the transportation of goods through a pipe. Most commonly, liquid and gases are sent, but pneumatic tubes that transport solid capsules using compressed air have also been used while dealing with rules of law and other infrastructures worldwide. Enron owned a large network of natural gas pipelines, which stretched ocean to ocean and border to border including Northern Natural Gas, Florida Gas Transmission, Transwestern Pipeline company and a partnership in 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 Portland General Electric (NYSE: POR) is an electrical utility, formerly owned by the Houston-based Enron Corporation (but now independent), that distributes electricity to customers in parts of Portland, Oregon, as well as parts of Multnomah, Clackamas, Marion, Yamhill, Washington, and Polk counties - half of the inhabitants of Oregon. (The rest.^[8] In 1998, Enron moved into the water sector, creating the Azurix Corporation, which it part-floated on the New York Stock Exchange The New York Stock Exchange is a stock exchange located at 11 Wall Street in lower Manhattan, New York City, USA. It is the world's largest stock exchange by market capitalization of its listed companies at US$12.25 trillion as of May 2010. Average daily trading value was approximately US$153 billion in 2008 in June 1999. Azurix failed to break into the water utility The water industry provides drinking water and wastewater services to households and industry market, and one of its major concessions, in Buenos Aires Buenos Aires is the capital and largest city of Argentina, and the second-largest metropolitan area in South America, after São Paulo. It is located on the western shore of the estuary of the Río de la Plata, on the southeastern coast of the South American continent. Greater Buenos Aires conurbation, which also includes several Buenos Aires, was a large-scale money-loser. After the move to Houston, many analysts^[who?] criticized the Enron management as swimming in debt. The Enron management pursued aggressive retribution against its critics, setting the pattern for dealing with accountants, lawyers, and the financial media.

Enron grew wealthy due largely to marketing Marketing is the process by which companies create customer interest in products or services. It generates the strategy that underlies sales techniques, business communication, and business development. It is an integrated process through which companies build strong customer relationships and create value for their customers and for themselves, promoting The specification of these four variables creates a promotional mix or promotional plan. A promotional mix specifies how much attention to pay to each of the four subcategories, and how much money to budget for each. A promotional plan can have a wide range of objectives, including: sales increases, new product acceptance, creation of brand equity, power, and its high stock price. Enron was named "America's Most Innovative Company" by "Fortune (magazine) Fortune is a global business magazine published by Time Inc.'s Fortune|Money Group. Founded by Henry Luce in 1930, the publishing business, consisting of Time, Life, Fortune, and Sports Illustrated, grew to become Time Warner. In turn, AOL grew as it acquired Time Warner in 2000 when Time Warner was the world's largest media conglomerate. Fortune'" for six consecutive years, from 1996 to 2001. It was on the Fortune's "100 Best Companies to Work for in America" list in 2000, and had offices that were 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 For example, there is an often cited "80-20 rule" or the "Pareto principle" or the "Law of the Vital Few" — 80% of the crimes are committed by 20% of the criminals, 80% of the useful research results are produced by 20% of the academics, etc. In some cases, such "80-20" tendencies do emerge, and a curve is until its exposure in corporate fraud. The first analyst to publicly disclose Enron's financial flaws was Daniel Scotto, who in August 2001 issued a report entitled "All Stressed up and no place to go", which encouraged investors to sell Enron stocks and bonds at any and all costs.

As was later discovered, many of Enron's recorded assets and profits were inflated or even wholly fraudulent and nonexistent. Debts and losses were put into entities formed "offshore" that were not included in the firm's financial statements A financial statement is a formal record of the financial activities of a business, person, or other entity. In British English—including United Kingdom company law—a financial statement is often referred to as an account, although the term financial statement is also used, particularly by accountants, and other sophisticated and arcane financial transactions between Enron and related companies were used to take unprofitable entities off the company's books.

