Chronology of Enron's Recent Woes

Read other sections of the chronology:

The Investigation¹
Enron & Arthur Andersen²
Enron & the Financial Markets³
Enron's Employees⁴
The Fallout World-Wide⁵

Return⁶ to Called to Account, the Andersen & Enron special report.

The Accounting Debacle

May 31: Enron continued to revamp⁷ its board, naming a veteran electric-utility executive and a private investor who specializes in risk management as members.

May 30: In the wake⁸ of recent energy-trading scandals, UBS Warburg is naming new executives to oversee a group of former Enron executives brought in to oversee its energy-trading business after UBS acquired Enron's trading unit last year.

• A lawsuit in Delaware Chancery Court⁹, involving a dispute between the founders of a small energy company, underscores how Enron executives played hardball even when the stakes were relatively small.

May 24: In a much-anticipated decision¹⁰ in Enron's bankruptcy case, Judge Arthur Gonzalez denied a motion to disqualify the lead law firm for Enron creditors' committee.

May 22: As Enron structured¹¹ ever-more-complex deals, Enron's lawyers at Vinson & Elkins sometimes objected, saying the deals posed conflicts of interest or weren't in Enron's best interests, but the firm didn't blow the whistle.

May 21: The Securities and Exchange Commission charged¹² Ernst & Young with violating SEC rules by entering into lucrative business deals with a software company that it also audited.

• The chairman of the Senate Banking Committee¹³ has put off action on a sweeping overhaul of accounting practices, hoping to buy time to develop a consensus on the Enron-inspired package.

May 15: The Federal Energy Regulatory Commission investigated¹⁴ Enron's online energy-trading system last year but found no cause for concern, according to Sen. Joseph Lieberman.

• Blasting the ethics¹⁵ of the accounting profession, Arthur Levitt, the former chairman of the Securities and Exchange Commission, warned that the remaining Big Four auditing firms and their allies in Congress are trying to block effective reform of the U.S. accounting system.

May 9: Enron and at least two other power sellers¹⁶ combined to profit by using false information to resell extra power during California shortages in 2000, according to internal Enron memos.

May 8: Several directors' professed ignorance¹⁷ of Enron's questionable accounting practices is contradicted by documents showing that a senior Arthur Andersen auditor warned them about the maneuvers more than three years ago.

• Federal energy regulators significantly widened¹⁸ their investigation into California's troubled energy market, after regulators released a trio of explosive Enron memos that outlined how the energy trader profitably manipulated the state's deregulated markets.

May 7: Enron's energy traders¹⁹ manipulated California's power system to increase profits during the height of the state's 2000-2001 energy crisis, documents released by federal regulators show.

May 6: Documents show²⁰ Enron officials were aware, at least a year ago and long before the energy concern filed for bankruptcy protection in December, that the company's portfolio of foreign assets had lost as much as half of the $6.15 billion value shown on its books at the time.

• Enron's chief executive told²¹ unsecured creditors that the collapsed company aims to recover $15 billion to $20 billion through the bankruptcy-court process, roughly 40%, at best, of the $50 billion or more Enron is believed to owe creditors.

May 2: Enron plans to reorganize²² as a small company under a new name, returning to its roots of a decade ago, before the aggressive strategy that led to its spectacular expansion and then collapse.

April 26: The same attributes²³ that underpinned former Enron Chairman Kenneth Lay's success -- tireless ambition, stubborn optimism and sometimes easy trust -- helped bring about his downfall.

• Read excerpts²⁴ from an interview with Mr. Lay.

April 23: In a bid to restore²⁵ credibility to its post-bankruptcy finances, Enron said it could post a write-down of the value of its assets by about $14 billion and raised further questions about the auditing work done by Arthur Andersen.

• Congress is moving²⁶ to impose tough new penalties to address future securities and accounting-law violations similar to those that allegedly surfaced in the collapse of Enron.

April 22: Enron's president and chief operating officer²⁷, Jeffrey McMahon -- one of the few top executives to survive the company's collapse -- is resigning June 1 amid heightened government scrutiny of his role in questionable Enron-related deals.

April 15: A trove of tape transcripts²⁸ reveals just how close they were, showing how effusively people at both companies spoke of their intertwined operations.

