ENRON- A Study of FAILURES

Who, How, Why!

Arthur Gudikunst, Ph.D.

Professor of Finance
Finance Department
Bryant College

Revised: April, 2003

Introduction:
The saga of the ENRON Corporation has been unfolding in the media for well over a
year. In the span of only three years, ENRON has gone from public and professional
acclaim of the company and its senior executives to scorn, infamy and bankruptcy. Its
public auditing firm, Arthur Andersen, has basically been destroyed, as well as publicly
disgraced. Tens of thousands of employees and investors have been emotionally and
financially affected. Major financial services firms in banking, securities brokerage and
insurance have been, and may yet be, drawn into the legal battles regarding who is to
blame for the ENRON failure.
Overview of ENRON:
The following timeline for ENRON is presented to set the major milestones for the
company:
July 1985- Houston Natural Gas merges with InterNorth to form ENRON, as an interstate
natural gas pipeline company. Kenneth Lay is CEO.
1989- ENRON starts trading natural gas commodities and commodity derivative financial
contracts.
1994- ENRON begins trading electricity as a commodity and related financial derivative
contracts. Jeffrey Skilling is executive in charge of this new business venture.
Nov. 1999- EnronOnline is launched as a web site for the global trading of energy
commodities and derivative contracts. Jeffrey Skilling leads this continued transformation
from a natural gas pipeline company to a global marketer and trader of oil, gas and
electric energy. Stock price trades at $45 per share.
2000- Stock price trades at high during year of $91 per share.
Feb. 2001- Jeffrey Skilling takes position as CEO, and Ken Lay remains as Chairman of
the Board. Stock price is trading at high range of $84 per share.
Aug. 2001- Jeffrey Skilling resigns as CEO, and Ken Lay returns to position as CEO and
Chairman. ENRON vice president, Sherron Watkins, writes anonymous letter to Ken Lay
about severe problems with partnerships known as LJM and Raptor, the accounting for

those partnerships, the role of the ENRON CFO in the partnerships, and the possible
adverse effect of these partnerships and their accounting if the information were ever
revealed to the investment markets.
Jan.-Aug. 2001- Lay and Skilling sell $41 million of ENRON stock. Other corporate
insiders sell $71 million of stock. Employees are restricted from selling stock from
401(k) retirement accounts unless retiring or leaving employment.
Sep. 2001- Stock price trades around $28 per share, after 9/11 terrorist attacks.
Oct. 2001- ENRON reports a $618 million loss for the third quarter, and restates past
financial statements that results in $1.2 billion writedown of ENRON's stockholder
equity. Loss and writedowns result from Special Purpose Entities (partnerships) created
under the direction of Chief Financial Officer (CFO) Andrew Fastow. The Securities and
Exchange Commission (SEC), requests further explanation and information on the
reported losses and financial restatements. CFO Andrew Fastow is relieved of his
position. ENRON's problems largely related to "aggressive" accounting related to
reporting of indebtedness on balance sheet, reporting of profits from asset sales and
reporting of earnings and cashflow from on-going operations.
Nov. 2001- SEC upgrades inquiry into ENRON to a "formal investigation". ENRON
states that its profits over last five years have been "overstated" by $586 million. Public
auditing firm, Arthur Andersen, receives request from SEC for its records on the ENRON
audits. ENRON attempts to raise cash by delaying loan repayments and seeking new
sources of short term capital. Merger attempt with Dynegy Corp. is cancelled.
Dec. 2001- ENRON files for Chapter 11 bankruptcy protection. CEO of Arthur Andersen
tells Congress that ENRON might have violated securities laws.
Jan. 2002- Justice Department begins criminal investigation of ENRON's failure. Reports
are received about document destruction at ENRON and Arthur Andersen after SEC
investigation was announced. ENRON stock trades at prices between $0.20 and $0.50 per
share.
Feb.-Aug. 2002- Ongoing investigations by SEC, U.S. Justice Department, U.S. House of
Representatives, U.S. Senate, et al. Companies such as Merrill Lynch, Citicorp and J.P.
Morgan Chase are called to testify about their dealings with ENRON. Role of ENRON in
the California energy crisis is investigated. ENRON employees sustain massive losses in
401(k) retirement accounts and employee layoffs continue. Federal government evaluates
need for new laws related to employee pension accounts, regulation and oversight of
public auditing firms, and corporate fraud and governance issues.
ENRON Failure: Who's to Blame?
At first glance, it would appear that ENRON's senior executives, notably Lay, Skilling
and Fastow, are the primary suspects. However, they claim that they were operating with

the consent and approval of the ENRON Board of Directors. The Auditing Committee of
the Board of Directors continued to rely on its public auditing firm, Arthur Andersen,
who continued to write favorable opinion letters that ENRON's accounting was "adequate
to provide reasonable assurance as to the reliability of financial statements" for the years
1998, 1999 and 2000. Arthur Andersen public auditors were using the accounting system
that was developed by ENRON in conjunction with the advice and counsel of the
consulting arm of Arthur Andersen. The accounting system was developed also to
conform to Generally Accepted Accounting Principles (GAAP), as interpreted by joint
agreement of Arthur Anderson auditors and the consulting unit, ENRON accounting
personnel and, to some extent, by the legal firms passing favorable opinions on
accounting and tax treatments of the ENRON related partnerships (SPE's).
Throughout ENRON's history, up to the October-November, 2001, restatement of the
income statement and balance sheet due to the LJM and Raptor partnerships, all of the
players indicated above were giving each other confirmation and approval for the
accounting and business practices that suddenly were being undone in October. In the
previous year, ENRON paid over $50 million to Arthur Andersen for their consulting and
auditing services. The law firms, providing services and opinions to ENRON, received
about $50 million in fees. As a result, the various ENRON players were all confident that
they were operating in a system where each was being covered by the actions and
confirmations of others in the system. Nobody did anything wrong, because the actions
were all blessed by the other players in the system!
But who else was involved in ENRON debacle? Lets us not forget the various members
of the financial community, i.e., the banks, credit rating agencies and the securities
brokerage firms. Recent hearings in the U.S. Senate explored the activities of J.P. Morgan
Chase and Citibank (the banking side of Citigroup) with ENRON. Apparently both of
these banks were involved in what are called "prepay" energy transactions. Employees of
the banks were dealing with ENRON and ENRON partnerships to provide cash to
ENRON for its day-to-day financial operations, in ways that could be reported as
"operating activities" versus "debt financing" activities. The banks were finding ways,
supported by legal and accounting opinions, that enabled ENRON to engage in practices
that had the effect of hiding its debt obligations off-the-balance sheet, while appearing to
report positive profits and flow of funds from operations.
Merrill Lynch dealt with an ENRON partnership (the Nigerian Barge Project) in a
transaction that allowed ENRON to report a $12 million addition to profits just before the
end of fiscal year 1999. Merrill Lynch claimed that the transaction was a $7 million
purchase of equity, with attendant equity risks, but even Merrill's own company
newsletter and executive e-mails were indiscriminant in referring to the deal as "equity"
in some documents, and a "loan" in other documents. In essence, Merrill's "equity "
investment was guaranteed to be repaid in 6 months at a stated 15 % rate of return, in
addition to ENRON paying a $225,000 fee when the documents were signed, and
agreeing to compensate Merrill for all its expenses of drawing up the legal papers for the
transaction. (As a professor of finance and investments, this "deal" sounds a lot to me like

a guaranteed "loan" at a fixed rate of interest, and not a real "equity" position with price
risk to the investor.)
But where were the various credit agencies that were supposed to provide independent
advice about ENRON's financial ability to repay its indebtedness? Moody's and Standard
and Poor's credit ratings indicated that ENRON was an "investment grade" credit risk
until well into the year 2001, although the rating was softening. The massive restatement
of financial statements in October, 2001, and further insights into the "off balance sheet"
financing methods of ENRON led to ratings downgrades to "junk" or high risk status of
ENRON as a creditor. However, even the credit rating agencies, with their supposed
accounting and analytical expertise, failed to fully understand the condition of ENRON
and to give early warning of the potential failure to the investing public and financial
institutions.
Where were the government's regulatory agencies? The Securities and Exchange
Commission, our federal government oversight of publicly traded companies and the
securities markets, were apparently caught flat-footed with the ENRON October, 2001,
revelations. The State of California deregulated electric energy with a plan that
established the rules for energy trading and pricing, but the rules were apparently so
complex that there was an incentive for energy producers and trading companies to
"game the system" in order to make profits by finding loopholes in the system. The
California energy deregulation also had some interesting characteristics, such as, the
energy prices to consumers were fixed in price, but the firms transmitting energy to
consumers would have to pay an energy price which was deregulated and adjusted to
prevailing market conditions. Could the politicians have also been unwitting partners in
the ENRON failure?
And lets not fail to identify the role of ENRON rank-and-file employees and the general
investing public. ENRON employees were seeing the day-to-day company operations up
close and personal. The accounting department had hundreds of professionally trained
accountants working on the reporting of company transactions. Many of the accountants
were also prior employees of the auditing firm, Arthur Andersen, trained to look at the
transactions with an "independent" auditor's perspective. Finally, one employee, Sherron
Watkins, did attempt to blow the whistle on suspected accounting problems, but only in
an anonymous communication to the CEO of ENRON. And what was driving the
executives of ENRON to do the things that are now linked to the failure of the company?
The obvious answer was a desire to satisfy the profit and stock price expectations of the
investing public, in an effort to fulfill the corporate objective, as stated in the financial
management texts, to "maximize the value of the firm to the shareholders". In the 1990's,
investors in equity securities became enamored with the expectation of 25-30% annual
rates of returns, and rewarded companies with fast growing earnings with very rich stock
prices, but also severely punished company stocks which failed to meet the "Wall
Street's" expected next period earnings numbers. Can you say investor "greed"? As a
result, ENRON executives and employees were caught up in the desire to report ever
increasing earnings in order to keep stock prices rising, and to protect their jobs and
wealth in their retirement plans.

