Economy & Politics

Yesterday’s Western Long before Wirecard: Enron’s gigantic balance sheet fraud

Jeffrey Skilling (r.) Talking to a US marshal
Former Enron CEO Jeffrey Skilling served a long prison term. The photo shows him (right) talking to a US marshal in 2013Getty Images

A few months before the fall in December 2001, Jeffrey Skilling still wants to conquer the world. In the company headquarters of the US energy trading giant Enron in Houston, the employees cheer when the management duo Skilling and Kenneth Lay announce a “new vision” and roll out a banner. It says: “From the largest energy company in the world to the largest company in the world”.

They don’t make it smaller here – least of all Skilling, who introduced himself at Harvard Business School as “fucking smart”. Together with company founder Lay and thanks to the support of the US government, the ex-McKinsey man pulled the energy industry out of the comfortable time when the state was still in control of production and sales. They make gas and electricity a product that can be traded like stocks. Enron is becoming a huge trading platform – first for energy, then for paper, coal and even insurance against bad weather.

Skilling buys companies, has its dealers close aggressive deals and has only one goal: to drive the share price up. A year before the crash, Enron is the seventh largest company in the United States. Top managers collect hundreds of millions of euros with their stock options.

Enron conjures up profits from debt

Jeffrey Skilling 2002 at a hearing in the US Congress (Photo: imago images / ZUMA Press)

On December 2, 2001, Enron was surprisingly broke – but also produced new superlatives in the doom: The most violent balance sheet fraud in US history was exposed. Shareholders, banks, and pension funds lose $ 60 billion, 20,000 employees lose their jobs, and many of them lose their retirement plans. A wave of rage sweeps across the country.

For many years Enron has pumped up the balance sheet, conjured up profits from debt. A network of more than 2,000 partner companies was used for this, through which the group actually did business with itself. Only the revenue appeared in the Enron balance sheet. The debts disappeared in the partner companies.

Until the very end, Skilling and Lay deny that they knew about the manipulations. They accuse their chief financial officer, who later testifies against them as a key witness. Three years after the bankruptcy, one court found both guilty. Lay dies of heart failure before the sentence is announced. Skilling is now serving his sentence in open prison. He has not yet been able to watch the play about the Enron case, which also ran on Broadway.

main character

Jeffrey Skilling was formally only number two at Enron as Chief Operating Officer – behind founder Kenneth Lay. But after he joined the company in 1990, he became the brain of the company and embodied everything that Enron stood for: intelligence, aggressiveness, arrogance. To this day, Skilling, who also served as CEO for six months in 2001, is still fighting against his conviction. In 2013, a court reduced his prison sentence by ten to 14 years.


More from our series “Western from yesterday” you’ll find here


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