Enron

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Enron #0 Enron #1 Enron #2 Enron #3 Enron #4 Enron #5 Enron #6 Enron #7 Enron #8 Enron #9

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Kenneth LayBiography Kenneth Lee Lay, the son of a Baptist preacher in rural Missouri was born on April 15, 1942, in Tyrone, Missouri, and received both his bachelor and master degrees in from the University of Missouri. He rose to the pinnacle of corporate America as head of . Career History Lay served in the U.S. Navy from 1968 to 1971. In 1970, after earning a Ph.D. in economics at the University of Houston, Lay went to work for the Exxon predecessor Humble Oil & Refining. He worked for the Federal Power Commission from 1971 to 1972, and served as energy deputy under secretary for the United States Department of Interior until 1974. In 1974, Kenneth Lay joined the Florida Gas Company, eventually serving as president of its successor company, Continental Resources Company.Career History In 1981, he left Continental to join Transco Energy Company in Houston, Texas. Three years later, Lay joined Houston Natural Gas Co. as chairman and CEO. The company merged with Inter North in 1985, and was later renamed Corp. In 1986, Kenneth Lay was appointed chairman and chief executive officer of . .Key Players in the Enron ScandalKenneth Lay Former CEO of Enron, helped start the company. Enron extended to him $7.5 million revolving credit line, which he reportedly used and repaid with Enron stock 15 times within a period of just several monthsHe quit as CEO in February 2001He returned as CEO in August 2001until he resigned on Jan. 23, 2002 He quit the Enron board altogether on Feb. 4. Sherron Watkins said Lay was "duped" by top executivesJeffrey SkillingEnron's chief executive in the first half of 2001Since joining the company in 1990, Skilling helped transform Enron from a natural-gas pipeline company into an energy-trading powerhouse.Between January and August 2001 he sold off about $20 million in Enron stockResigned after the close of markets on Aug. 14 2001Being charged with conspiracy, fraud and insider tradingDavid DuncanEnron's chief auditor at AndersonHis job was to check Enron’s accountsHe is accused of ordering the shredding of thousands of Enron-related documents in an effort to hide them from Securities and Exchange Commission investigatorsAndrew FastowFormer Chief Financial Officer of EnronThe mastermind behind the deceptive accounting practicesLea Fastow (his wife) also plead guilty to signing and filing a tax return that did not include income the Fastow’s had received from Mike Kopper Sherron WatkinsKnown as the "Enron whistle-blower" Was Enron's vice president of corporate developmentWrote a letter to Kenneth Lay about “suspicions of accounting improprieties" Not really a “whistle-blower” because she never went public with her suspicionsThe Smartest Guys in The Room Skilling was born in Pittsburgh, Pennsylvania, and was the second of four children of Betty (Clarke) and Thomas Ethelbert Skilling, Jr. His father was a sales manager for an Illinois valve company. He grew up in New Jersey and Aurora, Illinois. When he was 16 years old, he worked at WLXT (channel 60), a UHF television station in Aurora.Skilling graduated from West Aurora High School. He received a full scholarship to Southern Methodist University in Dallas where he was a member of the fraternity Beta Theta Pi. He initially studied engineering before changing to business. After graduation, he went to work for a Houston bank, which sent him to Harvard Business School. During his admissions interview for Harvard Business School, he stated that he was asked if he was smart, to which he supposedly replied, "I'm fucking smart". Skilling earned his M.B.A. from Harvard Business School during 1979, graduating in the top 5% of his class as a Baker Scholar. He became a consultant at McKinsey & Company in the energy and chemical consulting practices. Skilling became one of the youngest partners in the history of McKinsey. Skilling started his career in Houston as an analyst for First City Bancorporation of Texas in Houston. First City was one of Enron's banks and just before it failed the first time, Skilling quit.[citation needed] The CEO of Collecting Bank, the FDIC's facility for managing the bad assets of First City, was Sam Segnar, the first CEO and chairman of Enron. The new First City Bank, headed by A. Robert Abboud, was also an Enron bank. Abboud was the former president of First Chicago Bank and Occidental Petroleum under Armand Hammer.[citation needed] First City was initiated by Judge James Andersen Elkins and his law partnership, Vinson & Elkins, one of Enron's main law companies. As a consultant for McKinsey & Company, Skilling worked with Enron during 1987, helping the company create a forward market in natural gas. Skilling impressed Kenneth Lay in his capacity as a consultant, and was hired by Lay during 1990 as chairman and chief executive officer of Enron Finance Corp.Enron What Went Wrong?How did the collapse begin?Energy companies lobbied congress in the 1980s for deregulation of the energy businessEnergy policy was changed and Washington lifted controls on who could produce energy and how it was soldJeff Skilling took and aggressive approach to expand Enron by trading futures in gas contractsSkilling’s PlanUnder Skilling’s new plan Enron bet against future movements in the price of gas-generated energy“Enron bought and sold tomorrow’s gas at a fixed price today”With every trade, Enron took a cut for transaction costsUsing the internet to promote trading, Enron became the most successful player in the futures game; 90% of Enron’s income came from tradesEarly 2000Enron took advantage of the dot.com boom and traded internet bandwidthThe value of Enron’s online transactions was huge ($880 billion)The problem was Enron wasn’t making money on many of their online trades because they made the market very efficientFuzzy NumbersEnron began tweaking the numbers in their financial statements with accounting techniques to hide their lossesEnron created partnerships, and then passed the assets (losses) to these partnerships which eliminated the losses from their balance sheetsWhy wasn’t Enron caught earlier?Throughout all of this, Enron and its key members were making political contributions to the white house and congress.Kenneth Lay donated $100,000 to President Bush in 2000, and in 2001 Bush invited Lay to become an advisor to his transition team.In the year 2000, Kenneth Lay met three times with Dick Cheney to discuss energy policy review.When the review was published in May 2001, it was very favorable to the Enron and the energy sector. Aug 14, 2001 Jeff Skilling resigned, Kenneth Lay became CEO once again.Stock prices began to fall, as investors were uncertain about the company’s stability. This started a chain reaction: Enron had hedged against its own stock, so as long as the stock price was declining, it could not recover its losses. December 2001, Enron filed for chapter 11 bankruptcyIt’s share price had collapsed from about $95 to under $1.Chapter 11 Bankruptcy Companies and large firms that are facing severe and unmanageable debt may seek to file chapter 11 bankruptcy, which allows them to re-organize so they can either continue their day-to-day operations or go out of business entirely. Under chapter 11, a company is protected from damaging lawsuits and other negative measures, but in exchange the company is usually required to have all its major business decisions approved by the bankruptcy court.What Now“Enron is in the midst of restructuring various businesses for distribution as ongoing companies to its creditors and liquidating its remaining operations.”Personality of Kenneth LayInteresting events for Business Ethics Class Kenneth Lay is known as the notorious business executive who was convicted of conspiracy and fraud, which cost 20,000 employees their jobs and many their life savings, and losing billions for investors. Kenneth Lay violated the following two laws of moral theories. Lay was charged, in a 65-page indictment, with 11 counts of securities fraud, wire

 

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