After twenty years of epic bankruptcy, Enron left a complex legacy

A logo lights up in front of the new corporate headquarters of Houston-based energy trading company Enron on November 29, 2001 in Houston, Texas.

James Nielsen | Getty Images

The Enron bankruptcy on December 2, 2001, led to an epic scandal, nearly two dozen criminal convictions, and sweeping government reforms. I became Enron A permanent code for corporate fraud.

But 20 years later, many experts and former company insiders and others said Enron’s legacy deserves another look. They say the company, which has been repeatedly hailed as America’s “most innovative”, has already pioneered the businesses we take for granted today, from energy trading to video streaming.

Among those defending Enron’s legacy is the daughter and son of the company’s founder and former chairman, Kenneth Lay. A federal jury convicted Lai in 2006 of 10 felony charges, but because he died of a heart attack six weeks later — before he could appeal — his conviction was overturned.

Prior to 2000, Enron was one of the world’s largest developers and operators of renewable energy sources (primarily solar and wind), the first major US energy company to endorse cap and trade carbon dioxide credits, and targeted black college recruitment programs Historically, actively promoted Elizabeth Lai, a lawyer who worked on her father’s defense team, and Mark Lay, former Enron vice president, said in a statement provided exclusively to CNBC.

“The model was simple, hire the smartest people you can find, give them the capital and run the back office for them so they can build new markets,” said Liz.

Stephen Webster, former executive director of the international division of Enron, described the culture of high pressure, diving or swimming.

“I would tell you it was probably one of the best jobs I ever had,” he said. Looking back, Webster said, he doesn’t regret the stress. “We were entering new markets. We were doing new things.”

Ravi Kathuria, former director of strategy at Enron’s retail energy unit, Enron Energy Services, described a culture in which employees are given a significant amount of autonomy—a culture in which bosses never call to ask what workers are doing or how they are doing. Employees were expected to make the most of the freedom.

“Enron fostered innovation, fostering an environment in which nearly everyone within the company acts as an entrepreneur, an in-house entrepreneur, and you are in charge of your own destiny,” he said.

forefront

If they hadn’t hidden the fact that they didn’t make any money, they would still be here.

Ed Herz

Former Adviser, Enron Task Force, Department of Justice

Taking advantage of the liberalization of the natural gas industry, Enron has established itself as an intermediary between gas pipeline operators and customers such as utilities, taking its own stake in the operation. She has adapted the concept to electricity as well.

By 2000, Enron’s last full year as a public company, the division that included trading operations represented more than 90% of the company’s $100 billion in revenue. The company’s online trading platform, known as EnronOnline, reported processing more than $336 billion in transactions that year, making it the largest e-commerce marketplace in the world at the time.

Herz said that while Enron’s business operation had little to do with the company’s accounting scandal, the unit’s successes created incentives for complex accounting in the business unit and elsewhere in the company.

“When they brought transparency and liquidity to the market, the margins — the gaps between supply and demand — narrowed,” Herz said. “And so it’s very, very difficult for them to continue reporting increased revenue and increased profit.”

But Herz said the business model itself was sound in the long run.

“If they hadn’t hidden the fact that they didn’t really make any money, they would still be here,” he said.

And in a sense, they are. Enron graduates are spread across the industry in companies that buy and sell natural gas using the same principles as the Skilling Gas Bank.

market maker

Enron will try to replicate the success it has had with natural gas in other markets, with mixed results. I became a leader in the electricity business, though Three Enron dealers pleaded guilty to manipulate the market in California during the energy crisis of 2000. However, the business itself was sound. Some, including the Federal Energy Regulatory Commission, have argued that much of the blame rests with California for developing a system that could be tampered with in the first place.

FERC staff wrote in 2003 after death.

Kenneth Lay speaks during an interview in his office at company headquarters on February 5, 1996 in Houston, Texas.

Paul S. Howl | Holton Archive | Getty Images

Enron’s attempt to work its magic in the nascent broadband market in the 1990s was perhaps the most problematic, although it helped shape the way we communicate and consume content to this day.

The idea was to buy and sell internet bandwidth the same way the company was trading natural gas. To help secure demand, Enron Broadband will offer services including online video conferencing – an early version of cloud computing – and even on-demand movie streaming in a joint venture with Blockbuster video rental chain. These innovations happened decades ago Zoom And Netflix They became familiar names.

F said. Scott Yeager, a former director at Enron Broadband who has worked on the new technologies: “We said there would be a new medium.” “The new medium will be a mixture of flows, interaction and dynamic content based on databases that are unique user experiences.”

before the match

But with the dot-com bubble collapsing, Blockbuster’s inability to license critical content from Hollywood studios, and a glut of bandwidth, the broadband division fell short of Enron’s lofty goals. Allegations that the company tried to hide this from investors became central to the prosecution — and the guilty plea — of several Enron Broadband executives, as well as part of the case of Skilling, the former CEO.

I’m not saying that they don’t have any good ideas or do anything, but they tried to monetize things before they were really ready.

Leslie R. Caldwell

Former Director, Enron Task Force

Yeager was accused of inflating the value of Enron’s stock by inflating technology that prosecutors claimed did not work. But a jury acquitted him of conspiracy, securities fraud and electronic fraud, while he was deadlocked on about 20 counts of insider trading and 99 counts of money laundering. When the government tried to retry him on these charges, Yeager took his case All the way to the Supreme Court and won.

“Our network was real, yeah, everything we did was real. And the infrastructure was real,” said Yeager.

But 20 years later, prosecutors who worked on the investigation still say broadband was typical of a pattern at Enron of being too ahead of its time and not on par with investors when gambling fails.

Leslie Caldwell, senior director of the Justice Department’s Enron Task division, told the force. Caldwell will continue to head the department’s criminal division during the Obama administration. Today, she is a partner at Latham & Watkins in San Francisco.

“I’m not saying they don’t have any good ideas or do anything, but they tried to monetize things before they were really ready,” she said.

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