How they played the game.

How did Enron get from the most successful company in 2000 to the worst in 2001? Their aim was to keep on growing at the same magnificent rate as they did in the years before. To manage that they invested in new projects with borrowed money. The company created partnerships to make their earnings look more impressive, in that way Enron was able to keep $600 million in debt off the books. When the first signs off failure appeared, the staff announced an even bigger stock growth while selling their own stocks. When the dishonorable truth was revealed the stocks nosedived. Enron was no longer capable to repay its creditors and was declared bankrupted.

Source: http://www.articleclick.com/Article/What-happened-at-Enron-/932817

Stijn Casneuf

Guilty of dishonesty

Unlike most fraud trials, the story of Enron had a huge impact on the way of looking to an organisation. From this moment a company can be condemned of being disloyal to its stakeholders. Because the employees didn’t get the same privileges as the managers, Enron was found guilty harming innocent victims. Although the trial started as an ordinary number-based claim, it ended up as an emotional case. Corporate governance has become a deciding factor in business execution.

Source: http://www.soxfirst.com/50226711/enron_stakeholders_and_the_consequences_for_corporate_governance.php

Stijn Casneuf

The end game

Enron, which was once the biggest energy trader in the United States, was the first company that realized that they could buy, sell and hedge their products just as shares and bonds. The greed of the owners forced the executives to make extremely complicated transactions relating to unsure deals full of risk that would take place many years later. In time these speculations turned into huge losses. The company tried to hide these debts by keeping them off the balance sheet. When the ugly truth was revealed, the company‘s executives had already sold their shares before its stock price collapsed. The gambling scandal on the future uncertainties left Enron with a vast number of debts and an enormous quantity of unemployed people.

Source: http://news.bbc.co.uk/2/hi/business/3398913.stm

Stijn Casneuf

Goldman Sachs pays Enron creditors

Goldman Sachs Inc., the famous Wall Street investment bank, will compensate Enron creditors for about $7 million. A month before Enron went bankrupt, Goldman Sachs helped Enron to pay commercial-paper investors. The commercial paper was repurchased by Enron right before the bankruptcy, and now it demands that Goldman Sachs pays a part of Enron’s debts. Goldman Sachs was once a great name in Wall Street, but has lost most of its fame because of the economic crisis. It has been reformed to a financial holding recently. Enron has already sued 175 firms to pay its debts. In total, $22 has been recovered to compensate Enron creditors.

Filip De Geyter

Source: Chron

‘Enronesque’ behavior of Bear Stearns managers

Two hedge-fund managers of Bear Stearns Cos., prosecuted for conspiracy and fraud, have been acquitted. The two men persuaded people to invest in unhealthy hedge funds. The case looks similar like the one of Enron, as they used vague statements to mislead the investors. Their e-mail correspondence proved their awareness of the risks of the hedge funds. But federal agents have failed to get the two managers convicted. After the Enron case, the world was struck by the subprime crisis, which brought new fraude cases to light. The American government still struggles to solve all the cases and get every “white- collar crook” behind bars.

Filip De Geyter

Source: Chron

Former Enron employees claim their share

A team of lawyers managed to recover the bonuses, paid to Enron executives and traders right before the bankruptcy. Enron employees who were fired after the bankruptcy will be compensated with part of the money. Some $30 million has been claimed back by the lawyers. The amount was wrongfully paid as ‘retention’ bonuses for the executives, a short time before Enron went bankrupt. It will probably take some time before the employees get their money, as it will take several years of work to divide the money properly. After all the workers have been compensated, the remaining funds will be dispersed.

Filip De Geyter

Source: Chron

Enron wasn’t all bad

The bankruptcy of Enron has also a good consequence : the theater industry, more specifically Lucy Prebble came up with the brilliant idea of making a new play about the corporate corruption in Enron. The play is a mix of political satire, modern morality and multimedia spectacle. With the play, the producer wants to show that capitalism has 2 sides, on the one hand it’s turbulent energy and on the other hand hubristic vanity. They also try to lay the focus on the fact that nothing has been learned out of the past. Enron was a fantasy and nothing or nobody could have avoid this.

Bram De Cocker

source:
http://www.guardian.co.uk/stage/2009/jul/23/enron-review-by-michael-billington

Banks act dumb

Not only Enron but also a dozen investment banks and law firms have now been accused of committing fraud and of defrauding investors. The complaint has been lodged by thousand of stockholders, who lost an amount of $25bn, and by formal employees who have lost their pension funds. One of the reasons for the inclusion of new defendants is that Andersen isn’t capable of paying the demanded compensation and they now want to receive the compensation from the corrupt banks. The accused banks denied the fact that they have anything to do with the fraud or they weren’t reachable for comment.

Bram De Cocker

Source:
http://news.bbc.co.uk/2/hi/business/1917627.stm

Death penalty for dead company

Enron, as first, has been given a death penalty, which means that the trader have been barred after their fraudulent behavior in the energy crisis of California.
With this penalty the Ferc(Federal Energy Regulatory Commission) wants to make clear that the public interest has to be an important objective in each company, instead of boosting their own profits by selling energy at high prices. According to the Ferc, the energy industry got itself into trouble and had to seek for bankruptcy protection because they didn’t use any rules. Today new rules are imposed and they contain that the basic things should be done. Despite the work of the Ferc, people still have to accept the highly-prized contracts.

Bram De Cocker

Source:
BBC News: http://news.bbc.co.uk/2/hi/business/3021336.stm

Fastow’s remorse

In January 2004, the till then frozen Enron investigation, knew a tremendous breakthrough when Andrew Fastow, former chief financial officer, decided to plead guilty and help the case a huge step forward in exchange for a softened sentence. In September 2006 Mr. Fastow had his 10-year prison term reduced to 6 by a federal judge, Ken Hoyt. This exceptional decision took place because the CFO had given help to recover the colossal debts of the energy trading company and had revealed valuable information to secure the convictions of his previous bosses, Kenneth Lay and Jeffrey Skilling.

Bart De Clercq

Sources:
New York Times
Guardian 1
Guardian 2

Lay’s fault on the right side?

In October 2006, Kenneth Lay, Enron’s founder, CEO and chairman, was cleared of charges after he died of a terrible heart attack 3 months earlier. Lay, who had been found guilty on a multi-million dollar fraud, a massive conspiracy and 10 other worrisome charges in May 2006, was pronounced dead after a heart failure on 5 July. Due to Mister Lay’s death, all charges against him were dropped. He would have been sentenced in October but the jury returned a guilty verdict because he did not had the opportunity to appeal. Since he was facing up to 45 years behind bars, people wonder: “Was his death a fault on the right side?*”.

*fault on the right side=geluk bij een ongeluk

Bart De Clercq

Sources:
BBC 1
BBC 2
BBC 3

Skilling’s breakthrough

Jeffrey Skilling, former CEO of Enron and the mastermind behind the ‘Enron corruption scandal’, is finally getting his case reviewed. Skilling was accused of the embezzlement of enormous losses using illegal accounting tricks and forbidden loopholes. The white-collar criminal misrepresented the balance sheet of the energy trading company and brought the supplier to bankruptcy. Now, after almost 3 years in jail, his lawyer will try to influence the sentence by exploiting 2 possible mistakes made during his trial. Neither was the jury free from "venomous emotion", nor was his trial judge, Sim Lake, correct in handling the case. This way his 24 years prison sentence could possibly be reduced to a poor 15 years.

Bart De Clercq

Sources:
Guardian 1
Guardian 2
Guardian 3