Enron

Energy rate speculator. Accounting fraud.

Internal emails are now available to the public. Related article notes Enron declared Bankruptcy in December 2001. Andy Fastow and his wife, Lea, are awaiting trial on criminal charges. And while neither Kenneth Lay nor Jeffrey Skilling has been charged with any crime yet, they are the subject of any number of civil suits and have become poster boys for everything wrong in corporate America.

http://en.wikipedia.org/wiki/Enron

an old company

Malcolm Gladwell article - it was a mystery, not a puzzle kinda like understanding any Complex System.

  • "There have been scandals in corporate history where people are really making stuff up, but this wasn't a criminal enterprise of that kind," Jonathan Macey says. "Enron was vanishingly close, in my view, to having complied with the accounting rules. They were going over the edge, just a little bit. And this kind of financial fraud - where people are simply stretching the truth - falls into the area that analysts and short-sellers are supposed to ferret out. The truth wasn't hidden. But you'd have to look at their financial statements, and you would have to say to yourself, What's that about? It's almost as if they were saying, "We're doing some really sleazy stuff in footnote 42, and if you want to know more about it ask us." And that's the thing. Nobody did." See [z2002-02-27-d]

  • In the spring of 1998, Macey notes, a group of six students at Cornell University's Business School decided to do their term project on Enron. "It was for an advanced financial-statement-analysis class taught by a guy at Cornell called Charles Lee, who is pretty famous in financial circles," one member of the group, Jay Krueger, recalls. ... The people in the group reviewed Enron's accounting practices as best they could. They analyzed each of Enron's businesses, in succession. ... The students' conclusions were straightforward. Enron was pursuing a far riskier strategy than its competitors. There were clear signs that "Enron may be manipulating its earnings." The stock was then at forty-eight dollars - at its peak, two years later, it was almost double that - but the students found it over-valued. The report was posted on the Web site of the Cornell University business school, where it has been, ever since, for anyone who cared to read twenty-three pages of analysis. The students' recommendation was on the first page, in boldfaced type: "Sell". This blog has links.

started big chapter when hired Ken Lay as CEO in 1986.

Enron was named "America's Most Innovative Company" by Fortune Mag for six consecutive years, from 1996 to 2001.

stock peak value of $90/sh Aug'2000

Jonathan Weil story for Wall St Journal questioning their finances was published Sept20'2000.

JamesChanos started Short Selling the stock Nov'2000.

Bethany Mc Lean published critical article in Fortune Mag March'2001. (Gladwell says "and then the stock began to fall", but the chart linked above shows it had started falling Aug'2000.

US operations declared Bankruptcy Dec02'2001.


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