THE ENRON
SCANDAL
Le Yen Ha Tran – MA2N0235
OVERVIEW
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About Enron company
The scandal – what happened?
Causes and consequences
Lessons to be learned
Conclusions
ABOUT ENRON COMPANY
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
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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.”
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THE SCANDAL- WHAT HAPPENED?
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.
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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.

CAUSES AND CONSEQUENCES
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.
CAUSES AND CONSEQUENCES
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).
LESSONS TO BE LEARNED
Conflicts of interest
 If it’s too good to be true, it’s probably is.
 Transparency is vital
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CONCLUSION
The failure of the company represents the
biggest business bankruptcy ever.
 Also attractive to academics researchers.
 Both legal and ethical issues.
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Thank you for your
attention!