ABOUT ENRON

Enron
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Enron Creditors Recovery Corporation

Former type Defunct / Asset-less Shell

Industry formerly Energy

Founded Omaha, Nebraska, 1985

Defunct 2001

Enron Complex
Headquarters
Downtown Houston, Texas, United States

Kenneth Lay, Founder, former Chairman

and CEO
Jeffrey Skilling, former President, CEO and
COO
Andrew Fastow, former CFO
Key people
Rebecca Mark-Jusbasche, former Vice
Chairman, Chairman and CEO of Enron
International
Stephen F. Cooper, Interim CEO and CRO
John J. Ray, III, Chairman

Revenue $101 billion (in 2000)

 Employees approx. 22,000 in 2000

Website http://www.enron.com/

"ENRON" redirects here. For the play of that title, see ENRON (play).

Enron Corporation (former NYSE ticker symbol ENE) was an American energy company
based in the Enron Complex in Downtown Houston, Texas. Before its bankruptcy in late
2001, Enron employed approximately 22,000[1] staff and was one of the world's leading
electricity, natural gas, communications and pulp and paper companies, with claimed
revenues of nearly $101 billion in 2000.[2] Fortune named Enron "America's Most Innovative
Company" for six consecutive years. At the end of 2001, it was revealed that its reported
financial condition was sustained substantially by institutionalized, systematic, and creatively
planned accounting fraud, known as the "Enron scandal". Enron has since become a popular
symbol of willful corporate fraud and corruption. The scandal also brought into question the
accounting practices and activities of many corporations throughout the United States and
was a factor in the creation of the Sarbanes–Oxley Act of 2002. The scandal also affected the
wider business world by causing the dissolution of the Arthur Andersen accounting firm.[3]

Enron filed for bankruptcy protection in the Southern District of New York in late 2001 and
selected Weil, Gotshal & Manges as its bankruptcy counsel. It emerged from bankruptcy in
November 2004, pursuant to a court-approved plan of reorganization, after one of the biggest
and most complex bankruptcy cases in U.S. history. A new board of directors changed the
name of Enron to Enron Creditors Recovery Corp., and focused on reorganizing and
liquidating certain operations and assets of the pre-bankruptcy Enron.[4] On September 7,
2006, Enron sold Prisma Energy International Inc., its last remaining business, to Ashmore
Energy International Ltd. (now AEI).[5]

Contents
[hide]

 1 Early history
o 1.1 Worst Case Scenario: Misleading Financial Accounts
 2 Former Management and Corporate Governance
 3 Products
o 3.1 Online marketplace services
o 3.2 Broadband services
o 3.3 Energy and commodities services
o 3.4 Capital and risk management services
 3.4.1 Commercial and industrial outsourcing services
 3.4.2 Project development and management services
 3.4.3 Energy transportation and upstream services
 4 EnronOnline
 5 Principal assets
o 5.1 Power plants
o 5.2 Pipelines
 o 5.3 Electric utilities/distributors
o 5.4 Natural gas-related businesses
o 5.5 Pulp and paper
o 5.6 Other
 6 Accounting scandal of 2001
o 6.1 Accounting practices
o 6.2 Peak and decline of stock price
o 6.3 Post-bankruptcy
 7 California's deregulation and subsequent energy crisis
 8 See also
 9 References
 10 Bibliography
 11 External links
o 11.1 Data

[edit] Early history

Enron Complex in Downtown Houston

Enron traces its roots to the Northern Natural Gas Company, which was formed in 1932, in
Omaha, Nebraska. It was reorganized in 1979 as the leading subsidiary of a holding
company, InterNorth. In 1985, it bought the smaller and less diversified Houston Natural
Gas.[6]

The separate company initially named itself "HNG/InterNorth Inc.", even though InterNorth
was the nominal survivor. It built a large and lavish headquarters complex of pink marble in
Omaha (dubbed locally as the "Pink Palace"), that was later sold to Physicians Mutual.
However, the departure of ex-InterNorth and first CEO of Enron Corp Samuel Segnar six
months after the merger allowed former HNG CEO Kenneth Lay to become the next CEO of
the newly merged company. Lay soon moved Enron's headquarters to Houston after swearing
to keep it in Omaha and began to thoroughly re-brand the business. Lay and his secretary,
Nancy McNeil, originally selected the name "Enteron" (possibly spelled in camelcase as
"EnterOn"), but, when it was pointed out that the term approximated a Greek word referring
to the intestines, it was quickly shortened to "Enron". The final name was decided upon only
after business cards, stationery, and other items had been printed reading Enteron. Enron's
"crooked E" logo was designed in the mid-1990s by the late American graphic designer Paul
Rand.

