Enron: The Inside Story

1
Enron The Inside Story

• John McAnulty
• Evan Kennedy

2
A Timeline of Enrons Collapse

• July 1985 Houston Natural Gas merges with
  InterNorth to form Enron, originally an
  interstate natural gas pipeline company.
• Nov 1999 EnronOnline is launched, the first
  global commodity trading web site.
• Sept 10, 2000 Enron Chairman Ken Lay
  contributes more than 290K to Bushs election
  campaign.
• Jan 3, 2001 Lay is one of the 474 people Bush
  names to advise his presidential transition
  team.
• Feb 2001, Jeffrey Skilling takes over as CEO
  Lay remains the chairman.

3

• May 19, 2001 Congress begins implementing
  President Bushs energy plan into legislation.
• June 5, 2001 Karl Rove, Bushs senior advisor,
  divests his stock in energy, defense, and
  pharmaceutical companies (owned more than 100K
  in Enron stock)
• Aug 14, 2001 Kenneth Lay takes over as CEO
  after Jeffrey Skilling resigns for personal
  reasons.
• Oct 16, 2001 Enron reports a 618M
  third-quarter loss and discloses a 1.2B
  reduction in shareholder equity.
• The next day, the SEC sends a letter to Enron
  asking for information regarding the companys
  losses
• Enron acknowledges a SEC inquiry into a possible
  conflict of interest relating to Enrons
  dealings with its partnerships.

4

• Oct 24, 2001 Enron ousts CFO Andrew Fastow.
• Nov 8, 2001 Enron begins talks to sell itself
  to Dynegy for 8B in stock and cash.
• The next day, Enron discloses that it overstated
  its earnings by 567M since 1997. Two officials
  are fired.
• Nov 19, 2001 Enron restates its 3rd quarter
  earnings and tries to restructure a 650M
  pending obligation.
• Nov 28, 2001 Dynegy seeks to cut its buyout
  offer as Enrons credit rating is cut to
  junk-bond status.
• Dec 2, 2001 Enron files for Chapter 11
  bankruptcy protection and announces 4,000
  layoffs.
• Jan 10, 2002 The Justice Dept. confirms that a
  criminal investigation of Enrons collapse has
  begun.

5
Corporate Culture The Pressure Cooker

• Extremely competitive and hostile.
• Cut throat. The successful stay. The underdogs
  are cut.
• Executive battles for power
• company strategies, big deals
• Shady Accounting procedures
• Risky Investments

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The Driving Forces

• Hopes of Big bonuses
• Pressure to Keep Enron growing
• Groupthink
• brainwashed to disregard reality
• Fear of pleasing your superiors
• The blinding power of money