Kenneth Lay rose through the ranks of the energy industry, becoming CEO of Enron in 1986. Under his leadership, Enron grew rapidly but also engaged in deceptive accounting practices to hide losses. This led to Enron's bankruptcy in 2001, costing thousands their jobs and pensions and resulting in Lay's criminal conviction for fraud, though he died before being sentenced.

3.  Biography Kenneth Lee Lay, the son of a Baptist preacher in rural Missouri was
born on April 15, 1942, in Tyrone, Missouri, and received both his bachelor and
master degrees in from the University of Missouri. He rose to the pinnacle of
corporate America as head of .
 Career History Lay served in the U.S. Navy from 1968 to 1971. In 1970, after
earning a Ph.D. in economics at the University of Houston, Lay went to work for
the Exxon predecessor Humble Oil & Refining. He worked for the Federal Power
Commission from 1971 to 1972, and served as energy deputy under secretary
for the United States Department of Interior until 1974. In 1974, Kenneth Lay
joined the Florida Gas Company, eventually serving as president of its successor
company, Continental Resources Company.
 Career History In 1981, he left Continental to join Transco Energy Company in
Houston, Texas. Three years later, Lay joined Houston Natural Gas Co. as
chairman and CEO. The company merged with Inter North in 1985, and was
later renamed Corp. In 1986, Kenneth Lay was appointed chairman and chief
executive officer of . .

4.  Kenneth Lay
 Former CEO of Enron, helped start the company.
 Enron extended to him $7.5 million revolving credit line, which he reportedly used
and repaid with Enron stock 15 times within a period of just several months
 He quit as CEO in February 2001
 He returned as CEO in August 2001until he resigned on Jan. 23, 2002
 He quit the Enron board altogether on Feb. 4.
 Sherron Watkins said Lay was "duped" by top executives

5.  Jeffrey Skilling
 Enron's chief executive in the first half of 2001
 Since joining the company in 1990, Skilling helped transform Enron from a
natural-gas pipeline company into an energy-trading powerhouse.
 Between January and August 2001 he sold off about $20 million in Enron stock
 Resigned after the close of markets on Aug. 14 2001
 Being charged with conspiracy, fraud and insider trading

6.  David Duncan
 Enron's chief auditor at Anderson
 His job was to check Enron’s accounts
 He is accused of ordering the shredding of thousands of Enron-related
documents in an effort to hide them from Securities and Exchange Commission
investigators

7.  Andrew Fastow
 Former Chief Financial Officer of Enron
 The mastermind behind the deceptive accounting practices
 Lea Fastow (his wife) also plead guilty to signing and filing a tax return that did
not include income the Fastow’s had received from Mike Kopper

8.  Sherron Watkins
 Known as the "Enron whistle-blower"
 Was Enron's vice president of corporate development
 Wrote a letter to Kenneth Lay about “suspicions of accounting improprieties"
 Not really a “whistle-blower” because she never went public with her suspicions

9. Skilling was born in Pittsburgh, Pennsylvania, and was the second of four children of Betty (Clarke) and Thomas
Ethelbert Skilling, Jr. His father was a sales manager for an Illinois valve company. He grew up in New Jersey and
Aurora, Illinois. When he was 16 years old, he worked at WLXT (channel 60), a UHF television station in Aurora.
Skilling graduated from West Aurora High School. He received a full scholarship to Southern Methodist University
in Dallas where he was a member of the fraternity Beta Theta Pi. He initially studied engineering before changing to
business. After graduation, he went to work for a Houston bank, which sent him to Harvard Business School. During
his admissions interview for Harvard Business School, he stated that he was asked if he was smart, to which he
supposedly replied, "I'm fucking smart". Skilling earned his M.B.A. from Harvard Business School during 1979,
graduating in the top 5% of his class as a Baker Scholar. He became a consultant at McKinsey & Company in the
energy and chemical consulting practices. Skilling became one of the youngest partners in the history of McKinsey.
Skilling started his career in Houston as an analyst for First City Bancorporation of Texas in Houston. First City
was one of Enron's banks and just before it failed the first time, Skilling quit.[citation needed] The CEO of
Collecting Bank, the FDIC's facility for managing the bad assets of First City, was Sam Segnar, the first CEO and
chairman of Enron. The new First City Bank, headed by A. Robert Abboud, was also an Enron bank. Abboud was
the former president of First Chicago Bank and Occidental Petroleum under Armand Hammer.[citation needed]
First City was initiated by Judge James Andersen Elkins and his law partnership, Vinson & Elkins, one of Enron's
main law companies. As a consultant for McKinsey & Company, Skilling worked with Enron during 1987, helping
the company create a forward market in natural gas. Skilling impressed Kenneth Lay in his capacity as a consultant,
and was hired by Lay during 1990 as chairman and chief executive officer of Enron Finance Corp.

