Enron’s Demise ~ Where There Warning Signs?

Enron was a corporation that reached heights unknown, only to watch it fall apart from the inside out based on a foundation of falsehoods and cheating. Enron established a business culture that flourished on competition and was perceived in society as an arrogant corporation, mainly because of its corporate leadership. The fairytale of Enron actually ended as a nightmare with it destroyed by one of America’s largest bankruptcies in history. The demise of Enron impacted the livelihood and futures of numerous employees, their pensions, and in due course impacted Wall Street in a significant way. Even people today are amazed at how such a powerful company met its demise so rapidly. Enron’s end was a product of greed when certain executives of Enron were not eager to accept the failure of their company. The company utilized mark-to-market accounting that detailed the projected impending profits from a long-term deal (Lawry, 2015, p. 28) The results of the deals did not generate revenue as anticipated, but tremendous loss instead. This resulted in Enron accumulating enormous amounts of debt that they attempted to keep classified from the public. Ultimately the truth came to fruition.

Enron was one of the largest electricity and natural gas companies in the world located in Houston, Texas. On December 2nd 2001, Enron filed for chapter 11 bankruptcy when it was found by the SEC that they were misstating their income and their equity value fell below what their balance sheet had stated. The stock of the company was once selling around $90 per share and had a net worth of $70 billion dollars. At one point, the company stood as the 6th largest energy company in their world known for their innovativeness and is now known as one of the largest accounting scandals in history.

Enron was an energy trading and communications company located in Houston, Texas. During 1996-2001 Enron was given the name of America’s Most Innovative Company by Fortune magazine as it was the seventh-largest corporation in the US. The problem that led this company to bankruptcy was due to the fact that fraudulent accounting practices took place allowing Enron to overstate their earnings and tuck away their high debt liabilities in order to have a more appealing balance sheet (Forbes.com, 2002). Enron’s accounting team “cooked” the books to every meaning of the word so that their investors would not see anything wrong with the failing organization. This poorly structured company led people to jail time, unemployment, and caused retirement stocks to be dried up. Enron had a social responsibility to its stockholders and rather than being up front and honest about the failing company they hid every financial flaw in order to keep receiving money from its investors. By Enron not keeping a social

CEO Kenneth Lay was a very smart man who always thought ahead of the curve. In his search for new opportunities, he started thinking about the deregulation of energy markets, particularly the natural gas market. Then in 1985, Lay eventually founded Enron in Houston, Texas. This was the result of merging two relatively small regional natural gas pipeline companies: Houston Natural Gas and InterNorth.

Whenever someone hears the word "Enron" today, they usually think of the transgressions committed by the top-level executives who successfully managed to destroy the company's reputation and achievements.

Enron was a publicly traded energy company formed in 1985 by Kenneth Lay when Internorth acquired Houston Natural Gas; the company, based in Houston Texas, Enron (originally entitled “EnterOn”, but was later subjected to abbreviation), worked specifically in power, natural gas, and paper and even ventured into various non-energy-based fields as they expanded, including: Internet bandwidth, risk management, and weather derivatives. Several years after the founding of the company, Enron hired a man by the name of Jeffrey Skilling, a former chemical and energy consultant, who, upon promotion, created a team of high-level administrative employees who, by using special purpose entities, lackluster reporting of finances, and unethical accounting practices, hid billions of dollars of debt from unsuccessful arrangements and ventures from stock holders and the U.S. Securities and Exchange Commission. Enron executives achieved this scheme by using a controversial accounting method entitled “mark-to-market accounting,” which in essence, assigns value to financial commodities based on their projected market values; mark-to-market accounting is the opposite of cost-based accounting which records the price of a commodity at the purchase price. As a result of this new method, Enron’s worth skyrocketed to over $70 billion at one time, only to collapse miserably several years later—ultimately costing thousands upon thousands of people their jobs, pensions, and retirements. Enron’s employees

Enron’s demise was led by the arrogance and greed of senior executives. The belief was they had to be the best business leaders in the United States. Many also believe that there was a conflict of interest with the auditing firm because not only did they serve as the auditing firm, they also served as a consulting firm to Enron. This enabled them to fabricate financial statements by building assets and hiding debt from investors. The loss of the recorded $1.2 billion shareholders equity meant that many victims of this fraud lost their jobs and their retirement funds.