In summary, who caused the ENRON failure? Answer: a lot of individual and
institutional players! While it may be comforting to just fix blame on a few "rotten
apples" in the company, there are a lot more cooks who contributed to the terrible stew
served by ENRON. We will see later who is "legally" to blame, once the legal process
works its way through the court system.
ENRON Failure: How did it happen?
The precipitous public event that really led to the ENRON failure was most likely the
announcement of the financial and profit restatements in October, 2001. But this was just
the "tip of the iceberg". The real explanation lies in the operations and activities of
ENRON for many years leading up to October, 2001. Pivotal to this was the nature of the
change in ENRON's business activities, from that of a producer and transporter of energy,
to a global marketer and trader of energy, with production and trading of energy, energy
financial derivatives products, and telecommunications systems and other derivative
products trading. ENRON was even developing new financial products on weather and
corporate credit enhancement, i.e., financial contracts that would make payments based
on outcomes of weather and changes in the credit worthiness of businesses. However, the
issue of accounting and auditing for these new activities, and the increasing use of offbalance-sheet partnerships and financing activities are intricately entwined with the issue
of how the failure occurred. And finally, the corporate, economic and political
environment impact should be included as contributing factors.
It is likely that books and learned tomes will be written on this topic for years to come, so
I will only raise the issues I see as key to how ENRON descended so quickly into
bankruptcy.
The birth of ENRON in 1985 was as a company that transmitted natural gas to customers
through its physical pipeline system. It built pipelines with long physical lifetimes, and
used debt capital to raise money for the construction of the facilities. Government
regulation, at the state and federal level, of energy companies and prices was very
comprehensive. But there was a trend in government and economic policy to deregulate
the industry and let market forces prevail, which would also change the risk and reward
characteristics of the companies in this industry. The move toward deregulation also
opened up new possibilities for company activities and products. ENRON embarked on
the development of financial products and commodities trading platforms (EnronOnline)
that moved the company toward becoming a financial services and information
technology based business enterprise. Producing energy and transporting it to the end
user was the boring, old line of business, with limited growth potential and investor
appeal. ENRON's new focus on becoming a global marketer and trader of energy and
other financial products was the new wave that would offer prospects of rapidly growing
earnings and stock prices for the shareholders.
But, the new operational environment involved the need to finance development of
entirely new business activities, and changed the characteristics of funds flowing into and

out of the company. Risks to ENRON from this new corporate strategy would include
variability of funds needed to finance the new activities, the variability of economic
profits caused by new market factors, and complexity of implementing accounting
systems to handle the new products/businesses. So ENRON needed new capital sources
with which to invest in its new corporate direction. This would change in the future the
ability of the company to meet its financial obligations to those providing the new capital.
Banks and bondholders would be providing loans with interest and principal repayment
obligations fixed by legal contract, with well-defined risks and penalties if repayment
was not made. Equity investors buying newly issued shares of ENRON stock were
making decisions based on future expected profits and risks quite different from that of
an energy production and transportation company. Future returns to purchasers of these
new ENRON shares would be dependent on the success of the new corporate strategic
investments.
With this background, Lay and Skilling, with the advice and consent of the members of
the Board of Directors (elected, in theory, by and for the interests of the stockholders)
proceeded to implement the new corporate strategy. A new employee, Fastow, was
brought to the firm from the banking industry and rose to become the Chief Financial
Officer. Together, Lay, Skilling and Fastow had the responsibility to conduct the
financing, accounting and operating activities of the company as it transformed itself in
the corporate future. The pressure on this management team was to bring about the
transformation of the company, to produce growing profits from old and new operations,
and to grow the value of the firm, as indicated by the market price of its common stock.
The stage was set. ENRON's business transformation was firmly set in place in the
middle and late 1990's. However, new markets and new products bring new risks and
new competitors. Forecasts of how much new financing is needed to fund the new
activities may prove to be too low. More new capital must be raised from external capital
sources. Lenders want assurance that loans can and will be repaid, determined partly by
the credit agency ratings on the company, which are based on the company's reported
financial statements which are given the seal of approval by the public auditors. Investors
purchasing new shares of ENRON stock will only be rewarded if the stock price
continues to rise, but that largely depends on the company continuing to produce ever
higher reported after tax accounting profits.
So reality sets in. The company discovers that the new investments are not as profitable
as forecasted or desired. The financial officer is responsible for raising continuously
increasing amounts of new capital to fund the growing investments required to fulfill the
new corporate strategy. Wall Street securities analysts expect to see growing assets and
growing corporate revenues being reflected in the after tax reported profits and earnings
per share (EPS). The management team must deliver new capital to meet needs, must
continue to pay and meet its past loan repayments, and must deliver the bottom line
income numbers on the profit statement. How do you accomplish this when the
underlying economics of the business is short of expectations? One answer is to adjust
the corporate operations to reflect the changed economic environment (potentially
disappointing the shareholders of the company and having the senior management team

replaced by the Board of Directors). The other answer is to find ways to raise the new
capital without it appearing adversely on the firm's financial statements, and to find
accounting methodologies that will allow stated profit reports to investors to be inflated
beyond the true level of what would be called "economic" profits for the firm. The
information and legal accusations regarding ENRON seem to indicate that management
took the latter course of action.
The results of the Lay-Skilling-Fastow leadership decisions embarked ENRON on a path
of using available accounting devices to both understate the amount of borrowed capital
actually being used by the company, and to "manufacture" higher after tax reported
profits and EPS to shareholders. The issue of whether these were legal or illegal actions
awaits the outcome of future court trials, but the fact that ENRON is now in the legal
condition of Chapter 11 bankruptcy, with the massive losses in stock value and
uncertainty about lenders being repaid, is the result of the course of action set in place by
ENRON's executive officers ( who were aided and abetted to some extent by members of
the Board of Directors, Arthur Andersen and various outside law firms).
The story of HOW this occurred is very complex. I will attempt to explain several of the
techniques used by ENRON to under-report the debt required to keep the company
operations running and to overstate the profits of the firm. Both goals were achieved with
the creation of Special Purpose Entities (SPE's or partnerships). A company can enter into
a partnership with outside investors and lenders, and not have to consolidate that entity
into the company's financial statements reported to the investing public. So, ENRON
establishes a partnership with outside equity investors who buy as little as 3 percent of
the partnership's total capital, with ENRON investing the rest of the capital. Next, the
partnership buys assets from ENRON, using the equity capital from the partners and
loans from a financial institution or bank.
As a simplified illustration, assume that ENRON sells electric generating equipment to a
SPE for a price of $50 million. Banks lend the SPE $45 million for the purchase with a
fixed maturity and interest rate. ENRON invests $0.5 million in equity of the SPE and
sells shares for $4.5 million (over 3 percent of total capital) to outside investors. Because
the bank loan is not directly to ENRON, but to the SPE, it does not get reported as a debt
obligation on the balance sheet. Further, if the assets book value on ENRONs balance
sheet for this equipment was $28 million at the time of the sale to the SPE, then ENRON
now can report in this fiscal year a profit on the sale of $50-$28=$22 million of profits.
ENRONs cash receipt from the SPE is $50 million minus its equity investment in the
SPE equity ($49.5 million net new cash to ENRON). If the SPE successfully uses the
asset to generate future cash inflows to repay the loan to the bank and have remaining
profits for the SPE partners, then ENRON will book future profits.
But what happens if the assets are overpriced and do not generate sufficient future
revenues to repay the bank loan? Does this mean that the banks might not get repaid the
principal of the loan? The answer lies in what might have been a separate agreement, oral
or written, that ENRON promised to the banks that loaned money to the SPE. The
agreement might look like the following. ENRON will agree to give to the SPE (or

