CONFIRMED
Enron and the Most Innovative Company That Never Really Made Money
For six consecutive years, Fortune magazine named Enron the most innovative company in America. The Houston-based energy company had, the story went, transformed itself from a sleepy operator of natural-gas pipelines into a dazzling new kind of business — a trading powerhouse that bought and sold energy and almost anything else, light on physical assets and heavy on financial genius, the very model of the modern corporation. Its stock soared; its executives were celebrated as visionaries; its revenues, on paper, rocketed past $100 billion. And then, in the autumn of 2001, it all came apart with breathtaking speed. It emerged that Enron's reported profits were substantially an illusion, manufactured through aggressive and deceptive accounting; that the company had hidden enormous debts and losses in a web of hundreds of secretive off-the-books entities, some named after Star Wars characters; and that the 'innovation' the world had admired was, to a damaging degree, the art of making a company that did not really make money look as though it made a great deal. In about six weeks, Enron went from a $60 billion blue-chip giant to the largest corporate bankruptcy in American history to that point. Twenty thousand employees lost their jobs and, in many cases, their retirement savings, which had been tied up in Enron stock. Its auditor, Arthur Andersen — one of the five great global accounting firms — was destroyed in the fallout. The scandal sent executives to prison, prompted landmark reforms, and became the defining symbol of corporate fraud at the turn of the millennium. This article tells the story of how the most admired company in America turned out to be a confidence trick, and how the trick unravelled.
