Enron has become one of the greatest examples of fraud in corporate America - when a company with a $60 billion market cap disappears overnight, it draws some attention! But what really happened at Enron, and what can we learn from it? Well, here's the story: In early 2001, the high-flying energy company was the darling of Wall Street, trading at over $80 a share with analysts at their feet strongly recommending the stock. A few months later the stock began to slowly drop; however, so did the rest of the market, so few analysts voiced any concerns. Many just assumed that it was trading alongside the rest of its sector. Little did people know that executives were dumping millions worth of stock while trying to keep their financial statements in order for just a few more months...

The first sign of trouble came in August 2001, when Enron's CEO Jeffrey Skilling unexpectedly resigned. Shortly after, the company's chairman and previous CEO Ken Lay took over. However, by the end of the month the stock was trading at just $35 per share - less than half of its early 2001 highs. But the real news didn't hit until two months later when the company stunned Wall Street with a $638 million loss along with a $1.2 billion write-down in its book value. This turned out to be far less than the actual losses, which came as a result of losses suddenly realized on a series of partnerships setup by CFO Andrew Fastow. It turns out that Enron had guaranteed the partnerships' debt, making its true liabilities much higher than what was shown on Enron's financial statements. It was this fact that ultimately caused both investors and customers to flee, leading to the company's bankruptcy.

As if this weren't enough, investors and employees soon discovered that senior executives had received over $750 million in salaries, bonuses, and stock options for good performance in the same year before the company declared bankruptcy! It turns out that executives were bailing out of the stock while the partnership losses remained hidden. Soon after, even more conflicts of interest on Wall Street were revealed: It turns out that Enron's accounting firm, Arthur Anderson, turned a blind eye because they wanted to keep the lucrative contract they had with the company. Meanwhile, analysts continued touting the stock in order to help the investment banking side of their firms get more business from Enron in future offerings.

Luckily, financial statements and securities laws have come a long way since this scandal first started; however, there is still much work that needs to be done. With the new executive compensation disclosure requirements (recently approved by the SEC) and web portals like ExecutiveDisclosure, investors will have tools at their disposal to find problems and conflicts of interest before they become full-blown scandals like Enron or WorldCom.