directly to the banks) additional shares of ENRON stock in sufficient market value for the
SPE to sell the stock and repay the bank loan principal. This action might also be required
in the case where ENRON either has a downgrade of its own credit rating below
investment grade, or when the ENRON stock price falls to a lower boundary level.
Therefore, when the market price reaches $28 per share, ENRON must give the SPE
enough shares of stock to enable the SPE to repay all of the outstanding bank loan
principal. However, if ENRON fails to inform its stockholders about these future
obligations, the massive amounts of new shares that ENRON would have to issue would
cause high equity dilution, immediately lower the EPS of the stock, and further put
downward pressure on the market price of ENRON stock. Since ENRON by year 2000
had created approximately 2000 SPEs, any major reversal of the companys operations
would be cataclysmic.
The above illustration shows how ENRON was able to use the SPEs to enter into debt
obligations with lenders, and still not report the debt on its own financial balance sheet.
Further, the company could use the sales of its assets and operations to the SPE to
generate an immediate profit to add to its current income statement.
Now, in keeping with the classic type of Ponzie scheme, you start with small deals to
boost profits and hide small amounts of debt off-balance sheet. To grow next years
earnings, support investment in additional assets and new businesses and repay the old
lenders, you need to create more and bigger SPEs in the second year, then the third year,
etc. As long as increasing stock prices continue, everything is fine. When lenders dont
get repaid or stock trigger points are reached in the loan agreements, then things start to
unravel quickly and in the full glare of the investors, security analysts and credit rating
agencies. For ENRON, activities undertaken over many years came to public attention in
October, 2001, and the company was taken into bankruptcy by December of that year.
In addition to the creation of the SPEs, ENRON seemed to be equally busy creating the
appearance of corporate profits from other aggressive uses of accounting. One method
of boosting reported earnings after taxes to shareholders is to find ways to lower the
corporate tax bill on reported profits. Because GAAP and tax accounting rules can be
quite different, it might be possible for a creative company to raise reported after-tax
profits using GAAP accounting, but using different rules to report zero profits for
government tax purposes. To the shareholders in the annual report, following GAAP
rules, the company would report its higher pre-tax profits, while reporting the taxes
payable at a much lower amount. One report suggests that of ENRONs year 2000
earnings after-tax reported to shareholders, about $296 million or 30 % of earnings were
the result of one-time tax saving strategies created by the tax accountants. Clearly,
companies can follow rules that allow them to minimize taxes payable to government.
And, with the complexity of US corporate tax codes and the added factor that ENRON
was a global company facing many different country taxes, bright tax accountants can
contribute significantly to lowering the companys total tax bill. By September of 2001,
reports indicate that lowered operating profits in many of ENRONs divisions resulted in
pressure on the tax department to generate up to $600 million of new tax savings for
fiscal year 2001. Accountants know that strategies to avoid excess tax payments are

legal, but that attempts to evade taxes by fraudulent means is illegal. Here again,
ENRON's internal staff likely made use of legal opinions from internal and external legal
advisors that their techniques were "appropriate".
These several examples indicate the potential methods by which aggressive application
of accounting can hide debt off-balance sheet and create the appearance of increasing
profits. The result can have the effect of convincing investors that the company stock is
more valuable than it might truly be worth. But these methods, when learned about by the
investing public and the creditors, can lead to rapid deterioration of the company and the
value of its common stock shares. Reports in the media about ENRON suggest that the
reliability of the company balance sheet and income statements in the annual reports to
the SEC and the shareholders over the previous 3 to 4 years were highly dependent on the
aggressive and creative skills of ENRONs accounting staff, aided by the acquiescence
of the Arthur Andersen auditors, and the counsel of legal firms hired by ENRON.
ENRON Failure: Why did it happen?
I think that the answer to why it happened is relatively straightforward. The Lay-SkillingFastow executive team was trying to create a business enterprise that would deliver
increasing wealth for their shareholders. However, when the cold light of dawn showed
that the real economics of the firm was less than that desired or necessary to support a
growing stock price, it became necessary for the firm to apply aggressive accounting
methods to achieve the desired effect. To the extent that the new business ventures
undertaken required continuously increasing amounts of new capital, the executive team
relied on other creative mechanisms and accounting to bring in new debt capital, but to
do it in a way that would not make the firm look to be more risky to the new capital
investors. Once started down a slippery slope, the need to continue these types of
activities simply increased in each succeeding year. They wanted to keep their jobs,
personal wealth and public acclaim, which meant keeping ENRON moving forward by
any means. But where were the ethical checks and balances that should have been
recognized by management?
Which brings me to the ENRON Board of Directors. Where was the corporate
governance process that should have been exercised by the members of the Board?
Certainly the Audit Committee of the Board should have been more critical of the
auditors and their work. But, with the stock price and earnings rising, they were perhaps
lulled into a false sense of security about ENRONs internal accounting, and the
favorable opinion letters signed by Arthur Andersen. The Board members enjoyed their
status at ENRON and the remuneration paid by ENRON. They seemed willing to accept
information from the Lay-Skilling-Fastow team at face value, without critical analysis.
They failed to live up to their role as overseers of management on behalf of the
stockholders who elected them to the Board.
ENRON employees also facilitated the failure of their own company, and have suffered
accordingly. ENRON had an inside legal staff of over 100 lawyers, and an accounting
staff of several hundred trained accountants. All seemed to be operating in a way that

supported the executive management team. There seemed to be little incentive or

willingness to question the methods being employed to boost reported profits and hide
corporate debt. As employees were being paid good salaries, provided with full benefits,
and investing their pension contributions in rising company stock, rocking the boat about
questionable activities would be a supreme act of courage, with high risk penalties. So
they remained supportive, until Sherron Watkins finally tried to raise awareness of
potential problems.
ENRON executives were further aided and supported by the Arthur Andersen auditors
and scores of outside legal firms working for the company. ENRON was a very good
client for Arthur Andersen, collecting over $50 million in revenues in year 2000. The
legal firms were paid about $50 million in fees for their services that supported and
justified the activities of ENRON. Remaining in good standing with the executive team at
ENRON meant future business for their firms, and perhaps added bonuses for individual
executives at the auditing and the legal firms. Executives probably do not look favorably
on outside firms who give contrary advice to that which the executives desire. So
ENRON may not have been receiving the negative responses that would have cut short
the activities that ultimately brought ENRON down. Whether illegal activities occurred is
the subject of future investigations involving the auditing and legal firms hired by
ENRON.
The government also bears some responsibility. The federal budget for the SEC has been
reduced in past years, while the number and complexity of companies to be overseen by
the SEC has increased. Politicians have reversed SEC enforcement rules through the
legislative process, as seen in the debate over the rule of having companies expense
options grants to employees in the income statement. Legislative activities have reduced
regulatory oversight of energy companies, and replaced old regulations with new sets of
rules and procedures that are only tested later in the real world, and sometimes found not
to achieve the intended economic consequences. I wont even raise the issue of campaign
contributions to the politicians by individuals and corporations!
And finally, how the ENRON failure resulted must be viewed in relation to the desires of
investors and financial institutions. Investors in the markets created conditions that meant
companies which appeared to be winners saw rapid stock price increases, while poor
performers had plunging stock prices. Pressure on company management was intense to
continue to be seen as a winner to drive prices higher for their stockholders. Risk
evaluation of stocks seemed to be secondary to investors relative to higher reported
earnings per share. In addition, the banks and security brokerage firms wanted to do
business with ENRON to generate profits (and perhaps individual annual bonuses for the
employees doing the ENRON deals) for their own shareholders. It seems evident, based
on information concerning ENRONs SPE activities, that the financial institutions
benefited from the relationship, while they took steps to reduce the risks of dealing with
ENRON through separate side deals and guarantees that were not fully understood by or
revealed to the investing public.

