Buy, Lie, and Sell High: How Investors Lost Out on Enron and the Internet Bubble

Inflating the Enron Bubble

A striking aspect of the Enron story is that the company's success in deceiving the investing public into believing that it was both growing very rapidly and profitable was made possible only by the energetic cooperation of many key elements of the Financial Value Chain, especially investment banks, accounting firms, and regulatory agencies.

Enron used several means to give its revenues and profits the appearance of enormous growth during the years of the bubble and beyond into late 2001. Its key methods were:

• A shift in Enron's business model to Internet-based trading suggested by consultants;

• Imaginative financing vehicles provided by investment banks;

• Favorable accounting treatment accorded by auditors; and

• Advantageous ...