[edit] Worst Case Scenario: Misleading Financial Accounts

In 1990, Enron CEO Jeffrey Skilling, a Harvard M.B.A., hired Andrew Fastow who was well
acquainted with the burgeoning deregulated energy market Skilling wanted to exploit. In
1993, Fastow set to work establishing numerous "Special Purpose Entitites" that would be
able to absorb any liability by transfering it to an outside company so that it would not appear
in the Enron's books to maintain a robust and generally growing stock price thus keeping its
critical investment grade credit ratings. As future events would eventually prove, according to
some Enron insider, Fastow was the kind of man who could talk the talk but could not walk
the walk. However, by 1998, he was Enron's CFO.[7]

Enron was originally involved in transmitting and distributing electricity and natural gas
throughout the United States. The company developed, built, and operated power plants and
pipelines while dealing with rules of law and other infrastructures worldwide. Enron owned a
large network of natural gas pipelines, which stretched ocean to ocean and border to border
including Northern Natural Gas, Florida Gas Transmission, Transwestern Pipeline company
and a partnership in Northern Border Pipeline from Canada. The states of California, New
Hampshire and Rhode Island had already passed power deregulation laws by July 1996, the
time of Enron's proposal to acquire Portland General Electric.[8] In 1998, Enron moved into
the water sector, creating the Azurix Corporation, which it part-floated on the New York
Stock Exchange in June 1999. Azurix failed to break into the water utility market, and one of
its major concessions, in Buenos Aires, was a large-scale money-loser. After the move to
Houston, many analysts[who?] criticized the Enron management as swimming in debt. The
Enron management pursued aggressive retribution against its critics, setting the pattern for
dealing with accountants, lawyers, and the financial media.

Enron grew wealthy due largely to marketing, promoting power, and its high stock price.
Enron was named "America's Most Innovative Company" by "Fortune (magazine)" for six
consecutive years, from 1996 to 2001. It was on the Fortune's "100 Best Companies to Work
for in America" list in 2000, and had offices that were stunning in their opulence. Enron was
hailed by many, including labor and the workforce, as an overall great company, praised for
its large long-term pensions, benefits for its workers and extremely effective management
until its exposure in corporate fraud. The first analyst to publicly disclose Enron's financial
flaws was Daniel Scotto, who in August 2001 issued a report entitled "All Stressed up and no
place to go", which encouraged investors to sell Enron stocks and bonds at any and all costs.

As was later discovered, many of Enron's recorded assets and profits were inflated or even
wholly fraudulent and nonexistent. Debts and losses were put into entities formed "offshore"
that were not included in the firm's financial statements, and other sophisticated and arcane
financial transactions between Enron and related companies were used to take unprofitable
entities off the company's books.

