Enron
Omaha, Nebraska, U.S. | |
Founder | Kenneth Lay (for the Houston National Gas branch) |
---|---|
Defunct | March 1, 2007 November 28, 2016 (as Enron Creditors Recovery Corporation) |
Fate | Bankruptcy (as an effect of accounting fraud) |
Successor | |
Headquarters | , United States |
Area served | United States, India, Caribbean, Brazil, and Canada |
Key people |
|
Services | Energy |
Revenue | $100.789 billion |
$979 million | |
Total assets | $67.503 billion |
Number of employees | 20,600 (2000) |
Divisions | Enron Energy Services (EES) Enron Xcelerator |
Website | Archived official website at the Wayback Machine (archived 2000-06-20(Date mismatch)) |
Enron Corporation was an American
At the end of 2001, it was revealed that Enron's reported financial condition was sustained by an institutionalized, systematic, and creatively planned
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 in 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 its last remaining subsidiary, Prisma Energy International, to Ashmore Energy International Ltd. (now AEI).[4] It is the largest bankruptcy, due specifically to fraud, of all time.[5]
History
Pre-merger origins (1925–1985)
InterNorth
One of Enron's primary predecessors was
Houston Natural Gas
The
Merger
With its conservative success, InterNorth became a target of corporate takeovers, the most prominent originating with Irwin Jacobs.[9] InterNorth CEO Sam Segnar sought a friendly merger with HNG. In May 1985, Internorth acquired HNG for $2.3 billion, 40% higher than the current market price.[10] The combined assets of the two companies created the second largest gas pipeline system in the US at that time.[11] Internorth's north-south pipelines that served Iowa and Minnesota complemented HNG's Florida and California east-west pipelines well.[10]
Post-merger rise (1985–1991)
The company was initially named HNG/InterNorth Inc., even though InterNorth was technically the parent.[11] At the outset, Segnar was CEO but was soon fired by the board of directors to name Lay to the post. Lay moved its headquarters back to Houston and set out to find a new name, spending more than $100,000 in focus groups and consultants before Enteron was suggested. The name was eventually dismissed over its apparent likening to an intestine and shortened to Enron.[9][10] (The distinctive logo was one of the final projects of legendary graphic designer Paul Rand before his death in 1996.)[12][13][14] 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.[9] 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, it ramped up its electric power and natural gas efforts. In 1988 and 1989, the company added 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.[11] Another major development inside Enron was a pivot to overseas operations with a $56 million loan in 1989 from the Overseas Private Investment Corporation (OPIC) for a power plant in Argentina.
Timeline (1985–1992)
1980s
- 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.[15]
July 1985
November 1985
- Lay is appointed chairman and chief executive of the combined company. The company chooses the name Enron.[16]
1986
- Company moves headquarters to Houston, where Ken Lay lives. Enron is both a natural gas and oil company.
- Enron's vision: To become the premier natural gas pipeline in America.[17]
1987
- Enron Oil, Enron's petroleum marketing operation, reports a 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.[15]
1988
- 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.[16]
- 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.[15]
1989
- Enron launches Gas Bank, later run by CEO Jeff Skilling in 1990, which allows gas producers and wholesale buyers to purchase gas supplies and hedge the price risk at the same time.[16]
- Enron begins offering financing to oil and gas producers.[15]
- Transwestern Pipeline Company, owned by Enron, is the first merchant pipeline in the US to stop selling gas and become a transportation-only pipeline.[15]
1990
- Enron launches plan to expand US natural gas business abroad.[15]
- Enron becomes a natural gas market maker. Begins trading futures and options on the New York Mercantile Exchange and over-the-counter market using financial instruments such as swaps and options.[15]
- Jeff Skilling from McKinsey & Company to become CEO of Enron Gas Services, Enron's "Gas Bank". Enron Gas Services eventually morphs into Enron Capital and Trade Resources (ECT).[15]
- Jeff Skilling hires Andrew Fastow from the banking industry; he starts as account director and quickly rises within the ranks of ECT.[15]
1991
- Enron adopts mark-to-market accounting practices, reporting income and value of assets at their replacement cost.[15]
- CEO of Enron Development Corp., a unit formed to pursue international markets.[17]
1992
- Enron acquires Transportadora de Gas del Sur.[15]
1991–2000
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. and headed by Skilling.[9]
Operations as a trading firm
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.
