Enron Reports $618 Million Loss and Reveals CFO Partnership Schemes

On October 16, 2001, Enron announced a $618 million quarterly loss, marking a pivotal moment in the company’s downfall. The loss was largely attributed to a one-time charge for terminating “certain structured finance arrangements” known as the Raptors, which were partnerships controlled by CFO Andrew Fastow.

The announcement revealed that Enron had taken a $1.01 billion charge in the third quarter due mostly to write-downs of failed investments. More significantly, the company disclosed a $1.2 billion write-off tied to Fastow’s partnerships, known as LJM. These complex off-balance-sheet special purpose entities had been used to conceal Enron’s massive losses and inflate earnings.

On October 23, during a conference call with two directors, Fastow revealed he had personally made $45 million from his work with LJM partnerships, despite claiming to spend only a few hours per week on them. This disclosure exposed the fundamental conflict of interest at the heart of Enron’s accounting fraud.

The October 16 announcement triggered a cascade of investigations that would ultimately lead to Enron’s bankruptcy on December 2, 2001, and criminal prosecutions that sent multiple executives to prison. This event marked the beginning of the last significant era of executive accountability for corporate fraud in American history.