Its most valuable asset and the largest source of honest income, the 1930s-era Northern
Natural Gas, was eventually purchased back by a group of Omaha investors, who moved its
headquarters back to Omaha, and is now a unit of Warren Buffett's MidAmerican Energy
Holdings Corp. NNG was put up as collateral for a $2.5 billion capital infusion by Dynegy
Corporation when Dynegy was planning to buy Enron. When Dynegy looked closely at
Enron's books, they backed out of the deal and fired their CEO, Chuck Watson. The new
chairman and head CEO, the late Daniel Dienstbier, had been president of NNG and an
Enron executive at one time and an acquaintance of Warren Buffett. NNG continues to be
profitable today.
[edit] Former Management and Corporate Governance
 Central Management
o Kenneth Lay: Founder, Chairman, and Chief executive officer
o Jeffrey Skilling: President, Chief operating officer, and CEO (February-
August 2001)
o Andrew Fastow: Chief financial officer
o Rick Causey: Chief accounting officer
o Rebecca Mark-Jusbasche: CEO of Enron International and Azurix
o Lou Pai: CEO of Enron Energy Services
o Forest Hoglund: CEO of Enron Oil and Gas
o Richard Gallagher: Head of Enron Wholesale Global International Group
o Kenneth "Ken" Rice: CEO of Enron Wholesale and Enron Broadband
Services
o J. Clifford Baxter: CEO of Enron North America
o Sherron Watkins: Head of Enron Global Finance
o Jim Derrick: Enron General Counsel
o Mark Koenig: Head of Enron Investor Relations
o Cindy Olson: Head of Enron Human Resources
o Greg Whally: President and COO of Enron (August 2001- Bankruptcy)
o Jeff McMahon: CFO of Enron (October 2001-Bankruptcy)
 Board Of Directors
 Robert A. Belfer: Chairman, Belco Oil and Gas Corp
 Norman P. Blake Jr.: Chairman, President and CEO, Comdisco,
Inc.
 Ronnie C. Chan: Chairman, Hang Lung Group
 John H. Duncan: Former Chairman of The Executive Gulf and
Western Industries Inc.
 Wendy L. Gramm: Former Chairman of US Commodity
Futures Trading Commission
 Ken L. Harrison: Former Chairman and CEO of Portland
General Electric
 Robert K. Jaedicke: Professor of Accounting at Emeritus
 Charles A. LeMaistre: President Emeritus, University of Texas
M.D. Anderson Cancer Center
 John Mendelsohn: President, University of Texas M.D.
Anderson Cancer Center
 Jerome J. Meyer: Chairman, Tektronix
 Paulo V. Ferraz Pereira: Executive Vice President if Group
Bozano
 Frank Savage: Chairman: Alliance Capital Management
 John A. Urquhart: Senior Advisor to the Chairman of Enron
 John Wakeham: Former U.K. Secretary of State for Energy
 Herbert S. Winokur Jr.: President of Winokur Holdings Inc.

[edit] Products
Enron traded in more than 30 different products, including the following:
  Products traded on EnronOnline
o Petrochemicals
o Plastics
o Power
o Pulp and paper
o Steel
o Weather Risk Management

 Oil and LNG transportation

 Broadband
 Principal investments
 Risk management for commodities
 Shipping / freight
 Streaming media
 Water and wastewater

It was also an extensive futures trader, including sugar, coffee, grains, hog, and other meat
futures. At the time of its bankruptcy filing in December 2001, Enron structured into seven
distinct business units.

[edit] Online marketplace services

 EnronOnline (commodity trading platform)

 ClickPaper (transaction platform for pulp, paper, and wood products)
 EnronCredit (the first global online credit department to provide live credit prices and
enable business-to-business customers to hedge credit exposure instantly via the
Internet.)
 ePowerOnline (customer interface for Enron Broadband Services)
 Enron Direct (sales of fixed-price contracts for gas and electricity; Europe only)
 EnergyDesk (energy-related derivatives trading; Europe only)
 NewPowerCompany (online energy trading, joint venture with IBM and AOL)
 Enron Weather (weather derivatives)
 DealBench (online business services)
 Water2Water (water storage, supply, and quality credits trading)
 HotTap (customer interface for Enron's U.S. gas pipeline businesses)
 Enromarkt (business to business pricing and information platform; Germany only)

[edit] Broadband services

 Enron Intelligent Network (broadband content delivery)

 Enron Media Services (risk management services for media content companies)
 Customizable Bandwidth Solutions (bandwidth and fiber products trading)
 Streaming Media Applications (live or on-demand Internet broadcasting applications)

[edit] Energy and commodities services

 Enron Power (electricity wholesaling)

  Enron Natural Gas (natural gas wholesaling)
 Enron Clean Fuels (biofuel wholeshaling)
 Enron Pulp and Paper, Packaging, and Lumber (risk management derivatives for
forest products industry)
 Enron Coal and Emissions (coal wholesaling and CO2 offsets trading)
 Enron Plastics and Petrochemicals (price risk management for polymers, olefins,
methanol, aromatics, and natural gas liquids)
 Enron Weather Risk Management (Weather Derivatives)
 Enron Steel (financial swap contracts and spot pricing for the steel industry)
 Enron Crude Oil and Oil Products (petroleum hedging)
 Enron Wind Power Services (wind turbine manufacturing and wind farm operation)
 MG Plc. (U.K. metals merchant)
 Enron Energy Services (Selling services to industrial end users)
 Enron International (operation of all overseas assets)

