This is your morning Open Thread. Pour your favorite beverage and review the past and comment on the future
Find the past “On This Day in History” here.
December 2 is the 336th day of the year (337th in leap years) in the Gregorian calendar. There are 29 days remaining until the end of the year.
On this day in 2001, Enron filed for Chapter 11 bankruptcy protection in a New York court, sparking one of the largest corporate scandals in U.S. history.
An energy-trading company based in Houston, Texas, Enron was formed in 1985 as the merger of two gas companies, Houston Natural Gas and Internorth. Under chairman and CEO Kenneth Lay, Enron rose as high as number seven on Fortune magazine’s list of the top 500 U.S. companies. In 2000, the company employed 21,000 people and posted revenue of $111 billion. Over the next year, however, Enron’s stock price began a dramatic slide, dropping from $90.75 in August 2000 to $0.26 by closing on November 30, 2001.
As prices fell, Lay sold large amounts of his Enron stock, while simultaneously encouraging Enron employees to buy more shares and assuring them that the company was on the rebound. Employees saw their retirement savings accounts wiped out as Enron’s stock price continued to plummet. After another energy company, Dynegy, canceled a planned $8.4 billion buy-out in late November, Enron filed for bankruptcy. By the end of the year, Enron’s collapse had cost investors billions of dollars, wiped out some 5,600 jobs and liquidated almost $2.1 billion in pension plans.
Enron had created offshore entities, units which may be used for planning and avoidance of taxes, raising the profitability of a business. This provided ownership and management with full freedom of currency movement and the anonymity that allowed the company to hide losses. These entities made Enron look more profitable than it actually was, and created a dangerous spiral, in which each quarter, corporate officers would have to perform more and more contorted financial deception to create the illusion of billions in profits while the company was actually losing money. This practice drove up their stock price to new levels, at which point the executives began to work on insider information and trade millions of dollars worth of Enron stock. The executives and insiders at Enron knew about the offshore accounts that were hiding losses for the company; however, the investors knew nothing of this. Chief Financial Officer Andrew Fastow led the team which created the off-books companies, and manipulated the deals to provide himself, his family, and his friends with hundreds of millions of dollars in guaranteed revenue, at the expense of the corporation for which he worked and its stockholders.
In 1999, Enron launched EnronOnline, an Internet-based trading operation, which was used by virtually every energy company in the United States. Enron president and chief operating officer Jeffrey Skilling began advocating a novel idea: the company didn’t really need any “assets.” By pushing the company’s aggressive investment strategy, he helped make Enron the biggest wholesaler of gas and electricity, trading over $27 billion per quarter. The firm’s figures, however, had to be accepted at face value. Under Skilling, Enron adopted mark to market accounting, in which anticipated future profits from any deal were tabulated as if real today. Thus, Enron could record gains from what over time might turn out to be losses, as the company’s fiscal health became secondary to manipulating its stock price on Wall Street during the Tech boom. But when a company’s success is measured by agreeable financial statements emerging from a black box, a term Skilling himself admitted, actual balance sheets prove inconvenient. Indeed, Enron’s unscrupulous actions were often gambles to keep the deception going and so push up the stock price, which was posted daily in the company elevator. An advancing number meant a continued infusion of investor capital on which debt-ridden Enron in large part subsisted. Its fall would collapse the house of cards. Under pressure to maintain the illusion, Skilling verbally attacked Wall Street Analyst Richard Grubman, who questioned Enron’s unusual accounting practice during a recorded conference call. When Grubman complained that Enron was the only company that could not release a balance sheet along with its earnings statements, Skilling replied “Well, thank you very much, we appreciate that . . . asshole.” Though the comment was met with dismay and astonishment by press and public, it became an inside joke among many Enron employees, mocking Grubman for his perceived meddling rather than Skilling’s lack of tact. When asked during his trial, Skilling wholeheartedly admitted that industrial dominance and abuse was a global problem: “Oh yes, yes sure, it is.”
1409 – The University of Leipzig opens.
1755 – The second Eddystone Lighthouse is destroyed by fire.
1763 – Dedication of the Touro Synagogue, in Newport, Rhode Island, the first synagogue in what became the United States.
1775 – The USS Alfred becomes the first vessel to fly the Grand Union Flag (the precursor to the Stars and Stripes); the flag is hoisted by John Paul Jones.
1804 – At Notre Dame Cathedral in Paris, Napoleon Bonaparte crowns himself Emperor of the French, the first French Emperor in a thousand years.
1805 – Napoleonic Wars: Battle of Austerlitz – French troops under Napoleon Bonaparte defeat a joint Russo-Austrian force.