• Congressional investigators turn²⁹ up the heat on J.P. Morgan Chase over its ties to collapsed Enron.

• John Hancock Financial Services joined³⁰ the raft of investors suing Arthur Andersen and former Enron executives and directors over losses tied to Enron's collapse, as litigation over the matter continues to spread.

• Federal regulators interceded³¹ into Enron's restructuring for a second time, objecting to a company plan to earmark as much as $140 million for employee retention and bonuses.

April 12: In the months³² before the collapse of Enron, facing three other high-profile botched audits, top executives at Arthur Andersen were trying to reduce the risks.

• In his first address³³ to the company's demoralized employees, Enron's acting chief executive officer, Stephen F. Cooper, laid out plans for restructuring as a smaller firm and for digging out from under a mountain of claims that he estimated at between $60 billion and $100 billion.

April 11: In the months before³⁴ Enron filed for bankruptcy-court protection late last year, the company had been quietly trading tens of millions of dollars in stocks through an internal hedge fund -- among the riskiest forms of financial trading.

April 9: Enron called it "snowballing,"³⁵ a recognition that project costs needed to be watched and controlled or they could run over the company. But an amended class-action lawsuit is claiming it is a method of avoiding write-offs that would otherwise bring the company's earnings below Wall Street's expectations.

April 8: In an intensified effort³⁶ to recoup billions of dollars for investors in bankrupt Enron, an amended class-action lawsuit alleges that nine major banks and securities firms and two national law firms participated in a scheme with Enron's top executives to defraud shareholders and creditors.

April 5: Two investment bankers³⁷ at Credit Suisse First Boston who helped design some of the financing vehicles used by Enron served as directors of one of those entities, underscoring Wall Street's major role in helping create the complex financial structure of the former Houston energy giant.

• With Arthur Andersen³⁸ looking as if it may not have especially deep pockets for Enron creditors and shareholders to recover their losses, aggrieved parties are taking aim at another potential target: Enron's bankers.

April 3: Long before³⁹ Enron took a massive charge in October for bad investments, Arthur Andersen accountants knew of the growing losses, but continued to bend to the wishes of Enron executives who didn't want to make them public.

March 29: The accounting practices⁴⁰ of retailers may face tighter regulation in the wake of the Enron scandal, particularly for their use of so-called special-purpose entities.

March 28: The Securities and Exchange Commission⁴¹ was concerned enough about International Business Machines' financial disclosure practices two years ago that it asked the company to consider amending its 1999 annual report.

• Army Secretary Thomas White⁴² said his dozens of conversations with Enron executives since he took office didn't involve aiding his former company or getting inside information about Enron's pending collapse before he sold stock.

March 25: As federal investigators⁴³, creditors and angry shareholders scramble to piece together what happened at the failed energy giant, the odd tale of New Power raises serious questions of whether this IPO was used by Enron executives to falsely bolster the company's earnings.

March 20: The Securities and Exchange Commission⁴⁴ announced plans to complete an outside review of Big Five accounting firms and ensure continuing oversight of the industry after March 31, when the current oversight board disbands.

• Adding to the chorus⁴⁵ calling for reform of the accounting industry, an influential professional group of finance executives is throwing its weight behind some stiff measures for cleaning up auditing practices.

March 18: Nearly three years ago⁴⁶, a top Enron risk-management official began warning top executives of the improprieties of some of the company's off-balance-sheet partnerships.

March 15: Thanks to recent rulings⁴⁷ from the Securities and Exchange Commission and other regulators, corporate board audit committees were already under scrutiny. But the recent Enron calamity has just cranked the wattage up a thousand-fold.

March 11: Enron Corp. was granted⁴⁸ permission by a bankruptcy judge to shut down its broadband network and sell existing contracts for $491,000.

• A group comprising⁴⁹ Royal Bank of Scotland and Abbey National has emerged as the leading bidder for Wessex Water, one of the largest international assets of Enron, with an offer of about 1.2 billion pounds ($1.71 billion or 1.94 billion euros).

• Bidders for Dabhol Power⁵⁰ Co., Enron's ailing Indian power unit, have suffered a further setback after a row erupted between Dabhol's financiers and its foreign sponsors over who will receive the proceeds from the sale.

