Enron collapse

June 3, 2004 7:29 PM

ENRON: They were making money hand over fist. How is it that they went bankrupt?
posted by Tryptophan-5ht to Work & Money (9 answers total)

See this news series in the hometown newspaper of Enron, the Houston Chronicle.
posted by calwatch at 7:34 PM on June 3, 2004

It's called the stock market. Hiding losses does wonders for your stock price. The company was not necessarily doing so great, but individuals who sold stock at the right time certainly walked away with fortunes.
posted by scarabic at 7:57 PM on June 3, 2004

Do you think they'd only lie to and cheat their customers and somehow be honest with their stockholders?
posted by rdr at 8:20 PM on June 3, 2004

Creative accounting. Its really as simple as that.
posted by Fupped Duck at 8:32 PM on June 3, 2004

One small tidbit that illustrates it all was the fake trading floor they used to pump up their stock price every year.

I suspect your question is more, "Technically, how can you go bankrupt, i.e., have no money, when you were raking in unethical bucks day in day out? Where'd the cash go?" In which case the answer probable involves a lot of off-shore accounts. But I'm not sure that's what you mean. Could you provide more detail, please?
posted by jbrjake at 8:36 PM on June 3, 2004

They weren't making money hand over fist. While they reported great profits, this was done through accounting trickery. In particular, losses and debt were offloaded into "special partnerships" and not disclosed in the books of the main company.

The fact is they put a lot of effort into creating the impression that they were making money hand over fist, but this simply wasn't true. That's why the execs etc should be in jail. Not for incompetence - hey, we all make mistakes! - but for deliberately misleading investors and other stakeholders.

Individual officers of the company profited greatly from this mess, but the company itself never did.
posted by i_am_joe's_spleen at 8:40 PM on June 3, 2004

jake - exactly! didn't they rob californian energy consumers of 8 billion dollars (or something to that tune)? Where did all that money go? They couldn't stay afloat, even bilking consumers for literally billions? Wouldn't you kind of have to *try* to fuck up?

just read joe!

so the money went into pockets, not corporate reserves?

...and so that means - they were so drunk with power and greed, that despite all the money flowing in, they couldn't restrain themselves enough to keep the whole mess rolling?
posted by Tryptophan-5ht at 9:12 PM on June 3, 2004

Tryp -- Read i_am_joe's response again. No conspiracy here, the money didn't go into offshore accounts... they may have taken in a lot of money, but they spent or lost gobs more than that (energy brokering/trading is risky and expensive, and most of their hard assets (i.e. PGE) weren't profitable) and hid the losses elsewhere.

It's like making $50,000 a year and spending $150,000/year. You're making decent money, 'cept that additional $100k/year is on credit cards registered in your little sister's name and doesn't show as your debt, so you leave people wondering what you did with that $50k per year you were making.
posted by SpecialK at 12:55 AM on June 4, 2004

i see. makes sense.
posted by Tryptophan-5ht at 2:43 AM on June 4, 2004