THE ENRON SCANDAL by Abhimanyu Ravindranath
Overview of Enron[1] The antecedent to the American multinational company Enron was the Northern Natural Gas Company which was founded in Omaha, Nebraska in the year 1932. It was redesigned in 1979 as the fundamental subsidiary of a holding organization, InterNorth which was an enhanced energy and energy related items organization. InterNorth was a significant business for gas generation, electricity and was a pioneer in the plastics business. InterNorth was later sold to Physicians Mutual. In 1986, Kenneth Lay became the CEO after the departure of the first CEO of Enron Corp Samuel Segnar. Kenneth Lay moved the organization’s headquarters to Houston, TX and began to change the way the business
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[1] A large portion of Enron's recorded holdings and benefits were fake and nonexistent. One illustration of fake records was when Enron guaranteed to reimburse an investment of Merrill Lynch. All of the debts faced by the company were put in offshore entities and were unpublished in the company’s official financial statements and undisclosed to investors and financial analysts. Unprofitable entities were wiped from the company’s records using a number of deceptive financial transactions. The scandal continued to an unprecedented scale that had never been witnessed in the world. What level to the destruction of Enron was the revelation of its offshore entities used to cover the debts the company suffered.The connections that were structured among top heading executives and the top managerial staff led to a presumptuous attitude, with a sense of invulnerability which led to their unethical behavior. The revelation also led to the closure of Arthur Anderson, an accounting company, which participated in destruction of documentation related to the Enron …show more content…
The majority of the shareholders lost all of the money and resources put into the enterprise after the revelation of the Enron scandal. The investors not only faced material loss; there was also a loss of trust/confidence and could never be regained.[7] The Enron scandal also affected the country in a number of different ways. The outrage that stemmed from the scandal created an awareness of the importance of trust and integrity in the financial sector and also the ethics in business and accounting. The scandal prompted the creation of laws to ensure that the possibility of repetition of a similar scandal would be
The Enron Scandal, which unrolled in October 2001, lead to the bankruptcy of the Enron Corporation, an American energy company based in Houston, Texas, and the de facto dissolution of Arthur Andersen, a large audit and accountancy partnership firm.
The Fastows headed to Mrs. Fastow's native Houston in 1990, both taking jobs at a young company called Enron. Just five years old, Enron was starting to evolve from a natural-gas and pipeline company into a trading firm. Mr. Fastow was one of the first managers hired by Mr. [Jeffrey Skilling], who himself had only recently arrived, from management consultants McKinsey & Co. Brought into Mr. Skilling's inner circle, Mr. Fastow returned the loyalty, telling colleagues he had named a child after his mentor. When Mr. Skilling became Enron's president and chief operating officer in early 1997, he and Mr. [Kenneth Lay] promoted Mr. Fastow to lead a new finance department. A year later, Mr. Fastow became chief financial officer.
The Enron Corporation was founded in 1985 out of Houston Texas and was one of the world 's major electricity, natural gas, communications, and pulp and paper companies that employed over 20,000 employees. This paper will address some of the ethical issues that plagued Enron and eventually led to its fall.
Investors and the media once considered Enron to be the company of the future. The company had detailed code of ethics and powerful front men like Kenneth Lay, who is the son of a Baptist minister and whose own son was studying to enter the ministry (Flynt 1). Unfortunately the Enron board waived the company’s own ethic code requirements to allow the company’s Chief Financial Officer to serve as a general partner for the partnership that Enron was using as a conduit for much of its business. They also allowed discrepancies of millions of dollars. It was not until whistleblower Sherron S. Watkins stepped forward that the deceit began to unravel. Enron finally declared bankruptcy on December 2, 2001, leaving employees with out jobs or money.
"Andrew Fastow Draws on Enron Failure in Speech on Ethics at CU." - The Denver Post. N.p., n.d. Web. 06 Apr. 2014.
The three main crooks Chairman Ken Lay, CEO Jeff Skilling, and CFO Andrew Fastow, are as off the rack as they come. Fastow was skimming from Enron by ripping off the con artists who showed him how to steal, by hiding Enron debt in dummy corporations, and getting rich off of it. Opportunity theory is ever present because since this scam was done once without penalty, it was done plenty of more times with ease. Skilling however, was the typical amoral nerd, with delusions of grandeur, who wanted to mess around with others because he was ridiculed as a kid, implementing an absurd rank and yank policy that led to employees grading each other, with the lowest graded people being fired. Structural humiliation played a direct role in shaping Skilling's thoughts and future actions. This did not mean the worst employees were fired, only the least popular, or those who were not afraid to tell the truth. Thus, the corrupt culture of Enron was born. At one point, in an inter...
