Word: enronize
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...didn't yield smarter investors. In the 1990s, employees at some fast-growing companies kept up to 90% of their 401(k)s in company stock. When Enron and WorldCom tanked in 2001 and '02, they each took more than $800 million in savings with them, prompting landmark lawsuits. The current meltdown has skimmed about 20% from 401(k)s since 2007 and ignited debate over their retirement-income reliability. "Unlike Wall Street executives, American families don't have a golden parachute to fall back on," said California Representative George Miller at an Oct. 7 hearing on retirement savings...
...There has also been mixed success with legislating clawbacks. The Sarbanes-Oxley Act, passed in 2002 in the wake of accounting scandals at Enron and other companies, required CEOs and CFOs of companies that have to restate earnings because of financial misconduct to pay back bonuses and incentive compensation. But that provision proved largely ineffective. The SEC didn't bring a case under this provision for four years, and when it finally found success - UnitedHealth's former CEO was forced to pay back more than $400 million worth of stock options gains, unexercised options and retirement pay after a stock...
...didn't know what they were doing. Credit raters, who claim to offer only opinions, are party to Wall Street's cycles too. At the beginning, they're far too lenient with borrowers, who are the ones who pay their rating fees. Then, after a couple of embarrassments - remember Enron and WorldCom? - the raters tighten up, maybe too much. Then memory fades, and the cycle repeats...
...seen a version of this game before. Enron, PSINet, Trans World Airlines and WorldCom all paid out for naming rights at U.S. sporting arenas before going under earlier this decade. In fact, sponsors of major U.S. sports stadiums lost an average of 33% of their market value in 2002, roughly double the Dow's fall that year...
...high-flying energy company made billions trading esoteric derivatives until insiders blew the whistle on Enron's massive accounting fraud - prompting a bankruptcy filing that rocked the U.S. financial world. The company was instantly devalued and thousands of employees were laid off, their pensions evaporated. Executives Kenneth Lay and Jeffrey Skilling were both convicted of fraud and other charges, although Lay died before being sentenced...