It’s been 20 years, to the day, since Enron Corp. filed for bankruptcy, marking one of the most spectacular financial collapses in history and forever cementing its legacy as the poster child of corporate fraud.
The energy-trading giant’s downfall, triggered by revelations of shady accounting practices, still reverberates throughout the business and political world today. The deceptive practices of its executives, some of whom served jail time, helped spur the passage of federal laws and regulations designed to improve the accuracy of financial reporting.
Enron’s misdeeds in energy — its traders were found to have manipulated California’s recently deregulated electricity market, helping spark a crisis that led to sky-high power prices and rotating blackouts — ultimately led to the downfall of the state’s governor. The name Enron is still invoked in shorthand — like Theranos, Madoff or Lehman — a full two decades after its public ruin. It even inspired a limited-run Broadway show.
“They had the smartest guys in the room and then it blew up,” said Michael Webber, a University of Texas at Austin professor who specializes in energy, adding that Enron’s failure rippled through a host of institutions. “They were a bowling ball that knocked down a lot of bowling pins.”
Formed in 1985, Enron rose to prominence throughout the 1990s as an energy supplier and trading powerhouse with far-flung holdings including natural gas pipelines and utilities. But things went off the rails as executives put together obscure financial instruments that ultimately became ticking time bombs. As the company unraveled, it was forced to write off more than $1 billion (¥113 trillion) of failed investments, disclose major losses in shareholder equity because of dealings with affiliated partnerships and restate years of earnings. When it filed for bankruptcy on Dec. 2, 2001, it was at the time the largest-ever Chapter 11 case in history, costing shareholders billions and leaving thousands of people pensionless and out of work.
Here’s a look at some of the prominent players in the scandal — both fallen executives and those who investigated them — and where they are now:
Kenneth Lay, founder, former chairman and CEO
Lay founded Enron with the merger of two regional natural gas pipeline companies and, during the subsequent 16 years, transformed the Wall Street darling into America’s most famous example of corporate greed and corruption. He was indicted in 2004 by a grand jury for his role in wide-ranging schemes to defraud the public and accused by regulators of reaping more than $90 million in ill-gotten gains from selling stock. A jury convicted him but charges were dropped after he died at the age of 64 in July 2006 while vacationing, just months before his sentencing was slated to take place.
Gray Davis, former California governor
Davis, a Democrat, blamed Enron for gaming California’s power market and contributing to the blackouts that roiled the state. To stabilize the situation, he authorized the state to buy expensive power contracts that were paid off by customers over 20 years. He was ultimately recalled in 2003, with the state’s 2000-2001 electricity crisis fresh on voters’ minds. Davis is now an attorney in the Los Angeles office of Loeb & Loeb law firm, where he advises companies, nonprofits and schools.
Lou Pai, ex-CEO of Enron Energy Services
Pai ran Enron’s retail energy unit, arriving at the company after stints at ConocoPhillips and DuPont. He left Enron six months before it collapsed in late 2001, pocketing more than $265 million from exercising Enron options and selling stock. Pai was later cast in news reports as a symbol of Enron’s excess, with an alleged fondness for corporate jets and strip clubs. Pai left his wife to marry an ex-topless dancer, and his lawyer argued the stock sales were tied to the divorce, according to court documents. In 2008, Pai settled insider trading charges and agreed to pay regulators $31.5 million. He didn’t admit wrongdoing, and he wasn’t charged criminally. Pai went on to co-found Element Markets, a Houston-based carbon-trading firm. He’s not currently listed among the executives on the company website, and attempts to reach him were unsuccessful.
Bill Lockyer, ex-California AG
Lockyer offered one of the more provocative quotes of the Enron saga, saying he’d “love to personally escort Lay to an 8-by-10 cell that he could share with a tattooed dude” named Spike. (Lockyer later apologized for the remarks.) State agencies reached a $1.52 billion settlement with Enron in 2005 to resolve allegations that the company engaged in large-scale market manipulation during the energy crisis, though the state only expected to recover a fraction of that. Lockyer is now an attorney at the law firm Brown Rudnick.
Jeffrey Skilling, former president and COO
Working as a McKinsey consultant, Skilling came up with the idea that transformed Enron from a gas company to a broker of natural gas contracts between producers and wholesalers. The “gas bank,” as it became known, reduced Enron’s own exposure to fluctuating prices and spurred its growth through the 1990s. Skilling was hired to lead that effort and eventually became CEO of Enron, briefly, before quitting in July 2001 just months after taking the role. He was convicted by a Houston jury in 2006 of conspiracy, securities fraud, making false statements to auditors and insider trading. His prison sentence of 24 years was eventually reduced, and he left prison in 2019. He is now back in the energy world, according to a report that quotes unnamed people. Skilling couldn’t be reached, and his lawyer didn’t immediately return messages seeking comment.
Richard Kinder, Lay’s college friend who helped build Enron
A former college classmate of Lay, Kinder resigned as president of Enron in 1996 after it became clear he wouldn’t become CEO. With a partner, Kinder went on to form his own energy company. He bought a publicly traded liquids pipeline company from Enron and turned it into one of the largest U.S. energy infrastructure companies in the world: Kinder Morgan Inc. Kinder is today worth $7.8 billion, ranking 346 on the Bloomberg Billionaires Index.
Rebecca Mark, who built Enron’s water business
Known as “Mark the Shark” for her negotiating skills, Mark was one of the most senior female executive in the energy industry in the 1990s, rising to chief executive of Enron International and serving as a member of the company’s board. She spun off the company’s water business, Azurix, in a 1999 IPO, but lost a power struggle to Skilling and resigned from Enron in 2000. She was never accused of any involvement in the fraud that emerged in late 2001. Now Mark-Jusbasche, she invests in energy technology, water and agricultural projects with a focus on sustainable development, according to her LinkedIn profile. She declined to comment further when reached by phone.
Andrew Fastow, former CFO
Fastow — seen as one of the chief architects of using off-book partnerships to conceal billions of dollars of losses and debt — pled guilty to securities and wire fraud in 2004 and was sentenced to six years in prison. His wife, Lea, also worked at Enron, where she was an assistant treasurer; she was sentenced to a year in prison. Fastow last year said he accepted full responsibility for his actions and considers himself “probably the person most responsible for Enron’s failure” after originally viewing himself as a “hero.” Fastow, who’s now a public speaker on business ethics, declined to comment when reached by phone.
Andrew Weissmann, former federal prosecutor who led the investigating task force
As a member of the Enron Task Force, Weissmann led the prosecution of accounting firm Arthur Andersen and then became director of the unit. After serving as the FBI’s general counsel under director Robert Mueller and then chief of the Justice Department’s Criminal division, he became a lead prosecutor for Special Counsel Mueller’s investigation of Russian interference in the 2016 election. He wrote a book about that probe, “Where Law Ends,” and now teaches at New York University Law School.
Sherron Watkins, the whistleblower who started it all
In August 2001, Watkins alerted Lay to problems with the company’s books, warning in a memo that Enron could “implode in a wave of accounting scandals.” She was lauded as one of Time Magazine’s persons of the year in 2002 along with two other whistleblowers, Cynthia Cooper of WorldCom and the FBI’s Coleen Rowley. Watkins is now executive in residence at the McCoy College of Business at Texas State University and teaches a course at UNC’s Kenan-Flagler Business School, she told Bloomberg News.
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