In this essay, I will be examining the financial events surrounding Bernie Madoff, and the events surrounding Enron. Bernie Madoff, “a former American stock broker, investment advisor, non-executive chairman of the NASDAQ stock market, and the admitted operator of what has been described as the largest Ponzi scheme in the history of the world”. Bernard Madoff, 2011, para. 78. 1) Bernie was able to convince investors to give him large sums of money with the promise that they would receive between eight percent and twelve percent return a year.... ...
In 1985, after federal deregulation of natural gas pipelines, Enron was born from the merger of Houston Natural Gas and InterNorth, a Nebraska pipeline company. In the process of the merger, Enron incurred a lot of debt and, as the result of deregulation, no longer had exclusive rights to its pipelines. In order to survive, the company had to come up with a new and innovative business strategy to generate profits and cash flow. Kenneth Lay, CEO, hired McKinsey & Co. to assist in developing Enron’s business strategy. It assigned Jeffrey Skilling to the task. Skilling, who had a background in banking and asset and liability management, proposed a revolutionary solution to Enron’s credit, cash, and profit worries in the gas pipeline business: create a “gas bank” in which Enron would buy gas from a network of suppliers and sell it to a network of consumers, contractually guaranteeing both the supply and the price, charging fees for the transactions and assuming the associated risks. Thanks to the young consultant, the company created both a new product and a new paradigm for the industry—the energy derivative. Lay was so impressed with Skilling’s ...
Enron Corporation started back in 1985. It was created as a merger of Houston Natural Gas and Omaha based InterNorth as a interstate pipeline company (CbcNews). Kenneth Lay was the former chief executive officer of Houston natural gas merged his company with another natural gas line company, Omaha Based InterNorth. During the time of the merger there were many arguments amongst the two companies and in the end Ken Lay the former C...
Enron started about 18 years ago in July of 1985. Huston Natural Gas merged with InterNorth, a natural gas company. After their merge they decided to come up with a new name, Enron. Enron grew in that 18-year span to be one of America's largest companies. A man named Kenneth Lay who was an energy economist became the CEO of Enron. He was an optimistic man and was very eager to do things a new way. He built Enron into an enormous corporation and in just 9 years Enron became the largest marketer of electricity in the United States. Just 6 years after that, in the summer of 2000 the stock was at a tremendous all time high and sold for more than 80 dollars a share. Enron was doing great and everything you could see was perfect, but that was the problem, it was what you couldn't see that was about to get Enron to the record books.
Enron Corporation was based in Houston, Texas and participated in the wholesale exchange of American energy and commodities (ex. electricity and natural gas). Enron found itself in the middle of a very public accounting fraud scandal in the early 2000s. The corruption of Enron’s CFO and top executives bring to question their ethics and ethical culture of the company. Additionally, examining Enron ethics, their organization culture, will help to determine how their criminal acts could have been prevented.
In July 1985, the Texas based energy firm Enron Corporation was founded by Kenneth Lay by the merge of Houston Natural Gas and Inter-North. Enron primarily focused on the energy markets, due to electrical power markets becoming deregulated Enron expanded into trading electricity and other energy goods. With Enron growing, the company began moving into new markets. In 1999, Enron launched Enron Online, its website for trading goods. The rapid awareness and use of the business website made it the prime business site in the world with a substantial amount of transactions arising from Enron Online. The growth of Enron was extensive and in 2000, the firm was ranked the 7th largest energy firm in the world with year ending accounts 31 December 2000 showing a profit of $979 million and share prices soaring from $40 to $90 in one year.
Enron was on the of the most successful and innovative companies throughout the 1990s. In October of 2001, Enron admitted that its income had been vastly overstated; and its equity value was actually a couple of billion dollars less than was stated on its income statement (The Fall of Enron, 2016). Enron was forced to declare bankruptcy on December 2, 2001. The primary reasons behind the scandal at Enron was the negligence of Enron’s auditing group Arthur Andersen who helped the company to continually perpetrate the fraud (The Fall of Enron, 2016). The Enron collapse had a huge effect on present accounting regulations and rules.
Glater, Jonathan. "Enron Trail Stirs Memory of Andersen." New York Times 21 Feb 2006, web.
The Enron Corporation was an American energy company that provided natural gas, electricity, and communications to its customers both wholesale and retail globally and in the northwestern United States (Ferrell, et al, 2013). Top executives, prestigious law firms, trusted accounting firms, the largest banks in the finance industry, the board of directors, and other high powered people, all played a part in the biggest most popular scandal that shook the faith of the American people in big business and the stock market with the demise of one of the top Fortune 500 companies that made billions of dollars through illegal and unethical gains (Ferrell, et al, 2013). Many shareholders, employees, and investors lost their entire life savings, investments,