For a brief history of Enron, it was formed in 1985 from two Houston-area energy company's. It soon embarked on a long tenure as a mover and shaker in the energy industry. It currently dominates the natural gas and electricity markets as well as delivers various commodities. In 1999, it paid $100 million to have the Astros' new stadium named Enron Field. And in Summer 2000, Enron and other energy giants faced allegations of price-gouging in California. I think Congress is holding/was going to hold/held hearings on the matter.

A few weeks ago, Enron announced third quarter losses in the range of $600 million. At about the same time, the House Energy and Commerce Committee announced it would hold hearings on the shady accounting practices of Enron led by its former CFO. It appears that the former CFO hid a lot of Enron's liabilities in off-balance-sheet transactions. These transactions were with partnerships that were owned by the former CFO. And this was apparently all done with the blessing of the Board of Directors to boot. And, the Security Exchange Commission decided to start investigating Enron as well for its accounting practices.

With Enron facing all of these problems Dynegy Incorporated announced that it would merge with Enron (this was about two weeks ago). Dynegy happens to be Enron's hometown rival. The deal would have Dynegy buyout Enron for $9 billion. A week later after Enron's stock continued to fall, it would cost Dynegy only $5 billion to buy their rival. Then yesterday happened.

Yesterday, Dynegy backed out of the deal when it learned that Enron was on even shakier ground financially than it had revealed to Dynegy. In addition, Standard&Poor's as well as two other credit-rating firms cut Enron's rating to "junk status." This was after Enron's 10Q financial disclosure revealed that it had to settle an immediate debt of $690 million and needed a cash infusion of $1 to $3 billion to maintain its core operations.

Now, Enron is almost fully-expected to file for bankruptcy. A year ago, Enron's stock was trading for over $84.00 a share. Today, Enron's stock closed at $0.36 a share. That company has 21,000 employees in its worldwide operations, and it looks like most are going to find themselves unemployed soon. A large group of its contracted workers have just found out that tomorrow is their last day at work.

So, it looks like this is history in the making. In a little less than a year, Enron has gone from energy titan to facing imminent collapse. I feel really sorry for all of its employees, especially since my grandfather used to work for Enron as an engineer. Hundreds (and possibly thousands) of people are going to find themselves without jobs as we head into the Holiday season. The job market isn't real strong in Houston at the moment, so the immediate future for them looks quite bleak.

Anyway, yeah, something is going to happen to the people responsible for this. CFO Andrew Fastow was fired at the end of October when all of this started coming to light. However, I think the CEO Ken Lay and the Board of Directors may share in the responsibility since they approved a lot of the Fastow's decisions. So, it's going to be messy. It also looks like the House Energy and Commerce Committee is now going to probe Enron's downfall instead of Fastow's financial dealings.

On the plus side, though, it looks like we won't be facing an energy crisis like we did last summer at the moment. The energy companies all have adequate supplies for the winter and spring. So, the odds of another economic downturn are minimal to non-existant. On the other hand, I don't know what much is going to happen to the employees. Those working on Enron's northern pipeline system are likely to be absorbed into Dynegy since they are going to be taking control of it from Enron. As for the others... ::shrug::

At this point in time, I can't say for certain whether any laws have been broken or not. All the reports I've watched and read haven't really gone into the legal aspect a great deal. However, there are enough irregularities that lawsuits have been filed. I think there are currently four class action lawsuits that have been filed against Enron and/or key personnel on behalf of employees and shareholders.

Since this mess is still ongoing and unfolding, the HECC and the SEC are not likely to conclude their investigations for some time. In fact, the HECC isn't going to start hearings until sometime in mid-December. The investigations are certainly going to focus on the balance sheets and debt records of the past four years. These are the ones that involve the whole mess with Fastow and the off-balance-sheet transactions. The investigations are also probably going to focus on Enron's accounting oversight, and the HECC is probably going to investigate SEC for not discovering Enron's improprieties sooner.

[ November 29, 2001: Message edited by: Siegfried ]