1. Le Yen Ha Tran – MA2N0235

2. 1. About Enron company 2. The scandal – what happened? 3. Causes and consequences 4. Lessons to be learned 5. Conclusions

3.  Found in 1985, after the deregulation of natural gas pipelines  Born from the merger of Houston Natural Gas and Internoth, a pipelines company.  Invented the new product: a “gas bank” which Enron could buy gas from a network of suppliers and sell it to a network of consumers  Applied the same model to sell electricity

4.  Pursued diversification strategy, owned and operated gas pipelines, pulp and paper plants, broadband assets, electricity plants, water plants internationally.  Enron’s stock rose from the start of the 1990s until the year end 1998 by 331%.  “In just 15 years, Enron grew from nowhere to be America's seventh largest company, employing 21,000 staff in more than 40 countries.”

5.  Enron’s shareholders filed a 40 billions lawsuit after the company stock price, which achieved US $ 90,75 per share in mid-2000, dropped to less than US $ 1 in November 2001.  The U.S. Securities and Exchange Commission (SEC) began an investigation, and rival Houston competitor Dynegy offered to purchase the company at a very low price  On December 2, 2001, Enron filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code.

6.  Top Enron executives sold their company stock prior to the company's downfall.  Lower-level employees were prevented from selling their stock due to 401k restrictions and many subsequently lost their life savings.

8. Causes:  Deregulation of Enron: resulted in skewed earning reports, losses were not showed in their entirety, prompting more investment.  Misrepresentation: executives embezzled funds from investments while reporting fraudulant earnings to those investors.

9. Consequences:  4500 employees lost their jobs  Investors lost 60 billion dollars within a few days  The pension fund of the company’s employees was lost.  Citizen trust in the American economic system was destroyed.  The rule for company financial reporting were sharpened : Sarbanes – Oxley Act (2002).

10.  Conflicts of interest  If it’s too good to be true, it’s probably is.  Transparency is vital

11.  The failure of the company represents the biggest business bankruptcy ever.  Also attractive to academics researchers.  Both legal and ethical issues.

12. Thank you for your attention!