hi welcome to another ColdFusion video

it's a distant fact now but Enron was

once the seventh largest corporation in

America they revolutionized trading and

the energy market there were far smarter

than their competitors and their

business was intricate and too complex

for the average person to understand

except in reality it was all a big scam

filled with lies

fraud and political manipulation Enron

was the biggest scam in US history the

fallout from the scam was monumental

billions of dollars stolen thousands of

lost jobs

dozens of convictions one suicide and

the unveiling of a very public display

of corporate greed that shined directly

into the heart of corporate America this

is the story of how one company took ten

years to grow to sixty billion dollars

in value and then in less than a month

go bankrupt this is the story of Enron

you are watching ColdFusion TV

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Enron began as an energy supply company

mainly dealing with natural gas

eventually the company moved on to

trading making energy deals in power and

then later

moving on to broadband and even trading

the whether there were Wall Street's

darling the company that could never

lose and a stock price kept growing

year-on-year the company was also

well-connected politically for example

Enron was the single biggest contributor

to the George W Bush campaign Bush even

called Kenneth Lay the founder of Enron

Kenny boy and it's with Kenny boy that

the story starts

growing up in a poor family Kenneth

Leia's father was a Baptist priest the

young Ken would often ponder about his

future a future where he could escape

his current conditions when he grew up

he became a prominent figure in the

deregulation of the energy sector the

PhD graduate spent his time as a

financial analyst in the Pentagon before

climbing the ranks and becoming close

friends with George Bush Senior Ken Lay

would even send the Enron corporate jet

to take George senior and his wife to

their sons inauguration as you will see

later these favors did not go unruhe

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the first red flag the founder of the

company Kenneth lay the something was

wrong within the company came during the

valhalla scandal of 1987 to oil traders

working for Enron gambled enormous Lee

on the company's behalf shifting money

to fake accounts with names such as my

ass or my ass worried auditors told lai

that they found the two traitors moving

money into their own accounts

manipulating earnings and gambling on

trades beyond their capacity but instead

of firing the two road traders lai made

no changes didn't seem to matter what

they were doing as long as they were

making the company money and run even

sent them a letter saying please keep

making us Millions

later the two were convicted of fraud

Ken Lay acted shocked saying that he was

not aware of their reckless gambling and

theft but as revealed later he actually

encouraged it one of the convicted

traders was sent to jail for a year and

this gave Ken Lay a big problem one of

his main moneymakers was behind bars and

he needed someone new to bring in cash

enter Jeffrey Skilling

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skilling Enron's new CEO was leis

biggest asset when he arrived at Enron

he started moving the company in a new

direction

skilling wanted to turn Enron from a gas

supply company into a stock market for

natural gas he also introduced the

company to mark to market accounting an

idea that would allow the company to

fraudulently reap billions so

mark-to-market accounting simply allows

the company to write down profits in

their books on the day that the deal was

signed this meant that if Enron signed a

deal worth 50 million dollars over the

next 10 years they could write 50

million dollars in their books that day

despite not receiving a penny it didn't

even matter if the deal fell through

effectively this myth of the company was

worth more on paper than it had actually

earned the deals were often subjective

they could be worth whatever Enron

thought they were worth when the

Security and Exchange Commission

approved the accounting trick of

mark-to-market for Enron the office

celebrated they knew that this was the

key to making billions meanwhile

skilling was known for his Darwinian

philosophy survival of the fittest his

favourite book The Selfish Gene

describes how greed and competition

motivate human nature at Enron skilling

wanted to unlock these instincts in his

employees one way he did this was

grading all employees on a scale of one

to five with one being the best and five

being the worst the thing was 10% of all

employees had to be greater to fire and

when you were graded a five you were

fired this created the competition that

skilling was looking for people began to

work 18 hours a day and were ruthless in

their efforts to earn the company as

much money as possible skilling famously

said that money was the only thing that

motivated

unsurprisingly skilling was a massive

risk taker he often went on wild

adventures with other Enron executives

this includes dirt biking on dangerous

trails where people often flip their

cars an executive even required stitches

after a biking accident on one of these

trips skilling said he liked guys like

this guys with a bit of edge Lao PI a

mild-mannered executive was one of these

guys with a bit of edge

skilling called Lao PI is ICBM

intercontinental ballistic missile

he will CEO of an Enron subsidiary and

seem to be motivated by two things money

and strippers PI isn't as mysterious

thing as one can be in such a huge

scandal he left and on in 2001 with 215

million dollars became the second

largest landowner in Colorado

he left his business division with 1

billion dollars of losses and escaped

the whole scandal pretty much intact pi

would come back later into this story a

few decades after the dust settles Enron

online will change the markets for many

many commodities it is creating an open

transparent marketplace that replaces

the dark blind system that existed it is

real simple to turn on your computer and

it's right there and if you want to do

business you push the button

that's our vision and we're trying to

change the world

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and it wasn't just Internet companies

