Now Playing
From $90 to Eighty Cents: The Full Unraveling of Enron
Audio is available on Spreaker — see link below.
On October 16, 2001, a $1 billion charge buried in a routine earnings call cracked Enron's decade-long illusion — and exposed mark-to-market fraud, 500 special-purpose entities, and the Raptors designed to fail. This is how the machine came apart.
Audio is available on Spreaker — see link below.
It's October sixteenth, two thousand one. Enron's investor call is underway.
To understand October two thousand one, you have to understand what Enron had built in the years before it. Ken Lay founded the company in nineteen eighty-five through a merger of two natural gas pipelines.
Jeff Skilling arrived from McKinsey in the early nineties and became the intellectual architect of what Enron would become. He was aggressive, confident, and genuinely brilliant in some respects.
Among the most revealing of Fastow's creations were four special-purpose entities called the Raptors. The purpose was specific: to hedge Enron's mark-to-market losses on equity investments.
While the financial engineering was happening inside Enron's Houston headquarters, something else was happening on the other side of the country. California deregulated its electricity market in nineteen ninety-nine.
In August two thousand one, a vice president inside Enron named Sherron Watkins wrote a memo to Ken Lay. She told him, directly, that she was worried Enron would implode from a series of accounting scandals.
From October sixteenth onward, the timeline compresses. The SEC opened a formal investigation.
The trials that followed were lengthy and contested. Andy Fastow pleaded guilty to wire fraud and securities fraud.
Enron's story doesn't reduce neatly to a few bad actors. That framing is too convenient.
Chapter summary auto-generated from the verified script. Listen to the full episode for the complete content.