March 7: Senate investigators signed⁵¹ an agreement with Enron's lawyers to open up the company's tax returns, but the company left itself some loopholes.

March 6: It may be only weeks⁵² before the Securities and Exchange Commission rolls out proposals that stand to dramatically change corporate America's disclosure practices. A plan to accelerate quarterly and yearly filings was likely be the first out of the gate.

March 5: Cash flow⁵³ isn't the immutable measure of financial health that many, in the wake of the rapid collapse of once-seemingly profitable Enron, may think.

March 4: For several years⁵⁴, Enron lobbied unsuccessfully to be allowed to postpone paying U.S. taxes on some overseas profit, including income from its derivatives deals, according to newly disclosed documents.

Feb. 28: Facing scrutiny⁵⁵ from the Internal Revenue Service, Enron is considering using a temporary government amnesty program to seek relief from potential tax-shelter penalties.

• Some top energy traders⁵⁶ for Enron are expected to quit shortly, and more are likely to follow, dealing a potential setback to the efforts by Swiss financial powerhouse UBS to revive the business.

• A bankruptcy-court judge⁵⁷ left it up to insurers to decide whether lawyers for Enron will have access to as much as $85 million in insurance money sought by Enron employees.

• The nation's accounting standards board⁵⁸ is speeding up its timetable slightly on enacting new, stricter rules governing when companies are allowed to keep affiliates and their debt off their financial statements.

Feb. 27: Investors in⁵⁹ an Enron-backed community-development fund run by Mark Lay, Mr. Lay's son, are raising concerns over potential fund mismanagement last year, and asking that their money be returned.

Feb. 25: Thirty-three states⁶⁰ are asking a bankruptcy court to block Enron executives from securing millions of dollars from the company for their legal defense.

Feb. 22: The Federal Reserve Bank of New York⁶¹ is examining J.P. Morgan Chase's accounting for commodity-related trades with Enron.

Feb. 20: Top former Enron executives⁶² were personally involved in stage-managing a fake trading room to impress analysts, an episode employees jokingly referred to as "The Sting." Former employees said secretaries and other staff who in 1998 once posed as busy energy traders in an unused trading room were part of a more elaborate charade.

• Amid heightened investor awareness⁶³ about what executives and directors are doing with their own company shares, hedging maneuvers often are off the radar screens of shareholders. Yet experts say that hedging strategies designed to limit an individual's downside risk in stock are becoming increasingly common.

• In an internal company interview⁶⁴ last August, former Enron Chief Financial Officer Andrew Fastow strongly defended his role in controversial outside partnerships, saying they were good for the company and blaming criticism about them on a rival's efforts to get his job.

Feb. 19: For years⁶⁵, Enron disclosed little information about the outside partnerships that would eventually contribute to the company's collapse. But an allusion to one of the most controversial and secretive of those partnerships in Enron's 1999 annual report could be a liability-filled time bomb for former top officials.

• Between February and October of last year⁶⁶, Mr. Lay sold $70.1 million of stock back to the company , conducting transactions even as the Houston energy giant's shares were in free fall and he was exhorting employees to stand by the company.

• Creditors of⁶⁷ Enron's European arm might get 20 to 25 cents on the dollar, but cautioned that the total claims and the total value of Enron's European assets are still unclear.

Feb. 15: When numerous Enron⁶⁸ directors finish leaving the boardroom, Raymond S. Troubh may be the only director left. Earlier in the week, the Enron board picked the Mr. Troubh to run a restructuring committee that is overseeing efforts to reorganize the company following its Dec. 2 bankruptcy filing.

• Enron executive⁶⁹ Sherron Watkins told a House subcommittee that the collapsed energy trading company's corporate culture was "arrogant" and "intimidating," and discouraged employees from blowing the whistle on partnerships used to conceal debt and enrich executives.

Feb. 14: Ms. Watkins⁷⁰, who warned Enron's chief executive in August that the company might be swamped by an accounting scandal, later urged him to contain the damage by restating earnings by pleading ignorance, a strategy he eventually employed, newly released documents show.

• Enron's interest⁷¹ in expanding its political influence extended to a little-known group that sets international accounting standards.

