Enron a byword for corporate greed

Enron. Just saying the word conjures an orgy of greed and executive malfeasance. Yet, little more than five years ago, the energy company's name evoked a different response.

It was a stock market superstar, the seventh-largest company in America, routinely voted the most innovative, and the source of great wealth for its loyal army of investors.

Its bosses were feted as the smartest and most influential in corporate America. Kenneth Lay was its grandfatherly figurehead, golfing partner to George Bush snr, informal adviser to George W, and talked of as a potential energy secretary.

Lay's right-hand man, the Harvard alumnus Jeffrey Skilling, had transformed the sleepy Texan oil pipeline company into a US$70 billion giant that kept on inventing new and complex ways to make money.

As Lay and Skilling proselytised the deregulation of energy markets, Enron and its top traders made themselves filthy rich from buying and selling electricity supply contracts as if they were stocks and shares.

And as the company's profits went up, so did Enron's share price. Its employees were seduced by the thrill of working for one of America's most successful companies.

It was also the era of the dotcom boom, when people who had never dabbled in shares were playing the market like pros. Encouraged by the bullish predictions of Lay and Skilling, Enron's employees and followers shovelled their spare cash and their pensions into the company's shares.

But Enron was a con trick. Hidden within the company was a mountain of debt that would eventually engulf it.

To the outside world, it looked so powerful it was accused of holding electricity markets to ransom and triggering blackouts in California. Inside, a vast network of unpublicised side deals had been used to push US$30 billion of liabilities beyond the view of the company's formal accounts, creating the illusion of ever-rising profit.

This network was so labyrinthine that the man in charge, chief financial officer Andrew Fastow, was able illegally to cream off US$45 million without the board knowing.

With regulators closing in, Fastow's deceit was made public and he was fired, triggering a collapse of confidence in the company. No one would trade with it, partners called in the liabilities, and Enron - and the livelihoods of 21,000 employees - was doomed to be wiped out.

A con trick, yes, but a fraud that stretched right to the two top men? The jury decided yes. Sherron Watkins, whose memo to Lay proved he had been made aware of concerns over Enron's accounting practices, said: "The dark side of innovation is fraud if you push your employees and don't have the right risk management procedures. Any trip up in ethics at the top is magnified in the trenches."

The government has wrung 19 guilty pleas from employees further down the ladder, and from some bankers. Only one, the former treasurer Ben Glisan, is serving time. Most are yet to be sentenced, and three British bankers are fighting extradition. The question remains how much individual investors might recover.

This week, three more big banks agreed to settle a class action lawsuit. That netted US$6.6 billion and took the total compensation wrung from Wall Street to US$7.2 billion. That pales next to the US$40 billion the shareholders claim they lost.

- INDEPENDENT