[edit] Capital and risk management services

[edit] Commercial and industrial outsourcing services

 Commodity Management
 Energy Asset Management
 Energy Information Management
 Facility Management
 Capital Management\\\\\
 Azurix Inc. (water utilities and infrastructure)

[edit] Project development and management services

 Energy Infrastructure Development (developing, financing, and operation of power

plants and related projects)
 Enron Global Exploration & Production Inc. (oil and natural gas field services)
 Elektro Electricidade e Servicos SA (Brazilian electric utility)

[edit] Energy transportation and upstream services

 Natural Gas Transportation

 Northern Border Pipeline
 Houston Pipeline
 Transwestern Pipeline
 Florida Gas Transmission
 Northern Natural Gas Company
 Natural Gas Storage
 Compression Services
 Gas Processing and Treatment
 Engineering, Procurement, and Construction Services
 EOTT Energy Inc. (oil transportation)
Enron manufactured gas valves, circuit breakers, thermostats, and electrical equipment in
Venezuela through INSELA SA, a 50-50 joint venture with General Electric. Enron owned
three paper and pulp products companies: Garden State Paper, a newsprint mill; as well as
Papiers Stadacona and St. Aurelie Timberlands. Enron held a controlling stake in the
Louisiana-based petroleum exploration and production company Mariner Energy.

[edit] EnronOnline
In November 1999, Enron launched EnronOnline. Conceptualized by the company's
European Gas Trading team under John Siepierski, it was the first web-based transaction
system that allowed buyers and sellers to buy, sell, and trade commodity products globally. It
allowed users to do business only with Enron. At its peak, over $6bn worth of commodities
were transacted through EnronOnline every day.

EnronOnline went live on November 29, 1999. The site allowed Enron to transact with
participants in the global energy markets. The main commodities offered on EnronOnline
were natural gas and electricity, although there were 500 other products including credit
derivatives, bankruptcy swaps, pulp, gas, plastics, paper, steel, metals, freight, and TV
commercial time.

EnronOnline was sold to UBS as part of the sale of the North American Natural Gas and
Power trading group to UBS AG.

[edit] Principal assets

At the time of bankruptcy, Enron owned interests in the following major assets:

[edit] Power plants

Enron owned or operated 38 electric power plants worldwide:

 Teesside (United Kingdom)—at the time of commission in 1992, at 1750 MW, was
the largest Natural Gas Co-Gen plant in the world. Its on-time and under-budget
completion put Enron Power on the map as an international developer, owner and
operator.
 Bahia Las Minas (Panama)—largest thermal power plant in Central America, 355
MW
 Puerto Quetzal Power Project (Guatemala)—110 MW
 PQP LLC (Guatemala)—holding company for 124 MW Power Barge named
"Esperanza"
 Empresa Energetica Corinto (Nicaragua)—holding company for "Margarita II" 70.5
MW power barge, Enron held 35% share
 EcoElectrica (Puerto Rico, USA)—507 MW natural gas cogeneration plant, with
adjacent LNG import terminal- supplied 20% of island's electricity
 Puerto Plata Power Project (Dominican Republic)—185 MW power barge named
"Puerto Plata"
 Modesto Maranzana Power Plant (Argentina)—70 MW
 Cuiaba Integrated Project (Brazil)—480 MW combined cycle power plant
  Nowa Sarzyna Power Plant (Poland)—116 MW, first privately developed post-
Communist electricity project in Poland
 Sarlux Power Project (Italy)—551 MW combined cycle power plant, converted
residue from Italy's largest oil refinery into synthetic gas for fuel
 Trakya Power Project (Turkey)—478 MW
 Chengdu Cogen Project (China)—284 MW, joint venture with Sichuan Electric
Company
 Northern Marianas Power Project (Guam, USA)—80 MW slow speed diesel oil plant
 Batangas Power Project (Philippines)—110 MW
 Subic Bay Power Project (Philippines)—116 MW
 Dabhol Power Project (India)—2,184 MW combined cycle plant, generally
considered one of Enron's most controversial and least successful projects
 Storm Lake Wind Generation Project (Iowa, USA)—193 MW wind farm
 Lake Benton II Wind Generation Facility (Minnesota, USA)—104 MW wind farm
 Lake Benton I Wind Generation Facility (Minnesota, USA)—107 MW wind farm
 Cabazon Wind Generation Facility (California, USA)—40 MW wind farm
 Green Power I Wind Generation Facility (California, USA)—16.5 MW wind farm
 Indian Mesa I Wind Generation Facility (Texas, USA)—25.5 MW wind farm
 Clear Sky Wind Power Generation Facility (Texas, USA)—135 MW wind farm
 Mill Run Wind Wind Power Generation Facility (Pennsylvania, USA)—15 MW wind
farm
 Trent Mesa Wind Generation Facility (Texas, USA)—150 MW wind farm
 Montfort Wind Generation Facility (Wisconsin, USA)—30 MW wind farm
 8 hydroelectric plants in Oregon with a combined capacity of 509 MW, owned
through Portland General Electric
 4 additional thermal plants in Oregon and Montana with a combined capacity of 1,464
MW, owned through Portland General Electric

[edit] Pipelines

 Centragas (Colombia)—357 miles, natural gas

 Promigas (Colombia)
 Transportadora de Gas del Sur (Argentina)—largest pipeline system in South
America, 5,005 km
 CEG (Brazil)—1,368 miles, natural gas
 CEGRio (Brazil)
 Transredes (Bolivia)—3,000 km natural gas pipeline and 2,500 km oil & liquids
pipeline
 Bolivia-to-Brazil Pipeline (Bolivia/Brazil)—3,000 km, natural gas
 Northern Natural Gas (Upper Midwestern USA)—16,500 miles, included share in
Trailblazer Pipeline
 Transwestern Pipeline (Texas, Arizona, New Mexico, Colorado)—2,554 miles
 Florida Gas Transmission (Texas, Louisiana, Alabama, Mississippi, Florida)—4,800
miles
 Northern Border Pipeline (Indiana, Illinois, Iowa, South Dakota, North Dakota,
Montana )—1,249 miles

[edit] Electric utilities/distributors

  Portland General Electric Company (USA)—serving 775,000 customers in Oregon
 Elektro Electricidade e Servicos S.A. (Brazil)—1.5 million customers
 Compania Anonima Luz y Fuerza Electricas de Puerto Cabello (Venezuela)—50,000
customers

[edit] Natural gas-related businesses

 ProCaribe (Puerto Rico, USA)—LPG storage terminal, only fully refrigerated LPG
storage facility in Caribbean
 San Juan Gas Company (Puerto Rico, USA)—gas distribution, 400
industrial/commercial customers
 Industrial Gases Ltd. (Jamaica)—8 filling plants, industrial gas manufacturing & LPG
distribution, held 100% monopoly on Jamaican industrial gas business and 40% of
LPG business
 Gaspart (Brazil)—consortium of 7 gas distribution companies
 Vengas (Venezuela)—LPG transportation and distribution
 SK-Enron Company Ltd. (South Korea)—joint venture with SK Corporation;
included 8 city gas utilities, an LPG distributor, and a steam and electricity
cogeneration facility

[edit] Pulp and paper

 Garden State Paper Company Inc. (New Jersey, USA)—paperboard and newsprint
recycling mill
 Papiers Stadacona Ltee. (Quebec, Canada)—wood pulp & paper mill
 St. Aurelie Timberlands Company Ltd. (Quebec, and New Brunswick, Canada &
Maine, USA)—timber company

[edit] Other

 Mariner Energy Inc. (Houston, Texas, USA)—oil & gas exploration, development,
and production with operations in the Gulf of Mexico
 Interruptores Especializados Lara (Venezuela)—manufacturer of valves, thermostats,
and electrical breakers for appliances
 Enron Wind (formerly Zond) — manufacturer of wind power turbines and related
systems, with factories in USA, Spain, Portugal, and Germany. Purchased by General
Electric in 2002.[9]

[edit] Accounting scandal of 2001

Main article: Enron scandal

After a series of revelations involving irregular accounting procedures bordering on fraud

perpetrated throughout the 1990s involving Enron and its accounting firm Arthur Andersen,
Enron stood on the verge of undergoing the largest bankruptcy in history by mid-November
2001 (the largest Chapter 11 bankruptcy until that of Worldcom in 2002, now surpassed by
the collapse of Lehman Brothers). A white knight rescue attempt by a similar, smaller energy
company, Dynegy, was not viable.
As the scandal unraveled, Enron shares dropped from over US$90.00 to just pennies. Enron
had been considered a blue chip stock, so this was an unprecedented and disastrous event in
the financial world. Enron's plunge occurred after it was revealed that much of its profits and
revenue were the result of deals with special purpose entities (limited partnerships which it
controlled). The result was that many of Enron's debts and the losses that it suffered were not
reported in its financial statements.

Enron filed for bankruptcy on December 2, 2001. In addition, the scandal caused the
dissolution of Arthur Andersen, which at the time was one of the world's top accounting
firms. The firm was found guilty of obstruction of justice in 2002 for destroying documents
related to the Enron audit and was forced to stop auditing public companies. Although the
conviction was thrown out in 2005 by the Supreme Court, the damage to the Andersen name
has prevented it from returning as a viable business.

Enron also withdrew a naming rights deal with the Houston Astros Major League Baseball
club to have its name associated with their new stadium, which was formerly known as Enron
Field (it is now Minute Maid Park).

[edit] Accounting practices

Enron had created offshore entities, units which may be used for planning and avoidance of
taxes, raising the profitability of a business. This provided ownership and management with
full freedom of currency movement and the anonymity that allowed the company to hide
losses. These entities made Enron look more profitable than it actually was, and created a
dangerous spiral, in which each quarter, corporate officers would have to perform more and
more contorted financial deception to create the illusion of billions in profits while the
company was actually losing money.[10] This practice drove up their stock price to new levels,
at which point the executives began to work on insider information and trade millions of
dollars worth of Enron stock. The executives and insiders at Enron knew about the offshore
accounts that were hiding losses for the company; however, the investors knew nothing of
this. Chief Financial Officer Andrew Fastow led the team which created the off-books
companies, and manipulated the deals to provide himself, his family, and his friends with
hundreds of millions of dollars in guaranteed revenue, at the expense of the corporation for
which he worked and its stockholders.

In 1999, Enron launched EnronOnline, an Internet-based trading operation, which was used
by virtually every energy company in the United States. Enron president and chief operating
officer Jeffrey Skilling began advocating a novel idea: the company didn't really need any
"assets." By pushing the company's aggressive investment strategy, he helped make Enron
the biggest wholesaler of gas and electricity, trading over $27 billion per quarter. The firm's
figures, however, had to be accepted at face value. Under Skilling, Enron adopted mark to
market accounting, in which anticipated future profits from any deal were tabulated as if real
today. Thus, Enron could record gains from what over time might turn out to be losses, as the
company's fiscal health became secondary to manipulating its stock price on Wall Street
during the Tech boom. But when a company's success is measured by agreeable financial
statements emerging from a black box, a term Skilling himself admitted, actual balance
sheets prove inconvenient. Indeed, Enron's unscrupulous actions were often gambles to keep
the deception going and so push up the stock price, which was posted daily in the company
elevator. An advancing number meant a continued infusion of investor capital on which debt-
ridden Enron in large part subsisted. Its fall would collapse the house of cards. Under
pressure to maintain the illusion, Skilling verbally attacked Wall Street Analyst Richard
Grubman,[11] who questioned Enron's unusual accounting practice during a recorded
conference call. When Grubman complained that Enron was the only company that could not
release a balance sheet along with its earnings statements, Skilling replied "Well, thank you
very much, we appreciate that . . . asshole." Though the comment was met with dismay and
astonishment by press and public, it became an inside joke among many Enron employees,
mocking Grubman for his perceived meddling rather than Skilling's lack of tact. When asked
during his trial, Skilling wholeheartedly admitted that industrial dominance and abuse was a
global problem: "Oh yes, yes sure, it is."[1]

[edit] Peak and decline of stock price

In August 2000, Enron's stock price hit its highest value of $90.[12] At this point Enron
executives, who possessed the inside information on the hidden losses, began to sell their
stock. At the same time, the general public and Enron's investors were told to buy the stock.
Executives told the investors that the stock would continue to climb until it reached possibly
the $130 to $140 range, while secretly unloading their shares.

As executives sold their shares, the price began to drop. Investors were told to continue
buying stock or hold steady if they already owned Enron because the stock price would
rebound in the near future. Kenneth Lay's strategy for responding to Enron's continuing
problems was in his demeanor. As he did many times, Lay would issue a statement or make
an appearance to calm investors and assure them that Enron was headed in the right direction.

