The Biggest Fraud in History - The Rise and Fall of Enron

Enron's story is a cautionary tale of greed, corruption, and corporate malfeasance. It's a story that has claimed many victims, the most tragic of which is a former vice-chairman of the company who committed suicide, ostensibly as a result of his involvement in the scandal. On the surface, the motivations and attitudes that led to Enron's ultimate collapse appear straightforward: individual and collective greed born in an atmosphere of market euphoria and corporate arrogance. Nobody wanted to believe the company was too good to be true, not the company, its employees, analysts, or individual investors. So, for a while, almost no one did. Many people continued to buy the stock, the corporate mantra, and the dream. Meanwhile, the company engaged in a number of high-risk transactions, some of which fell outside of the company's standard asset risk control process. Many things went wrong in the early months of 2001, when Enron's stock price and debt rating collapsed due to a loss of investor and creditor trust. Methods used by the company to disclose its complicated financial dealings were incorrect and, in the opinion of some, deceptive. The company's failure to report its financial affairs transparently, followed by financial restatements revealing billions of dollars in omitted liabilities and losses, all contributed to its demise. The whole thing took place under the watchful eye of Arthur Andersen LLP, which had a full floor of auditors assigned to Enron all year.
The Biggest Fraud in History - The Rise and Fall of Enron

In the eyes of the financial world, Enron's most exciting development was the establishment of Enron Online (EOL) in October 1999. EOL, a Web site for trading electronic commodities, was significant for at least two reasons. For starters, Enron was a party to every transaction on the platform. Traders received extremely valuable information in real-time about the "long" and "short" parties to each trade, as well as the prices of the products. Second, because Enron was either a buyer or a seller in every transaction, credit risk management was critical, and Enron's credit was the foundation that gave the energy community confidence that EOL provided a secure transaction environment. In 2000, EOL was an overnight success, handling $335 billion in online commodity trades.

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