1823 – Monroe Doctrine: US President James Monroe delivers a speech establishing American neutrality in future European conflicts.
1845 – Manifest Destiny: US President James K. Polk announces to Congress that the United States should aggressively expand into the West.
1848 – Franz Josef I becomes Emperor of Austria.
1851 – French President Louis-Napoleon Bonaparte overthrows the Second Republic.
1852 – Louis-Napoleon Bonaparte becomes Emperor of the French (Napoleon III).
1859 – Militant abolitionist leader John Brown is hanged for his October 16th raid on Harper’s Ferry.
1867 – At Tremont Temple in Boston, British author Charles Dickens gives his first public reading in the United States.
1899 – Philippine-American War: The Battle of Tirad Pass, termed “The Filipino Thermopylae”, is fought.
1908 – Child Emperor Pu Yi ascends the Chinese throne at the age of two
1917 – An armistice was signed between Russia and the Central Powers at Brest-Litovsk and peace talks leading to the Treaty of Brest-Litovsk began.
1920 – Following more than a month of Turkish-Armenian War, the Turkish dictated Treaty of Alexandropol is concluded.
1927 – Following 19 years of Ford Model T production, the Ford Motor Company unveils the Ford Model A as its new automobile.
1930 – Great Depression: US President Herbert Hoover goes before the United States Congress and asks for a US$150 million public works program to help generate jobs and stimulate the economy.
1939 – New York City’s La Guardia Airport opens.
1942 – Manhattan Project: A team led by Enrico Fermi initiates the first self-sustaining nuclear chain reaction.
1943 – A Luftwaffe bombing raid on the harbour of Bari, Italy, sinks numerous cargo and transport ships, including an American Liberty ship, the John Harvey, with a stockpile of World War I-era mustard gas.
1946 – The British Government invites four Indian leaders, Nehru, Baldev Singh, Jinnah and Liaquat Ali Khan to obtain the participation of all parties in the Constituent Assembly.
1947 – Jerusalem Riots of 1947: Riots break out in Jerusalem in response to the approval of the 1947 UN Partition Plan.
1954 – Red Scare: The United States Senate votes 65 to 22 to condemn Joseph McCarthy for “conduct that tends to bring the Senate into dishonor and disrepute”.
1954 – The Sino-American Mutual Defense Treaty, between the United States and the Republic of China, is signed in Washington, D.C.
1956 – The Granma yacht reaches the shores of Cuba’s Oriente province and Fidel Castro, Che Guevara and 80 other members of the 26th of July Movement disembark to initiate the Cuban Revolution.
1961 – In a nationally broadcast speech, Cuban leader Fidel Castro declares that he is a Marxist-Leninist and that Cuba is going to adopt Communism.
1962 – Vietnam War: After a trip to Vietnam at the request of US President John F. Kennedy, US Senate Majority Leader Mike Mansfield becomes the first American official not to make an optimistic public comment on the war’s progress.
1970 – The United States Environmental Protection Agency begins operations.
1971 – Abu Dhabi, Ajman, Fujairah, Sharjah, Dubai, and Umm Al Quwain form the United Arab Emirates.
1972 – Gough Whitlam becomes the first Labor Prime Minister of Australia for 23 years.
1975 – Pathet Lao seizes power in Laos, and establishes the Lao People’s Democratic Republic.
1976 – Fidel Castro becomes President of Cuba replacing Osvaldo Dorticos Torrado.
1977 – The first World Series Cricket “supertest” match played between Australia and West Indies
1980 – Four U.S. nuns and churchwomen, Ita Ford, Maura Clarke, Jean Donovan, and Dorothy Kazel, are murdered by a death squad in El Salvador.
1988 – Benazir Bhutto is sworn in as Prime Minister of Pakistan, becoming the first woman to head the government of an Islam-dominated state.
1990 – A coalition led by Chancellor Helmut Kohl wins the first free all-German elections since 1932.
1993 – Colombian drug lord Pablo Escobar is shot and killed in Medellin.
1993 – Space Shuttle program: STS-61 – NASA launches the Space Shuttle Endeavour on a mission to repair the Hubble Space Telescope.
1999 – Glenbrook rail accident near Sydney, New South Wales.
1999 – The United Kingdom devolves political power in Northern Ireland to the Northern Ireland Executive.
2001 – Enron files for Chapter 11 bankruptcy.
2008 – Thai Prime Minister Somchai Wongsawat resigns after the 2008 Thailand political crisis.
* Christian Feast Day:
o Channing Moore Williams (Anglican Communion)
* International Day for the Abolition of Slavery (International)
* National Day (Laos)
* National Day, celebrates the independence of United Arab Emirates from United Kingdom in 1971.