Enron: from the Beginning to the End

2542 Words Apr 16th, 2008 11 Pages
Introduction
When many people hear the word Enron, they immediately associate it with the most important accounting scandal of our lifetimes. Enron was an American gas company that began as the Northern Natural Gas Company in 1931. Internorth, a holding company in headquartered in Omaha, Nebraska, purchased the Northern Natural Gas Company and reorganized it is 1979. Enron arose from the 1985 merger of Houston Natural Gas and Internorth. After building a large, new corporate headquarters in Omaha, the new Enron named former Houston Natural Gas CEO Kenneth Lay as CEO of the newly merged company, and soon moved Enron 's headquarters to Houston, Texas. After becoming the newly created top executive, Lay later became chairman of the board
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These were named “Special Purpose Entities” (SPE). These SPEs were of doubtful legality and served a number of purposes. (Walsh, 2002) At first Enron apparently set up these SPEs correctly with the help of its independent auditors, Arthur Anderson. When Enron ran into some difficulties finding replacement for these SPEs, it started using key management personnel for this purpose. What Enron was in fact doing, was using these Special Purpose Entities to move debt off the balance sheet and using the company stock as collateral. (Reinstein, et all, 2002)

Enron’s Downfall
Concerns about Enron’s financial stability were mounting. On August 14, 2001, Jeffrey Skilling, the chief executive of Enron, a former energy consultant at McKinsey & Company who joined Enron in 1990, announced he was resigning from his position. Skilling cited that his reasons for leaving were personal. The months leading up to his resignation, Skilling had sold at minimum 450,000 shares of Enron at a value of around $33 million. After Skilling’s departure Lay reassured the concerned public that Enron was not facing any problems and was in a healthy state. Lay reassumed the position of Chief Executive after Skilling left but a lot of attention was now being focused on the company. Meanwhile, Kenneth Lay had cashed in hundreds of millions of dollars of his own shares but failed to warn others of the tidal wave that was heading their way, particularly those employees that had their entire
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