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In April 2001 an analyst on an Enron earnings call asked CEO Jeffrey Skilling for a balance sheet, and Skilling called him an asshole on the open line. Enron was born in 1985 when Kenneth Lay merged Houston Natural Gas with InterNorth, then lobbied successfully to deregulate natural gas sales. Skilling, a consultant who rose to chief operating officer and CEO, turned the pipeline company into a trader of energy derivative contracts. Enron booked the full value of brokered trades as revenue under a merchant model, lifting reported revenue from $13.3 billion in 1996 to more than $100 billion by 2000. With SEC approval in 1992, it used mark-to-market accounting to book a contract’s estimated lifetime profits on the day it was signed. CFO Andrew Fastow hid the resulting debt in hundreds of special purpose entities such as Chewco, Whitewing and the Raptors, backed by Enron’s own stock.

Auditor Arthur Andersen earned $25 million for Enron audits and $27 million for consulting in 2000, and its Houston partners could overrule the firm’s national experts in Chicago. Short seller Jim Chanos and Bethany McLean’s March 2001 Fortune article, Is Enron Overpriced, raised doubts. Skilling resigned in August 2001, Sherron Watkins warned Lay in writing, and an October restatement set off the slide. A rescue by Dynegy collapsed and Enron filed for Chapter 11 on December 2, 2001, then the largest corporate bankruptcy in U.S. history. Fastow pleaded guilty, Skilling was sentenced to 24 years, later reduced, Lay died in 2006 before sentencing, and Congress passed the Sarbanes-Oxley Act of 2002.

• Enron booked more than $110 million in estimated profit from a 20-year broadband deal with Blockbuster that collapsed months later and was never reversed.
• Fastow received a special exemption from Enron’s code of ethics to manage the LJM entities and made about $30 million doing so.
• Employees printed coffee mugs reading Ask Why, Asshole, after the earnings call remark.
• A new CFO found Enron did not track its cash on a daily basis.
• Shareholders lost $74 billion, employees had 30 minutes to leave the building, and Arthur Andersen’s collapse cost 85,000 jobs.