DRISHTI

PALLAVI
USHMI
DEEPA
ABOUT ENRON
 One Of The Worlds Leading Supplier of Electricity, Natural
Gas, Communications, Pulp And Paper.
 Development Of Power Plants, Pipelines.
 CEO, CFO And Chairman Transformed Enron Dramatic
Growth
 Fortune Named Enron “Americas Most Innovative
Company” For Six Consecutive
SOME IMPORTANT
DATES OF THE SCANDAL
1985: Houston
Natural Gas Merges
With Omaha Based
Internorth Forming
Enron Corporation

2000: Annual Revenue

Touched $100 Billion
And Acknowledge As
The Sixth Largest
Energy Company.

August 2001: The CEO

Resigns And Lay Takes
Over As The New CEO
WHAT MADE IT A SCANDAL ?
During 2001, after a series a of revelations involving
irregular accounting procedure bordering on fraud
perpetrated throughout the 1990s involving Enron and its
accounting company Arthur Anderson ,Enron suffered the
largest Chapter 11 bankruptcy in history.

Some highlights of the scandal are:-

$30 Million of self dealings by the CFO
$700 Millions of Net earnings disappeared
$1.2 Billion of Equity Shareholders disappeared
Over $4 billion hidden liabilities
 ENRONS MISLEADING
Bankruptcy Filing came After Series Of
ACCOUNTS
Revelations That Giant Energy Traders Had Been
Using Special Purpose Entites.(SPE)

Companys CFO In 2001 Stated That Enron

Has Established SPE To Move Asset And
Debt Off its Balance Sheet And To Increase
Cash Flow.

According To John, A University Law

Professor, Once SPE Is Formed By Enron, It
Will Then Borrow Debt Form Banks And
Enron Would Guarantee That Debt
 BANKRUPTCY
In reality SPE founded by ENRON
were used as means of storage,
transportation, or other energy related
operations.

The cash flow of ENRON from its

operations declined from positive 127
million dollar in 2000 to a negative of
753 million dollar in 2001

ENRON finally filed for bankruptcy

on December 2, 2002 after Dynergy
terminated the deal when STANDARD
AND POORS downgraded ENRON S
debt below investment grade
THE WHISTLE
BLOWER
In June 2001,Enron Vice
President Sherrron Watking was
given the task of finding some
assets to sell off but it was very
difficult for her.
Watking prepared a memo
regarding the various problems
and placed it into the box but this
memo was not taken into
consideration.
On August 22, Watking handed
CEO LAY a Seven page letter and
told him that Enron would
implode in a wave of accounting
scandal.
THE WHISTLE BLOWER
Against Watkins letter Lay, the CEO
arranged to have a ENRON Law Firm
Vinson and Elkins that looked after all
questionable deals.
Watkins continued to do her work and
sold stock of 30000 dollar in August 2001
and some in late September.
IN February 2002, she revealed the
various facts regarding ENRON
partnership and finally resigned in
November`. But Watkings Revealed all the
facts only after Enron filed for Bankrupty
Partners In Crime
KENNETH LAY-THE
CHAIRMAN
Became the
Chairman And CEO
in Feb 1986

He drew down his

$4 Million Enron
credit Line
repeatedly and then
repaid the company
with the enron
shares .
ANDREW FASTOW- THE CFO
Fatsow joined Enron in 1990 And took
it to soaring heights
His expertise awarded him CFO
excellence award for Capital structure
He used to get support from Enron
President And COO Jeffrey K Skiling.

Fastow was accused of being

mastermind behind the Enron scandal
Fastow designed a complex web of
companies that solely did business with
Enron, with the dual purpose of raising
money for the company, and also hiding
its massive losses in their quarterly
balance sheets
JEFFERY SKILLING- THE
PRESIDENT AND CHEIF
OPERATING OFFICER

Held equally
responsible for the
Enron Scandal

Involvement In
Government
Deregulations

Securities Fraud
ARTHUR ANDERSEN:- THE
ACCOUNTING FIRM
ARTHUR ANDERSEN:- THE ACCOUNTING FIRM
Andersen Partner Complained about
Fastows Plan to contribute his money
into Partnership saying Why Would
Any Director In His or Her Right Mind
Ever Approve Such a Scheme
The U.S Government Asserted that
after Investigation of Enorn began
following its Bankruptcy, Anderson
destroyed thousands of Documents in
Houston, Portland, London And
possibly other Locations.
Andersen also provide Consulting
services helping set up and opine on the
validity of Enron spe under accounting
rules
FRAUDLENT PRACTICES OF VINSION
&ELKINS

Watkins allegations
of accounting fraud

Professional
misconduct by the
Charge by the texas bar

Legitimacy of Enrons
business practices
MERRILL LYNCH

Merrill Lynch faced

scrutiny by Federal
Prosecutors and Securities
And Exchange Commission
for its role in Enron 1990
sale of Nigerian barges.

Overstated statement
about guaranteed Rate of
Return.

False statements and

misleading Information.
IN 2001&2002
 October 2001 Securities And
Exchange Act Launches
 A formal Investigation into its
“Related Party Transaction”.
 December 2001 Enron files for
Protection from Creditors in New
York Bankruptcy Court
 Lays off Five Thousand
Employees
 February 2002 The Hearing
Begins. Improper Financial
Transaction and Self Dealing.
 October 2002 The CFO Fastow is
indicated of being the The
Mastermind behind the Scandal.
IN 2003 & 2004

The Creditors sue Lay

and his Wife to recover
$70 million in transfers
It settled its
allegations of SEC
paying $300 million
In 2004 Fastow agree
to serve 10 years in
Prison
IN 2004 Lay
surrenders after being
indicated
THE END OF ENRON
2006:- Lay and Skilling trial
begins

Lay and Skilling are convicted

of conspiracy to commit
securities and wire fraud. Lay
convicted in a separate bank
case