Entrance into the retail energy market
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 the 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 starting in 1998. Enron Energy also began to sell natural gas to customers in Ohio and wind power in Iowa. However, the company ended its retail endeavor in 1999 as it was revealed it was costing upwards of $100 million a year.[6][9][11]
Data management
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.[23] In 1997, FTV Communications LLC, a limited liability company formed by Enron subsidiary FirstPoint Communications, Inc., constructed a 1,380 mile fiber optic network between Portland and Las Vegas.[24] In 1998, Enron constructed a building in a rundown area of Las Vegas near E Sahara, right over the "backbone" of fiber optic cables providing service to technology companies nationwide.[25] 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".[25] The location was also more protected from natural disasters than areas such as Los Angeles or the East Coast.[25] 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."[26] 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.[27]
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
By the second quarter of 2001, Enron Broadband Services was reporting losses. On March 12, 2001, a proposed 20-year deal between Enron and
Following the bankruptcy of Enron, telecommunications holdings were sold for "pennies on the dollar".[25] 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.[25][26] Following the sale, Switch expanded to control "the biggest data center in the world".[26]
Overseas expansion
Enron, seeing stability after the merger, began to look overseas for new possible energy opportunities in 1991. Enron's first such opportunity was a
In 1998, Enron International acquired
Misleading financial accounts
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.[35] 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 some of its liabilities off its books, allowing it to maintain a robust and generally increasing stock price and thus keep its critical investment grade credit ratings.[citation needed]
Enron was originally involved in transmitting and distributing electricity and natural gas throughout the US. The company developed, built, and operated
Enron grew wealthy due largely to marketing, promoting power, and having a high stock price.[citation needed] Enron was named "America's Most Innovative Company" by Fortune for six consecutive years, from 1996 to 2001.[38] 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".[39]
As was later discovered, many of Enron's recorded assets and profits were inflated, wholly fraudulent, or nonexistent. One example was in 1999 when Enron promised to repay
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 to their city; 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 by Ken Lay.[citation needed] Dienstbier was an acquaintance of Warren Buffett. NNG continues to be profitable now.[relevant?]
2001 accounting scandals
In 2001, after a series of revelations involving irregular accounting procedures perpetrated throughout the 1990s involving Enron and its auditor
As the scandal progressed, Enron share prices decreased from US$90 during the summer of 2000, to just pennies.[42] 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 maneuver allowed many of Enron's debts and losses to disappear from its financial statements.[43]
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 of the world's accounting firms. The company was found guilty of obstruction of justice in 2002 for destroying documents related to the Enron audit.[44] 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 recovering or reviving itself as a viable business even on a limited scale.
Enron also withdrew a naming-rights deal with the Houston Astros Major League Baseball club for its new stadium, which was known formerly as Enron Field (now Minute Maid Park).[45]
Accounting practices
Enron used a variety of deceptive and fraudulent tactics and accounting practices 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.[46] 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 that 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]
In 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's president and chief operating officer
Post-bankruptcy
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 [51] and later sold other assets to Vulcan Capital Management.[52]
Enron sold its last business,
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 in 1999, which resulted in substantial amounts of debt (approx. $620 million) and the eventual collapse of the branch.[57]
Soon after emerging from bankruptcy in 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[update], 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.[58] 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 stock while Marge chooses to keep her own Microsoft shares) 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 2003 documentary The Corporation made frequent references to Enron post-bankruptcy, calling the company a "bad apple".
Insider trading scandal
Peak and decline of stock price
During August 2000, Enron's stock price attained its greatest value, closing at $90 on the 23rd.[31]: 244 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.[59] 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.[60]
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.[61] 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.[59]
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.[62] 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.[63] 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 in July 2001, a week before the public was told what she already knew about the $102 million loss.[64] 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.[65]
California's deregulation and subsequent energy crisis
In October 2000,
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 in 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."[68]
After the passage of the deregulation law, California had a total of 38 Stage 3 rolling blackouts declared, until federal regulators intervened in June 2001.[69] 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.[70][71] 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 20 × its normal peak value.
