Enron

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The energy company Enron was one of the largest corporations in the USA and had its headquarters in Houston , Texas . Enron liked to refer to itself in publications as "The World's Greatest Company" and was praised and recognized by numerous media for a long time as an allegedly highly innovative company. Enron employed approximately 22,000 people. In 2001, Enron caused one of the biggest corporate scandals the US economy has ever seen due to continued accounting fraud .

The events resulted in a drastic tightening of the legal requirements for corporate reporting, the Sarbanes-Oxley Act , which had been defused in the previous government years . Because of its close ties to Enron founder and CEO Kenneth Lay , which were vehemently denied after the scandal , the administration of George W. Bush also came under sharp criticism.

timeline

In July 1985, the US company Houston Natural Gas (HNG) merged with Internorth, a natural gas company from Omaha , to form the Enron group, which was mainly active as an operator of gas pipelines . After entering the natural gas trade in 1989, Enron quickly became the largest gas trader in the USA and Great Britain. In 1999 the company EOG Resources was separated from Enron as an independent company.

In 1992, the government under George HW Bush deregulated the electricity market. Previously, companies (since Franklin D. Roosevelt ) were obliged to keep the power grids in good condition and prices low, electricity systems and balance sheets were controlled by the state, and party donations from energy companies were prohibited. The state of California was the first to pass a new energy law. This gave Enron greater business freedom. The California energy crisis occurred in California with blackouts and a massive increase in electricity prices of up to 300 percent, contrary to previous announcements by Enron. In late 2000 , the Bill Clinton administration ordered energy price controls and the removal of Enron from the California market. Under the administration of George W. Bush this instruction was reversed shortly after taking office.

In October 2001, Enron confirmed that the US Securities and Exchange Commission ( SEC) had started a preliminary investigation to clarify possible conflicts arising from the investment agreements. Enron admitted that profits in previous years by 1.2 billion US dollars were reported to be high. $ 30 billion in debt was disclosed. In 1999, Enron reported annual sales of $ 40.112 billion.

On December 2, 2001, the company filed for bankruptcy , as a takeover by competitor Dynegy on November 28, 2001 had failed. The employee's $ 2 billion worth of 401 (k) savings and company pensions were lost. In January 2002 the share was suspended from trading. The share price previously fell from a high of 90 US dollars (August 2000, the management of Enron sold all of its shares at this point) to a few cents per share.

In February 2002 it became known that around 500 Enron managers had received hefty bonus payments shortly before their group went bankrupt. Kenneth Lay, for example, received a severance payment of 300 million US dollars.

The rating agencies Standard & Poor’s and Moody’s still certified Enron with an "excellent credit rating" until shortly before the bankruptcy. The accounting firm Arthur Andersen , implicated in the Enron scandal (and ultimately collapsed in the wake of the Enron investigation) was fined $ 500,000 in June 2002 for obstruction of justice .

The bankruptcy forced Enron to sell its significant domestic pipelines and several foreign holdings. Enron sold its last stake, Prisma Energy, in 2006 and renamed itself Enron Creditors Recovery Corporation in 2007.

Relationship between the company and politics

Secretary of State James Baker and Secretary of Commerce Robert Mosbacher , members of the Bush senior administration , became advisors to Enron in 1993 after their tenure. Enron boss Kenneth Lay had financially supported George W. Bush in Texas and in the presidential election with 550,000 US dollars. Enron supported the Bush presidential campaign financially with a total of two million US dollars. The two Enron advisers Robert Zoellick and Lawrence B. Lindsey became US trade representatives under Bush. Kenneth Lay's money also went to a lesser extent to the Democrats. A total of 188 congressmen and 71 senators had received money from Enron, according to the New York Times. Abroad, Enron had good relations with Margaret Thatcher's government , which licensed Enron's first unregulated power plant in the UK. Thatcher's Secretary of Energy, Lord Wakeham , was later hired as a consultant and board member at Enron.

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Methods of falsifying accounts

Enron changed its balance sheet mainly in the following ways:

  • Sales of goods (for example natural gas) as forward transactions (a transaction agreed in the present will only be carried out at a later point in time) were booked as income from the start. In addition, similar transactions for the purchase of such goods were not booked as expenses. This increases profit (and thus also equity) in the reporting period.
  • Enron began to conduct such transactions with anonymous " offshore " companies incorporated in foreign tax havens that were under the control of Enron or its executives, but were not included in the scope of consolidation of the consolidated financial statements of the Enron Group . Enron was practically doing business with itself. The company reported the "revenue" from these deals on its own balance sheet.
  • Furthermore, the company began to have the “purchases” of the offshore companies pre-financed by banks, so that the group got into debt through its anonymous subsidiaries without this being disclosed in the consolidated balance sheet.
  • Incorrect application of the “ mark to market accounting”. With this method, the recognized assets are valued at the “ fair value ” - also called “ fair value ” in German - which can be objectively achieved on the market. However, since no transparent market prices were available as a basis for valuation in illiquid markets, an alternative "recognized valuation method" had to be used to determine the value. This happened in part at the expense of the degree of objectivity of the balance sheet, so that an inflated assessment was made.

