The filing of bankruptcy under Chapter 11 of the United States Bankruptcy Code, by the Enron Corporation, on December 2, 2001, was the largest filing ever at the time. Since then the filing's been surpassed only by WorldCom in 2002 and the massive implosion of Lehman Brothers, which jump-started the frankly gigantic economic recession of 2008. Enron's system of business was enabled to thrive when the Securities and Exchange Commission (SEC) approved its proposed mark-to-market accounting practices. Being able to essentially book profits before actually earning them opened the door to a level of corruption never before seen on such a multinational scale. Enron's stock rose from the beginning of 1990 until the end of 1998 by 311% percent. Human greed, lust for power, and general iniquity drove the executives into dishonesty. Time after time the Enron Corporation estimated future profits and “cooked the books” to achieve them. Prime examples of such disreputable practices can be found in the deal with Blockbuster Video and the Dabhol Power project, both of which fell through, though the profits of which were both clearly reported. Several TV appearances were made by pompous Enron executives detailing, with as little detail as possible, the felicity of their beloved company. During one broadcast it was suggested that all employees should dump, in complete entirety, their 401k money into Enron stock. After such palpably obscene earnings and such unprecedented growth, not to mention lackluster financial statements and odd business models, the SEC launched an informal inquiry which quickly led to full scale, formal, investigation. This investigation led to the permanent demise of one of the five largest accounting firms in the United States, Arthur Andersen LLP. Arthur Andersen was cited for obstruction of justice and accused of shredding incriminating documentary evidence. The dissolution of both the Enron Corporation and Arthur Andersen LLP was, at the very least, monumental. Enron was an empire. Empire, as defined by a certain Merriam Webster, is, “a powerful and important enterprise or holding of large scope that is controlled by a single person, family, or group of associates.” Every single empire, so far, has collapsed, decayed and melted due to its own existence as an imperial power. The Enron Corporation, as the very model of an economic empire, self-destructed. This self-destruction led to unexampled international, national, executive and working class crises in the world of finance.
As a multinational player in the game of commercial enterprise, when the Enron Corporation, so to say, crumbled into teenie weenie pieces, so with it came the global economic system. Employing 21,000, in more than 40 countries, there were far-reaching consequences to its deceitful effectuation of business. Banqueting upon the crops of pecuniary delinquency and sampling the nectar of monetary ruin were the operating-subsidiaries and special purpose vehicles (SPVs) of the Enron Corporation. Operating-subsidiaries and SPVs are in fact similar, yet their purposes to the parent company are different. Operating-subsidiaries run to benefit their parent with their own publicly disclosed identity, stock, and when applicable, instruments. On the other hand SPVs exist mainly to house risk, not publicly connected to the parent company. SPVs are normally created to fulfill temporary objectives, if the SPV fails it does so without affecting the its parent. With too much control by the sponsoring company (Enron), the new entity will not be an SPV but only a subsidiary, and losses attributed to its parent (Enron). During its rise the Enron Corporation seriously abused its special purpose vehicles, their primary function being to only attract debt away from Enron leaving in its place nothing but profit. They were set up to fail. These SPVs, and those men and women who ran them, were but tools to the bigwigs, pawns in a larger scheme, disposable in every sense of the word, and disposed of they were. When Enron fell so with it fell the legitimate subsidiaries. The Enron stockholders knew not what hit them. With an ultimate high stock price of $90 in mid-2000 shareholders lost in excess of $11 billion when the price dropped to under a dollar in December of 2001. On November 28, 2001, the day Dynegy Incorporated backed out of it's planned purchase of Enron, the German DAX dropped well over 100 points. The Japanese Nikkei plummeted 250 points off its high and the Chinese Hang Sang fell over 200 points. In the US the Dow Jones Idustrial Average dipped over 230 points.
