Enron Case: Crime in the Suites

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Enron Declared Bankruptcy

<figure id&equals;"attachment&lowbar;15152" aria-describedby&equals;"caption-attachment-15152" style&equals;"width&colon; 336px" class&equals;"wp-caption alignright"><a href&equals;"https&colon;&sol;&sol;www&period;fraudswatch&period;com&sol;enron-2&sol;" rel&equals;"attachment wp-att-15152"><img class&equals;"wp-image-15152" src&equals;"https&colon;&sol;&sol;www&period;fraudswatch&period;com&sol;wp-content&sol;uploads&sol;2015&sol;10&sol;enron-1-1&period;jpg" alt&equals;"Enron Declared Bankruptcy" width&equals;"336" height&equals;"252" &sol;><&sol;a><figcaption id&equals;"caption-attachment-15152" class&equals;"wp-caption-text"><em><strong>Enron Declared Bankruptcy<&sol;strong><&sol;em><&sol;figcaption><&sol;figure>&NewLine;<p><span class&equals;"blackgraphtx">When Enron declared bankruptcy in December 2001 and took with it the nest eggs of thousands of employees and stockholders&comma; the FBI field office in Houston assigned two agents to investigate&period; Within weeks&comma; the number of agents and support staff assigned to the case grew to 45&comma; many hand-picked from field offices around the country for their expertise in traversing even the most circuitous paper trails&period;<&sol;span><&sol;p>&NewLine;<p><span class&equals;"blackgraphtx">The case would become the largest and most complex white-collar investigation in FBI history and spawn a unique investigative task force of prosecutors&comma; agents and analysts in Houston and Washington&comma; D&period;C&period;&comma; each uniquely skilled at drilling deep into balance sheets and following the money&period; Their job&colon; to learn how company officials perpetrated fraud on such a grand scale&comma; build a strong criminal case&comma; and hold accountable those responsible&period;<&sol;span><&sol;p>&NewLine;<p><span class&equals;"blackgraphtx">The five-year investigation led to jury convictions of top Enron officials who enriched themselves by cheating investors with sham accounting&comma; and guilty pleas from some 16 others who were in on it&period; Being a major case&comma; it was administered at the highest levels of the FBI and the Department of Justice&comma; as well as the Securities and Exchange Commission&period; In Houston&comma; Supervisory Special Agent &lpar;SSA&rpar; Michael E&period; Anderson&comma; chief of his office’s economic crimes squad&comma; led the investigation on the ground&period; He describes how agents assembled the case&colon;<&sol;span><&sol;p>&NewLine;<ul>&NewLine;<li><span class&equals;"blackgraphtx">In January 2002&comma; agents executed a consent search of Enron’s 50-story corporate headquarters building&period; The search lasted nine days as investigators unearthed critical documents and emerged with over 500 boxes of evidence&period; At the same time&comma; agents conducted more than 100 interviews that helped identify fresh leads for investigators&period;<&sol;span><&sol;li>&NewLine;<li><span class&equals;"blackgraphtx">In February 2002&comma; Enron’s board of directors issued findings from its own internal investigation—the Powers Report&comma; named for William Powers Jr&period;&comma; head of the special investigation committee that wrote it—that said Enron executives reaped millions by violating basic accounting principles&period; &OpenCurlyDoubleQuote;That was a gold mine&comma;” SSA Anderson said&period; Agents conducted over 1&comma;800 interviews in the U&period;S&period; and overseas&period;<&sol;span><&sol;li>&NewLine;<li><span class&equals;"blackgraphtx">Agents expert at teasing forensic evidence from computers—a Computer Analysis and Response Team—collected over four terabytes &lpar;imagine 4&comma;000 copies of an encyclopedia&rpar; of data&comma; including e-mail from over 600 employees&period; Meanwhile&comma; the <a href&equals;"http&colon;&sol;&sol;www&period;ghrcfl&period;org&sol;">Regional Computer Forensics Laboratory in Houston<&sol;a> processed some 30 terabytes of data&comma; making still more sense of the paper trail and flagging important leads for investigators&period;<&sol;span><&sol;li>&NewLine;<li><span class&equals;"blackgraphtx"><a class&equals;"wpil&lowbar;keyword&lowbar;link" href&equals;"https&colon;&sol;&sol;www&period;fraudswatch&period;com&sol;tag&sol;financial-fraud&sol;" title&equals;"Financial" data-wpil-keyword-link&equals;"linked" data-wpil-monitor-id&equals;"491">Financial<&sol;a> analysts combed through hundreds of bank and brokerage accounts to track fraudulent purchases&comma; which proved critical in securing restraining orders&comma; seizing more than &dollar;168 million in assets and supporting insider trading charges&period;<&sol;span><&sol;li>&NewLine;<&sol;ul>&NewLine;<p><span class&equals;"blackgraphtx">What