10

In summary, the ENRON failure has not been the result of just questionable activities by
ENRONs executive management team. The cast of contributors to the failure and
bankruptcy are both inside and outside the company. Its the total system that resulted in
failure that needs to be further understood and investigated.
A Proposal for the Academic Community
If you the reader are still with me, I will now endeavor to explain my proposal for a
systematic study of ENRON. In an academic community, containing the business types
and the liberal studies, the ENRON story need not be just of interest to the business
side. Yes, the faculty of management, finance, accounting and management information
systems can study ENRON for insights and lessons about how corporate value can be
destroyed, and what can be learned to prevent similar situations. But I see a bridge in the
ENRON story with links to the liberal studies in the areas of economics, government,
human psychology and legal studies, at a minimum. My proposal is simply to establish a
series of defined workshops to explore all the dimensions of the ENRON failure, in order
to focus on the relevant issues and understand the system in which an ENRON-type
situation can occur. The benefits can be:
1.) to bring the two sides of the faculty together to explore a common fascinating story,
2.) to provide a mechanism for showing the students the multi-faceted operation of
business management and liberal studies disciplines in our society,
3.) as a means to potentially reach the wider members of the academic and business
communities interested in learning more about this fascinating and disturbing failure
of a business enterprise.
Possible topics for the seminars/research are as follows:
1. Accounting for SPEs and use of off-balance sheet financing. Faculty leaders from
Accounting and Finance departments.
2. Analysis of common stock valuation and determination of debt credit ratings after the
ENRON experience. Faculty leaders from Finance department.
3. Evaluation of corporate strategy changes at ENRON and its lessons. Faculty leaders
from Management and Business Policy.
4. Arthur Andersen: Management Shills or Investor Guardians? Faculty leaders from
Accounting/Auditing and Finance departments.
5. Evaluation of Corporate Governance failures at ENRON and possible improvements.
Faculty leaders from Management and Organization Theory.
6. Exploration of human factors, employee responsibility and individual ethics in
business. Faculty leaders from Management and Psychology departments.
7. Government regulation of business and corporate tax policies after the ENRON
experience. Faculty leaders from Economics and Tax Accounting departments.
8. The role of the legal system in the post-ENRON era. Faculty leaders from the Legal
Studies department.
I hope that this endeavor might pique your interest and support.

11

REFERENCES
1. New York Times newspaper, various dates
2. Washington Post newspaper, various dates
3. Houston Chronicle newspaper, various dates
4. Securities and Exchange Commission, Civil Action Complaint No. H-03-0946,
March, 2003, Houston, TX
5." Powers Report of the Special Investigating Committee", submitted to the Board of
Directors, ENRON Corporation, February 1, 2002.

12

ENRON- Sebuah Studi KEGAGALAN

Siapa, Bagaimana, Mengapa!

Arthur Gudikunst, Ph.D. Revisi: April 2003

Profesor Keuangan
Departemen Keuangan
Bryant Universitas
Pendahuluan:
Kisah dari Enron Corporation telah berlangsung di media untuk lebih dari setahun.
Dalam rentang waktu hanya tiga tahun, Enron telah pergi dari pengakuan publik dan
profesional perusahaan dan eksekutif senior untuk menghina, penghujatan dan
kebangkrutan. Perusahaan audit publik, Arthur Andersen, pada dasarnya telah hancur,
serta dipermalukan di depan umum. Puluhan ribu karyawan dan investor telah secara
emosional dan finansial terpengaruh. Perusahaan jasa keuangan utama di bidang
perbankan, broker sekuritas dan asuransi telah, dan mungkin belum, ditarik ke dalam
pertempuran hukum tentang siapa yang harus disalahkan atas kegagalan Enron.
Ikhtisar Enron:
Berikut timeline untuk Enron disajikan untuk mengatur tonggak utama bagi perusahaan:
Juli 1985 Houston Natural Gas menyatu dengan InterNorth untuk membentuk Enron,
sebagai perusahaan pipa gas alam interstate. Kenneth Lay adalah CEO.
1989- Enron mulai perdagangan komoditas gas alam dan komoditas kontrak derivatif.
1994- Enron mulai perdagangan listrik sebagai komoditas dan kontrak derivatif keuangan
terkait. Jeffrey Skilling adalah eksekutif yang bertanggung jawab atas ini usaha bisnis
baru.
November 1999- EnronOnline diluncurkan sebagai situs web untuk perdagangan global
komoditas energi dan kontrak derivatif. Jeffrey Skilling memimpin transformasi lanjutan
ini dari sebuah perusahaan pipa gas alam untuk pemasar global dan pedagang minyak,
gas dan energi listrik. Perdagangan harga saham $ 45 per saham.
2000 perdagangan harga saham di tinggi selama tahun $ 91 per saham.
Februari 2001 Jeffrey Skilling mengambil posisi sebagai CEO, dan Ken Lay tetap sebagai
Ketua Dewan. Harga saham diperdagangkan pada kisaran tinggi $ 84 per saham.
Agustus 2001 Jeffrey Skilling mengundurkan diri sebagai CEO, dan Ken Lay kembali ke
posisi sebagai CEO dan Chairman. Enron wakil presiden, Sherron Watkins, menulis surat
kaleng ke Ken Lay tentang masalah berat dengan kemitraan yang dikenal sebagai LJM
dan Raptor, akuntansi bagi mereka kemitraan, peran Enron CFO di kemitraan, dan efek

13

samping yang mungkin dari kemitraan ini dan mereka akuntansi jika informasi yang
pernah diungkapkan ke pasar investasi.
Januari-Agustus 2001 Lay dan Skilling menjual $ 41.000.000 saham Enron. Orang dalam
perusahaan lainnya menjual $ 71.000.000 saham. Karyawan dilarang menjual saham dari
rekening 401 (k) pensiun kecuali pensiun atau meninggalkan pekerjaan.
September 2001 perdagangan harga saham sekitar $ 28 per saham, setelah serangan
teroris 9/11.
Oktober 2001 Enron melaporkan kerugian $ 618.000.000 untuk kuartal ketiga, dan
menyatakan kembali laporan keuangan masa lalu yang menghasilkan $ 1200000000
pencadangan dari pemegang saham ekuitas Enron. Kerugian dan writedown hasil dari
Entitas Bertujuan Khusus (kemitraan) yang dibuat di bawah arahan Chief Financial
Officer (CFO) Andrew Fastow. Securities and Exchange Commission (SEC), meminta
penjelasan lebih lanjut dan informasi tentang kerugian yang dilaporkan dan Peninjauan
kembali keuangan. CFO Andrew Fastow dibebaskan dari posisinya. Masalah Enron
sebagian besar terkait dengan "agresif" akuntansi yang terkait dengan pelaporan utang
pada neraca, laporan laba dari penjualan aset dan pelaporan pendapatan dan arus kas dari
operasi yang sedang berlangsung.
November 2001 SEC upgrade penyelidikan Enron untuk "penyelidikan formal". Enron
menyatakan bahwa keuntungannya selama lima tahun terakhir telah "terlalu tinggi" oleh
$ 586.000.000. Perusahaan audit publik, Arthur Andersen, menerima permintaan dari
SEC untuk catatan pada audit Enron. Enron mencoba untuk mendapatkan uang tunai
dengan menunda pembayaran pinjaman dan mencari sumber-sumber baru modal jangka
pendek. Merger upaya dengan Dynegy Corp dibatalkan.
Desember 2001 Enron file untuk perlindungan kebangkrutan Bab 11. CEO Arthur
Andersen mengatakan Kongres bahwa Enron mungkin telah melanggar undang-undang
sekuritas.
Januari Departemen Kehakiman 2002- mulai investigasi kriminal kegagalan Enron.
Laporan diterima kehancuran dokumen di Enron dan Arthur Andersen setelah
penyelidikan SEC diumumkan. Saham Enron diperdagangkan dengan harga antara $ 0,20
dan $ 0,50 per saham.
Februari-Agustus 2002- investigasi yang sedang berlangsung oleh SEC, US Departemen
Kehakiman, US House of Representatives, Senat AS, et al. Perusahaan seperti Merrill
Lynch, Citicorp dan JP Morgan Chase dipanggil untuk bersaksi tentang hubungan mereka
dengan Enron. Peran Enron dalam krisis energi California diselidiki. Karyawan Enron
mempertahankan kerugian besar-besaran di 401 (k) rekening pensiun dan PHK karyawan
terus. Pemerintah federal mengevaluasi kebutuhan untuk undang-undang baru yang
terkait dengan akun karyawan pensiun, regulasi dan pengawasan dari perusahaan audit
publik, dan penipuan perusahaan dan isu-isu pemerintahan.

14

Enron Kegagalan: Siapa yang Menyalahkan?