The top managers operated in a corrupted fashion They did not even try to produce a positive symbolic management within the organization. Thus, the failure of the company was also the reflection of their moral failing. As a matter of fact, not only there was an aggressive and arrogant culture, but managers were mainly driven by corruption, and greed. They had no space for ethics; their main goal was trading for financial gains. Managers at Enron did not focus on long term goals. Moreover, they did not take care of their shareholders. Executives had neither an open relationship nor a shared vision with their employees. Instead, they were only interested in enriching themselves; according to their philosophy any situation could bring profits, even though this might involve crossing ethical lines. Indeed, the culture of pride, arrogance and greed at Enron made executives look for whichever solution in order to get more and more profits. Because executives wanted to benefit themselves first, all the decisions they took in the board room were made on the only account of how they could earn more. For all the above-mentioned reasons, operational and financial controls were inadequate,

Enron started as a sound company that had a promising future in the oil and energy business. The companies CEO and CFO were charged on 35 different accounts of fraud, conspiracy, and insider trading that cleared most of its employee’s retirement pensions and billions of dollars for others (Unknown, 2016). It is impossible to account for every transaction that a company will produce, but the revamping of government

Enron was firstly a natural gas pipeline company that combine as the combination of Nebraska and Omaha’s natural gas company, Houston Natural gas and InterNorth. It took 15 years from 1985 to 2000 to climb up into the one of the largest gas company in North America. Behind the successful of the company, it was a story of betrayal and

Enron began as a pipeline company in Houston in 1985. It profited by promising to deliver so many cubic feet to a particular utility or business on a particular day at a market price.

The Enron corporation was formed in 1985 by the merging of two natural gas companies, Houston Natural Gas, and InterNorth; In the following year Kenneth Lay was appointed Chairman and CEO.2 Enron began its escapade of fraud and corruption in April of 1987 when it was discovered by Enron executives that Louis Borget and Thomas Mastroeni, traders in their Valhalla, New York office, known as Enron Oil, had been misappropriating funds; traders were “gambling beyond their limits, destroying trading reports, keeping two sets of books and manipulating accounting” (PBS, 2015) to make it appear as if the company’s profits were legitimate. The shocking yet not surprising response from CEO Kenneth Lay was not to fire the two

The story of Enron begins in 1985, with the merger of two pipeline companies, orchestrated by a man named Kenneth L. Lay (1). In its 15 years of existence, Enron expanded its operations to provide products and services in the areas of electricity, natural gas as well as communications (9). Through its diversification, Enron would become known as a corporate America darling (9) and Fortune Magazine’s most innovative company for 5 years in a row (10). They reported extraordinary profits in a short amount of time. For example, in 1998 Enron shares were valued at a little over $20, while in mid-2000, those same shares were valued at just over $90 (10), the all-time high during the company’s existence (9).

All of the prior represents the business side of the downfall of Enron. That being said, businesses fail all of the time. The reason why Enron Corporation and its executives will always live in infamy is not because the company failed, but how and why the company failed. How, exactly, does a company worth about $70 million collapse in less than a month? It became clear that the company not only had financial problems, but ethical problems that started from the top of the company and trickled down. A key player in these problems was Jeffrey Skilling. He was a man brought to the company by Ken Lay himself. Skilling brought his own accounting concept to the company. It was called mark-to-market accounting. This concept allowed Enron to record potential profits the day a deal was signed. This meant that the company could report whatever they “thought” profits from the deal were going to be and count the number towards actual profits, even if no money actually came in. Mark-to-market accounting granted Enron the power to report major profits to the public, even if they were little or even negative. It became a major way

Enron Corporation was formed as the result of the July 1985 merger of Houston National Gas and InterNorth of Omaha, Nebraska. Their headquarters were located in Houston, TX. In its earlier years, Enron was a