The callousness of the traders' attitude toward ratepayers was documented in an evidence tape of a conversation regarding the matter, and sarcastically referencing the confusion of retiree voters in Florida's
"They're fucking taking all the money back from you guys? All the money you guys stole from those poor grandmothers in California?"
"Yeah, Grandma Millie man. But she's the one who couldn't figure out how to fucking vote on the
butterfly ballot." (Laughing from both sides.)"Yeah, now she wants her fucking money back for all the power you've charged right up, jammed right up her ass for fucking $250 a megawatt-hour."
The traders had been discussing the efforts of the
Former management and corporate governance
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
- chief accounting officer
- Enron International and Azurix
- 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 - Kenneth Lay: chairman of the board
- Robert A. Belfer
- Norman P. Blake Jr.
- Ronnie C. Chan
- John H. Duncan
- Wendy L. Gramm
- Ken L. Harrison
- Robert K. Jaedicke
- Charles A. LeMaistre
- John Mendelsohn
- Jerome J. Meyer
- Richard K. Gallagher
- Paulo V. Ferraz Pereira
- Frank Savage:
- John A. Urquhart
- John Wakeham
- Herbert S. Winokur Jr.
Products
Enron traded in more than 30 different products, including
Online marketplace services
- EnronOnline (commodity trading platform).
- ClickPaper (transaction platform for pulp, paper, and wood products).
- EnronCredit (the first global online credit department to provide live credit prices and enable business-to-business customers to hedge credit exposure instantly via the Internet).
- ePowerOnline (customer interface for Enron Broadband Services).
- Enron Direct (sales of fixed-price contracts for gas and electricity; Europe only).
- EnergyDesk (energy-related derivatives trading; Europe only).
- NewPowerCompany (online energy trading, joint venture with IBM and AOL).
- Enron Weather (weather derivatives).
- DealBench (online business services).
- Water2Water (water storage, supply, and quality credits trading).
- HotTap (customer interface for Enron's U.S. gas pipeline businesses).
- Enromarkt (business-to-business pricing and information platform; Germany only).
Broadband services
- Enron Intelligent Network (broadband content delivery).
- Enron Media Services (risk management services for media content companies).
- Customizable Bandwidth Solutions (bandwidth and fiber products trading).
- Streaming Media Applications (live or on-demand Internet broadcasting applications).
Energy and commodities services
- Enron Power (electricity wholesaling).
- Enron Natural Gas (natural gas wholesaling).
- Enron Clean Fuels (biofuel wholesaling).
- Enron Pulp and Paper, Packaging, and Lumber (risk management derivatives for the 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
Commercial and industrial outsourcing services
- Commodity Management.
- Energy Asset Management.
- Energy Information Management.
- Facility Management.
- Capital Management.
- Azurix Inc. (water utilities and infrastructure).
Project development and management services
- 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
EnronOnline
Enron opened EnronOnline, an
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.[74][76]
Enron International
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 at the bankruptcy filing.[citation needed] Enron International consisted of all of Enron's foreign power projects, including ones in Europe.
The company's
Management
Rebecca Mark was the CEO of Enron International until she resigned to manage Enron's newly acquired water business, Azurix, in 1997. Mark had a major role in the development of the Dabhol project in India, Enron's largest international endeavor.[78]
Projects
Enron International constructed power plants and pipelines across the globe. Some are presently still operating, including the massive
India
Around 1992 Indian experts came to the United States to find energy investors to help with India's energy shortage problems.[31] During December 1993, Enron finalized a 20-year power-purchase contract with the Maharashtra State Electricity Board.[31] 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 through a two-phase project called Dabhol Power Station.[80] 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 with the remaining 90% covered by the MSEB [81]
In 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.[31] The MSEB 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]
By 2000, the Dabhol plant was almost complete and Phase 1 had begun producing power.[82][83] Enron as a whole, however, was heavily overextended,[84] and in the summer of that year Mark and all the key executives at Enron International were asked to resign from Enron in an effort to reshape the company and get rid of asset businesses.[85] Shortly thereafter a payment dispute with MSEB ensued, and Enron issued a stop-work order on the plant in June 2001.[86][87] From 1996 until Enron's bankruptcy in 2001 the company tried to revive the project and revive interest in India's need for the power plant without success. By December 2001 the Enron scandal and bankruptcy cut short any opportunity to revive the construction and complete the plant.[88] In 2005, an Indian government-run company,[89] Ratnagiri Gas and Power, was set up to finish construction on the Dabhol facility and operate the plant.[90]
Project summer
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.[91] Employees who worked with company assets were told in 2000 [92] that Jeff Skilling believed that business assets were an outdated means of a company's worth, and instead he wanted to build a company based on "intellectual assets".
