"The collapse of Enron was devastating to tens of thousands of people and shook the public's confidence in corporate America."
Enron became a giant corporation who depended on outside credit sources to finance its daily operations. Its credits depended on its performance as the result of their share prices. As the price of Enron's shares collapsed, so did its' credit as well. Right after this collapse the cash credit to the company became expensive or unavailable to the people. Without ready infusions of cash, Enron became unable to meet its earlier credit obligations. This depressed Enron's stock even deeper, which led to further collapsing of the company. This continual collapsing led Enron to become Bankrupt and left millions with no pay or jobs.
It all started in July of 1985 when it began as an interstate pipeline company through the merger of Houston Natural Gas and Omaha- based InterNorth. The former chief executive officer of the Houston Natural, Kenneth Lay became the Chief Executive officer which later became post chairman of Enron when the new chief executive officer was given to Jeff Skilling. After a couple of years, Enron became the largest merchant of energy in the United States and the United Kingdom. The merged company owned 37,000 miles of intra- and interstate pipelines for transporting natural gas between producers and utilities. By 1994 Enron became the largest seller of electricity in the United States as well. In 1997 Enron introduced a new corporate logo, to give the company a new modern and environmental-aware look to it. This new look led to the formation of the Enron Renewable Energy Corporation. By August 1997 Enron announced that it was entering the marketplace with new weather derivative products; in addition to energy and trade in such ephemera as weather derivatives, which Enron was already buying and selling cellulose, pulp, paper, fertilizer, plastics, metals and bandwidth. By the year 1999 Enron grew so big, that it became involved in about a quarter of all energy deals in the world. Soon after Enron was expanding, they launched Enron Online, which was the first global Web-based commodity trading site. Enron had become an internet company, and decided that the old-economy energy-industry analysts were loath to be left behind. Enron’s rapid pace growth ranked them the sixth largest energy company in the world by the Energy Financial Group. After sparking more interest from the Enron Online, the Fortune magazine survey called Enron "The Most Innovative Company in America" in 2000.
In May of 2000, Enron, IBM, and America Online, launched the New Power Company, which was the first national energy service provider for residential and small businesses in newly deregulated U.S. energy markets. About 90 percent of its income eventually came from the trades over Enron Online. In April of 2000, Enron revealed that they owed more than five hundred million dollars by bankrupt California energy companies. On December, 28, 2000 their was a drop in the stocks caused by reports claiming that the financially troubled energy giant was seeking yet more financing to "shore up" confidence. By 2001, Enron had become a conglomerate that owned and operated gas pipelines, electricity plants, pulp and paper plants, broadband assets and water plants internationally and traded extensively in financial markets for the same products and services.
In August of 2001 the Enron chief executive officer, Jeff Skilling resigned after running the company. The Chairman and former CEO Kenneth Lay returned to his position atop Enron. In October 16, 2001, Enron reported a $683 million third-quarter loss and announced a $1.2 billion reduction in shareholder equity, partly related to diverse partnerships run by Andrew Fastow, its' chief financial officer. A few days later Enron saw that the Securities and Exchange Commission or also know as SEC made a study into a possible conflict of interest related to the company's operations with those partnerships. Just two days later Enron brook off its relationship with Fastow's partnership and fired him. Four days later, on October 31, 2001 Enron created a special committee headed by, William Powers the dean of the Law School of the University of Texas, to help company respond to the investigation after the announcement that the SEC inquiry has been advanced to a formal investigation Enron's was gradually falling on their path to bankruptcy which would lead to the end of Enron.
Now Enron teetered on the brink of bankruptcy, and tempted to paint its demise as a series of extraordinary events driven by behind-the-scenes deals hidden by questionable accounting. These two reports caused investor to lose their confidence in Enron and its stock price fell even more. At this point Enron was facing a dramatic decrease in their shares. Enron rose so quickly to fast which led to the faster decline in their shares. October 27, 2001, Enron borrowed more than $ 3 billion, in a move that was supposed to boost the confidence of the investors and customers. By November 6, 2001 the price of Enron's stock dropped below ten dollars a share, from its fifty-two week high of $84.87. Enron made an attempt to try to survive by merging with another energy company, Dynegy but failed. After Enron was trying their best to get themselves out of the state of their constant fall it was too late. Enron filed for Chapter 11 bankruptcy on December 2, 2001. Some experts predicted that the company would not survive bankruptcy intact, its assets would be sold to satisfy creditors, and the firm eventually disappeared.
This collapse of one of the biggest corporation in the world at one point brought a lot of media and governmental scrutiny. To bring about these investigations, the Department of Justice created an Enron task force, which included investigators from the Federal Bureau of Investigation and the Internal Revenue Service. These investigators looked for fraud and also illegal practice of buying or selling stocks not available to the public. The investigators sought to learn whether Enron’s senior executives defrauded investors and the insider trading investors centered their focus on the sale by senior Enron executives of company stock. These investors found that the year the company declared bankruptcy, Enron paid one hundred -forty of its managers about six hundred eighty million dollars. They also found out that the lower level employees were not so fortunate and received the money that was in their savings with Enron stock. Investors also found out that the average Enron worker got sixty-two percent of their savings with Enron.
On the other hand the media focused on Enron’s role in the California energy crisis. The media used this example to make people aware of Enron’s scandal especially the people of California. By the media using these strategies Enron was called Death Star and Load Shift too many.
The Enron Scandal shook America’s stock markets. Investors feared that other companies engaged in fraudulent accounting practices, and their fears were realized when scandals hit several leading telecommunication firms. As a result of Enron scandal, the prices of stocks for the nation’s largest companies fell by more than thirty-three percent and the technology stocks dropped seventy percent. Enron made investors wonder whether they could trust corporations, auditors, or stock analysts. The Enron scandal reminded Americans that a capitalist economy needs full and fair disclosure. The Enron scandal hurt a lot of families financial just to make an easy buck.