Enron And The Collapse Of Enron

1718 WordsApr 17, 20157 Pages
INTRODUCTION Enron, one of the most influential and profitable companies in utility, paper, and communications for numerous years, came crashing down and filed for bankruptcy in fall 2001 (Bottiglieri, Revile, and Grunewald 1). Houston National Gas and InterNorth fused together and created Enron in 1985. The company faced initial problems of debt and loss of exclusive rights to pipelines (Thomas 1). This accounting method allowed Enron to log entire profits from the life of a contract in the year the company made the deal (Stewart 116). Three individuals and one firm had major impacts in the collapse of Enron, which were Kenneth Lay, Jeffrey Skilling, Andrew Fastow, and Arthur Andersen Accounting Firm. Kenneth Lay was the Chief Executive Officer when the company began in 1985. (Cunningham and Harris 32). Jeffrey Skilling was another key individual in the story of Enron and made his first major appearance in 1990. He held many titles at Enron, including president and Chief Financial Officer, and Chief Executive Officer (Chandra 100). The third individual is Andrew Fastow, who also joined Enron in 1990. Fastow’s major contribution to Enron was the use of special purpose entities. SPEs allowed the company to keep losses and debts off Enron’s financial statements and dump them in other hidden areas (Chandra 101). The final group was Arthur Andersen. Arthur Andersen’s biggest impact on Enron was the allowance of mark-to-market accounting, which allowed Enron to record all

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