Enron Corporation

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This article is part of the Tobacco portal on Sourcewatch funded from 2006 - 2009 by the American Legacy Foundation.

Learn more about corporations VOTING to rewrite our laws.

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See also EOG Resources, formerly Enron Oil & Gas.

The ENRON Corporation was a corrupt energy company based in Houston, Texas that went bankrupt as a result of committing institutionalized, systematic and well-planned accounting fraud. Since it's fall, it has become a symbol of corporate fraud and corruption.

Enron was an energy trading and communications company based in Houston, TX employing around 21,000 people by the middle of 2001. Careful accounting strategies allowed it to be listed as the seventh largest company in America, and it was expected to dominate the trading it had virtually invented in communications, power and weather securities. Instead it became the biggest corporate failure in history.

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Ties to the American Legislative Exchange Council

Enron was a corporate funder of the American Legislative Exchange Council (ALEC)[1][2]. See ALEC Corporations for more.

About ALEC
ALEC is a corporate bill mill. It is not just a lobby or a front group; it is much more powerful than that. Through ALEC, corporations hand state legislators their wishlists to benefit their bottom line. Corporations fund almost all of ALEC's operations. They pay for a seat on ALEC task forces where corporate lobbyists and special interest reps vote with elected officials to approve “model” bills. Learn more at the Center for Media and Democracy's ALECexposed.org, and check out breaking news on our PRWatch.org site.


The fall of Enron

After a series of scandals involving irregular accounting procedures bordering on fraud involving it and its accounting firm Arthur Andersen, Enron stood at the verge of undergoing the largest bankruptcy in history by mid November 2001. A white knight rescue attempt by a much smaller energy company, Dynegy, was not viable.

The fall of the value of investors' equity per share in Enron during 2001 was from $85 to 30 cents. As Enron was considered a blue chip stock, this is an unprecedented and disastrous event in the financial world. Enron's plunge in value occurred after it was revealed that many of its profits and revenue were the result of deals with limited partnerships which it controlled. The result of this is that many of the losses that Enron encountered were not reported in its financial statements.

The firm's European operations filed for bankruptcy on November 30, 2001, and sought Chapter 11 protection in the US. The long term implications of Enron's collapse are unclear, but there is considerable political fall-out both in the US and in the UK relating to the monies Enron gave to political figures (around $6m since 1990).

Enron was formed in 1985 with the merger of Houston Natural Gas and InterNorth, engineered by Houston Natural Gas CEO Kenneth L. Lay. It was originally involved in the transmission and distribution of electricity and gas throughout the United States and the development, construction and operation of power plants, pipelines, etc. worldwide.

Enron grew wealthy through its pioneering marketing and promotion of power and communications bandwidth commodities, and related risk management derivatives as tradable securities, including exotic items such as weather derivatives.

As a result Enron was named "America's Most Innovative Company" by Fortune magazine for five consecutive years, from 1996-2000. It was on Fortune's "100 Best Companies to Work for in America" list of 2000, and was legendary even amongst the elite workers of the financial world for the opulence of its offices.

Its global reputation was undermined, however, by persistent rumours of bribery and political pressure to secure contracts in Central and Southern America, in Africa and in the Philippines. Especially controversial was the $30bn contract with the Indian MSEB (Maharashtra State Electricity Board), where it is alleged that Enron officials used political connections within the George Walker Bush administration to pressure the Indians. On January 9, 2002, the U.S. Department of Justice announced it was going to pursue a criminal investigation of Enron and Congressional hearings began on January 24.

Former Enron CFO Andrew Fastow, alleged mastermind behind Enron's complex network of offshore partnerships and questionable accounting practices, was indicted on November 1, 2002, by a Federal grand jury in Houston on 78 counts including fraud, money laundering, and conspiracy.

And, in 2006 Enron Executives, Kenneth L. Lay and Jeffrey K. Skilling were convicted of fraud and conspiracy.[3] Lay passed away before sentnecing and Skilling was sentenced to 24 years in prison. [4] However, in 2013 Skilling had his prison sentence cut from 24 years to 14 in a deal with federal prosecutors after an appeals court ruled the original sentence was too harsh. The resentencing deal included that more than $40 million of Skilling's fortune would be distributed to victims of Enron's collapse. [5]

Enron and the tobacco industry

An October 1988 United Press article states that Enron planned to ban smoking from all of its downtown Houston offices effective January 1, 1990. This policy was quite restrictive for its time.[1]

In March 2000, Enron gave a presentation titled "Total Energy Management Outsource Solution" to executives of the R.J. Reynolds (RJR) Tobacco Company. The presentation sought to convince RJR to outsource all of its energy supply and maintenance needs to Enron. At the beginning of the presentation, to help make the sale, Enron states, "After extensive research and analysis we believe our two companies have similar corporate cultures..." [2]

In a March 30, 2001 memo to Brendan McCormick of Philip Morris, the PR firm Apco Worldwide directed Philip Morris to look at the "Corporate Responsibility" section of Enron's Website as a model for how to pattern a similar section of PM's Website.[3]

Enron and Wind Energy

Enron bought Zond Wind Energy and around 1990 persuaded California to allow them to package the "environmental attributes" of wind turbines as commodities separate from the actual energy produced.[citation needed] They are now called "green tags" or "renewable energy certificates."[citation needed] In addition, Enron worked with Texas governor George W. Bush to ensure the continuation of a "production tax credit" for wind energy.[6] After Enron's collapse, General Electric bought Enron's wind division.[citation needed]

Dabhol

PR companies and people who worked for or on Enron accounts

Hill & Knowlton and Enron

In April 2002, O'Dwyers reported that there was a team of seven Hill & Knowlton consultants "that is trying to salvage Enron" and were "managing the flow of information between new management and Capitol Hill."[7] In late 2003, O'Dwyers reported that Enron had paid H&K $300,000 in the first six months of 2003.[8]

Those identified were:

Government officials who worked for Enron

Also see Bush administration and the Enron connection.

Enron cultivated a long list of former government officials to lobby on behalf of the company's interests, including the following:

Follow the Money

Related SourceWatch Resources

External links

Press Releases

General

Articles, Movies & Commentary

2001

2002

2003

2004

2005

This article may include information from Tobacco Documents Online.

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References

  1. Clearinghouse on Environmental Advocacy and Research, project of the Environmental Working Group, Information on American Legislative Exchange Council, archived organizational profile, archived by Wayback Machine December 2, 2000, accessed August 19, 2011
  2. Defenders of Wildlife, Natural Resources Defense Council, "Corporations and Trades Associations that Fund ALEC," Corporate America's Trojan Horse in the States: The Untold Story Behind the American Legislative Exchange Council, online report, 2003
  3. Alexei Barrionuevo, Enron Chiefs Guilty of Fraud and Conspiracy, The New York Times, May 25, 2006.
  4. David Teather, Skilling to report to prison The Guardian, December 13, 2006.
  5. Patrick Rizzo, Former Enron CEO Jeffrey Skilling gets prison sentence cut, NBC News, June 21, 2013.
  6. Enron's Ken Lay asks for Texas Gov. Bush's help in securing tax credits for wind
  7. H&K Delivers PA Pitch", O'Dwyers, April 26, 2002.
  8. Enron Pays H&K $300K", O'Dwyers, September 16, 2003.