Enron's Life And Accomplishments Of Kenneth Lay

Enron, the smartest guy in the room
1. Define what you are protecting
Kenneth Lay was born in April 15, 1942, in Tyrone, Missouri, the second of three children of Omer and Ruth Lay. His father was a Baptist preacher in rural Missouri. In addition, he had a chicken business. When Lay was 6, the chicken business was when a large shipment of birds was killed in a truck accident. He learned the value of money early by supplementing the family's meager income by delivering newspapers, cutting grass and baling hay.
Lay studied economics at University of Missouri. He received his Ph. Degree in Economics from the University of Houston. In the late 1960's Lay arrived his first real job, the Houston-based Humble Oil and Refining part of Exxon. Kenneth
served the Navy and Pentagon. He was undersecretary for the Department of the Interior before he returns to the business. As the one executive responsible for setting up Humble Oil's corporate development department, Mr. Lay received what seemed a princely salary of $13,000 a year. It was around this time that he married his college girlfriend, Judith Ayers. They had two children.
Determine the risk
Threats
Lay´s ambitious came from his need of money.
His parents lived in rural Missouri and his father was minister. In addition his family ran a chicken business. At age 6, his business end ended when the chicken´s truck had an accident. In his early life he worked as a newspaper delivery boy, cut grass and bailed hay in order to help the family´s income.
His ambition to have money in his adult life was motivated by the luxurious life that he did not have when he was child.
Vulnerabilities
Lay ascended from a near poverty family. When he began making money he started to live a luxurios life even when he could not afford
it.
Lay was arrogant always defending his extravagant lifestyle. One time he bought a $200,000 yacht for wife's, Linda, birthday party, despite he had a $100 million in personal debt.
From early in the company Lay built political connections that helped the company grow. Lay´s energy Company drew attention from Govenor George Bush for his visionary reputation. Lay contributed to Bush´s political campaign when Bush ran for the presidency.
When Bush became president he deregulated the price of energy to help Enron to manipulate the market. Enron controled the energy in California.

Impact of Loss
Enron got profits from manipulating stock market by using mark to market accounting. In between 1998 and 2001 Lay received around $300 million from selling the Enron stock options. The profit was more than $217 million in net with salaries and bonuses around $19 million. In 2001 he received $ 1million in salary, bonus around $7 million and $3.5 million in long term incentive payments. . (Roberts 2006)
He sold 918,104 shares of Enron to repay advances totaling $26,025,000 from a line of credit extended to Lay by Enron. Ken Lay and his executive took the Enron profits for their personal life while the company in reality did not reflect in its financial statement. The creating of false accounts made the company look like it was in a good financial situation.
3. Decide to amputate, avoid or accept
Lay accepted the risk when he decided to tell the traders to continue making millions. He approved that traders gambled with the price of the stock where stocks did not generate unreal profits for the company. He knew the financial statement did not report the real information about the company. The accounting firm of Arthur Andersen approved the financial reports even while knowing they were not reporting accurate information. The institutions accepted the reports because Andersen had a good reputation in the market.
4. Deter the adversary
Nothing seemed to stop Kenneth Lay until the bankruptcy of Enron occurred. The United States Supreme Court refused to hear an appeal of investors who wanted to sue investment banks involved with Enron in order to attempt to recover some of their losses. In October 2008, in the midst of the major financial crisis of this period, a commentator noted that the post Enron convictions had failed to deter major wrongdoing on Wall Street.
When Enron was asked about their financial reports should be presented to Wall Street Enron answered they had to keep secret the way they did their business. Enron was compared to Coca Cola that they did not reveal the secret of the formula.

5. Detect and assess the attack
Arthur Andersen firms did detected the accounting reports were wrong but they supported the company by saying that it was in a good condition. Also, Securities Exchange Commission never detected the manipulation of the stock market by Enron.
In 2001 an analyst was taped saying to Skilling on the phone that Enron was the only financial institution that never present a balance sheet or cash flow statement
Lay’s ceo Jeff Skilling never answer the question of the analyst because Enron´s executive believe their way to make money was a secret comparing it to the Cola Cola formula that they could not reveal their secret because the competitors can copy their way of business.
6. Dispatch responders (equal or greater than your adversary
Through the years people asked how Enron made their money but Enron never answered the questions. Regulators like Security Exchange Commission believed in Enron. Also, Andersen firm did not stop the Enron bad practices. Wall Street had one analyst who asked Enron about their reports but Enron never answer about that.
7. Delay t attack until responders can arrive and stop the adversary
Lay was convicted of numerous charges at his trail.
He was acused of security fraud. His staff manipulated the stock market. False statements were presented to banks and regulators. He and the accounting firm misreported the real financial information in the statements. In the case Enron was determined to be fraudulent in their price. Kenneth Lay the president and Jeff Skilling the CEO were responsible for misreporting the true state of the financial situation of the company.

8. Defeat the adversary

Lay died at 64 age when he was guilty of six counts of conspiracy and fraud. Kenneth Lay was the highest profile of recent white collar crime trials. When the state widens the net and seeks more indictments against more individuals, defendants apparently become intimidated and are more likely to plead guilty.
In 2000 Enron’s stock was at an all-time high of $90.56
In 2001, one of its division reported $137 million loss. This made analyst worry and drop the rating of Enron´s stock with drop the share to $39.95.
Just few months later the accounting firm Enron to destroy all its financial information.
Security Exchange Commission stated to look the situation and the share drop again. Within a month Enron admitted inflating Enron´s income since 1997. Shortly after, Enron failed for Chapter 11 bankruptcy.
At the beginning of 2002 Criminal investigation was
begun. Results

Kenneth Lay was the creator of Enron. Lay used his executive position like chairman of Enron to get millions of dollars from company to get a luxurious life. Nobody could not stop his bad behavior by manipulating stock market using mark to market accounting. Lay committed fraud in Enron using that money for his lifestyle.