Feb. 13: Enron announced⁷² the planned resignations of six board members, including four who served on its highly criticized audit committee. Simultaneously, Enron dropped its request to employ its longtime outside counsel, Vinson & Elkins, as special counsel to the bankruptcy proceedings.

• Remarks by⁷³ Mr. Lay to a special internal investigative committee in January indicate that on at least two occasions he may have deliberately misled the public in order to keep the energy giant's problems from becoming known.

Feb. 12: An internal Enron document⁷⁴ indicates for the first time that Mr. Lay had a direct role approving deals with at least one of the company's controversial executive-run partnerships.

• The possibility of criminal charges⁷⁵ against senior Enron executives is already being raised by lawmakers investigating the company's collapse. Mr. Lay, Enron's just-departed chairman, has announced he will invoke his Fifth Amendment right against self-incrimination at a Senate hearing Tuesday.

Feb. 11: Mr. Cooper⁷⁶, the restructuring specialist hired as Enron's acting chief executive, said he believes it possible to salvage a smaller but stable company from the turmoil now swirling around the energy concern.

Feb. 8: A company run⁷⁷ by one of Enron's outside directors and biggest shareholders indirectly supplied money used to fund a 1997 partnership that eventually helped lead to Enron's collapse.

• The official unsecured creditors⁷⁸ committee of Enron rebuffed a recommendation by the company's advisers to immediately file suit against Arthur Andersen, Mr. Fastow, and other individuals whose relationships with Enron have come under attack.

Feb. 7: Within two months⁷⁹ of assuming his job as general counsel at Enron's global-finance unit in October 2000, Jordan Mintz began raising questions about procedures used in approving executive-run partnerships.

• Enron's quest⁸⁰ to avoid taxes by using offshore tax havens took the company to some unlikely places, including Holland, which embraces its citizens with a cradle-to-grave welfare state and takes half their salaries in taxes to pay for it.

• Some current and former⁸¹ employees of Enron's retail energy unit say the company asked them to pose as busy electricity and natural-gas sales representatives one day in 1998 so the unit could impress Wall Street analysts visiting its Houston headquarters.

• Mr. Lay⁸² is cutting back on his commitments of time to nonprofit organizations, some of which are worried he will cut back on his financial commitments, as well.

Feb. 6: Enron executives⁸³ tried to get one of the company's in-house lawyers fired in 2000 after their boss expressed unhappiness with the way the lawyer was negotiating with a partnership in which the boss had an interest, congressional investigators said.

• With the accounting profession⁸⁴ facing a credibility crisis, a wide array of critics -- from members of Congress to small investors to officials of the big accounting firms -- have begun calling for a major overhaul of the system.

Feb. 5: Lawmakers⁸⁵ say they will issue a subpoena to compel Mr. Lay to appear before committees investigating the collapse of the Houston energy trading giant. Mr. Lay also announced his resignation from the Enron board.

• Enron's board⁸⁶ is expected to put the company's two top accounting officers on administrative leave this week in reaction to an internal report that says neither did his job adequately, sources close to the matter say.

• Legal liability⁸⁷ in the Enron debacle could depend, in part, on who knew about an innocuous-looking, two-page memorandum dated Dec. 30, 1997, involving one of the now-controversial outside partnerships run by company executives.

Feb. 4: Enron's rise⁸⁸ and fall mirrors the collapse of Middle West Utilities seven decades ago.

• Goldman Sachs⁸⁹ invented a security in 1993 that offered Enron and other companies an irresistible combination. The security was designed in such a way that it could be called debt or equity, as needed.

Feb. 1: A much-anticipated⁹⁰ report on an internal investigation into the collapse of Enron is expected to point fingers at former and current Enron executives who were behind the questionable partnerships that led to the company's ruin, congressional aides said.

• More details⁹¹ are emerging about how the company got into such a mess. On Nov. 5, 1997, the top echelon of Enron assembled for a meeting where its now-infamous outside partnership arrangements took a turn from the straightforward and mundane to the deceptive and possibly illegal.

• Amid finger-pointing⁹² at top management and the company's outside auditors at Arthur Andersen, Enron's audit committee is under harsh scrutiny from a slew of civil, criminal and congressional investigations the company's board of directors.