feeling the fever and run stock had

tripled in the space of two years

everyone with a little bit of spare cash

was playing the stock market game and

run knew that as long as the company met

or exceeded endless expectations the

stock price will keep rising and somehow

they always met or exceeded those

expectations during this time while Jeff

Skilling stood at the company's

conventions telling his staff to put

more of their 401k in to Enron he knew

that the profits were actually going in

the opposite direction around the world

they were losing billions on natural gas

projects Enron had poured billions of

dollars into appliance in India you need

to realize that India couldn't afford to

buy the electricity the site lay in

ruins but that didn't stop the

executives at Enron writing down future

profits for the project into their books

and handing themselves massive bonuses

the analyst the very people who were

supposed to stop the corruption fell

under the spell of skilling the

complexity of the company and the

charisma of skilling made analysts

simply take him at his word in fact the

ones that didn't were fired the company

soon began trading bandwidth after some

calm inspiration they made a deal with

blockbuster to provide streaming

services but the technology just simply

didn't work well enough yet the deal

fell through but Enron still rode fifty

three million dollars in their books for

things began to get out of control and

Enron soon began trading weather

yes the weather like sunshine and rain

they would soon sell futures on the

weather essentially gambling what the

temperature would be you would probably

imagine that most people would be

skeptical of this but it was activities

like this that led and run to being

listed on the fortune 500s most

innovative companies list but one

reporter at fortune would soon start

asking questions and this would later

lead to the company's demise Bethany

McLean a reporter at fortune was doing a

piece on Enron she had a phone call with

John skilling where she asked some

simple questions like how exactly does

Enron make its money

skilling said he couldn't answer because

he wasn't an accountant so he sent a few

finance guys including Andy fust our the

CFO to answer her questions the next day

they sat in the office for three hours

poring over documents at the end as

others had left the room and he turned

to the reporter and said I don't care

what you write about the company just

don't make us look bad Andy Foster was a

character described as having no moral

compass

he made Enron deaths disappear by moving

them to show companies so that on paper

and run was profitable he even set up

his own fraudulent firm just to buy an

Iran assets this fraudulent firm was

called ljm Andy would later convince

ninety-six bankers to invest in the scam

ljm firm ljm would make Andy Faust our

forty five million dollars but it seemed

to that the banks were in on the deal

too

Merrill Lynch bought three Nigerian

barges from Enron and sold them back

five months later this was to help

anyone cook their books and later

several bankers would go to jail for

this both skilling him lay knew that

even this couldn't last forever they

needed a new gold mine and then they

turned their eyes to the Golden State

California now skilling became

increasingly volatile arriving at work

unshaved and retired on a 2001 investors

call he even called an investor in a

hole a brash reaction from a fortune 500

CEO the pressure was getting to him

the company had to keep making quarterly

targets

despite their businesses failing at home

and abroad California was going to be

their next big score Enron merged with

Pacific Gas & Electric which gave them

access to the Californian grid once this

was achieved strange things began to

happen in the newly deregulated

electricity market of California rolling

blackouts became common but strangely

the state had almost doubled the

capacity than there was demand so why

was this happening it turns out Enron

traders were manipulating the market

they moved electricity out of state to

increase demand and when the price got

high enough they would move it back in

they even called power plants and asked

them to make excuses to shut down for a

few hours increasing the price as those

less demand traders had energy maps and

the control to move the energy they knew

exactly how to squeeze every last dollar

from the people of California while the

state faced blackouts causing unknown

holes on the lives of Californians the

Enron traders were high-fiving

themselves over their bonuses Ken Lay

even said it doesn't matter how many

rules you Californians make I've got a

bunch of smart people here that will

figure out how to make money anyway the

year-long ordeal would cost California

30 billion dollars but why didn't the

state put a stop to it well the law

states that it's the federal government

issue and it's their responsibility to

take care of it and guess who the

president was at the time that's right

leis good friend George W Bush Bush

refused to step in saying that it was

his administration's belief that

intervention would not solve anything

the Federal Energy Regulation Commission

also didn't step in until the Senate

forced them to the chairman of the

Commission was personally recommended by

Kenneth Lay this whole ordeal caused the

people of California to turn on their

governor and appoint a new one one that

was more suitable for the role the

Terminator

one day in 2001 out of the blue skilling