During the deliquesce of Enron, the United States, were, so to speak, overcome with a bout of insalubrity. From 1996 until its final taxable business year, 2001, the Enron Corporation posted $1.785 billion in profits. Tax at the 35% corporate rate would be $625 million. Luckily for Enron they had over 800 subsidiaries in “tax havens” such as the Cayman Islands and, instead of forking over $625 million, they received $381 million in rebates, $278 million of which came in the year 2000. Millions of dollars were contributed to the ultimately successful republican presidential campaign of a certain George Walker Bush. It is also a well known fact that in April 2001 a direct memorandum was delivered by former Enron Chairman Ken Lay to Vice President Dick Cheney. The influence of this memo is tangible, “The administration should reject any attempt to re-regulate wholesale power markets by adopting price caps or returning to archaic methods of determining the cost-base of wholesale power,” reads the document. Ordering about the leaders of the free world was genuinely frowned upon when the memo leaked, both by citizens and sovereign states alike. The integrity of arguably the most powerful administration was officially debatable. The issue was far from closed, the Enron Corporation held tightly onto its last business, Prisma Energy, until 2006, finally abandoning it as an asset-less facade. In 2007 Prisma became Enron Creditors Recovery Corporation, its evident goal to collect assets to pay Enron's previous debt and wipe the slate clean to the extent possible. The US hasn't seen the last of Enron, nor does it want to. As long as the malodorous stink of the Enron carcass lingers in the economic air of our fine United States the issue will not, and cannot, be forgotten. Millions of tax dollars were not only lost but, in reality, paid out to the most illegitimate of conglomerations; the presidential office was entwined with scandal and not soon shall theses misdoings face neglect. It didn't look good for the good ol' US of A, and it still doesn't.
The law came down hard upon the heads of the Enron executives; years in prison sold like hotcakes. Perhaps more shocking than the 24-year, 4-month prison sentence handed down to Jeffery Skilling, former president and CEO, were the deaths of John Clifford Baxter, an executive, and Kenneth Lay, CEO from 1985 until 2003. there after Skilling, except for a few months in 2000. Baxter's deal was suicide. After agreeing to testify before Congress, he bit the bullet. Not so much figuratively, no he didn't testify, he literally bit a bullet. Lay's deal was labeled a heart attack caused by coronary artery disease, although many assert differing dispositions, suicide being the most common. Lay died whilst on vacation, about three and a half months before his sentencing, a sentencing presumed to include 45 years of prison time. Enron's Chief Financial Officer, Andrew Fastow, responsible for his share of the corruption, and then some, received 10 years. A surprising number of the spouses of convicted executives were also sentenced, albeit for astronomically shorter terms. One might suspect the Enron execs of losing just about everything, they did. The day to day employees, the laborers, the line workers, the lackeys, they, they lost everything. Perhaps not everything, $2 billion vanished with the bankruptcy, but $85 million was recovered. If evenly distributed, each employee would receive but $4.25 out of every $100 in their pension. This takes into consideration only the actual cash value of their compensation. Many employees held stock in their retirement plans. The retirement plans of many employees consisted mostly of Enron stock, stock that fell from $90 to under a dollar so fast they couldn't react, or at times, were disallowed from reacting. From the aforementioned settlement employees each received on average about $3,100. $3,100 on which to live the rest of their miserable lives.
The Enron Corporation basically ate itself. As a result, international, national, executive and working class practices in the world of finance were dramatically dented. Multinational special purpose vehicles suffered severe monetary losses. The United States government certainly didn't fare well. Executives ended up in jail and general laborers were hit hardest of all. However, after all the ruin we're still left with questions. To play the Devil's Advocate, how could the Enron story have been written differently? Why wasn't it? As Ronald Lopez, Operations Analyst, Royal Bank of Scotland, stated so eloquently “Their financial statements were not clear, [an] adjective used a lot is opaque. This is the same shit with the sub prime mortgage baskets and the credit derivative transactions of recent. Why would you invest in something where you don't know where their 'profits' are coming from? This is absolute lunacy.” Empires collapse, decay and melt. Why then, why, do time after time, businesses and governments adopt imperialist methods of management? The many questions to which there are answers only pose many more questions. Why don't such serious repercussions, (fiscal ruin, jail time, etc.) beg change? Why weren't the lessons learned? Why won't they be? Ask why.