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Enron was a business conglomerate and Wall Street darling during the 1990s, created by the
merger of smaller oil and energy companies. Houston executives Kenneth Lay, Andrew Fastow
and Jeffrey Skilling parlayed their new mega-company into a poster child for American business,
boasting of record profits with minimal losses. Unknown to almost everybody, this image was the
result of one of the greatest swindles in financial history.
The Collapse:
Initially, Skilling and other executives responded to questions by insulting reporters and lying to
employees. When pressure mounted, Skilling sold his Enron shares at a massive profit and
resigned; Lay stayed on. In 2001, the Enron scandal came to light, resulting in massive stockholder
defections. In December of that year, the company declared bankruptcy, its formerly golden stock
now worthless. Because of its silent complicity in the Enron scandal, the Arthur Andersen
Company was also forced to close its doors.
The fallout:
In the end, 90,000 people lost their jobs; Enron employees, who had been encouraged to invest
their retirement plans in company stock, lost $2 billion into the bargain. Stockholders lost another
$70 billion in the Enron scandal, and the state of California sued for $6 billion in energy losses.
Chief executive Ken Lay escaped justice, dying of a heart attack before he could be sentenced.
Skilling, Fastow and another dozen executives went to prison. Skilling appealed his 24-year
sentence to the U.S. Supreme Court; Fastows release was scheduled for December 2011.