suddenly resigned
perhaps he figured he could leave the

company years before it imploded then he

could say well it was fine when I left

it regardless

Kenneth Lay took over the CEO role just

one day later Sharon Watkins who worked

under the company CFO Andrew foster sent

a letter to Kenneth Lay detailing the

staggering amount of corruption and

fraud that she'd found within the

company The Wall Street Journal would

write a piece about some of Andy's

dealings and soon the SEC would launch

an informal inquiry at this point

investors began to feel nervous Kenneth

Lay tried to bring calm and reassurance

to investors and employees while he was

addressing the company's issue to a

speech to employees to several blocks

away and runs accounting firm was busy

shredding documents one of the

accounting firms shred one ton of paper

on October the 23rd but it was too late

the walls began to fall and over the

course of a month the company went from

that healthy appearance of one of the

leading innovators to total bankruptcy

you want us to believe that you sat

there in your office and didn't and had

no clue that this place was about to

collapse

on the day I left on August 14 2001 I

believe the company was in strong

financial condition I did not do

anything right that was not in the

interest and all the time I worked for

an run corporation that was in the

interest of the shareholders of the

company if I could go back and redo

things I would not know

for the thousands of people who held

Enron stock the market was frozen at the

$32 mark and when it reopened it was

nine dollars a share meanwhile andron

executives had a fire sale of all of

their stock in the months leading up to

the bankruptcy skilling told his

employees to blame or stock while he

sold all of his as the media began

circling the story criminal

investigations were launched cliff

Baxter a trader who often went on

Skilling's wild adventures cashed in 30

million dollars from Enron after being

called to testify in court

Baxter Cod in his Mercedes drove down a

quiet street and shot himself

Andy Foster the former CFO pleaded

guilty to conspiracy to commit wire

fraud he ratted out and cut himself a

deal to testify against other Enron

executives he was sentenced to 10 years

but only served six and paid 23 million

in fines and runs accounting firm Arthur

Andersen the one that shredded one ton

of paper was convicted of obstructing

justice America's oldest accounting firm

collapsed due to the loss of reputation

29,000 people lost their jobs

Ken Lay earned 300 million from Enron he

was found guilty of 10 counts of

securities fraud and was facing 45 years

in prison but died of a heart attack a

month before his sentencing 20,000

people at Enron lost their jobs and

medical insurance with an average

severance pay of only $4,500 executives

were paid 55 million dollars during the

bankruptcy and cashed a further 774

million in the year before the collapse

skilling the mastermind behind Enron was

convicted of 19 counts of security and

wire fraud he was sentenced to 24 years

and 180 million in fines while in jail

his parents and his son passed away

I only served 12 years of his 24 year

sentence and was released in early 2019

but this isn't where the story ends

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skilling is hoping that he can get a

second chance he appears to be applying

a return to the energy sector only two

months after his prison release in early

2019 skilling was entered as a manager

of a new company which he founded a few

years ago Lau PI / former Enron

executive who sailed off into the sunset

with us 250,000,000 is reported to be

helping skilling regain connections and

funding according to The Wall Street

Journal skilling has been holding

meetings from former Enron executives in

relation to starting a new venture this

may be difficult for him as obviously

his reputation has been massively

smeared

but apart from people's perception

there's technically nothing stopping him

the SEC has banned skilling from being

an officer if any public company so as

long as this venture stays private he

can do whatever he wants so that is the

story of Enron with a not so typical

ending despite being one of the biggest

players in the biggest scam in the US

history resulting in billions of dollars

in losses for average people tens of

thousands of lost jobs and executives

reaping and billions skilling is out of

jail and free to start again

Enron's motto was asked why during his

astronomical rise it seemed that no one

bothered to ask why how or where the

money was coming from and now with

skilling out of jail and trying to

re-enter the business world maybe once

again we should ask why

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so that wraps up our look at Enron

thanks for watching this video I hope

you enjoyed it if you want to see stuff

like this or much more you should

definitely consider subscribing to this

channel if you want to see my last video

on business fraud which was the fairness

story I'll leave a link for that after

this interestingly enough Elizabeth

Holmes as dad was a former executive at

Enron I'll say no more anyway that's it

thanks for watching this has been - gogo

and you've been watching cold fusion and

I'll see you again soon for the next

video

cheers guys have a good one

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cold fusion it's me thinking

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