Enron: The Fall from Grace/ The World’s Biggest Fraud
A. Enron’s History B. Overview of Enron’s Operations 1. Wholesale Services 2. Energy Services 3. Global Services C. Enron’s Timeline D. Enron’s Role in The Energy Crisis in California E. The Fall of Enron F. Why Enron Fell from Grace? G. The Crash of Enron 1. Key Management at Enron 2. Enron’s Auditor 3. Credit Rating Agencies 4. Investment Banks 5. Links with The Government (Bush Administration) 6. The Link of Enron with The British Front 7. The Victim: Employees & Pension Fund Holders H. Investigators & Regulators Involved 1. Capital Market Regulatory Authorities 2. Judicial & Legislative Entities I. Lessons Learned J. Proposed Reforms to Avoid Future Enronitis K. What Could be Done to Avoid Such Enron-like Crises in Emerging Markets Such as Egypt? 1. In Relation to The Exchange (CASE) 2. In Relation to The Regulator (CMA) 3. In Relation to Auditing & Accounting Practices 4. In Relation to Investors 5. In Relation to Board of Directors & Management
A. Enron’s History Enron, a Houston-based energy firm founded by Kenneth Lay, transformed itself over its sixteen years lifespan from an obscure gas pipeline concern to the world’s largest energy-trading company (both off and online). Enron has become an interstate and intrastate natural gas pipeline company with approximately 37,000 miles of pipe. Enron was largely credited by creating market trading in energy, allowing energy to be traded in the same way as other commodities such as oil. Enron was long viewed as the star of the stock market. It experienced a meteoric rise and ranked 22nd in the Fortune’s 100 best companies list in America in 2000. The company had offices around the world including Australia, Japan, South America and Europe. Furthermore, Enron established itself in the UK, as the first foreign company, to begin construction of a power plant, after the electric industry in the UK was privatized. B. Overview of Enron’s Operations Enron had three main business units - Wholesale Services, Energy Services and Global Services combing broadband and transportation services. It offered its services to thousands of customers around the world. The Wholesale Services unit was responsible for marketing a number of wholesale commodity products, allowing industrial companies to manage commodity delivery and price risk. Customers could arrange selling or buying commodities on terms that suited their needs (i.e. long term, short term, fixed price, indexed price or other innovative variations). Enron’s Energy Services unit, the retail arm of Enron, offered companies a better way to develop and execute their energy strategies. Enron was the largest provider of energy services to commercial and industrial companies, with a total contract value amounting to $2.1 billion in 2000. Enron’s Global Services unit included North American pipeline businesses of Enron Transportation Services including Northern Natural Gas, Transwestern Pipeline, Florida Gas Transmission, Northern Border Partners, Portland General Electric and Enron Global Services. On an international level it encompassed engineering businesses; Enron Wind; EOTT Energy Corp; Azurix and Wessex Water. EnronOnline was the world's largest e-commerce site for global commodity transactions, which provided real-time transaction tools and information for commodity transactions. Enron in Numbers: Employees Countries in which Enron Operates Assets Miles of Pipeline Owned Power Projects under Construction Power Projects in Operation Fortune 500 Ranking Enron in 1985 15,076 4 $12.1 billion 37,000 1 1 Not Ranked Enron in 2000 18,000+ (worldwide) 30+ $33 billion 32,000 14 in 11 Countries 51 in 15 Countries 18
C. Enron’s Timeline With the deregulation of the energy sector in the early 1980s, Enron’s rose to stardom as energy corporations lobbied Washington to deregulate the business. Companies including Enron argued that extra competition would benefit...
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