Enron employees outside the company’s Houston HQ on Dec 3, 2001, the day after the company went bankrupt. (Photo: David J. Philip, Colorized) [1440×800]

On October 16, 2001, Enron Corporation of Houston, Texas, one of the largest corporations in the world, announced it was reducing its after-tax net income by $544 million and its shareholders’ equity by $1.2 billion.

On November 8, it announced that, because of accounting errors, it was restating its previously reported net income for the years 1997–2000.

These restatements reduced previously reported net income as follows:

– 1997, $28 million (27% of previously reported $105 million);

– 1998, $133 million (19% of previously reported $703 million);

– 1999 $248 million (28% of previously reported $893 million);

– 2000 $99 million (10% of previously reported $979 million)

These changes reduced its stockholders’ equity by $508 million. Thus, within a month, Enron’s stockholders’ equity was lower by $1.7 billion (18% of previously reported $9.6 billion at September 30, 2001).

On December 2, 2001, Enron filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. With assets of $63.4 billion, it is the largest US corporate bankruptcy at the time. (Lehman Brothers surpassed Enron in 2008)

The price of Enron’s stock, which had increased spectacularly over the 1990s from a low of about $7 to a high of $90 a share in mid-2000, declined to under $1 by year-end 2001.

Many Enron employees who had invested their tax-deferred 401(k) retirement plans in Enron stock saw their assets go from hundreds of thousands and even millions of dollars to almost nothing.