Enron files for bankruptcy
On this day in 2001 the Enron Corporation files for Chapter 11 bankruptcy protection in a New York court sparking one of the largest corporate scandals in U.S.history.An energy-trading company based in Houston Texas Enron was formed in 1985 as the merger of two gas companies Houston Natural Gas and Internorth.Under chairman and CEO Kenneth Lay Enron rose as high as number seven on Fortune magazines list of the top 500 U.S.
companies.In 2000 the company employed 21000 people and posted revenue of 111 billion.Over the next year however Enrons stock price began a dramatic slide dropping from 90.75 in August 2000 to 0.26 by closing on November 30 2001.As prices fell Lay sold large amounts of his Enron stock while simultaneously encouraging Enron employees to buy more shares and assuring them that the company was on the rebound.
Employees saw their retirement savings accounts wiped out as Enrons stock price continued to plummet.After another energy company Dynegy canceled a planned 8.4 billion buy-out in late November Enron filed for bankruptcy.By the end of the year Enrons collapse had cost investors billions of dollars wiped out some 5600 jobs and liquidated almost 2.1 billion in pension plans.Over the next several years the name Enron became synonymous with large-scale corporate fraud and corruption as 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 Enrons CEO from February to August 2001 of conspiring to cover up their companys financial weaknesses from investors.
The investigation also brought down accounting giant Arthur Andersen whose auditors were found guilty of deliberately destroying documents incriminating to Enron.In July 2004 a Houston court indicted Skilling on 35 counts including fraud conspiracy and insider trading.Lay was charged with 11 similar crimes.The trial began on January 30 2006 in Houston.
A number of former Enron employees appeared on the stand including Andrew Fastow Enrons ex-CFO who early on pleaded guilty to two counts of conspiracy and agreed to testify against his former bosses.Over the course of the trial the defiant Skillingwho unloaded almost 60 million worth of Enron stock shortly after his resignation but refused to admit he knew of the companys impending collapseemerged as the figure many identified most personally with the scandal.In May 2006 Skilling was convicted of 19 of 35 counts while Lay was found guilty on 10 counts of fraud and conspiracy.
When Lay died from heart disease just two months later a Houston judge vacated the counts against him.That October the 52-year-old Skilling was sentenced to more than 24 years in prison.
