Enron and Parmalat

The Italian dairy food corporation Parmalat SpA was founded by Calisto Tanzi in 1961 and grew to a global company. It had about 140 production centers, 36,000 employees and 5,000 contracted dairy farms (https://en.wikipedia.org/wiki/Parmalat). The dairy food giant defaulted on debt in November 2002 and filed bankruptcy in December 2003. It sounds ridiculous because Parmalat’s subsidiary in Cayman Islands had a $4.9 billion cash balance in Bank of America account. However, this account was falsified. Meanwhile, Parmalat also hid losses of $10 billion and increasing assets as high as $19 billion. The auditors did not show enough professional skeptism and due care during the audit.

The Enron Corporation started in 1985 when Houston Natural Gas merged with InterNorth, a Nebraska based Company. Enron was known as the ‘Americas Most Innovative company’ for 6 consecutive years.”(Folger). The reason Enron was so innovative is because it completely changed the way the energy industry was run. Kenneth Lay, Enron’s CEO hired consultant Jeffrey Skilling to completely change the business strategy that the company was run on. They started taking advantage of the fact that energy industry because deregulated and “created a ‘gas bank’ in which Enron would buy gas from a network of suppliers and sell it to a network of consumers, contractually guaranteeing both the supply and the price, charging fees for

Upon watching the documentary, one could conclude that Enron’s bosses created a culture of pushing limits and taking risks. From the movie, we understand that Jeff Skilling was known to be a nerd as well as others within Enron. It seemed as though Jeff had woken up one day and decided to change himself by wearing contacts instead of glasses, changing is wardrobe, and doing some modeling. As he changed, so did others who worked under him for the fact that they saw Skilling as their hero. With time, it has been noted that Jeff became some sort of tragic figure. He became a man who was radically different than how he portrays himself. It was known that Skilling was a huge risk taker and he often talked about, and then started to manifest in trips that he began to lead with small groups and customers that were often times dangerous. These

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.

Enron went into debt during the merger. Enron right from the start was forced to come up with a new way to make money and pay off their debts. Enron shortly after lost its exclusive pipeline rights and Kenneth Lay had a huge problem and need a solution, he enlisted the help of Jeremey Skilling from Mckinsey & Co to help come up with a solution. His solution was to build a ‘Gas Bank’. This was a concept that Enron would buy gas from network suppliers then sell it directly to consumers under a contract which would guarantee supply and price. This revolutionary idea lead to Skilling’s Employment at Enron in 1990 in a new division called Enron Finance Corp. Enron Finance Corp. had the responsibility of gaining access to suppliers and getting clients to sign contracts. They began to dominate the market and with such market power they were able predict future prices

During the 1990s, Kenneth Lay, Enron’s CEO, and his top subordinate, Jeffrey Skilling, transformed the company from a conventional natural gas supplier into an energy trading company.

United States 1). During the first years of the deregulation of the electric market, under the vision and command of Kenneth Lay, who, supported by his studies of economics and the experience obtained from his work in important positions in the cabinet of government of the United States of America, decides to explore the energy industry especially in the area of natural gas. In 1989, Ken Lay hired Jeffrey Skilling, then a consultant to McKinsey & Co., to help him implement the new diversification strategy, which was successful so that by 1995 Enron was already the industry marketing leader, controlling 20% of the energy market in the United States. “Later in the 1990s, Enron used favorable Washington decisions to expand its reach, marketing a variety of other real and virtual commodities, from plastics to bandwidth.” (St. Petersburg Times, "Enron's meltdown.").

In 1996, Skilling became President and COO and convinced Lay in the application of their ‘gas bank’ model in the market for trade in electrical energy as well which led to Enron’s acquisition of

Major private financial institutions in the USA, Japan and Europe ended-up in the hands of such executives who were thus in no violation of any legislation but were in fact acting greedily and unethically, betraying the confidence of their customers. The border line between the laws and the Ethics were lost.

In 1985 Houston Natural Gas merged with Internorth and renamed itself Enron. In 1990 Jeffrey Skilling was hired to focus on trading in commodities. Skilling later becomes the president of Enron in 1997. Andrew S. Fastow is named as Enron’s financial chief in 1998. According to the New York Times Fastow created partnerships which the company claimed were to buy company assets which were not performing very well. We now have come to realize that these partnerships were instituted in order to conceal the company’s debt and give an image of overinflated profits to the public (2006). In 2000 through 2000 there was shuffling around of key leadership. Skilling resigned citing personal reasons only. Six days later Sherron Watkins approaches CEO

This report allows the facts to be known concerning the still mysterious case of Bernard L. Madoff and his longtime investment securities activities, which eventually turned into an enormous fraud of incomparable size. In this report, you will begin to understand how Bernard Madoff was able to execute such an elaborate fraud. The illegal business behavior found in this case is too numerous to count however, quite a few will be identified. In addition, the roles of the perpetrators, accomplices, and their involvement in this scheme will be made known. This fraud had such an enormous impact on the victims, we will examine several implementations that the private investors could have implemented to protect themselves. An

Enron was formed in 1985 after the merging two gas companies, Houston Natural Gas and Inner North. Under the supervision of chief executive officer, Kenneth Lay, Enron profited tremendously from the deregulation of the natural gas industry, which gained them substantial credibility on Wall Street (Watkins). In an attempt to achieve further growth, began investing billions of dollars in foreign projects and trading ventures (History.com Staff). Also, a team of executives was hired under the supervision of Jeff Skilling to speculate the market (Watkins). By 2001, Enron had become a conglomerate that both owned and operated gas pipelines, pulp and paper plants, broadband assets, electricity plants, and water plants internationally (Wall Street Club).

Most of the top executives overstated Enron’s earnings by several million dollars (Niskanen, 2005) causing the company’s stockholders to lose millions of dollars. Kenneth Lay who joined InterNorth, later renamed Enron, in 1985 became the CEO the following year. In 1990, Kenneth Lay hired Jeff Skilling to work in the operations department. Jeff Skilling would eventually take over Enron in 2001 as there Chief Executive Officer, replacing Kenneth Lay (Zimmerli, Richter, & Holzinger, 2007, p. 131).

As the merger was coming to completion Enron incurred massive debt due to deregulation, they no longer had the exclusive rights to its pipelines. During this time the company was forced to come up with new and innovative business strategies to generate a profit and receive cash flow. Mr. Lay decided to hire McKinsey and Corporation to assist in the development of a new business strategy. McKinsey and Corporation assigned Jeffrey Skilling to the project. Skilling had a background in banking and asset and liability management. He proposed a revolutionary solution to the solve the financial problems that have occurred since the merge. Skilling created the idea of a “gas bank” where Enron

The Centro director’s penalty case took place in the early months of 2007 after Centro Properties Group and Centro Retail Group closed its financial books owing to the end of a fiscal year (Kershaw, 2012). Their 2007 annual reports concealed the whereabouts of 1.5 billion dollars in short-term liabilities while asserting that they were non-current liabilities. The company also did not reveal guarantees of short-term liabilities of an associated company in the range of 1.75 billion dollars. The company did not also reveal the whereabouts of another 500 million US dollars that it categorized as non-current.