Pada pandangan pertama, akan terlihat bahwa eksekutif senior Enron, terutama Lay,
Skilling dan Fastow, adalah tersangka utama. Namun, mereka mengklaim bahwa mereka
beroperasi dengan persetujuan dan persetujuan dari Dewan Direksi Enron. The Audit
Komite Dewan Direksi terus mengandalkan tegas umum audit, Arthur Andersen, yang
terus menulis surat opini positif bahwa akuntansi Enron adalah "cukup untuk
memberikan keyakinan yang memadai mengenai keandalan laporan keuangan" untuk
tahun 1998, 1999 dan 2000. Arthur Andersen auditor publik menggunakan sistem
akuntansi yang dikembangkan oleh Enron bersama dengan nasihat dan bimbingan dari
lengan konsultasi dari Arthur Andersen. Sistem akuntansi dikembangkan juga untuk
menyesuaikan diri dengan prinsip akuntansi yang berlaku (GAAP), sebagaimana
ditafsirkan oleh kesepakatan bersama auditor Arthur Anderson dan unit konsultasi,
personil akuntansi Enron dan, sampai batas tertentu, oleh perusahaan hukum lewat opini
yang menguntungkan pada akuntansi dan perawatan pajak kemitraan Enron terkait (SPE).
Sepanjang sejarah Enron, hingga Oktober-November 2001, penyajian kembali laporan
laba rugi dan neraca karena LJM dan Raptor kemitraan, semua pemain yang ditunjukkan
di atas saling memberi konfirmasi lain dan persetujuan untuk praktek akuntansi dan
bisnis yang tiba-tiba sedang dibatalkan pada bulan Oktober. Pada tahun sebelumnya,
Enron membayar lebih dari $ 50 juta untuk Arthur Andersen untuk jasa konsultasi dan
audit mereka. Firma hukum, menyediakan layanan dan pendapat kepada Enron,
menerima sekitar $ 50 juta untuk biaya. Akibatnya, berbagai pemain Enron semua yakin
bahwa mereka beroperasi dalam suatu sistem di mana masing-masing sedang dibahas
oleh tindakan dan konfirmasi dari orang lain dalam sistem. Tidak ada yang melakukan
sesuatu yang salah, karena tindakan semua diberkati oleh pemain lain dalam sistem!
Tapi siapa lagi yang terlibat dalam Enron bencana? Mari kita tidak melupakan berbagai
anggota komunitas keuangan, yaitu, bank-bank, lembaga pemeringkat kredit dan
perusahaan pialang sekuritas. Dengar pendapat baru-baru ini di Senat AS dieksplorasi
kegiatan JP Morgan Chase dan Citibank (sisi perbankan Citigroup) dengan Enron.
Rupanya kedua bank tersebut terlibat dalam apa yang disebut "prabayar" transaksi energi.
Karyawan bank berurusan dengan Enron dan Enron kemitraan untuk menyediakan uang
tunai untuk Enron untuk operasi keuangan sehari-hari, dengan cara yang bisa dilaporkan
sebagai "aktivitas operasi" versus "pembiayaan utang" kegiatan. Bank-bank yang
menemukan cara, didukung oleh pendapat hukum dan akuntansi, yang memungkinkan
Enron untuk terlibat dalam praktek-praktek yang memiliki efek menyembunyikan
kewajiban utangnya off-the-neraca, sementara muncul untuk melaporkan laba positif dan
aliran dana dari operasi.
Merrill Lynch ditangani dengan kemitraan Enron (Nigeria Barge Project) dalam transaksi
yang memungkinkan Enron untuk melaporkan tambahan $ 12 juta untuk keuntungan
sebelum akhir tahun fiskal 1999. Merrill Lynch menyatakan bahwa transaksi adalah
pembelian $ 7.000.000 dari ekuitas, dengan risiko yang menyertainya ekuitas, tetapi
bahkan buletin perusahaan Merrill sendiri dan e-mail eksekutif yang indiscriminant

15

dalam mengacu pada kesepakatan sebagai "ekuitas" dalam beberapa dokumen, dan
"pinjaman" dalam dokumen lain. Pada intinya, Merrill "ekuitas" investasi dijamin akan
dilunasi dalam 6 bulan pada menyatakan tingkat 15% pengembalian, selain Enron
membayar biaya $ 225.000 ketika dokumen ditandatangani, dan setuju untuk
mengkompensasi Merrill untuk semua pengeluaran gambar kertas-kertas legal untuk
transaksi. (Sebagai seorang profesor keuangan dan investasi, ini "deal" terdengar banyak
bagi saya seperti dijamin "pinjaman" pada tingkat bunga tetap, dan tidak nyata "ekuitas"
posisi dengan risiko harga kepada investor.)
Tapi di mana berbagai lembaga kredit yang seharusnya untuk memberikan saran
independen tentang kemampuan keuangan Enron untuk membayar hutang-nya? Moody
dan peringkat kredit Standard and Poor menunjukkan bahwa Enron adalah "investment
grade" risiko kredit hingga memasuki tahun 2001, meskipun wisatawan itu pelunakan.
Penyajian kembali laporan keuangan besar-besaran pada bulan Oktober 2001, dan
wawasan lebih lanjut ke metode pembiayaan "off neraca" dari Enron menyebabkan
penurunan peringkat untuk "junk" atau status risiko tinggi Enron sebagai kreditor.
Namun, bahkan lembaga pemeringkat kredit, dengan akuntansi mereka seharusnya dan
keahlian analitis, gagal untuk memahami kondisi Enron dan memberikan peringatan dini
dari kegagalan potensial untuk lembaga-lembaga publik dan keuangan investasi.
Di mana badan hukum pemerintah? Securities and Exchange Commission, pengawasan
pemerintah federal kami perusahaan publik dan pasar surat berharga, rupanya tertangkap
datar kaki dengan Enron Oktober 2001, wahyu. Negara Bagian California deregulasi
energi listrik dengan rencana yang ditetapkan aturan untuk perdagangan energi dan harga,
tetapi aturan yang tampaknya begitu rumit bahwa ada insentif bagi produsen energi dan
perusahaan dagang untuk "permainan sistem" untuk membuat keuntungan dengan
menemukan celah dalam sistem. The California deregulasi energi juga memiliki beberapa
karakteristik yang menarik, seperti, harga energi untuk konsumen yang tetap dalam harga,
tetapi perusahaan-perusahaan transmisi energi untuk konsumen harus membayar harga
energi yang dideregulasi dan disesuaikan dengan kondisi pasar yang berlaku.
Mungkinkah politisi juga telah menjadi mitra tanpa disadari dalam kegagalan Enron?
Dan tidak membiarkan gagal untuk mengidentifikasi peran Enron peringkat-dan-file yang
karyawan dan masyarakat investasi umum. Karyawan Enron yang melihat operasi seharihari perusahaan dekat dan pribadi. Departemen akuntansi memiliki ratusan akuntan
profesional terlatih bekerja pada pelaporan transaksi perusahaan. Banyak akuntan yang
juga karyawan terlebih dahulu dari perusahaan audit, Arthur Andersen, dilatih untuk
melihat transaksi dengan perspektif "independen" auditor. Akhirnya, salah satu karyawan,
Sherron Watkins, apakah mencoba untuk meniup peluit pada masalah akuntansi yang
dicurigai, tetapi hanya dalam komunikasi anonim untuk CEO Enron. Dan apa yang
mendorong eksekutif Enron untuk melakukan hal-hal yang sekarang terkait dengan
kegagalan perusahaan? Jawaban yang jelas adalah keinginan untuk memenuhi
keuntungan dan harga saham harapan investasi publik, dalam upaya untuk memenuhi
tujuan perusahaan, sebagaimana tercantum dalam buku manajemen keuangan, untuk
"memaksimalkan nilai perusahaan kepada para pemegang saham". Pada tahun 1990,
investor pada efek ekuitas menjadi terpikat dengan harapan bunga tahunan 25-30% dari

