India’s Adani crisis is being compared to America’s Enron scandal? Learn how a report brought out the bankruptcy of a company worth billions.

Former US Treasury Secretary and former Harvard University President Larry Summers has compared the recent allegations in the Hindenburg Research report on the Adani group to the Enron scandal in the US. The Economist claimed that this could be India’s “potential Enron moment”. Last Friday, during Bloomberg’s Wall Street Week, Summers was asked what he was looking for from the G20 meetings. He did not name Adani but said, “We haven’t talked about it on the show, but there is a kind of potential Enron moment in India.”

Former US Treasury Secretary calls Adani crisis a potential Enron moment

Larry Summers, former US finance minister and former president of Harvard University, has compared the Adani group crisis to the Enron crisis. He said that India is probably facing an Enron-like moment when the accounting scandal in this American energy company came to light in 2001. We haven’t talked about this on the show, but there’s kind of a potential Enron moment in India, Summers told Bloomberg’s Wall Street Week last week. Though Summers did not name the Adani group, he was referring to the crisis the group is facing after an explosive report by American financial research firm and short seller Hindenburg Research came out. Adani has denied all the allegations. He said, “And I imagine that India is emerging as the largest country in the world and (G20) meeting is being held in India, everyone present there will be curious as to what will happen next and whether it will be for India.” There is going to be a major systemic impact. Summers made the remarks while referring to the G20 meetings, which India is hosting this year.

What was the Enron scam?

The Enron scandal was an accounting scandal involving the Enron Corporation, an American energy company based in Houston, Texas. Publicized in October 2001, the company declared bankruptcy and its accounting firm, Arthur Andersen – one of the world’s five largest audit and accountancy partnerships at the time – was effectively dissolved. In addition to being the largest bankruptcy reorganization in US history at the time, Enron was cited as the largest audit failure ever.

Enron was formed in 1985 by Kenneth Lay after the merger of Houston Natural Gas and InterNorth. Several years later, when Jeffrey Skilling was hired, Lay developed a staff of executives who – using accounting loopholes, special purpose entities, and poor financial reporting – removed billions of dollars in debt from failed deals and projects. were able to hide. Chief Financial Officer Andrew Fastow and other executives misled Enron’s board of directors and audit committee on high-risk accounting practices and pressured Arthur Andersen to ignore the issues.

Shareholders filed a $40 billion lawsuit after the company’s stock price, which had reached a high of US$90.75 per share in mid-2000, fell to less than $1 by the end of November 2001. The US Securities and Exchange Commission (SEC) launched an investigation, and rival Houston competitor Dynegy offered to buy the company at a much lower price. The deal failed, and on December 2, 2001, Enron filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. Enron’s $63.4 billion in assets kept it in the U.S. until the WorldCom scandal the following year. Made it the largest corporate bankruptcy in history.