The Enron Corporation Scandal

The American Dream typically involves working hard to build up an organization, maintaining it well, and reaping the benefits. This vision most certainly drove the formation of the energy powerhouse known as the Enron Corporation. The company began as two average sized organizations and within 15 years emerged as America’s seventh largest company. The organization employed close to 21,000 staff members with locations in over 40 nations around the world. Unfortunately, this success was decimated by numerous scandals involved with accounting practices. From lies of profits to questionable dealings, such as concealing debts, the parties involved with running the company had made some fatal errors. The end result left Enron without creditors and investors, leading to the firm to file for Chapter 11 bankruptcy (British Broadcasting Corporation, Enron Scandal at a Glance). The story of this once remarkable company is one that can be traced from the decisions made from its inception leading all the way to the much publicized trials that ensued.
Enron Corporation was an American company that specialized in energy commodities and services well known for its impressive rise and scandalous decline. The company was based in Houston, Texas and was formed in July 1985 as a result of Houston Natural Gas merging with InterNorth, an Omaha based company. Kenneth L. Lay, who previously worked as the CEO of Houston Natural Gas, became the chairmen and chief executive of the newly formed Enron in 1986 (Jelveh and Russell, The Rise and Fall of Enron). Enron initially began as an interstate and intrastate natural gas piping company containing 37,500 miles of pipe. The earliest signs of trouble surfaced in January 1987, when the company became aware of...

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...ns and the company’s fair-value accounting resulting in restatements of merchant investments based on faulty numbers. Additional violations included Enron’s accounting for stock issued to SPE’s, inadequate disclosure of related party transactions, and conflicts of interest and their cost to stockholders. These violations of GAAP and GAAs standards ultimately lead to the demise of a once mighty company (Benston, The Quality of Corporate Financial Statements and Their Auditors before and after Enron). The importance of consistently keeping up with accounting principles and producing accurate numbers for a company’s are exemplified through Enron’s story. The company faced an unfortunate fate that could have easily been avoided through more efficient and effective management, proper accounting methods, and a higher standard of morals and ethics within the workplace.