Judicial processing of bankruptcy

Various civil claims have followed the bankruptcy of the Enron Group . The shareholders damaged by the bankruptcy (including many former Enron employees who lost almost all of their assets as a result of the collapse of the group) as well as holders of Enron bonds tried to have at least a small part of their claims judged. The following court settlements have been made so far:

Plaintiff Compensation Awarded ($ million)
Lehman Brothers 222.5
Bank of America 69
Arthur Andersen 40
Citigroup 2,000
JP Morgan Chase 2,200
CIBC Bank (Canada) 2,400
Total: 7,100

The compensation of 7.1 billion US dollars achieved in the course of the settlements so far is compared to a market value of 60 billion US dollars , which was destroyed by the bankruptcy .

Enron itself has given creditors approximately $ 5.8 billion since November 2004. In early April 2006, Enron paid $ 4.1 billion in cash and $ 568 million in shares of the Portland General Electric Company (PGE). According to Enron, to meet controversial claims, it still has reserves of $ 4.7 billion in cash and $ 745 million in PGE shares.

It is worth noting that when the members of Enron's former board of directors were sentenced in January 2005 to a total of USD 168 million in compensation, of this sum, USD 13 million had to be paid directly by the ten directors concerned from their personal assets. while the rest of the sum was covered by liability insurance ( D&O insurance ) for the convicts. With direct access to the private assets of the board of directors, the judging court tried to make clear the personal responsibility of the board of directors in the collapse of the company they were supervising.

In addition to the civil suits, numerous criminal fraud proceedings were pending against former members of Enron's management, which were up for trial in spring 2005. The defendants included:

With the exception of Fastow, all of these defendants declared themselves "not guilty" prior to the trials. Fastow, on the other hand, made an admission of guilt and made himself available to the authorities as a witness against the other defendants.

Richard Causey , the former chief accountant, pleaded guilty to a court of securities fraud on December 28, 2005. Causey admitted publicly providing false information to deliberately defraud investors. Like his ex-bosses, he was charged with conspiracy. Before Causey, around 20 former Enron executives had pleaded guilty to the bankruptcy scandal. In November 2006, Causey was sentenced to five and a half years in prison.

On May 25, 2006 a jury found the company's founder, Kenneth Lay , and former Enron boss Jeffrey Skilling guilty of fraud. However, Kenneth Lay died of heart failure in July 2006 before the sentence could be pronounced. Former CFO Andrew Fastow , who appeared as a key witness in the trial and incriminated both bosses, received a six-year prison sentence in September 2006, which is still considered low by the agreement with the prosecutor that he will testify against other Enron employees . Jeffrey Skilling was sentenced to 24 years in prison for fraud in October 2006 . He started his sentence in January 2007. In late September 2009, Joseph Hirko was sentenced to 16 months' imprisonment and paid $ 7 million. Hirko was responsible for the broadband services division at Enron.

The data of the company Enron were published on the instigation of the insolvency administrator by the FERC (Federal Energy Regulatory Commission). They are freely available and comprise a large part of e-mail traffic, files from file servers and scanned documents. This extensive database of a real company serves as the basis for numerous research projects or as a basis for realistic test scenarios in software developments.

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See also

literature

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  1. ↑ Enron was z. B. Awarded six times as "America's Most Innovative Company" by Fortune (magazine) , see Matthias Kräkel: Organization and Management Mohr Siebeck; Edition: 3rd, 2003. ISBN 978-3-16-149258-7 ; P. 307
  2. ↑ a b Friday: Enron and the Shredder , January 25, 2002
  3. ↑ a b Friday: In the Pirates ' Network , August 2003
  4. ↑ BBC: Enron's dramatic expansion and rise to international prominence
  5. ^ Matthias Kräkel: Organization and Management Mohr Siebeck; Edition: 3rd, 2003. ISBN 978-3-16-149258-7 ; P. 307
  6. ↑ Friday: By the Prophet's Glass Eye , September 28, 2007
  7. ↑ BBC: Andersen guilty in Enron case , June 15, 2002
  8. ^ The Oil Daily: Baker, Mosbacher sign deal with Enron Corp., February 1993 ( Memento from June 11, 2014 in the Internet Archive )
  9. ↑ Der Spiegel: Kenny Boy had a dream , January 24, 2002
  10. ↑ Joseph Stiglitz: The Roaring Nineties , Penguin Books 2003, pp. 241-268
  11. ↑ SHOWING THEIR Analysis No. 12 ( Memento of August 20, 2007 in the Internet Archive ) (PDF; 357 kB), pp. 3–6, status May 4, 2007, accessed on August 4, 2009
  12. ^ FERC: Industries - Information Released in Enron Investigation. Retrieved October 30, 2017 .

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