On October 31, 2002, former Enron CFO Andrew Fastow was indicted by a federal grand jury in Texas. Enron had been a giant energy conglomerate founded by Kenneth Lay in 1986. The company grew at an unbelievable rate. By 2000, they were reporting revenues of over $100 billion. It would soon all fall apart.
By the end of 2001 it had come to light that Enron’s dramatic rise and fantastic profits were sustained by a creative and systemic accounting fraud scheme. This was no mere mistake that had been overlooked or never rectified. This was an intentional scheme to defraud. Executives essentially used shell companies to offset risk. Enron employees intentionally misrepresented the future value of contracts. They changed the value of assets and the cost of loans to benefit their financial outlook. The whole thing came to a calamitous end in a hurry. In November, 2001, shareholders sued the company after stocks had dropped from $90 to less than $1. This forced Enron into bankruptcy.
The Securities and Exchange Commission and the Department of Justice started a case against the company and its principles. They determined that Andrew Fastow had sold off financial interests in Enron and several of its shady partner companies in the beginning of 2001, knowing that a collapse was coming. In looking at these companies the feds determined that Fastow had eschewed even basic accounting practices. He was indicted on October 31, 2002 on 78 counts of fraud, money laundering and conspiracy. He plead guilty to a 10 year sentence and agreed to cooperate against other Enron executives. He testified against former CEO’s Kenneth Lay and Jeffrey Skilling, helping lead to their convictions.
Photo By Paul Rand - https://commons.wikimedia.org/w/index.php?curid=43473323
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