Enron Scandal?

Question

I posted this before, but the answers were not helpful. I am supposed to write an essay on what happened with it, we watched the Enron: The Smartest Guys In The Room, but I missed the day they did that. Online doesn't help me much, it all pretty much covers the court cases and everything that happened afterwards as a result, instead of what actually happened.

I was living in Canada when it happened and wasn't old enough to care about it, which is why I didn't know.

Answer 1

In a nutshell, Ken Lay, Jeff Skilling, and Andy Fastow, along with Arthur Andersen created a model called Hypothetical Future Value (HFV), which means putting future profits ahead. The banks such as Credit Sussie, Citi, Morgan Stanley bought into the HFV.

Enron got lots of money from the banks, but they weren't making any money, but they advertised it as a company heading into the right direction and Wall Street bought into what they were doing and people started to buy shares of Enron. During company meetings, the executives continued to push their employees to buy company stock while at the same time, the executives started to dump their shares.

Enron needed money very badly, and started to manipulate California by shutting down power, moving it to another location and when the demand was up, Enron was able to sell it at a higher price. In the meantime, Fastow was able to hide losses of the company by creating inside companies named after Star War characters.

The house of cards started to fall when a reporter from Fortune magizine questioned why Enron didn't release a balance sheet. Enron didn't want the story released and spent hours trying to convince the magazine not to release it, but they did. When analyst started to question Enron during conference calls, Skilling didn't disclose any information and called an analyst over the phone an "a*****e."

Jeff Skilling resigned, perhaps under a lot of pressure because the company wasn't in such a great place. The stock of Enron started to fall when Ken Lay took over. In a span of 4 months, Enron stock went from $90 a share to less then $3, and Enron declared bankruptcy and let go 20,000 people who lost their retirement plans.

During the Senate hearing, the executives didn't know what was going on and blamed each other. Skilling, Lay and Fastow were convicted of numerous security charges.

If you go to quicksilverscreen.com under documentaries, you will find the movie.