The Houston energy company, formed in 1985, grew into the nation's seventh-biggest company in revenue by buying electricity from generators and selling it to consumers. It was admired on Wall Street as a technological innovator. But it used complex partnerships to keep some $500-million in debt off its books and mask its financial problems so it could continue to get cash and credit to run its trading business. In a six-week downward spiral in the fall of 2001, Enron disclosed a stunning $618-million third-quarter loss, the Securities and Exchange Commission opened an investigation into the partnerships and the company's main rival backed out of an $8.4-billion merger deal. Enron filed for protection from creditors on Dec. 2, 2001, in the biggest corporate bankruptcy in U.S. history. Its stock, worth more than $80 about a year earlier, tumbled to less than $1 a share. Enron left behind $31.8-billion of debts.
What happened to Enron's employees?
About 21,000 workers around the world lost their jobs, investments, savings and retirement portfolios in the collapse of the energy trading giant. More than 20,700 participants in Enron's 401(k) plan had nearly two-thirds of their assets invested in company stock. As its price plunged in the fall of 2001, Enron barred employees from selling Enron shares from their retirement accounts, which were being switched to a new plan administrator. Enron said that the freeze lasted 10 days, and that its stock price was down to $13.88 when it was implemented. Former employees testified before Congress that the lockout lasted longer. Several class-action lawsuits brought by employees and shareholders are pending.
Could this happen again?
There is a fierce debate among corporate experts about whether the reforms introduced after Enron have done enough to prevent future fraud. Chief executives are certainly more cautious about signing off accounts that might be inaccurate now that they face criminal penalties. But the temptation to boost stock prices has been a consistent feature of booming markets - from the 1920s to the present - especially when the rewards for chief executives can be so high. In one year, Lay earned $252-million including stock options. The United States has been the pioneer in tougher financial regulation, from the creation of the Securites and Exchange Commission itself in the 1930s, after the stock market crash of 1929. Nevertheless, many argue that it has to be a change in corporate culture, rather than legal restrictions, that are needed to prevent another reoccurrence of corporate fraud.
So is this the Enron grand finale?
Not by a long shot. Three Enron Internet division defendants need to be retried in three different criminal trials, assuming the government sees that through as promised. Two Internet defendants have just finished their retrial in Houston and are awaiting the jury's verdict. Three British ex-bankers fighting extradition could be tried on Enron-related criminal charges. And in noncriminal matters, the giant class-action lawsuit by shareholders has plenty of defendants left despite numerous settlements. That could go to trial in a giant tangled mess the judge in that case has tried mightily to avoid.
Compiled by Times researcher Natalie Watson, with information from CBS News, the Houston Chronicle and BBC News.