Its most valuable asset and the largest source of honest income, the 1930s-era Northern Natural Gas, was eventually purchased back by a group of Omaha investors, who moved its headquarters back to Omaha, and is now a unit of Warren Buffett Warren Edward Buffett is an American investor, industrialist, and philanthropist. He is one of the most successful investors in the world. Often called the "legendary investor Warren Buffett", he is the primary shareholder, chairman and CEO of Berkshire Hathaway. He is consistently ranked among the world's wealthiest people, he was's MidAmerican Energy Holdings Corp. NNG was put up as collateral for a $2.5 billion capital infusion by Dynegy Corporation Dynegy Inc. , based in Houston, Texas, United States, is a large owner and operator of power plants and a player in the natural gas liquids and coal business. The corporate headquarters are in Suite 5800 in the Wells Fargo Plaza at 1000 Louisiana Street in Downtown Houston when Dynegy was planning to buy Enron. When Dynegy looked closely at Enron's books, they backed out of the deal and fired their CEO, Chuck Watson. The new chairman and head CEO, the late Daniel Dienstbier, had been president of NNG and an Enron executive at one time and an acquaintance of Warren Buffett. NNG continues to be profitable today.

Former Management and Corporate Governance

• Central Management
  • Kenneth Lay Kenneth Lee "Ken" Lay was an American businessman, best known for his role in the widely reported corruption scandal that led to the downfall of Enron Corporation. Lay and Enron became synonymous with corporate abuse and accounting fraud when the scandal broke in 2001. Lay was the CEO and chairman of Enron from 1985 until his resignation: Founder, Chairman, and Chief executive officer A chief executive officer or chief executive is the highest-ranking corporate officer (executive) or administrator in charge of total management of an organization. An individual appointed as CEO of a corporation, company, organization, or agency reports to the board of directors
  • Jeffrey Skilling Jeffrey Keith "Jeff" Skilling is the former CEO of Enron Corporation in 2001. He was convicted in 2006 of multiple federal felony charges relating to Enron's financial collapse, and is currently serving a 24-year, 4-month prison sentence at the Federal Correctional Institution, Englewood in Lakewood, Colorado: President, Chief operating officer A chief operating officer or chief operations officer is a corporate officer responsible for managing the day-to-day activities of the corporation and for operations management (OM). The COO is one of the highest-ranking members of an organization's senior management, monitoring the daily operations of the company and reporting to the board of, and CEO (February-August 2001)
  • Andrew Fastow Andrew Stuart Fastow was the chief financial officer of Enron Corporation until the U.S. Securities and Exchange Commission opened an investigation into his conduct in 2001. 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 their: Chief financial officer The chief financial officer is a corporate officer primarily responsible for managing the financial risks of the corporation. This officer is also responsible for financial planning and record-keeping, as well as financial reporting to higher management. In some sectors the CFO is also responsible for analysis of data. The title is equivalent to
  • Rick Causey: Chief accounting officer
  • Rebecca Mark-Jusbasche: CEO of Enron International and Azurix
  • Lou Pai: CEO of Enron Energy Services
  • Forest Hoglund: CEO of Enron Oil and Gas
  • 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
  • Cindy Olson: Head of Enron Human Resources
  • Greg Whally: President and COO of Enron (August 2001- Bankruptcy)
  • Jeff McMahon: CFO of Enron (October 2001-Bankruptcy)
    • Board Of Directors
      • Robert A. Belfer: Chairman, Belco Oil and Gas Corp
      • Norman P. Blake Jr.: Chairman, President and CEO, Comdisco, Inc.
      • Ronnie C. Chan: Chairman, Hang Lung Group
      • John H. Duncan: Former Chairman of The Executive Gulf and Western Industries Inc.
      • Wendy L. Gramm: Former Chairman of US Commodity Futures Trading Commission
      • Ken L. Harrison: Former Chairman and CEO of Portland General Electric
      • Robert K. Jaedicke: Professor of Accounting at Emeritus
      • Charles A. LeMaistre: President Emeritus, University of Texas M.D. Anderson Cancer Center
      • John Mendelsohn: President, University of Texas M.D. Anderson Cancer Center
      • Jerome J. Meyer: Chairman, Tektronix
      • Paulo V. Ferraz Pereira: Executive Vice President if Group Bozano
      • Frank Savage: Chairman: Alliance Capital Management
      • John A. Urquhart: Senior Advisor to the Chairman of Enron
      • John Wakeham: Former U.K. Secretary of State for Energy
      • Herbert S. Winokur Jr.: President of Winokur Holdings Inc.

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