Enron

Enron began as a boring natural gas pipeline company formed from the merger of Houston Natural Gas and InterNorth. Under CEO Kenneth Lay and later Jeffrey Skilling, it reinvented itself as an energy trading titan, using mark-to-market accounting to book future profits immediately. Wall Street loved it. Fortune named it 'America's Most Innovative Company' six years running.

The innovation was fraud. Enron used thousands of special-purpose entities to hide debt and inflate earnings. When journalist Bethany McLean asked a simple question in Fortune — 'How does Enron make its money?' — nobody could answer. The stock went from $90 to $0.26. Twenty thousand employees lost their jobs and retirement savings. Executives went to prison. Arthur Andersen, one of the Big Five accounting firms, was destroyed as collateral damage.

Enron became the textbook case for corporate fraud, the reason Sarbanes-Oxley exists, and proof that a company valued at $70 billion can be worth nothing.