• Earlier this week⁹³, Linda P. Lay, the wife of Mr. Lay, told a national television audience that nearly everything the couple owns is for sale as they struggle with a personal financial crisis. But few of the couple's vast real-estate holdings are on the market, according to Multiple Listing Service records.

Jan. 31: Enron's acting chief⁹⁴ executive Stephen Cooper said he believes that the troubled energy company is salvageable, and he pledged to move "at light speed" to get it out of bankruptcy court.

• Four employees⁹⁵ who were important figures in Bank of America's relationship with Enron, which triggered huge losses for the bank when Enron collapsed, have left the company.

Jan. 30: Enron named⁹⁶ Mr. Cooper, a principal at New York restructuring firm Zolfo Cooper, as acting chief executive officer, succeeding Mr. Lay, who resigned from the embattled energy concern.

• Arthur Andersen's destruction⁹⁷ of papers related to Enron has given shredding new notoriety. But at companies all over America, there's a shredding boom under way, heating up demand for a cottage industry of professional document destroyers.

• The Enron scandal⁹⁸ -- and the fact that top executives at the energy trader sold some of their holdings just before the company's meltdown -- has refocused public attention, and anger, on the sale of corporate stock, particularly when it happens before a collapse that the executives knew was coming.

Jan. 29: Enron's collapse⁹⁹ has Congress taking its finger off the deregulation button, as members suddenly queue up to push for new controls on the financial community.

• When Harvey Pitt¹⁰⁰ became SEC chairman in August, the SEC staff stopped work on a lengthy report detailing what it concluded were severe shortcomings in how the accounting industry regulates itself.

• Read the text¹⁰¹ of an employee e-mail to Enron's board of directors.

Jan. 28: Police investigators¹⁰² in Sugar Land, Texas, said they are continuing their investigation into the death of former Enron Vice Chairman J. Clifford Baxter. Mr. Baxter had been engaged in the difficult task of trying to sell off assets as the company's finances started to take a turn for the worse.

Jan. 25: A reorganization specialist¹⁰³ Mr. Cooper is the front-runner to be named acting chief executive of Enron, following the resignation earlier this week of Mr. Lay as chairman and CEO.

• Arthur Andersen¹⁰⁴ analysts determined during the fall that there was significantly "heightened risk of financial-statement fraud" at Enron, a newly released document shows.

• Off-balance-sheet¹⁰⁵ partnerships -- those sometimes debt-laden entities through which companies can do business while keeping financial obligations off their books -- are getting more scrutiny from individual investors.

• A number¹⁰⁶ of institutional investors -- with Enron's rapid collapse in mind -- are calling for companies to adopt "conflict of interest policies" that would prevent their accounting firm from providing anything beyond auditing services.

Jan. 24: Mr. Lay resigned¹⁰⁷ as chairman and chief executive of Enron, less than 24 hours after the court-appointed creditors committee requested his removal.

• Accounting failures¹⁰⁸ that helped precipitate the collapse of Enron have made reform of accounting-industry oversight the biggest issue immediately facing the SEC.

• Outraged lawmakers¹⁰⁹ are pointing fingers about bad accounting, but they shoulder some of the blame: Congress, including some of Enron's most vocal critics there, routinely opposed significant new accounting rules over the past decade.

• Numerous warning signs¹¹⁰ allow skeptical investors to protect their money, and individual investors have plenty of tools at hand to avoid being caught in a stock that suffers an accounting blowup.

Jan. 23: The complexity¹¹¹ of corporate accounting -- and how it has changed -- has become painfully clear in the collapse of Enron. A special package explores how financial statements from General Electric¹¹², AIG¹¹³, Williams¹¹⁴, IBM¹¹⁵, and Coca-Cola¹¹⁶ can often be difficult for investors to interpret.

• With Enron¹¹⁷ in the spotlight, the long look back at accounting mishaps looks more disconcerting.

• The accounting industry's¹¹⁸ Public Oversight Board, which oversees auditors' "peer review" method of self-regulation, unexpectedly voted itself out of existence to protest Mr. Pitt's plans to devise replacement body to monitor the industry.

• In Texas¹¹⁹, the State Board of Public Accountancy has opened an inquiry to determine whether "possible misdeeds, omissions or malfeasance" took place in Enron's accounting practices, and other state boards may follow suit.

