BBC NEWS Americas Africa Europe Middle East South Asia Asia Pacific Arabic Spanish Russian Chinese Welsh

 You are in:  Business
Front Page 
UK Politics 
Market Data 
Your Money 
Business Basics 
Talking Point 
In Depth 

Commonwealth Games 2002

BBC Sport

BBC Weather

Thursday, 21 February, 2002, 06:08 GMT
Enron 'created fake trading room'
Enron's headquarters in Houston
This is not the first time staff said they faked work
Enron created a fake trading room in order to impress Wall Street analysts, a former top executive at the firm has admitted.

Four years ago, the company built a command centre for its Enron Energy Services (EES) power supply arm, and ordered staff to pretend they were doing deals as analysts gathered in Houston for their annual meeting with the firm.

EES later went on to be an active part of the business, but former chairman Kenneth Lay and ex-president Jeffrey Skilling rehearsed staff in looking busy, in the hope of convincing investors that it was already a going concern in 1998.

The revelations come in an interview with Joseph Phelan, an ex-director of EES, published by the Reuters news agency.

They are not the first time that former staff have alleged being persuaded to fake activity when visitors dropped by Enron's Houston headquarters.

Pretend profits?

EES was intended to be the powerhouse of Enron's business.

Enron former chairman Kenneth Lay
Kenneth Lay allegedly drilled staff in fake work
It promised to manage the energy needs of large corporations for a flat fee, an area that was seen as highly promising.

Although EES eventually became profitable, it had only a tiny handful of customers and staff in 1998.

Mr Phelan said that staff were brought in from other floors to the EES "war room", and telephone calls into the centre were scheduled in order to create a buzz.

The whole operation was carefully choreographed in order to provide the most buoyant impression on analysts.

Probes persist

Regulators, investigators and politicians are currently trying to piece together exactly what was fact, and what fiction, in Enron's business practices.

Enron's Houston HQ
Although the deceptions allegedly practised at EES were not illegal, they are seen as part of a culture of dishonesty that culminated in the misleading accounting that ultimately brought the firm down last year.

The failed firm's critics argue that Enron was an organisation rotten to the core, where malpractice was inculcated by Mr Lay and Mr Skilling.

Enron's defenders, on the other hand, say that any malpractice was the work of unscrupulous individuals.

Enron has refused to comment on Mr Phelan's comments.

The BBC's Lesley Curwen
"The make believe command centre apparently cost about $500,000 to fit out."
See also:

21 Feb 02 | Business
Andersen 'offers Enron settlement'
20 Feb 02 | Business
Enron probe targets Wall Street
15 Feb 02 | Business
Enron witness: Lay was duped
Internet links:

The BBC is not responsible for the content of external internet sites

Links to more Business stories are at the foot of the page.

E-mail this story to a friend

Links to more Business stories