10. What Went Wrong?

11.  Energy companies lobbied congress in the 1980s for
deregulation of the energy business
 Energy policy was changed and Washington lifted controls on
who could produce energy and how it was sold
 Jeff Skilling took and aggressive approach to expand Enron by
trading futures in gas contracts

12.  Under Skilling’s new plan Enron bet against future
movements in the price of gas-generated energy
 “Enron bought and sold tomorrow’s gas at a fixed price
today”
 With every trade, Enron took a cut for transaction costs
 Using the internet to promote trading, Enron became the
most successful player in the futures game; 90% of Enron’s
income came from trades

13.  Enron took advantage of the dot.com boom and traded
internet bandwidth
 The value of Enron’s online transactions was huge ($880
billion)
 The problem was Enron wasn’t making money on many of
their online trades because they made the market very
efficient

14.  Enron began tweaking the numbers in their financial
statements with accounting techniques to hide their losses
 Enron created partnerships, and then passed the assets
(losses) to these partnerships which eliminated the losses
from their balance sheets

15.  Throughout all of this, Enron
and its key members were
making political contributions
to the white house and
congress.
 Kenneth Lay donated $100,000
to President Bush in 2000, and
in 2001 Bush invited Lay to
become an advisor to his
transition team.

16.  In the year 2000, Kenneth
Lay met three times with
Dick Cheney to discuss
energy policy review.
 When the review was
published in May 2001, it
was very favorable to the
Enron and the energy
sector.

17.  Aug 14, 2001 Jeff Skilling resigned, Kenneth Lay became CEO
once again.
 Stock prices began to fall, as investors were uncertain about
the company’s stability.
 This started a chain reaction: Enron had hedged against its
own stock, so as long as the stock price was declining, it
could not recover its losses.

18.  December 2001, Enron
filed for chapter 11
bankruptcy
 It’s share price had
collapsed from about $95
to under $1.

19.  Companies and large firms that are facing severe and
unmanageable debt may seek to file chapter 11 bankruptcy,
which allows them to re-organize so they can either
continue their day-to-day operations or go out of business
entirely.
 Under chapter 11, a company is protected from damaging
lawsuits and other negative measures, but in exchange the
company is usually required to have all its major business
decisions approved by the bankruptcy court.

21.  “Enron is in the midst of restructuring various businesses for
distribution as ongoing companies to its creditors and
liquidating its remaining operations.”

23.  Interesting events for Business Ethics Class Kenneth Lay is known as the
notorious business executive who was convicted of conspiracy and fraud,
which cost 20,000 employees their jobs and many their life savings, and
losing billions for investors. Kenneth Lay violated the following two laws
of moral theories.
 Lay was charged, in a 65-page indictment, with 11 counts of securities
fraud, wire fraud, and making false and misleading statements The trial
commenced on January 30, 2006, in Houston and on May 2006 Lay was
convicted of all six counts of conspiracy and fraud and faces a maximum
of 45 years in prison. Lay was also convicted on Thursday of bank fraud
and making false statements to banks in a separate trial related to his
personal banking.
 Lay died of a heart attack in Colorado in July 2006. Accordingly, the
judge vacated Lay's conviction on, since he died before he was October
17, 2006s sentenced and before all appeals could be exhausted.

24.  Michael Novak’s book Business as a Calling: Work and the
Examined Life as saying, “I was fully exposed to not only legal
behavior but moral and ethical behavior and what that means
from the standpoint of leading organizations and people.” In
an introductory statement to the revised Enron Code of Ethics
issued in July 2000, Lay wrote: “As officers and employees of
Enron Corp., its subsidiaries, and its affiliated companies, we
are responsible for conducting the business affairs of the
companies in accordance with all applicable laws and in a
moral and honest manner.”