16

keuntungan, dan perusahaan dihargai dengan penghasilan yang berkembang pesat dengan
harga saham yang sangat kaya, tetapi juga dihukum berat saham perusahaan yang gagal
memenuhi "Wall Street "diharapkan angka laba periode berikutnya. Dapatkah Anda
mengatakan investor "keserakahan"? Akibatnya, para eksekutif dan karyawan Enron
terperangkap dalam keinginan untuk melaporkan semakin meningkat pendapatan untuk
menjaga harga saham naik, dan untuk melindungi pekerjaan dan kekayaan mereka dalam
rencana pensiun mereka.
Singkatnya, yang menyebabkan kegagalan Enron? Jawaban: banyak pemain individual
dan institusional! Meskipun mungkin nyaman untuk hanya memperbaiki kesalahan pada
beberapa "apel busuk" di perusahaan, ada lebih banyak koki yang berkontribusi rebusan
mengerikan dilayani oleh Enron. Kami akan lihat nanti siapa yang "legal" untuk
menyalahkan, setelah proses hukum bekerja dengan cara melalui sistem pengadilan.
Enron Kegagalan: Bagaimana hal itu bisa terjadi?
Acara publik terjal yang benar-benar menyebabkan kegagalan Enron kemungkinan besar
pengumuman penyajian kembali keuangan dan keuntungan pada bulan Oktober 2001.
Tapi ini hanya "puncak gunung es". Penjelasan yang nyata terletak pada operasi dan
kegiatan Enron selama bertahun-tahun menjelang Oktober 2001. Penting untuk ini adalah
sifat dari perubahan kegiatan usaha Enron, dari seorang produser dan transporter energi,
untuk pemasar global dan pedagang energi, dengan produksi dan perdagangan energi,
energi derivatif keuangan produk, dan sistem telekomunikasi dan lainnya produk derivatif
perdagangan. Enron bahkan mengembangkan produk keuangan baru pada cuaca dan
peningkatan kredit korporasi, yaitu kontrak keuangan yang akan melakukan pembayaran
berdasarkan hasil cuaca dan perubahan kelayakan kredit usaha. Namun, isu akuntansi dan
audit untuk kegiatan baru, dan meningkatnya penggunaan kemitraan off-balance-sheet
dan pendanaan yang terjalin rumit dengan masalah bagaimana kegagalan terjadi. Dan
akhirnya, dampak lingkungan perusahaan, ekonomi dan politik harus dimasukkan sebagai
faktor kontribusi.
Sangat mungkin bahwa buku dan belajar buku-buku akan ditulis tentang topik ini untuk
tahun yang akan datang, jadi saya hanya akan mengangkat isu-isu yang saya lihat sebagai
kunci bagaimana Enron turun begitu cepat menjadi bangkrut.
Kelahiran Enron pada tahun 1985 adalah sebagai perusahaan yang ditransmisikan gas
bumi ke pelanggan melalui sistem pipa fisiknya. Itu dibangun pipa dengan masa hidup
fisik yang panjang, dan menggunakan modal utang untuk mengumpulkan uang untuk
pembangunan fasilitas. Peraturan pemerintah, di tingkat negara bagian dan federal,
perusahaan energi dan harga adalah sangat komprehensif. Tapi ada kecenderungan dalam
pemerintahan dan kebijakan ekonomi untuk menderegulasi industri dan membiarkan
kekuatan pasar berlaku, yang juga akan mengubah karakteristik risiko dan imbalan dari
perusahaan di industri ini. Bergerak ke arah deregulasi juga membuka kemungkinan baru
untuk kegiatan perusahaan dan produk. Enron memulai pengembangan produk keuangan
dan platform perdagangan komoditas (EnronOnline) yang pindah perusahaan untuk
menjadi sebuah perusahaan bisnis berbasis jasa keuangan dan teknologi informasi.

17

Menghasilkan energi dan membawanya ke pengguna akhir adalah membosankan, baris

yang lama usaha, dengan potensi pertumbuhan yang terbatas dan daya tarik investor.
Fokus baru Enron pada menjadi pemasar global dan pedagang energi dan produk
keuangan lainnya adalah gelombang baru yang akan menawarkan prospek laba yang
berkembang pesat dan harga saham bagi pemegang saham.
Tapi, lingkungan operasional yang terkait kebutuhan untuk membiayai pengembangan
kegiatan usaha yang sama sekali baru, dan mengubah karakteristik aliran dana masuk dan
keluar dari perusahaan. Risiko untuk Enron dari strategi ini perusahaan yang baru akan
mencakup variabilitas dana yang dibutuhkan untuk membiayai kegiatan baru, variabilitas
keuntungan ekonomi yang disebabkan oleh faktor pasar yang baru, dan kompleksitas dari
penerapan sistem akuntansi untuk menangani produk-produk baru / bisnis. Jadi Enron
membutuhkan sumber modal baru yang dapat digunakan untuk berinvestasi dalam arah
baru perusahaan. Hal ini akan berubah di masa depan kemampuan perusahaan untuk
memenuhi kewajiban keuangan kepada mereka yang menyediakan modal baru. Bank dan
pemegang obligasi akan memberikan pinjaman dengan bunga dan kewajiban pembayaran
angsuran tetap oleh kontrak hukum, dengan risiko yang terdefinisi dengan baik dan
hukuman jika pembayaran tidak dibuat. Investor ekuitas membeli saham yang baru
diterbitkan dari saham Enron sedang membuat keputusan berdasarkan masa depan
diharapkan keuntungan dan risiko yang cukup berbeda dari sebuah perusahaan produksi
energi dan transportasi. Keuntungan masa mendatang untuk pembeli saham tersebut
Enron baru akan tergantung pada keberhasilan investasi strategis perusahaan baru.
Dengan latar belakang ini, Lay dan Skilling, dengan saran dan persetujuan dari anggota
Dewan Direksi (terpilih, dalam teori, oleh dan untuk kepentingan para pemegang saham)
melanjutkan untuk menerapkan strategi perusahaan yang baru. Seorang pegawai baru,
Fastow, dibawa ke perusahaan dari industri perbankan dan bangkit untuk menjadi Chief
Financial Officer. Bersama-sama, Lay, Skilling dan Fastow memiliki tanggung jawab
untuk melaksanakan kegiatan pembiayaan, akuntansi dan operasional perusahaan karena
mengubah dirinya dalam waktu perusahaan. Tekanan pada tim manajemen ini adalah
untuk membawa transformasi perusahaan, untuk menghasilkan keuntungan yang tumbuh
dari operasi lama dan baru, dan untuk menumbuhkan nilai perusahaan, seperti yang
ditunjukkan oleh harga pasar dari saham biasa.
Panggung didirikan. Transformasi bisnis Enron tegas diatur di tempat di tengah dan akhir
1990-an. Namun, pasar baru dan produk baru membawa risiko baru dan pesaing baru.
Prakiraan berapa banyak pembiayaan baru yang dibutuhkan untuk mendanai kegiatan
baru mungkin terbukti menjadi terlalu rendah. Lebih banyak modal baru harus
dibangkitkan dari sumber modal eksternal. Pemberi pinjaman ingin jaminan bahwa
pinjaman dapat dan akan dilunasi, sebagian ditentukan oleh lembaga pemeringkat kredit
pada perusahaan, yang didasarkan pada perusahaan melaporkan laporan keuangan yang
diberi meterai persetujuan oleh auditor publik. Investor membeli saham baru Enron hanya
akan dihargai jika harga saham terus meningkat, tapi itu sangat tergantung pada
perusahaan terus menghasilkan yang lebih tinggi dilaporkan setelah laba akuntansi pajak.
Jadi dihadapkan pada kenyataan. Perusahaan menemukan bahwa investasi baru tidak

18

menguntungkan seperti yang diperkirakan atau diinginkan. Petugas keuangan

bertanggung jawab untuk meningkatkan terus meningkatnya jumlah modal baru untuk
mendanai investasi tumbuh diwajibkan untuk memenuhi strategi perusahaan yang baru.
Wall Street analis sekuritas mengharapkan untuk melihat aset tumbuh dan berkembang
pendapatan perusahaan yang tercermin dalam setelah pajak melaporkan laba dan laba per
saham (EPS). Tim manajemen harus memberikan modal baru untuk memenuhi
kebutuhan, harus terus membayar dan memenuhi pembayaran kembali pinjaman masa
lalu, dan harus memberikan nomor pendapatan bottom line pada laporan laba. Bagaimana
Anda mencapai hal ini ketika ekonomi yang mendasari bisnis adalah jauh dari harapan?
Salah satu jawabannya adalah untuk menyesuaikan operasi perusahaan untuk
mencerminkan lingkungan ekonomi yang berubah (berpotensi mengecewakan pemegang
saham perusahaan dan memiliki tim manajemen senior digantikan oleh Direksi). Jawaban
lainnya adalah menemukan cara untuk meningkatkan modal baru tanpa itu muncul
negatif terhadap laporan keuangan perusahaan, dan untuk menemukan metodologi
akuntansi yang akan memungkinkan laporan laba menyatakan kepada investor yang akan
meningkat melebihi tingkat sebenarnya dari apa yang disebut "ekonomi" keuntungan bagi
perusahaan. Informasi dan hukum tuduhan mengenai Enron tampaknya menunjukkan
bahwa manajemen mengambil kursus kedua tindakan.
Hasil keputusan kepemimpinan Lay-Skilling-Fastow memulai Enron di jalan
menggunakan perangkat akuntansi yang tersedia untuk kedua mengecilkan jumlah modal
yang dipinjam sebenarnya digunakan oleh perusahaan, dan untuk "memproduksi" lebih
tinggi setelah pajak melaporkan laba dan EPS kepada pemegang saham . Masalah apakah
ini adalah tindakan hukum atau ilegal menunggu hasil dari uji coba lapangan di masa
depan, tapi fakta bahwa Enron sekarang dalam kondisi hukum Bab 11 kebangkrutan,
dengan kerugian besar nilai saham dan ketidakpastian tentang pemberi pinjaman yang
dilunasi, adalah hasil dari tindakan set di tempat oleh pejabat eksekutif Enron (yang
membantu dan bersekongkol sampai batas tertentu oleh anggota Direksi, Arthur Andersen
dan berbagai firma hukum luar).
Kisah CARA ini terjadi sangat kompleks. Saya akan mencoba untuk menjelaskan
beberapa teknik yang digunakan oleh Enron untuk di bawah-laporan utang diperlukan
untuk menjaga operasional perusahaan berjalan dan melebih-lebihkan keuntungan
perusahaan. Kedua gol itu dicapai dengan penciptaan Entitas khusus tujuan (SPE atau
kemitraan). Sebuah perusahaan dapat masuk ke dalam kemitraan dengan investor luar
dan pemberi pinjaman, dan tidak perlu mengkonsolidasikan entitas ke dalam laporan
keuangan perusahaan dilaporkan ke masyarakat investor. Jadi, Enron membentuk
kemitraan dengan luar investor ekuitas yang membeli sesedikit 3 persen dari total modal
kemitraan, dengan Enron investasi sisa ibukota. Berikutnya, kemitraan membeli aset dari
Enron, dengan menggunakan modal dari mitra dan pinjaman dari lembaga keuangan atau
bank.
Sebagai ilustrasi sederhana, asumsikan bahwa Enron menjual peralatan pembangkit
listrik untuk SPE untuk harga $ 50 juta. Bank meminjamkan SPE $ 45.000.000 untuk
pembelian dengan jatuh tempo yang pasti dan tingkat suku bunga. Enron berinvestasi $
0.500.000 ekuitas SPE dan menjual saham seharga $ 4,5 juta (lebih dari 3 persen dari

