Enron Case Study

2596 WordsNov 5, 200811 Pages
Enron a Case Study Enron, once known as the worldwide leader in energy trading, began as a natural gas pipeline company. “At its peak, Enron brokered up to 20 percent of America’s energy transactions. These included basic contracts to deliver natural gas from wells to pipelines for distribution to homes, contracts for the purchase of electrical power facility out port, and more complex financial contracts, which allowed power companies to manage price and market risk” (Ackman). Along with selling oil and gas, Enron was an inventive market maker for the sale of gas related products. With market making activities and trading, Enron’s growth went from a simple regional supplier of energy to a global financial…show more content…
Before the company disclosed its financial troubles, Skilling sole 39 percent of his holdings. Kenneth Lay proclaims that he knew little of what was going on even though he allowed the partnerships to take place. Lay thought that the transactions were legal because they were approved by attorneys and accountants. Lay, who was informed that some of the investments could cause Enron millions of dollars, encouraged employees and investors that everything was fine. In 2000 Lay sold 80 million of his own stock, even when he was encouraging employees to buy more shares of the company. Lay with-drew his company $4 million credit line, then repaid it with Enron shares. These transactions don’t have to be reported to investors. Vinson and Elkins helped with the fall of Enron’s empire. Vinson and Elkins helped with some of Enron’s SPEs. The law firm wrote the opinion letters providing the deals were legal. Without these opinion letters Enron could not have done many of the deals. The big question lies in whether Vinson and Elkins approved deals that they knew were fraudulent. Merrill Lynch is another reason for the end of Enron. “Merrill Lynch helped Enron manipulate its income statement by buying barges for $28 million, of which $21 million was financed by Enron through an oral agreement by Fastow that Enron would buy Merrill Lynch’s

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