Enron Corporation has become synonymous with improper accounting and corporate fraud. Enron, which declared bankruptcy in 2001, remains an energy company that is based in Texas. At one time, Enron was considered one of the leading electricity, natural gas and communications companies that employed over 21,000 people and claimed revenues of $101 billion in 2000. It was also lauded for being an exemplary employer and to be a great place to work. It turns out that much of that reputation and revenue was completely fraudulent.
Enron became infamous at the end of 2001 when fraudulent accounting practices were unveiled and it wad clear that the company had been sustained by institutionalized, systematic, and well-planned fraud for years. It does still exist, a shadow of its former self, and it operated a handful of key assets, and most recently was preparing to sell or off its remaining businesses and holdings.
Enron was originally an energy company that was involved in the electricity and gas transmission and distribution throughout the U.S. It was also involved in the construction and operation of many power plants and gas pipelines worldwide. Enron widely claimed that it grew based on innovative promotion and marketing of both power and communications bandwidth commodities as “tradable financial instruments.” Enron was named by Fortune Magazine to be "America's Most Innovative Company" for six years until 2001 when it became clear that their “innovative” techniques were actually fraudulent accounting methods.
Not only were their recorded profits inflated and completely fabricated, they created their own related companies to absorb debt and to take the losses from unprofitable entities off their public accounting books. On January 9, 2002, the U.S. Department of Justice formally announced its own criminal investigation of Enron. As a result of the scandal and the revelation of improper accounting and the fabrication of profits and revenue, Enron’s once blue chip stock fell from $90.00 to $0.30 in value.
One of the most tragic outcomes of the Enron debacle was the loss of millions of dollars in retirement funds for former Enron employees. In 2003, the Department of Labor filed suit in Texas to attempt to recover the retirement savings losses that Enron employees suffered due to the blatant mismanagement of two of Enron’s main pension plans. Essentially, because of the poor management of the company and the widespread fraud, Enron was rendered virtually valueless – which left any employees who were dependent on the value of the stock without funding for retirement. In some cases, victims of this fraud were already retired and were virtually wiped out.
Because more than half of the assets of Enron’s 401(k) Savings Plan for employees consisted of Enron stock, which is now virtually worthless, the department of labor sued on the grounds that the employees had the right to assume someone would advocate for a more balanced investment plan. Since the management of the company and the board of directors failed to act in the best interest of the employees, they are being held liable for the massive losses that were incurred. Under tort law, this is considered a blatant lack of action leading to loss.