19

total modal) kepada investor luar. Karena pinjaman bank tidak langsung ke Enron, tetapi
untuk SPE, itu tidak bisa dilaporkan sebagai kewajiban utang pada neraca. Selanjutnya,
jika nilai buku aset pada neraca Enron untuk peralatan ini adalah $ 28 juta pada saat
penjualan ke SPE, maka Enron sekarang dapat melaporkan pada tahun fiskal ini
keuntungan atas penjualan $ 50- $ 28 = $ 22 juta keuntungan . Penerimaan kas Enron dari
SPE adalah $ 50.000.000 dikurangi investasi ekuitas pada ekuitas SPE ($ 49.500.000 kas
bersih baru untuk Enron). Jika SPE berhasil menggunakan aset untuk menghasilkan arus
kas masa depan untuk membayar kembali pinjaman ke bank dan memiliki keuntungan
yang tersisa bagi para mitra SPE, maka Enron akan membukukan keuntungan di masa
depan.
Tapi apa yang terjadi jika aset tersebut terlalu mahal dan tidak menghasilkan pendapatan
yang memadai untuk membayar kembali pinjaman bank? Apakah ini berarti bahwa bank
tidak mungkin akan melunasi pokok pinjaman? Jawabannya terletak pada apa yang
mungkin telah perjanjian terpisah, lisan atau tertulis, bahwa Enron berjanji untuk bankbank yang meminjamkan uang kepada SPE. Perjanjian tersebut akan terlihat seperti
berikut ini. Enron akan setuju untuk memberikan kepada SPE (atau langsung ke bank)
saham tambahan saham Enron nilai pasar yang cukup untuk SPE untuk menjual saham
dan membayar kembali pokok pinjaman bank. Tindakan ini juga mungkin diperlukan
dalam kasus di mana Enron baik memiliki penurunan peringkat kredit sendiri di bawah
investment grade, atau ketika harga saham Enron jatuh ke tingkat batas bawah. Karena
itu, ketika harga pasar mencapai $ 28 per saham, Enron harus memberikan SPE saham
cukup saham untuk mengaktifkan SPE untuk melunasi seluruh pokok pinjaman bank.
Namun, jika Enron gagal untuk menginformasikan para pemegang sahamnya tentang
kewajiban-kewajiban ini di masa depan, yang sejumlah besar saham baru yang Enron
harus mengeluarkan akan menyebabkan dilusi ekuitas tinggi, segera menurunkan EPS
saham, dan selanjutnya memberikan tekanan ke bawah pada harga pasar saham Enron.
Sejak Enron tahun 2000 telah menciptakan sekitar 2.000 SPE, setiap pembalikan besar
dari operasi perusahaan akan dahsyat.
Ilustrasi diatas menunjukkan bagaimana Enron bisa menggunakan SPE untuk masuk ke
dalam kewajiban utang dengan kreditur, dan masih belum melaporkan utang pada neraca
keuangannya sendiri. Selanjutnya, perusahaan dapat menggunakan penjualan aset dan
operasi ke SPE untuk menghasilkan keuntungan langsung untuk menambah laporan laba
rugi saat ini.
Sekarang, sesuai dengan jenis klasik skema Ponzie, Anda mulai dengan penawaran kecil
untuk meningkatkan keuntungan dan menyembunyikan sejumlah kecil utang off-balance
sheet. Untuk menumbuhkan pendapatan tahun depan, mendukung investasi dalam aset
tambahan dan bisnis baru dan membayar kembali pinjaman lama, Anda perlu
menciptakan lebih banyak dan lebih besar SPE pada tahun kedua, maka tahun ketiga, dll
Selama kenaikan harga saham terus, semuanya baik-baik saja. Ketika pemberi pinjaman
tidak mendapatkan dilunasi atau titik pemicu saham dicapai dalam perjanjian pinjaman,
maka hal-hal mulai terurai dengan cepat dan dalam silau penuh dari investor, analis
keamanan dan peringkat kredit lembaga. Untuk Enron, kegiatan yang dilakukan selama
bertahun-tahun datang ke perhatian publik pada bulan Oktober 2001, dan perusahaan itu

20

dibawa ke kebangkrutan pada bulan Desember tahun itu.

Selain penciptaan SPE, Enron tampaknya sama-sama sibuk membuat penampilan
keuntungan perusahaan dari yang lain "agresif" penggunaan akuntansi. Salah satu metode
meningkatkan laba yang dilaporkan setelah pajak kepada pemegang saham adalah untuk
menemukan cara-cara untuk menurunkan tagihan pajak perusahaan atas keuntungan yang
dilaporkan. Karena GAAP dan aturan akuntansi pajak bisa sangat berbeda, ada
kemungkinan untuk sebuah perusahaan kreatif untuk meningkatkan dilaporkan setelah
pajak keuntungan menggunakan akuntansi GAAP, tetapi menggunakan aturan yang
berbeda untuk melaporkan nol keuntungan untuk tujuan pajak pemerintah. Kepada
pemegang saham dalam laporan tahunan, mengikuti aturan-aturan GAAP, perusahaan
akan melaporkan laba sebelum pajak yang lebih tinggi, sementara melaporkan hutang
pajak pada jumlah yang jauh lebih rendah. Satu laporan menunjukkan bahwa dari tahun
Enron 2000 laba setelah pajak dilaporkan kepada pemegang saham, sekitar $ 296.000.000
atau 30% dari laba adalah hasil dari satu kali strategi penghematan pajak yang dibuat oleh
akuntan pajak. Jelas, perusahaan dapat mengikuti aturan yang memungkinkan mereka
untuk meminimalkan pajak yang harus dibayarkan kepada pemerintah. Dan, dengan
kompleksitas AS kode pajak perusahaan dan faktor menambahkan bahwa Enron adalah
sebuah perusahaan global yang dihadapi banyak pajak negara yang berbeda, akuntan
pajak cerah dapat memberikan kontribusi yang signifikan untuk menurunkan total tagihan
pajak perusahaan. Pada bulan September 2001, laporan menunjukkan bahwa laba usaha
menurunkan di banyak divisi Enron mengakibatkan tekanan pada departemen pajak
untuk menghasilkan sampai $ 600 juta penghematan pajak baru untuk tahun fiskal 2001.
Akuntan tahu bahwa strategi untuk "menghindari" pembayaran pajak kelebihan hukum,
tetapi yang mencoba untuk "menghindari" pajak oleh penipuan berarti adalah ilegal. Di
sini sekali lagi, staf internal Enron kemungkinan memanfaatkan pendapat hukum dari
penasehat hukum internal dan eksternal bahwa teknik mereka "tepat".
Maskapai beberapa contoh menunjukkan metode potensial dengan yang "agresif"
penerapan akuntansi dapat menyembunyikan utang off-balance sheet dan menciptakan
penampilan meningkatkan keuntungan. Hasilnya dapat memiliki efek meyakinkan
investor bahwa saham perusahaan lebih berharga daripada mungkin benar-benar layak.
Tetapi metode ini, ketika belajar tentang oleh investasi publik dan kreditur, dapat
menyebabkan kerusakan yang cepat dari perusahaan dan nilai saham saham biasa.
Laporan di media tentang Enron menunjukkan bahwa keandalan neraca perusahaan dan
laporan laba rugi dalam laporan tahunan kepada SEC dan pemegang saham selama 3
sampai 4 tahun sebelumnya yang sangat tergantung pada keterampilan "agresif" dan
kreatif dari staf akuntansi Enron , dibantu oleh persetujuan dari auditor Arthur Andersen,
dan nasihat dari perusahaan hukum yang disewa oleh Enron.
Enron Kegagalan: Mengapa hal itu bisa terjadi?
Saya berpikir bahwa jawaban mengapa hal itu terjadi relatif mudah. Tim eksekutif LaySkilling-Fastow berusaha untuk menciptakan sebuah perusahaan bisnis yang akan
memberikan peningkatan kekayaan bagi pemegang saham mereka. Namun, ketika cahaya
dingin fajar menunjukkan bahwa "nyata" ekonomi perusahaan adalah kurang dari itu

