On today in 2001, the Enron Corporation files for Chapter 11 bankruptcy protection in a New York court, sparking an individual of the largest corporate scandals in U.S. history.
An power-trading firm located in Houston, Texas, Enron was formed in 1985 because the merger of two gas firms, Houston Natural Gas and Internorth. Under chairman and CEO Kenneth Lay, Enron rose as high as number seven on Fortune magazine’s set of the prime 500 U.S. firms. In 2000, the firm employed 21,000 women and men and posted income of $111 billion. Over the next year, however, Enron’s stock price started a dramatic slide, dropping from $90.75 in August 2000 to $.26 by closing on November 30, 2001.
As costs fell, Lay sold massive levels of his Enron stock, while simultaneously encouraging Enron workers to get a lot more shares and assuring them that the business was on the rebound. Employees saw their retirement savings accounts destroyed as Enron’s stock cost continued to plummet. After just one more energy firm, Dynegy, canceled a well planned $8.4 billion purchase-out in late November, Enron filed for bankruptcy. By the finish of the entire year, Enron’s collapse had expense investors vast amounts of dollars, destroyed some 5,600 jobs and liquidated virtually $2.1 billion in pension plans.
Over another numerous years, the name “Enron” became synonymous with massive-scale corporate fraud and corruption, being an investigation by the Securities and Exchange Commission and the U.S. Justice Department revealed that Enron had inflated its earnings by hiding debts and losses in subsidiary partnerships. The government subsequently accused Lay and Jeffrey K. Skilling, who served as Enron’s CEO from February to August 2001, of conspiring to hide their company’s monetary weaknesses from investors. The investigation also brought down accounting giant Arthur Anderson, whose auditors have been found guilty of deliberately destroying documents incriminating to Enron.
In July 2004, a Houston court indicted Skilling on 35 counts including fraud, insider and conspiracy trading. Lay was charged with 11 similar crimes. The trial began on January 30, 2006, in Houston. A level of former Enron employees appeared on the stand, which include Andrew Fastow, Enron’s ex-CFO, who in early stages pleaded guilty to two counts of conspiracy and decided to testify against his former bosses. Over the span of the trial, the defiant Skilling-who unloaded almost $60 million worth of Enron stock shortly immediately after his resignation but refused to admit he knew of the company’s impending collapse-emerged because the figure numerous identified most personally with the scandal. In May 2006, Skilling was convicted of 19 of 35 counts, whilst Lay was found guilty on 10 counts of fraud and conspiracy. When Lay died from heart illness just 8 weeks later, a Houston judge vacated the counts against him. That October, the 52-year-old Skilling was sentenced to greater than 24 years in prison.