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December 2, 2001: The Day the Largest Bankruptcy in History Hit
Audio is available on Spreaker — see link below.
Enron's collapse didn't happen overnight — it was the inevitable end of mark-to-market fraud, Fastow's Raptors, and a warning memo nobody acted on. In this chapter, the house of cards finally falls, and 29,000 employees pay the price the executives never did.
Audio is available on Spreaker — see link below.
For six consecutive years, Fortune magazine named Enron the most innovative company in America. Not the most innovative energy company.
Ken Lay founded what would become Enron in nineteen eighty-five, through a merger of two natural gas pipeline companies. His instinct was always to move toward deregulation.
Even mark-to-market accounting has limits. Eventually, liabilities accumulate.
By the summer of two thousand and one, at least one person inside the company understood clearly what was happening. Sherron Watkins was a Vice President at Enron, and in August two thousand and one she wrote a memo directly to Chairman Ken Lay.
While the accounting fraud was running inside the company, Enron's traders were running a separate operation in California's electricity market. California had deregulated its electricity market in nineteen ninety-nine, and Enron moved into that space with traders who were creative in ways that ranged from clever to criminal.
On October sixteenth, two thousand and one, Enron announced quarterly earnings. Buried in the announcement was a nonrecurring charge of just over one billion dollars.
The numbers that defined Enron's collapse are big enough that they can become abstract. One billion in charges.
The trials took years, as federal fraud cases do. Fastow pleaded guilty and cooperated with prosecutors.
What made Enron work for as long as it did wasn't genius. It was institutional deference.
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