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The biggest scandal of the beginning of the 21st century was the Enron case. It was Enron that became the first owner of the gas pipeline network spread across the country.
In the 90s, the company began to engage in trade, not only of gas, but also of electricity. The corporation entered the securities market, which allowed it to have room for financial maneuvers. Enron soon became the largest trader in the electricity market, ranking 7th in the Fortune 500 in 2001. At that time, its staff consisted of 21 thousand employees in 40 states. At this time, the country's electricity market was freed from excessive government control, Enron was able to manipulate electricity prices across the United States.
Naturally, it did not go without close ties with big politicians - it was Enron that became the main sponsor of George W. Bush in his election campaign. The company mainly sponsored Republicans, although Democrats got their piece of the pie too. Many of the employees of the presidential administration ended up closely associated with the energy giant, being its shareholders, advisers or former employees. As a result, Enron receives unprecedented benefits in the supply of electricity, influences the choice of those who exercise control over this market.
Such activity, by the way, was quite legal, but not everything was going smoothly in the accounting department of the giant. Thus, the management of the company created thousands of legal entities, mostly offshore, to conceal the true state of affairs. So, at Georgetown, PO Box 1350, in the Cayman Islands, 692 subsidiaries of Enron were registered. It is interesting that all offshore companies were established legally, submitted appropriate reports to government services, moreover, all this abundance of small partners was approved by the company's board of directors, its auditors and lawyers.
The principle of the whole scheme was simple - through subsidiaries, electricity deals were carried out, allowing to inflate the value of the entire company, at the same time, those debts that Enron did not intend to show were shifted to offshore companies. As a result, the company's performance grew, the management received multimillion-dollar bonuses, the value of shares and their stakes grew. In parallel, the management managed to make a profit from the offshore companies themselves, so the chief financier of Enron, Andrew Fastow, who is the ideologist of this whole scheme, was able to get $ 30 million from one of the offshore companies.
For tax authorities, unlike shareholders, the company showed all its losses, being unprofitable and receiving tax refunds in the amount of 380 million dollars. Enron had the best lawyers and accountants working for Enron, so it was expected that virtually any operation of the company could be recognized as legal or challenged in court with a good chance of success.
However, the debts did not stop growing, accumulating like a snowball. In 2001, the company's top management began secretly dumping their stakes, although they told their employees about the bright prospects. By October, it became impossible to hide debts, the company announced losses of 640 million and a decrease in capital by 1.2 billion. The chief accountant of the company was accused of this, who was immediately fired for offshore machinations.
Enron's shares began to plummet. Already in November, the company reduced its reported profit for 5 years by 586 million, and the debt increased by another 2.5 billion. Now the fall of the company could no longer be avoided, the shares depreciated from $ 80 apiece to one, in December 2001, Enron filed for bankruptcy, which became the largest in the history of the country. About 4 thousand employees in the United States and a thousand in Europe were immediately dismissed, and Dynegie, which had previously wanted to buy a crumbling competitor, abandoned its plans.
In the course of the proceedings, it turned out that the pension savings of 15 thousand employees of the company in the amount of one billion were burned, as the Enron pension fund invested in its own shares, which are now worthless. It turned out that the auditors, the Arthur Andersen company, had a hand in concealing the unseemly facts.
One of the world leaders in this industry not only participated in the development of the scheme, but, anticipating the collapse, destroyed a huge amount of valuable information related to the company. The creditors put forward a number of claims not only against the bankrupt, but also against the bankers of Enron. Among the defendants were leading American banks, which are accused of helping the giant to mislead investors.
The scandal spread to Europe. In England, Enron sponsored the victorious Labor Party, which is now accused of shaping the state's energy policy to please the company. What happened to the giant caused a chain reaction in the American economy, because hundreds of other companies used similar practices, which have now revised their financial results.
In July 2002, another giant of the American economy collapsed - WorldCom. The largest Internet operator in the world filed for bankruptcy, leaving behind $ 107 billion in assets. The reason - the discovery a month before in the reporting error in the amount of 3.8 billion dollars. And all this time the well-known firm "Arthur Andersen" was the auditors of the company.
These events prompted the public to think about the relationship between big business and government, as well as a conflict of interest while providing consulting and auditing services. The state passed a number of bills that strengthened state control over the economy, stricter control by shareholders and officials, and increased the prison term for fraudulent leaders. Even foreign companies are subject to these rules, and more than 1,300 issuers are listed on the New York Stock Exchange alone.
For example, if the United States decides that a Russian company listed in the United States does not meet certain financial requirements, then its director may receive a considerable sentence in prison. This caused discontent even among US allies, who regard such a policy of combating fraudsters as economic imperialism. However, only time will tell how effective these measures turn out to be.