Enron and Parmalat

Decent Essays
Managua, Nicaragua
Sept 28th, 2013
In 1985 Kenneth Lay merged his company, Houston Natural Gas, with Nebraska’s InterNorth to create the Enron; a company to be the biggest natural gass corporation to exist in the U.S. During the 1980’s, under the presidency of Ronald Raegan, there was a considerable lack of regulations regarding the energy markets, thus allowing the company to buy and sell contracts for a delivery at some time in the future.
By 1990 Jeffery Skilling joined as a former consultant, eventually to become Enron’s COO (Chief Operating Officer). His participation encouraged the incentive of making the company more focused for contracts for delivery of energy as well as change accounting procedures to
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Parmalat’s strategy at this point relied on building a network of off-shore mail-box companies so that the company could conceal the losses, being the largest bond players Bank of America, J.P. Morgan and Citicorp. Basically these banks had the notion that these bonds were ‘’sound financial paper’’ where in fact they were absolutely nothing. (Claudio Celani, 2004)
Claudio Celani suggests in his article that ‘’ what strikes one is not only the dimension of the scheme, but the arrogance of its authors. For instance, one of the offshore mail-box firms used to channel the liquidity coming from the bond sales was called Bucanero, which means ‘black hole’! Appropriately, the first class-action suit in the United States on the Parmalat case, filed by the South Alaskan miners’ Pension Fund, is against Parmalat, its auditors, Bank of America, and Citicorp—and focuses on Bucanero’’ It was later found out in 2003 that the company concealed a sum of $14 bn ‘’black hole’’, as Celani suggests, in its finances. (Claudio Celani, 2004)
For the next years to come there was a marathon of court cases on both continents (American and European), and so it was discovered that nearly €4bn of funds in a Bank of America account did not exist. Though the firm admitted to have a certain amount of debts it was later seen in 2004 that it had in fact about €14.3bn (actually being 4 times the amount suggested). In turn , by 2008 Fausto Tonna is
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