They were never in on the red carpet, never starred in a movie or a music video, but Jeff Skilling and Ken Lay had talent and fame. From the late 90s to their downfall in 2001 these two men were the gods of the business world. They were on the cover of magazines, not US Weekly, but Forbes and Times. In their heyday they were accumulating more wealth for themselves then most A list celebrities and as well as gaining wealth for their employees, investors, and the US. Until we realized that they had entertained us all by putting on one of the most elaborate shows in recent history. Although the Enron scandal occurred eight years ago the repercussions it had on the American people can still be felt today.
Enron began as a natural gas distributer and commodities trader. In its quest to raise stock prices they came up with creative and seemingly profitable ideas such as EnronOnline, an internet trading operation, Dabhol power project, building a power plant in India, and broadband trading. In reality these ventures all failed to turn a profit. Some of Lay and Skilling’s most creative ideas were the ones that were created to hide these failures. They used mark-to-marketing accounting system and built special purpose entities, which allowed them to move money and hide losses, and their stock prices continued to climb.
Skilling and Lay changed the attitude of Wall Street by changing the culture of their own company. They encouraged a competitive, cutthroat, money driven environment. They took extreme trips, such as a 1000-mile dirt bike venture through Mexico, emphasizing the aggressive culture. At the company they made themselves gods, the all-powerful geniuses behind the perfect company, and soon that’s how the world saw them. For example, Fortune magazine rated them “Most Innovative Company” six years in a row. Enron employees trusted in what Skilling and Lay had created and invested their money how they were encouraged – into Enron stock. Everyone at Enron saw his or her stocks increase which solidified his or her idea that Enron could and would make everyone wealthy. Outside investors and banks saw what they thought was opportunity and wanted to a part, making it easy for Enron to bring banks, lawyers, and accounting firms into their corrupt scheme. Banks provided the company with their growing need for cash; lawyers helped set up the offshore entities; and accounting firms were in on their illegal accounting practices. When the “house of cards” finally fell the power and influence that Skilling and Lay had used made sure that they were not the only ones to feel the impact. When the stock price finally plummeted Employees saw their entire retirements, their entire wealth, disappear overnight. Arthur Anderson fell as its faulty audits and document shredding practices were exposed. Citibank and J.P. Morgan’s reputations were tainted and Americans began to lose faith in the financial system.
Skilling and Lay gained glory and fame because of their seeming ingenuity. They ended up being as creative as we thought, just not as honest. They not only took away millions of dollars from the American people, but also shook our confidence and faith, that still has not been restored.
The Enron case has still not been completely closed. Litigations and appeals are still filtering through the court system and the Enron Creditors Recovery Corp has been created to keep the public informed. Books and movies such as “The Smartest Guys in the Room” are still being written and produced because people are still fascinated by how this tragedy occurred, how two people were able to whip so many into a frenzy of greed and dishonesty, and how people lost themselves in it.
No comments:
Post a Comment