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1 (March 28, 2002)

handle is hein.crs/crsmthabayk0001 and id is 1 raw text is: Order Code RS21135 Updated March 28, 2002 The Enron Collapse: An Overview of Financial Issues Mark Jickling, Coordinator Specialist in Public Finance Government and Finance Division Summary Only months before Enron Corp.'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. Investigations of wrongdoing may take years to conclude, but Enron's failure already raises financial oversight issues with wider applications. 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 and bond raters who missed the 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. The report also describes related legislation and will be updated regularly. An indexed list of all Enron-related bills is available on the CRS website. Other contributors to this report include William D. Jackson, Bob Lyke, Patrick Purcell, and Gary Shorter. Formed in 1985 from a merger of Houston Natural Gas and Internorth, Enron Corp. was the first nationwide natural gas pipeline network. Over time, the firm's business focus shifted from the regulated transportation of natural gas to unregulated energy trading markets. The guiding principle seems to have been that there was more money to be made in buying and selling financial contracts linked to the value of energy assets (and to other economic variables) than in actual ownership of physical assets. Until late 2001, nearly all observers - including professional Wall Street analysts - regarded this transformation as an outstanding success. Enron's reported annual revenues grew from under $10 billion in the early 1990s to $101 billion in 2000, ranking it seventh on the Fortune 500. It now appears that Enron's problems did not arise in its core energy operations, but in other ventures, particularly in dot com investments in Internet and communications businesses and in certain foreign subsidiaries. The company used Congressional Research Service +. The Library of Congress CRS Report for Congress Received through the CRS Web

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