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Twenty years after epic bankruptcy, Enron leaves a complex legacy

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An emblem glows before the Enron corporate headquarters in Houston.

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Enron’s Dec. 2 bankruptcy elicited a scandalous episode, almost two dozen criminal convictions, and extensive reforms from the government. Enron was a public company. an enduring symbol of corporate fraud.

Experts, ex-company insiders, and other experts agree that Enron’s legacy deserves a second look 20 years after its founding. The company repeatedly called America’s “most innovating” was, according to experts, a leader in many businesses that are now commonplace today.

Kenneth Lay’s son and daughter, as well as his former chairman and founder Kenneth Lay’s child, are among those who defend Enron’s legacy. A federal jury convicted Lay in 2006 on 10 felony counts, but because he died of a heart attack six weeks later — before he could appeal — his convictions were vacated.

In a CNBC exclusive statement, Elizabeth Lay and Mark Lay (former Enron vice-president) stated that Enron was “Before 2000”, one of the most important renewables operators and developers in the world.

Lays explained that their model was straightforward: hire smart people, provide capital to them, manage back-office for them, so they can build new markets.

Stephen Webster was a former Enron executive and described Enron’s culture as one of high pressure, sink or swim.

He said, “I would say it was probably the most rewarding job I have ever held.” Webster stated that the stress was not something he regrets. We were launching into new markets. “We were trying new things.”

Ravi Kathuria, a former director of strategy in Enron’s retail energy unit, Enron Energy Services, described a culture where employees were given a remarkable amount of autonomy — one where bosses never called to ask what workers were doing or how they were doing. The expectation was that staff would make use of this freedom.

He said that Enron encouraged innovation and created an environment in which everyone within the company behaved almost as an entrepreneur. You were ultimately responsible for your fate.”

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They would be still here if they hadn’t covered up that fact.

Ed Hirs

Former consultant to the Enron Task Force at Department of Justice

Enron, which capitalized on deregulation in natural gas, set up itself as an intermediary between pipeline operators and their customers, such as utilities. It took its share of the profits. Enron also applied the same concept to electricity.

Enron was a publicly traded company for less than a year in 2000. The trading division accounted to more than 90% the $100 billion revenue. EnronOnline’s web trading platform was reported to have processed over $336 billion in transactions. This made EnronOnline the biggest e-commerce marketplace worldwide.

Hirs explained that although Enron’s trading business had very little to do the accounting scandal at the company, it was a catalyst for difficult accounting elsewhere within the company.

“As they brought transparency and liquidity to the market, the margins — the gaps between the bid and the ask — diminished,” Hirs said. It’s extremely difficult for them ever to continue reporting revenues growing and profits rising.

Hirs said that in the end, however, the business model is sound.

He stated, “Had the they not hidden that they were really losing money, they’d still be here.”

They are, in some ways. There are many Enron alumni working in the natural gas industry. They work for companies that use the same principles of Skilling’s Gas Bank to buy and sell natural gases.

Market Maker

Enron had mixed success in trying to duplicate the natural gas market success that it achieved with natural gas. However, it became the leader in electricity trading. three Enron traders pleaded guiltyTo manipulate the California market during a 2000 power crisis. However, the business itself proved to be sound. The Federal Energy Regulatory Commission and others argued that California is partly responsible for inventing a game-based system.

According to FERC staffers, the main causes of California’s meltdown were “significant supply gaps and a fatally flawed marketplace design.” post-mortem.

Kenneth Lay spoke during an interview held in his office in the headquarters of the company, February 5, 1996, Houston.

Hulton Archive | Hulton Archive | Getty Images

Enron tried to create a new market for broadband in the early ’90s, but it was the one that proved most difficult.

In order to trade internet bandwidth like natural gas, the plan was to buy/sell it. And to help ensure demand, Enron Broadband would offer services including videoconferencing over the internet — an early version of cloud computing — and even streaming movies on demand in a joint venture with video rental chain Blockbuster. These breakthroughs were possible decades earlier. Zoom NetflixThese names became household terms.

F. Scott Yeager was a former director of Enron Broadband and worked on new technologies. “The new medium is the combination of streams and dynamic content, as well as interactivity. It’s based on unique databases.

The game is ahead

However, Enron’s high goals for the broadband division were not realized due to Blockbuster’s failure to obtain significant content licensing from Hollywood studios and the collapse of dot-com’s bubble. Allegations that the company tried to hide that from investors became central to the prosecution — and guilty pleas — of several Enron Broadband executives, as well as part of the case of Skilling, the former CEO.

They didn’t lack any ideas, or even do anything. But they attempted to make money before they really were ready.

Leslie R. Caldwell

Former director, Enron Task Force

Yeager was charged with inflating Enron’s stock price by exaggerating technology that the prosecutors claimed did not work. He was acquitted of conspiracy and securities fraud charges, as well as wire fraud. The jury also failed to convict him of 20 counts each of insider trading or money laundering. The government tried to have him retried on these counts. Yeager took his caseIt was all the way up to the Supreme Court.

Our network was real. Yes, all we did was real. Yeager also stated, “The infrastructure was real.”

Prosecutors who were involved in the case say that broadband shows Enron being a little ahead of its times and refusing to level with investors when they fail.

Broadband was not ready to be a mainstream product. “And in the meantime they tried to cash it in on it,” Leslie Caldwell was, who was also the first director for the Justice Department’s Enron Task Force. Caldwell would later lead the criminal division of the department during the Obama presidency. Today, she is a partner at Latham & Watkins in San Francisco.

She stated that although she didn’t deny their ingenuity or ability to do things, they attempted to make money before they were truly ready.

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