Jan. 21: Some question whether¹²⁰ ties between Enron and Arthur Andersen were too cozy.

• Investigators sift through¹²¹ the complex financial structures of Enron's partnerships, which hid hundreds of millions of dollars of losses and debt from public view.

Jan. 18: Enron's board fires¹²² longtime auditor Arthur Andersen, but Andersen said the relationship ended when Enron's business failed and it went into bankruptcy.

Jan. 16: UBS won't have to inject¹²³ any minimum amount of capital, nor supply any minimum amount of credit, under an agreement to acquire Enron's North American trading operations.

• An August 2001 letter¹²⁴ from an Enron executive raises serious questions about the company's business and accounting practices, highlighting a growing struggle that had been going on inside the company for more than a year.

• A venerable¹²⁵ and politically connected law firm advised Enron officials not to worry about the company employee's warnings of questionable accounting.

Jan. 15: A newly discovered letter¹²⁶ written by an Enron employee warned the company's chairman about its accounting practices and prompted an internal investigation.

• Enron pleads¹²⁷ for federal assistance to stave off collapse.

Jan. 14: Top executives¹²⁸ at Enron and Arthur Andersen turned to high-powered lawyers for advice on how to deal with the investigations.

• Swiss financial giant UBS¹²⁹ emerged as the apparent victor to acquire Enron's North American energy-trading operation.

Jan. 10: Enron and its creditors¹³⁰ negotiated to coax the highest possible offer for parts of the company's once-powerful wholesale trading unit.

Jan. 7: Enron received formal bids¹³¹ for a majority stake in its energy-trading arm from Citigroup, UBS and BP.

Jan. 2: Internal Enron documents¹³² showed top management and directors viewed controversial partnerships as integral to maintaining its rapid growth in recent years.

Dec. 30: Enron asked the judge¹³³ overseeing its bankruptcy case to approve the sale of assets worth several hundred million dollars by the end of the year.

Dec. 20: Citigroup is close¹³⁴ to cementing a bid for most of Enron's flagship energy-trading operations.

Dec. 12: Enron unveiled¹³⁵ a one-year plan to restructure its way out of trouble, including a reorganization around its core businesses.

Dec. 9: Citigroup and UBS worked¹³⁶ to finalize separate bids to take over Enron's trading operations, the first step toward a potential bankruptcy-court auction for the flagship business.

Dec. 6: Bankruptcy court proceedings¹³⁷ start to take shape; U.S. Bankruptcy Judge Arthur Gonzalez, who will hear the Enron case, is known as a stickler for detail.

Dec. 4: Enron's highly questionable¹³⁸ financial engineering, misstated earnings and persistent efforts to keep investors in the dark were behind its collapse.

Dec. 2: Enron filed¹³⁹ for protection from creditors in a New York bankruptcy court, the biggest such filing in U.S. history.

Nov. 20: Enron warned¹⁴⁰ that continuing credit worries, a decline in the value of some of its assets and reduced trading activity could hurt its fourth-quarter earnings.

Nov. 8: Enron reduced¹⁴¹ its previously reported net income dating back to 1997 by $586 million, or 20%, mostly due to improperly accounting for its dealings with the partnerships run by some company officers.

Oct. 24: Enron replaced¹⁴² Mr. Fastow as chief financial officer with Mr. McMahon, the 40-year-old head of the company's industrial-markets division.

Oct. 19: The Wall Street Journal¹⁴³ reported that general partners of Mr. Fastow's partnerships realized more than $7 million last year in management fees and about $4 million in capital increases on an investment of nearly $3 million in the partnerships, set up principally to do business with Enron.

Oct. 16: Enron takes¹⁴⁴ $1.01 billion charge related to write-downs of investments. Of this, $35 million is attributed to partnerships until recently run by Mr. Fastow.

Read other sections of the chronology:

The Investigation¹⁴⁵
Enron & Arthur Andersen¹⁴⁶
Enron & the Financial Markets¹⁴⁷
Enron's Employees¹⁴⁸
The Fallout World-Wide¹⁴⁹

Return¹⁵⁰ to Called to Account, the Andersen & Enron special report.

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Updated May 31, 2002 9:02 a.m. EDT