emerged was a mosaic of inter-related schemes—some hardly more than smoke and mirrors—that toppled a company that once boasted annual revenues over &dollar;150 billion&period; Enron ripped off California&comma; selling energy to the state’s strapped utilities at over-inflated rates&period; Officials overstated the company’s fledgling Broadband venture&comma; hitching the company’s stock price to the star of the still-nascent Internet bubble&period; The company overvalued its international assets by billions to generate cash flow and manipulated its quarterly earnings statements to keep Wall Street happy and its stock price afloat&period;<&sol;span><&sol;p>&NewLine;<p><span class&equals;"blackgraphtx">SSA Anderson said it was the thousands of victims&comma; hard-working employees who lost their pensions&comma; and the desire to hold accountable those responsible for the failure of Enron&comma; that motivated agents&comma; analysts&comma; and others on the Enron Task Force to press ahead on the massive case&period;<&sol;span><&sol;p>&NewLine;<p><span class&equals;"blackgraphtx">&OpenCurlyDoubleQuote;They lost their retirements&comma; their health insurance&comma; their livelihoods&period; That kept everyone interested in pressing forward in spite of the huge personal sacrifices inherent in working a major case for over five years&comma;” Anderson says&period; &OpenCurlyDoubleQuote;If it’s some consolation to them&comma; the people that were responsible for this fraud were punished for it&period;”<&sol;span><&sol;p>&NewLine;<p>&nbsp&semi;<&sol;p>&NewLine;<h3 class&equals;"graphicboxheader">Ten Years Later&colon; The Enron Case<&sol;h3>&NewLine;<p><span class&equals;"blackgraphtx">It was 10 years ago this month that the collapse of Enron precipitated what would become the most complex white-collar crime investigation in the FBI’s history&period;<&sol;span><&sol;p>&NewLine;<p><span class&equals;"blackgraphtx">Top officials at the Houston-based company cheated investors and enriched themselves through complex accounting gimmicks like overvaluing assets to boost cash flow and earnings statements&comma; which made the company even more appealing to investors&period; When the company declared bankruptcy in December 2001&comma; investors lost millions&comma; prompting the FBI and other federal agencies to investigate&period;<&sol;span><&sol;p>&NewLine;<p><span class&equals;"blackgraphtx">The sheer magnitude of the case prompted creation of the multi-agency Enron Task Force&comma; a unique blend of investigators and analysts from the FBI&comma; the Internal Revenue Service-Criminal Investigation Division&comma; the Securities and Exchange Commission&comma; and prosecutors from the Department of Justice&period;<&sol;span><&sol;p>&NewLine;<p><span class&equals;"blackgraphtx">Agents conducted more than 1&comma;800 interviews and collected more than 3&comma;000 boxes of evidence and more than four terabytes of digitized data&period; More than &dollar;164 million was seized&semi; to date about &dollar;90 million has been forfeited to help compensate victims&period; Twenty-two people have been convicted for their actions related to the fraud&comma; including Enron’s chief executive officer&comma; the president&sol;chief operating officer&comma; the chief financial officer&comma; the chief accounting officer&comma; and others&period;<&sol;span><&sol;p>&NewLine;<p><span class&equals;"blackgraphtx">&OpenCurlyDoubleQuote;The Enron Task Force’s efforts resulted in the convictions of nearly all of Enron’s executive management team&comma;” said Michael E&period; Anderson&comma; assistant special agent in charge of the FBI’s Houston Division&comma; who led the FBI’s Enron Task Force in Houston&period; &OpenCurlyDoubleQuote;The task force represented a model task force—the participating agencies selflessly and effectively worked together in accomplishing significant results&period; The case demonstrated to Wall Street and the business community that they will be held accountable&period;”<&sol;span><&sol;p>&NewLine;<p><span class&equals;"blackgraphtx"><b>Resources&colon;<&sol;b><br &sol;>&NewLine;<&sol;span><&sol;p>&NewLine;<p><span class&equals;"blackgraphtx">&&num;8211&semi; <a class&equals;"internal-link" href&equals;"https&colon;&sol;&sol;www&period;fbi&period;gov&sol;news&sol;stories&sol;2006&sol;december&sol;enron&lowbar;121306">A Look Back at the Enron Case<&sol;a><br &sol;>&NewLine;&&num;8211&semi; <a class&equals;"external-link" title&equals;"" href&equals;"http&colon;&sol;&sol;www&period;justice&period;gov&sol;archive&sol;index-enron&period;html" target&equals;"&lowbar;self" rel&equals;"noopener"><span class&equals;"external-link">Enron trial exhibits and documents<&sol;span><&sol;a><&sol;span><&sol;p>&NewLine;

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