Case STudy

A Case Study: Kenneth Lay - Enron Scandal

Most, if not all Houstonians, remember the Enron Corporation’s collapse in 2001 which was widely publicized and led to the largest bankruptcy experienced in U.S. history, laying off more than 20,000 employees. While there is much information available about the Enron scandal, I’m using this case to demonstrate the absolute security Traditional and Fixed Indexed annuities provide, even under the most undesirable circumstances.

Kenneth Lay was acting CEO of Enron Corporation when the collapse occurred. Lay and other top executives were indicted on several charges including securities fraud and wire fraud. It was determined that prior to declaring bankruptcy, Lay and several company executives sold their Enron stock at over stated values, when the company stock was at an all-time high of approximately $90+ per share. At the same time, the other 20,000 + Enron employees were prohibited from moving or selling any of the stock held in their 401k accounts, until after Enron’s collapse. At that time stock was valued at less than $1.00 per share. As a result, virtually all of Enron’s other employees, lost most if not the entirety of their retirement nest egg, which had been essentially locked away in the company’s 401k plan. Many of these employees had been with the company for decades, yet lost all their savings.

Perhaps the wisest decision Lay made in the months leading up to Enron’s bankruptcy was moving approximately 20% of his net worth into annuities. Although he was eventually found guilty of securities and wire fraud, (among other crimes) and sentenced to prison, Lay’s annuity portfolio was protected and his family is still enjoying sizeable income, years after the trial and his sudden, and untimely death.

Please see the USA Today Article provided below for details regarding Lay’s Annuity Protection: