Enron's Case Study

The Players

Kenneth Lay – Lay was the Enron founder and later known as the dishonorable Enron business executive who was ultimately convicted of conspiracy and fraud. Lay was born in Missouri in 1942. He was very smart; he got his bachelors, masters and Ph.D. in economics. He started his carrier as economist and speech writer, then lecturer and assistant professor, but latter he got to be an energy deputy under-secretary for the United States Department of Interior. He also got to be the Florida Gas Company vice-president and then president, and other high standing positions with The Continental Group, Transco Energy Company, Houston Natural Gas Corporation, and of course Enron’s chairman, CEO, and president. In 1985, Lay formed Enron after

Everyone was amazed how profitable the company has become in such a short period of time. Even everyone on Wall Street was saying how brilliant they were. Thus, being blind of the Enron success, no one asked how exactly they were making money. Lay also was a good friend of the Bush family. He even contributed money to the Republican Party, so latter he got to be mentioned as a possible candidate for President Bush’s Treasury Secretary. As Enron’s CEO, Lay had paid compensation of $42.4 million. In 2001, Lay sold huge amounts of Enron stock which resulted in a drop in the share price. He also liquidated more than $300 million in Enron stock from 1989 to 2001. He had a fortune worth $40 million which after collapse was worth $0. Enron filed for bankruptcy in December 2001 which is considered to be “the biggest bankruptcy filing in U.S. history” at the time. Unfortunately, this crash put 20,000 out on the streets without their life investments. Investors also lost billions with Enron. In July 2004, Lay was convicted for his role in the company 's collapse, including 11 counts of securities fraud, wire fraud, and making false and misleading statements, but he never got sentences because he died

and was the son of middle class Jewish parents who worked in retail and merchandising. Like Skilling, he earned an MBA. He started his career at Enron 1990 as Enron’s CFO. Andrew Fastow was the one who cooked the books. Andrew Fastow made $30.5 million on Enron stock only. He created SPE (special purpose entities) to hide Enron’s debts and record profit on asset sale. He reported $45 million for these SPEs. In October 2002, Fastow was indicted on 98 counts including fraud, and money laundering. Two years later he pleaded guilty and agreed to work with authorities in exchange for a reduced punishment. He was first sentenced to 10 years in prison, but later his sentence was reduced to 6 years in federal prison and a forfeiture of almost $23.8 million in assets. His wife was former Enron assistant treasurer and she also was sentenced to one year in federal prison for tax fraud. Today, he presents a lot of speeches. He is amazed by: “No one ever asked me to give a presentation when I was CFO of Enron. But I get invited every week to give a presentation now, and the only reason is because I was in