Was Enron a Catalyst for Change?”
“It ought to be, but history has a way of repeating itself — and somehow, we just don't seem to learn!”
Financial Analysts the world over might view some Corporate failures that resulted in bankruptcy as an opportunity to refine investment strategy. Particularly, in situations where Investment Analysts have anticipated foreclosure or bankruptcy due to mismanagement and or foul play.
The Enron Scandal of 2001 in the US ought to serve as a warning and provide a good basis for what to avoid when dealing with other people’s money, how to manage available resources and perhaps why it's important to not make the same mistake twice. One might even argue that there is absolutely no correlation between Corporate failures, Bankruptcy's or Takeovers that happened in the US two decades ago and the current UK Energy Crisis. Particularly, since there has been no Corporate Scandals measured on the same scale in the UK to-date, to rival Enron's downfall.
Actually, that's not accurate.
Bank of Credit & Commerce International (BCCI) had the splendid idea of opening its Head Office in London, and registering the same in Luxembourg. No doubt to dodge Corporation Tax among other unscrupulous business incentives with money laundering and unorthodox lending practises to their buddies, being top of the list. This ought, at the very least, to have raised concerns. It should have raised red-flags and serious concerns to UK Bank Regulators. It didn’t. In effect, there was no Law against registering a Company's Holdings in Switzerland. This in fact, was a Tax loophole advantageous for many Business start-ups back in the day and heavily utilised by Business Corporations seriously out on the fiddle. As an Accounting and International and Banking Student, Offshore Banking, Tax Breaks and Loopholes were strictly speaking not part of the syllabus but something you just needed to know as a matter of interest.
However, U.K. Banking Regulation has since tightened its stance on Bank Policy and Regulatory Operations, including closing some of those Tax loopholes, but my guess is that a different kind of problem has ensued. Simply speaking, criminals are getting smarter and like the old adage of ‘keeping up with the Joneses’ it seems there is no yardstick for criminals to dodge bullets as they enjoy moving goal posts every time the Law adds a codicil or improves an Act passed through Parliament. The problem obviously stems from those societal disparities between the ‘haves and have nots’ playing with some companies of dubious means.
Then we had Barings Bank — the Bank sold for a Pound, and the Equitable Life Pensions Scandal in 2000 affecting over a million Pensioners. It seems that with so many prominent UK Businesses now also going bankrupt during this Energy crisis, the likelihood that the goal posts are being moved by the same type of Corporate Parasites the world over, is huge.
What's the probability then that any one of the UK Energy Providers will fall? With a knock-on-effect on everything Energy related impacting the average household, with devastating effects? There are scores of unhappy Electricity customers complaining, more specifically, about erroneous billing, overcharging, back-dated charges, miss-selling of gas and electricity, delays in switching energy suppliers and a score of other issues.
However, influencing factors that could potentially lead to a complete collapse of Energy in the UK could fundamentally be instigated by:
a) Poor Infrastructure in Energy Public Policy that does not provide clear guidelines
b) Consistent investment signals
c) Uncertainty
d) Regulation failing to keep pace
At the core of this enormous puzzle waiting to burst, is that Energy regulators and their products and services now have to potentially ensure clear and consistent information for the energy they provide, to enable customers to make informed purchasing choices.
It's clear that many Corporations irrespective of their business model, whether in the US or the UK, still need to structure their products and services around business models that are seen to be evolving with current trends. More significantly, energy investors and customers need to be assured that their money is safe, because ultimately, mismanagement of investors funds, and poor Energy Public Policy affects overall Public Confidence which would have a devastating effect on the economy; and to a greater extent, would mean higher inflation rates, a weaker Pound, loss of confidence in International Investors on the global markets and a full blown Energy Crisis!
What we have now is manageable on account of the Government's ruthless focus on Managing the Energy Crisis. I live in Somerset, England and was pleasantly surprised when I received £150.00 credit to my electricity bill. A Government incentive to financially boost 20 million households in England in council tax bands A-D. In fact, there are several Government schemes and ways Corporations and small businesses, including people on low incomes, could in effect, meet their electricity costs. But for how long? How long is this complacency going to last?
In March 2019, UK Inflation was 1.9% and as of May 2022, it's now soaring at 9%.
The crucial definitive difference between the mismanagement of Enron and the UK Government's success in alleviating a full blown Energy Crisis up to now, is that one of the proponents of the U.K. The Government's objective is 'Transparency and Reliability' — you can see and measure the results of the Government's strategies at work, and feel the difference those extra pennies make in your pocket. Whereas, Enron was besieged by bad executive decisions throughout. With Executives enjoying millions at the expense of their customers money based on:
i) Accounting Fraud
ii) Vendor Frauds
iii) Payroll Fraud
iv) Asset Misappropriation
v) Data Theft
vi) Bribery and Corruption
On an uptake, government legislation has been positively strategic so far, but I fear we are heading for another shake-down in relation to an Energy Crisis. There are far too many variables competing for prominence and many business models it seems, become defunct as soon as the ink is dry. In conclusion, one way to approach the idea of Mitigating the Risks of our UK Energy Crisis on a personal level at least, is that if Enron has taught me anything, it's not to put all your eggs in one basket!
REFERENCES
https://moneyweek.com/investments/investment-strategy/600706/great-frauds-in-history-bcci-agha-hasan-abedis-dodgy-bank
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