By August 15, 2001, Enron's stock price had fallen to $42. Many of the investors still trusted
Lay and believed that Enron would rule the market. They continued to buy or hold their stock
and lost more money every day. As October closed, the stock had fallen to $15. Many saw
this as a great opportunity to buy Enron stock because of what Lay had been telling them in
the media. Their trust and optimism proved to be greatly misplaced.

Lay has been accused of selling over $70 million worth of stock at this time, which he used to
repay cash advances on lines of credit. He sold another $20 million worth of stock in the open
market. Also, Lay's wife, Linda, has been accused of selling 500,000 shares of Enron stock
totaling $1.2 million on November 28, 2001. The money earned from this sale did not go to
the family but rather to charitable organizations, which had already received pledges of
contributions from the foundation. Records show that Mrs. Lay placed the sale order
sometime between 10:00 and 10:20 AM. News of Enron's problems, including the millions of
dollars in losses they had been hiding went public about 10:30 that morning, and the stock
price soon fell to below one dollar. Former Enron executive Paula Rieker has been charged
with criminal insider trading. Rieker obtained 18,380 Enron shares for $15.51 a share. She
sold that stock for $49.77 a share in July 2001, a week before the public was told what she
already knew about the $102 million loss.

[edit] Post-bankruptcy

Enron initially planned to retain its three domestic pipeline companies as well as most of its
overseas assets. However, before emerging from bankruptcy, Enron spun off its domestic
pipeline companies as CrossCountry Energy.
Enron sold its last business, Prisma Energy, in 2006, leaving it as an asset-less shell. In early
2007, it changed its name to Enron Creditors Recovery Corporation. Its goal is to pay off the
old Enron's remaining creditors and wind up Enron's affairs.

Shortly after emerging from bankruptcy in November 2004, Enron's new board of directors
sued 11 financial institutions for helping Lay, Fastow, Skilling and others hide Enron's true
financial condition. The proceedings were dubbed the "megaclaims litigation." Among the
defendants were Royal Bank of Scotland, Deutsche Bank and Citigroup. As of 2008, Enron
has settled with all of the institutions, ending with Citigroup. Enron was able to obtain nearly
$20 billion dollars to distribute to its creditors as a result of the megaclaims litigation. As of
December 2009, some claim and process payments are still being distributed.

[edit] California's deregulation and subsequent energy

crisis
See also: California electricity crisis

In October 2000, Daniel Scotto, the top ranked utility analyst on Wall Street, suspended his
ratings on all energy companies conducting business in California because of the possibility
that the companies would not receive full and adequate compensation for the deferred energy
accounts used as the cornerstone for the California Deregulation Plan enacted in the late
1990s. Five months later, Pacific Gas & Electric (PG&E) was forced into bankruptcy.
Senator Phil Gramm, the second largest recipient of campaign contributions from Enron,
succeeded in legislating California's energy commodity trading deregulation. Despite
warnings from prominent consumer groups which stated that this law would give energy
traders too much influence over energy commodity prices, the legislation was passed in
December 2000.

As Public Citizen reported, "Because of Enron’s new, unregulated power auction, the
company’s 'Wholesale Services' revenues quadrupled—from $12 billion in the first quarter of
2000 to $48.4 billion in the first quarter of 2001."[13]

Before passage of the deregulation law, there had been only one Stage 3 rolling blackout
declared. Following passage, California had a total of 38 blackouts defined as Stage 3 rolling
blackouts, until federal regulators intervened in June 2001. These blackouts occurred mainly
as a result of a poorly designed market system that was manipulated by traders and marketers.
Enron traders were revealed as intentionally encouraging the removal of power from the
market during California's energy crisis by encouraging suppliers to shut down plants to
perform unnecessary maintenance, as documented in recordings made at the time.[14][15] These
acts contributed to the need for rolling blackouts, which adversely affected many businesses
dependent upon a reliable supply of electricity, and inconvenienced a large number of retail
consumers. This scattered supply raised the price exponentially, and Enron traders were thus
able to sell power at premium prices, sometimes up to a factor of 20x its normal peak value.
Called to Account
JAMES NIELSEN/AFP
THE SCENE: Arthur Andersen's Houston branch