Who Paid the Largest Criminal Fine in History and Why

In July of 2014, BNP Paribas was handed the largest criminal fine in history. The bank was charged with violating U.S. sanctions against Sudan, Iran, and Cuba. This blog post will explore who paid the fine and why.

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Enron

Enron, once the seventh largest company in America, paid the largest criminal fine in history- $1.02 billion. So, what led to the company’s demise? In 2001, the company declared bankruptcy after an investigation revealed widespread fraud. The company had been using special purpose entities to hide debt and inflate profits. This led to the loss of billions of dollars for investors and thousands of people lost their jobs.

What is Enron?

Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. It was founded in 1985 as a merger between Houston Natural Gas and InterNorth, both relatively small regional companies in the U.S. Before its bankruptcy on December 2, 2001, Enron employed approximately 29,000 staff and was one of the world’s leading electricity, natural gas, communications and pulp and paper companies, with claimed revenues of nearly $101 billion in 2000. Fortune named Enron “America’s Most Innovative Company” for six consecutive years from 1996 to 2001.

The scandal came to light in October 2001 after it was revealed that Enron’s reported financial condition was sustained by institutionalized, systematic, and creatively planned accounting fraud, known since as the Enron scandal. Enron has since become a well-known example of willful corporate fraud and corruption. The scandal also brought into question the accounting practices of many corporations in the United States and was a factor in the enactment of the Sarbanes–Oxley Act of 2002. The scandal also affected the greater business world by causing the dissolution of Arthur Andersen LLP (AA), which at the time was one of the “Big Five” audit firms (along with PricewaterhouseCoopers LLP (PwC), Deloitte Touche Tohmatsu LLP (Deloitte), KPMG International Cooperative (KPMG), and Ernst & Young LLP (EY)).

The Enron Scandal

The Enron scandal was a financial scandal that occurred in the late 1990s and early 2000s. The scandal resulted in the bankruptcy of the Enron Corporation, one of the largest energy companies in the United States. The scandal also resulted in the conviction of several high-ranking Enron executives, including CEO Jeffrey Skilling and CFO Andrew Fastow.

The Enron scandal began to unravel in October 2001, when it was revealed that Enron had overstated its earnings by $586 million over the previous five years. Enron had used a variety of accounting tricks to artificially inflate its earnings and make it appear to be doing better than it actually was. As the news of Enron’s fraud became public, investors fled the company and its stock price plummeted.

Enron filed for bankruptcy on December 2, 2001, becoming one of the largest corporate bankruptcies in history. The Enron scandal played a significant role in bringing about reforms to U.S. financial regulations, including Sarbanes-Oxley Act of 2002.

The Largest Criminal Fine in History

In July 2014, Swiss bank UBS was ordered to pay $5.5 billion as a settlement for its role in the manipulation of LIBOR, the London InterBank Offered Rate. This is the largest criminal fine ever levied against a financial institution. The fine was the result of an investigation by the U.S. Justice Department, which found that UBS had engaged in a years-long scheme to manipulate LIBOR for its own financial gain.

The Enron Criminal Fine

In 2006, Enron Corporation became the largest criminal fine in history, amounting to $7.2 billion. The company was charged with income tax fraud, wire fraud, and securities fraud. Kenneth Lay, the former CEO of Enron, was found guilty of 10 counts of securities fraud and conspiracy. He was sentenced to prison but died before he could begin serving his sentence.

Why is it the Largest Criminal Fine in History?

On November 15, 2013, JPMorgan Chase & Co. agreed to pay $13 billion to settle federal probes into its sale of toxic mortgage securities leading up to the 2008 financial crisis. The U.S. Justice Department called it “the largest settlement with a single entity in American history.”

The record-setting figure includes a $2 billion civil penalty – the largest ever assessed under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) – as well as $1.1 billion to be relief to consumers who were harmed and $4 billion in payments to various state and federal agencies.

The criminal probe, which focused on Bear Stearns Cos., was led by the U.S. Attorney’s Office for the Southern District of New York. JPMorgan acquired Bear Stearns in early 2008 as the housing market was beginning to collapse.

After the Enron Scandal

Jeffrey Skilling, the former CEO of Enron, was sentenced to 24 years in prison and ordered to pay a $45 million fine in 2006. This was the largest criminal fine in history at the time. Skilling was convicted of conspiracy, insider trading, and making false statements to regulators.

What Happened to Enron?

Enron was an American energy company that engages in electricity, natural gas, and communication. In December 2001, the company declared bankruptcy due to widespread corporate fraud. The Enron scandal publicly came to light in October 2001 after it was revealed that the company had been deliberately overstating its financial reports for several years. This fraudulent accounting allowed Enron to appear as a very successful and profitable company when, in reality, it was deeply insolvent.

After the scandal came to light, all of Enron’s assets were sold off and the company ceased to exist. Many of its former employees lost their jobs and their retirement savings, and many investors lost a great deal of money. The Enron scandal resulted in a number of convictions and jail sentences for high-ranking officials at the company. It also had a profound impact on the accounting industry and corporate governance in the United States.

What Happened to the People Involved in the Scandal?

The Enron scandal was one of the biggest corporate bankruptcies in US history. The scandal involved multiple individuals, all of whom were eventually convicted of various crimes. Here is a brief overview of what happened to some of the main players in the Enron scandal.

-Jeffrey K. Skilling, former CEO of Enron, was convicted of conspiracy, fraud, and insider trading. He was sentenced to 24 years in prison and ordered to pay $45 million in restitution.
-Kenneth L. Lay, former Chairman and CEO of Enron, was convicted of conspiracy and fraud. He died before he could be sentenced.
-Andrew S. Fastow, former CFO of Enron, was convicted of conspiracy and wire fraud. He was sentenced to 10 years in prison and ordered to pay $23.8 million in restitution.
-Richard A. Causey, former Chief Accounting Officer of Enron, was convicted of conspiracy and securities fraud. He was sentenced to 5 years in prison and ordered to pay $1 million in restitution

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