How that crooked E got its final date with justice

For years, Enron’s gravity-defying stock price, ostensibly based on its performance as a power major, made it a Wall Street darling and an icon of the “New Economy” of the 1990s. At its peak, it was the seventh-biggest company, it’s ‘Crooked E’ a symbol of success. But it suddenly collapsed at the end of 2001, the biggest U.S. bankruptcy at the time, costing investors and employees billions of dollars (approximately $70 bn) when Enron shares became worthless.

At the centre of the scam was an extensive network of lies, hype and cover-ups, and off-the-books deals to hide billions of dollars in debt and inflate profits.

Who

Lay was the chairman and co-founder, Skilling his protege and CEO for six months. Prosecutors charged that Lay and Skilling knew Enron’s reports of booming profits were just financial trickery, but pretended all was well to keep the stock price up even as the company slid to its demise. Each made more than $100 million by selling Enron shares before the bust.

There was more to Lay than just his corporate side; he was a close friend of George W Bush (who called him Kenny Boy) and contributed heavily to his presidential campaigns. That, presumably, helped him maintain his profile and cow down would-be investigators

Why

Enron exposed the web of conspiracy between top corporates, politicians, accounting firms (Arthur Anderson was indicted for its role in the scam and has never recovered) and even the media, which was blinded by the Enron glitz. That’s the lesson for the West. For an economy such as India’s, where some sectors are growing at a dizzy pace, there’s much to learn from what went wrong in Houston.

Where

Enron was followed by the outing of several other ‘‘celebrity’’ corporate frauds, including Tyco (Dennis Kozlowski), WorldCom (Bernard Ebbers) and, most famously, Martha Stewart. All have done time for their crime. Also, the lifestyle excesses of Lay and Skilling provoked revulsion across the Us and prompted other top execs to curb their spending.

The 6th What Next

Both Lay and Skilling are likely to appeal. Their sentencing will be, significantly, on 9/11 2006, and they face spending the rest of their lives in jail. USA Inc already has systems in place to prevent such corporate crime, such as the Sarbanes-Oxley Act, which establishes new or enhanced standards for all US public company boards, management, and public accounting firms.