Well into 2001 Enron was flying high. The company was listed as number seven on the Fortune 500 list, had a total capitalization of $63 billion, was building a new $339 million office tower, and had obtained the naming rights of the Houston Astros' field, calling it "Enron Field." Founded in 1985, Enron had become the nation's largest and most innovative energy trader. Enron had brought high-tech and complex finance to energy trading and had been ultrasuccessful.

In a matter of weeks, if not days, Enron's stock fell from $90 a share to 61 cents a share, over 4,000 employees were laid off, and the company filed for bankruptcy. How could this possibly happen?

As it turned out, Enron businesses depended on the borrowing of lots of money. Institutions were anxious to lend Enron money as long as the company seemed healthy. However, when suspicions arose after some partnership problems were made public, the lenders began to become hesitant to lend money. What began as a trickle very soon became a flood. All of this was exacerbated by the failure of Enron's outside auditors, Arthur Andersen, to expose the problems.

Since Enron filed for bankruptcy in December 2001, Arthur Andersen has ceased to exist and several banks have agreed to significant settlements for their roles in the Enron debacle. As of November 2005, Enron was estimating about 22.8 cents per dollar in payouts to its creditors.

Sources: Allen Sloan, "Lights Out for Enron," Newsweek, December 10, 2001, pp. 50–51; and John C. Roper, "Enron's Settlement's Approval Means Cash Can Flow," Knight Ridder Tribune Business News, November 16, 2005, p. 1.