21

diinginkan atau diperlukan untuk mendukung harga saham tumbuh, menjadi perlu bagi
perusahaan untuk menerapkan metode akuntansi yang agresif untuk mencapai efek yang
diinginkan. Sejauh bahwa usaha bisnis baru yang dilakukan diperlukan terus
meningkatnya jumlah modal baru, tim eksekutif mengandalkan mekanisme kreatif
lainnya dan akuntansi untuk membawa modal utang baru, tapi untuk melakukannya
dengan cara yang tidak akan membuat tampilan perusahaan untuk menjadi lebih berisiko
untuk investor modal baru. Setelah mulai menuruni lereng licin, kebutuhan untuk
melanjutkan jenis kegiatan hanya meningkat pada setiap tahun berikutnya. Mereka ingin
mempertahankan pekerjaan mereka, kekayaan pribadi dan pujian publik, yang berarti
menjaga Enron bergerak maju dengan cara apapun. Tapi di mana pemeriksaan etika dan
saldo yang seharusnya diakui oleh manajemen?
Yang membawa saya ke Dewan Enron Direksi. Di mana proses tata kelola perusahaan
yang seharusnya dilakukan oleh anggota Dewan? Tentu Komite Audit Dewan seharusnya
lebih kritis terhadap auditor dan pekerjaan mereka. Tapi, dengan harga saham dan laba
meningkat, mereka mungkin terbuai ke dalam rasa aman palsu tentang akuntansi internal
Enron, dan huruf pendapat yang menguntungkan ditandatangani oleh Arthur Andersen.
Para anggota Dewan menikmati status di Enron dan imbalan yang dibayarkan oleh
Enron. Mereka tampaknya bersedia untuk menerima informasi dari tim Lay-SkillingFastow pada nilai nominal, tanpa analisis kritis. Mereka gagal untuk hidup sampai peran
mereka sebagai pengawas pengelolaan atas nama pemegang saham yang memilih mereka
kepada Dewan.
Karyawan Enron juga memfasilitasi kegagalan perusahaan mereka sendiri, dan telah
menderita sesuai. Enron memiliki staf legal dalam lebih dari 100 pengacara, dan seorang
staf akunting beberapa ratus akuntan terlatih. Semua tampaknya beroperasi dengan cara
yang didukung tim manajemen eksekutif. Tampaknya ada sedikit insentif atau kesediaan
untuk mempertanyakan metode yang digunakan untuk meningkatkan keuntungan yang
dilaporkan dan menyembunyikan utang perusahaan. Sebagai karyawan dibayar gaji yang
baik, dilengkapi dengan manfaat penuh, dan investasi iuran pensiun mereka dalam
meningkatnya saham perusahaan, goyang perahu tentang kegiatan dipertanyakan akan
menjadi tindakan tertinggi dari keberanian, dengan hukuman berisiko tinggi. Jadi mereka
tetap mendukung, sampai Sherron Watkins akhirnya mencoba untuk meningkatkan
kesadaran potensi masalah.
Eksekutif Enron yang lebih dibantu dan didukung oleh auditor Arthur Andersen dan
sejumlah perusahaan hukum luar bekerja untuk perusahaan. Enron adalah klien yang
sangat baik untuk Arthur Andersen, mengumpulkan lebih dari $ 50 juta pendapatan pada
tahun 2000. Perusahaan-perusahaan hukum dibayar sekitar $ 50 juta dalam biaya untuk
layanan mereka yang mendukung dan membenarkan kegiatan Enron. Sisa dalam
performa yang baik dengan tim eksekutif di Enron berarti bisnis masa depan untuk
perusahaan mereka, dan mungkin ditambahkan bonus bagi para eksekutif individu pada
audit dan perusahaan hukum. Eksekutif mungkin tidak terlihat baik pada perusahaanperusahaan di luar yang memberikan nasihat bertentangan dengan yang menginginkan
eksekutif. Jadi Enron mungkin belum menerima tanggapan negatif yang akan memotong
pendek kegiatan yang pada akhirnya membawa Enron turun. Apakah kegiatan ilegal

22

terjadi adalah subjek penyelidikan masa depan yang melibatkan audit dan perusahaan
hukum yang disewa oleh Enron.
Pemerintah juga menanggung beberapa tanggung jawab. Anggaran federal untuk SEC
telah berkurang dalam beberapa tahun terakhir, sementara jumlah dan kompleksitas
perusahaan harus diawasi oleh SEC telah meningkat. Politisi telah membalikkan aturan
penegakan SEC melalui proses legislatif, seperti yang terlihat dalam perdebatan aturan
memiliki pilihan beban perusahaan hibah kepada karyawan dalam laporan laba
rugi.Legislative activities have reduced regulatory oversight of energy companies, and
replaced old regulations with new sets of rules and procedures that are only tested later in
the real world, and sometimes found not to achieve the intended economic
consequences.I wont even raise the issue of campaign contributions to the politicians by
individuals and corporations!
And finally, how the ENRON failure resulted must be viewed in relation to the desires of
investors and financial institutions. Investors in the markets created conditions that meant
companies which appeared to be winners saw rapid stock price increases, while poor
performers had plunging stock prices. Pressure on company management was intense to
continue to be seen as a winner to drive prices higher for their stockholders. Risk
evaluation of stocks seemed to be secondary to investors relative to higher reported
earnings per share. In addition, the banks and security brokerage firms wanted to do
business with ENRON to generate profits (and perhaps individual annual bonuses for the
employees doing the ENRON deals) for their own shareholders. It seems evident, based
on information concerning ENRONs SPE activities, that the financial institutions
benefited from the relationship, while they took steps to reduce the risks of dealing with
ENRON through separate side deals and guarantees that were not fully understood by or
revealed to the investing public.
In summary, the ENRON failure has not been the result of just questionable activities by
ENRONs executive management team. The cast of contributors to the failure and
bankruptcy are both inside and outside the company. Its the total system that resulted in
failure that needs to be further understood and investigated.
A Proposal for the Academic Community
If you the reader are still with me, I will now endeavor to explain my proposal for a
systematic study of ENRON. In an academic community, containing the business types
and the liberal studies, the ENRON story need not be just of interest to the business
side. Yes, the faculty of management, finance, accounting and management information
systems can study ENRON for insights and lessons about how corporate value can be
destroyed, and what can be learned to prevent similar situations. But I see a bridge in the
ENRON story with links to the liberal studies in the areas of economics, government,
human psychology and legal studies, at a minimum. My proposal is simply to establish a
series of defined workshops to explore all the dimensions of the ENRON failure, in order
to focus on the relevant issues and understand the system in which an ENRON-type
situation can occur. The benefits can be:

23

1.) to bring the two sides of the faculty together to explore a common fascinating story,
2.) to provide a mechanism for showing the students the multi-faceted operation of
business management and liberal studies disciplines in our society,
3.) as a means to potentially reach the wider members of the academic and business
communities interested in learning more about this fascinating and disturbing failure of a
business enterprise.
Possible topics for the seminars/research are as follows:
1. Accounting for SPEs and use of off-balance sheet financing. Faculty leaders from
Accounting and Finance departments.
2. Analysis of common stock valuation and determination of debt credit ratings after the
ENRON experience. Faculty leaders from Finance department.
3. Evaluation of corporate strategy changes at ENRON and its lessons. Faculty leaders
from Management and Business Policy.
4. Arthur Andersen: Management Shills or Investor Guardians? Faculty leaders from
Accounting/Auditing and Finance departments.
5. Evaluation of Corporate Governance failures at ENRON and possible improvements.
Faculty leaders from Management and Organization Theory.
6. Exploration of human factors, employee responsibility and individual ethics in
business. Faculty leaders from Management and Psychology departments.
7. Government regulation of business and corporate tax policies after the ENRON
experience. Faculty leaders from Economics and Tax Accounting departments.
8. The role of the legal system in the post-ENRON era. Faculty leaders from the Legal
Studies department.
I hope that this endeavor might pique your interest and support.
REFERENSI
1. New York Times newspaper, various dates
2. Washington Post newspaper, various dates
3. Houston Chronicle newspaper, various dates
4. Securities and Exchange Commission, Civil Action Complaint No. H-03-0946,
March, 2003, Houston, TX
5." Powers Report of the Special Investigating Committee", submitted to the Board of
Directors, ENRON Corporation, February 1, 2002.

24