The Enron Collapse: An Overview of Financial Issues (CRS Report for Congress)
| Release Date |
Revised Aug. 12, 2004 |
| Report Number |
RS21135 |
| Report Type |
Report |
| Authors |
Jackson, William D., 1946-;Jickling, Mark;Lyke, Bob;Purcell, Patrick J.;Shorter, Gary W. |
| Source Agency |
Congressional Research Service |
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Summary:
The sudden and unexpected collapse of Enron Corp. was the first in a series of major corporate
accounting scandals that has shaken confidence in corporate governance and the stock market. Only
months before Enron's bankruptcy filing in December 2001, the firm was widely regarded as one
of the most innovative, fastest growing, and best managed businesses in the United States. With the
swift collapse, shareholders, including thousands of Enron workers who held company stock in their
401(k) retirement accounts, lost tens of billions of dollars. It now appears that Enron was in terrible
financial shape as early as 2000, burdened with debt and money-losing businesses, but manipulated
its accounting statements to hide these problems. Why didn't the watchdogs bark? This report
briefly examines the accounting system that failed to provide a clear picture of the firm's true
condition, the independent auditors and board members who were unwilling to challenge Enron's
management, the Wall Street stock analysts who failed to warn investors of trouble ahead, the rules
governing employer stock in company pension plans, and the unregulated energy derivatives trading
that was the core of Enron's business. This report also summarizes the Sarbanes-Oxley Act ( P.L.
107-204 ), the major response by the 107th Congress to Enron's fall, and related legislative and
regulatory actions during the 108th Congress. It will be updated as events warrant.
Other contributors to this report include William D. Jackson, Bob Lyke, Patrick Purcell, and
Gary Shorter.
