Tutorial Enron
● Historical Information
● Founded 1985 in Nebraska ● Stock price high of 90$ in mid-2000 ● Stock price breakdown to 1$ by end of November 2001 ● shareholders lost 11 Billion $ (deutsch: Milliarden) ● U.S. Securities and Exchange Commission (SEC) began investigation in Oct 31 2001 ● filed bankruptcy on December 2, 2001
Enron's success
● Thrive of Enron
● selling of electricity and gas ● through strong lobying by Enron a deregulation of prices was prevented ● Dec. 2000, market capitalization exceeded $60 billion, – 70 times earnings http://www.50statesclassifieds.com/uploadedi mages/4703312gas1.jpg – six times book value – an indication of the stock market’s high expectations about its future
Management board ● CEOs
● Kenneth Lay, Founder, former Chairman and CEO (CEO 1985-2002) ● Jeffrey Skilling, former President, CEO (Dez. 2000- Aug 2001) and COO ● Rebecca Mark-Jusbasche, former Vice Chairman, Chairman and CEO of Enron International ● Stephen F. Cooper, Interim CEO and CRO ● Andrew Fastow, former CFO ● Auditing company
● Arthur Anderson (Auditing company) Time-Line
● 01.11.2000 Lay begins selling shares ● 12.02.2001 Skilling is named CEO ● 21.06.2001 Skilling is hit in the face with a pie ● 14.08.2001 Skilling resigns ● 16.08.2001 Lay discusses Skilling's departure ● 21.08.2001 Lay states that increasing stock price has one of the highest priority ● 16.09.2001 Lay to employees: “the third quarter is looking great”
● www.fact-index.com/t/ti/timeline_of_the_enron_scandal.html Outrages (Excerpt)
● Kenneth Lay
● Spread of false information ● Arthur Anderson
● shredding several tons of supporting documents http://bp1.blogger.com/_KlE4PNnEzUk/R1rsh6Cu5xI/AAAAAAAA ArI/7Yos5bCNQeI/s400/jail%2Bbars.jpg ● violating the independence requirement ● Jeffrey Skilling
● balance sheet falsification to create a virtual revenue increase of 750%
● hide billions in debt from failed deals and projects Lessons learned
● several Enron managers were sentenced and imprisoned ● Arthur Anderson got banned from auditing public companies ● the Sarbanes-Oxley Act:
● Punish destroying, fabricating records in federal investigations ● increased the accountability of auditing firms to remain objective and independent of their clients http://www.magpictures.com/resources/presskits/Enron/ENR ON_onesheet.jpg
We need you...
● ... as an independ analyst working for the S.E.C. (Securities and Exchange commision)
● Identify Emails in which Enron ex- employees accuse Enron managers of misbehavior. ● Convict Enron mangers of destroying incriminating material and falsifying reports (a very hard task!)