Enron : Enron And Enron

Enron, an energy trading supply company, founded in 1985 was the product of a merger between the Houston Natural Gas Company and InterNorth Incorporated. Enron was able to flourish as a result of the Dotcom Bubble, a rapid rise in equity markets caused by investments in internet-based companies in the 1990s. Hoping to wreak more revenue through additional utilization of internet-based strategies, Enron created EOL, Enron Online, a computerized trading website. By the early 2000s, EOL was generating approximately $350 billion in trades. EOL’s success fueled Enron’s ambitions to create a broadband telecommunication network worth hundreds of millions of dollars. However, unlike EOL, this costly telecommunication network yielded minimal profits. Devastatingly, the financial blow was accentuated by the emergence of the Great Recession.

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.

Enron, the natural gas provider turned trader of natural gas commodities and in 1994, electric, was once touted as the seventh largest company in America. Kenneth Lay, founder, began changing Enron from just a provider into a financial energy powerhouse. Lay took advantage of the dot-com boom of the late 1990’s by creating Enron Online, an internet trading platform. Internet stocks were valued at astronomical prices and were all the rage on wall street, who accepted the increasing prices as normal (Investopedia). On December 2, 2001 Enron declared chapter 11 bankruptcy, resulting in the loss of twenty thousand jobs and billions of investor and creditor dollars. Enron, once designated as "America 's Most Innovative Company" by Fortune for six years consecutively, enacted massive financial fraud at the fault of its top level executives: Kenneth Lay, Jeffery Skilling, and Andrew Fastow.

LJM1 ignored some of Enron’s entries in the books that were missing. Outsiders owned less than 3% of the Special Purpose Entities equities. There was an error made by Arthur Andersen to let LJM’s financial statement to remain unconsolidated. If the financial statements had been consolidated, some of the errors could have been found. They may have even had some time to correct these errors before that had gotten so far out of control. There was not governing controls in place and fraudulent activities were unlimited. Andrew Fastow created LJM1 to handle investments with Rhythms NetConnections, high-speed Internet service provider. The stock that they bought at $10

Enron is viewed by many as the quintessential corrupt corporate juggernaut. Corporations are nothing more than a collection of people. If a corporation is corrupt than it must be filled with corrupt employs, and led by a front office devoid of moral standards, right? Perhaps this is not entirely true. Certainly an element of corruption was present in the case of Enron, the number of corrupt employees may not have been as encompassing as presumed. When asked to rate their level of honesty, most would respond that they are honest. In actuality, most people are not completely honest, and their level of dishonesty is correlated with their ability to rationalize the dishonesty and preserve their self- image as an honest and admirable person

The financial collapse of Enron had substantial and far-reaching ramifications throughout the financial investment field, tax compliance professions and the accounting profession. Intense Congressional scrutiny resulted in a new era of transparency in financial reporting, stricter reporting standards as provided in Sarbanes-Oxley and substantial penalties for failure to comply with new financial reporting and tax compliance standards in the Internal Revenue Code (Bottiglieri et. al., 2009)

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 company was created in 1985 out of Texas. The company was in the business of natural-gas pipelines. Eventually they merged with InterNorth and their business shifted towards other natural gas productions. They began to trade natural gas and electricity, which resulted in their biggest growth driver for their company. Enron was not only top in the country, but in the world they were known for their business’s success. In the year of 2000 they hit number seven on the fortune 500 list. At this point, Enron was also the sixth largest energy company in the world. But, the company quickly became the largest bankruptcy in the United States history. Humble beginnings of this company were not so humbling to the auditors and investigators soon after they uncovered their overstated financial statements.

December 31, 2001 will forever be etched in history as the day that one of the biggest white collar scandals came to an end. Electric and natural gas giant Enron was found to have been defrauding its investors out of billions of dollars in order to increase its stock prices, and fatten the pockets of high executives particularly Chairman and CEO Kenneth Lay, President and COO Jeffrey Skilling, and CFO Andrew Fastow. Thousands of employees were laid-off and lost their 401(k); those already retired lost funding from their pension.1 In this paper I will demonstrate that the Enron corporation was operating on a foundation of fraud, corruption, greed, and immorality; I will also reflect on the legal and financial consequences surrounding the scandal.

The purpose of this article is analyze the downfall of the Enron Corporation and how the collapse of Enron Corporation consequence affected the United states financial market. Enron Corporation was the seventh largest company in the United States, and had the biggest audit failure. In this Research paper, it describes the reason of Enron Corporation collapse, including details of the internal/ external management, accounting fraud, and conflict of interest. Enron is the largest bankruptcy in America history!

The story of Enron’s bankruptcy, an US company that provided products and services related to natural gas, electricity and communications has been one of the most serious cases of unethical practices in the American economy. The company directors in association with their accountants and lawyers created subsidiaries in order to generated false earnings, avoid taxes, inflated assets and hide losses. Finally in 2001 the company lost the credibility in the market and the scandal was exposed affecting thousands of employees and investors. (Tonge, Greer, & Lawton, 2003)

Expansion is necessary for the growth of a company, which is most commonly through local expansion or globalization. Globalization is the process in which a company begins international relations and influences or operate on the global level. Enron wanted to expand their reach in the market and in the natural oil industry. Enron’s first international investment was in India. Many other companies were wary about investing in India due to the state of their economy. However, Enron invested heavily in Dabhol, India not realizing a key factor about the country. The power plant was extremely expensive for the company, as well as the country being too poor to be able to pay for the energy that Enron provided. The city of Dabhol was in ruins and

The reprehensible story of the Enron Corporation’s rapid rise to success followed by their consequential disgraceful fall is one that has captivated the attention of the public for more than a decade. Not only was this scandal highlighted largely due to the widespread publication of the Enron Corp’s actions in the newspapers and television but must notably their substantial contradictory actions against not only basic ethics but Enron’s published Code of Ethics. Outlining the reputation of Enron, Kenneth Lay, Chairman and Chief Executive Officer (CEO), in a foreword within Enron’s Code of Ethics stated, “to be proud of Enron and know that it enjoys a reputation for fairness and honesty and that it is respected.” Even though Kenneth Lay spoke to the company as a whole on manners in ethics and good conduct, it was he and a number of other high placed executives who choose to ignore their own statements and act in complete disregard. When running an organization executives are held responsible and expected to maximize their shareholders interests and enhance overall capital gain while upholding to the practice of ethical processes and abiding by common governing virtues. Through the study of three key virtues (integrity, fairness, and justice) and applying them to the Enron case, it will quickly be seen how evident the leaders of this organization choose to neglect ethical practices and virtues to gain personal financial growth.

Imagine that we were stockholders of one of the biggest company, and our stock value has been on the rise and is now up to almost 100 dollars a share, but one day, our share value drops below one dollar. This happened to shareholders of Enron. The total debt amounted to over $ 16 billion, which was the largest corporate bankruptcy in American history. Shareholders lost 60 billion dollars within a few days, 4500 employees lost their jobs, and the employees lost billions in pension benefits. I had never heard the name of Enron nor Enron’s scandal until I watched a film, “Enron: The Smartest Guys in The Room,” but I realized the Enron scandal affected the whole of the business in the United States.

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).