Enron Global Exploration & Production, Inc.
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).[93] 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.[94] December 1994, a joint venture began between ONGC (40%), Enron (30%) and Reliance (30%).[94] 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.[95]
Enron Prize for Distinguished Public Service
During the mid-1990s, Enron established an endowment for the Enron Prize for Distinguished Public Service, awarded by
- 1995: Colin Powell.[96]
- 1997: Mikhail Gorbachev.[97]
- 1999 (early): Eduard Shevardnadze.[98]
- 1999 (late): Nelson Mandela.[99]
- 2001: Alan Greenspan.[100]
Greenspan, because of his position as the
In early 2002, Enron was awarded Harvard's (in)famous Ig Nobel Prize for "Most Creative Use of Imaginary Numbers". The various former members of the Enron management team all refused to accept the award in person, although no reason was given at the time.
Enron's influence on politics
- 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.[107]
- 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.[107]
- John Ashcroft, the attorney general at the time, recused himself from the DOJ's investigation into Enron due to receiving $57,499 when running for a 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.[107]
- Karl Rove, White House senior advisor at the time, waited five months before selling $100,000 of Enron stock.[107]
- 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.[107][108]
See also
- Enron: The Smartest Guys in the Room, an award-winning 2005 documentary film that examines the collapse of the Enron Corporation
- Enron Scandal: Greed Led to Corporate Catastrophe
- The Crooked E: The Unshredded Truth About Enron, a television movie aired by CBS in January 2003 based on the book Anatomy of Greed by Brian Cruver
- Pipe Dreams: Greed, Ego, and the Death of Enron, a book by Robert Bryce
- ENRON, a 2009 play by British playwright Lucy Prebble
- Dot-com bubble
- Theranos
- FTX
Notes
- Ken Lay that the Fastow partnerships could cause Enron to "implode in a wave of accounting scandals." Lay requested that Watkins and Elizabeth A. Tilney, whose investment banker husband Schuyler Tilney is a managing director and head of the energy investment banking unit at Merill Lynch and a close personal friend of Andrew S. Fastow and his wife Lea, develop a crisis management strategy.[20] In 1993, Schuyler Tilney joined Merrill Lynch and previously he had been employed at CS First Boston during which CS First Boston invested heavily in the privatization of Russia.[20][21][22]
References
- ^ "Fortune 500: Enron". Fortune.
- ^ "Andersen guilty in Enron case". BBC News. June 15, 2002. Retrieved May 2, 2010.
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Bibliography
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- Fusaro, Peter C.; Miller, Ross M. (2002). What went wrong at Enron. J. Wiley & Sons.
External links
- Enron emails and phone calls dataset, archived and searchable online with Threads at the Wayback Machine (archived June 5, 2015).
- Portland General Electric Company
- Northern Natural Gas Company
- Enron's Code of Ethics, TheSmokingGun.com
- Enron board records at the Hagley Library at the Library of Congress Web Archives (archived March 6, 2013)
- "The Fall of Enron", HBS Research paper
- FBI website
- Martin, Patrick (January 28, 2002). "The strange and convenient death of J. Clifford Baxter—Enron executive found shot to death". World Socialist Web Site.
Data
- Yahoo!: Enron Corp. company profile
- Enron Creditors Recovery Corp. profile on Hoovers.com
- Enron Creditors Recovery Corp. profile, Google Finance
- Enron Chronology. Archived September 29, 2011, at the Wayback Machine.
- Enron Securities Litigation Web Site at the Wayback Machine (archived August 18, 2010) (Contains the ENRON historical stock quotes from 1997 to 2002.)