How Enron Was A Company

Enron was an energy trading and communications company located in Houston, Texas. During 1996-2001 Enron was given the name of America’s Most Innovative Company by Fortune magazine as it was the seventh-largest corporation in the US. The problem that led this company to bankruptcy was due to the fact that fraudulent accounting practices took place allowing Enron to overstate their earnings and tuck away their high debt liabilities in order to have a more appealing balance sheet (Forbes.com, 2002). Enron’s accounting team “cooked” the books to every meaning of the word so that their investors would not see anything wrong with the failing organization. This poorly structured company led people to jail time, unemployment, and caused retirement stocks to be dried up. Enron had a social responsibility to its stockholders and rather than being up front and honest about the failing company they hid every financial flaw in order to keep receiving money from its investors. By Enron not keeping a social

Enron had the largest bankruptcy in America’s history and it happened in less than a year because of scandals and manipulation Enron displayed with California’s energy supply. A few years ago, Enron was the world’s 7th largest corporation, valued at 70 billion dollars. At that time, Enron’s business model was full of energy and power. Ken Lay and Jeff Skilling had raised Enron to stand on a culture of greed, lies, and fraud, coupled with an unregulated accounting system, which caused Enron to go down. Lies were being told by top management to the government, its employees and investors. There was a rise in Enron 's share price because of pyramid scheme; their strategy consisted of claiming so much money to easily get away with their tricky ways. They deceived their investors so they could keep investing their money in the company.

Jumping right into the summary then. Enron was one of the most successful corporations in America during its prime. Marketing electricity and other commodities, as well as, providing financial and risk management services to other companies were the main types of business that Enron conducted. However, Enron’s successful appearance was found out to be a façade, when it came out that the corporation was making a plethora of unethical business moves. Once the corporation’s actions became public, Enron’s fall from grace quickly followed. (Johnson, 2003)

The story of Enron is truly remarkable. As a company it merely controlled the electricity, natural gas and communications sectors of the world. It reported (key word, reported) revenues over one hundred billion US dollars and was presented America’s Most Innovative Company by Fortune magazine for six sequential years. But, with power comes greed and Enron from its inception employed people who set their eyes upon money, prestige, power or a combination of the three. The gluttony took over sectors which the company could not operate proficiently nor successfully.

The Enron scandal has far-reaching political and financial implications. In just 15 years, Enron grew from nowhere to be America's seventh largest company, employing 21,000 staff in more than 40 countries. But the firm's success turned out to have involved an elaborate scam. Enron lied about its profits and stands accused of a range of shady dealings, including concealing debts so they didn't show up in the company's accounts. As the depth of the deception unfolded, investors and creditors retreated, forcing the firm into Chapter 11 bankruptcy in December. More than six months after a criminal inquiry was announced, the guilty parties have still not been brought to justice.

Whenever someone hears the word "Enron" today, they usually think of the transgressions committed by the top-level executives who successfully managed to destroy the company's reputation and achievements.

In 2001 Enron was famous throughout the business world and was known as an technology powerhouse, and a corporation with absolutely no fear. The unpredicted fall of Enron in 2001 shattered the lives of their employees and the people who believed that their greatness was genuine. It is said the fall of Enron was followed by some revelations on how they may have manipulated their way to the top.

Enron was facing risks, risks from every angle. You can see from the history to the demise of the company everything was based on risk. Even when it came to the personal lives of those in charge, you can find some type of risk. Being a Houston native, I did not quite understand the reaction to Enron. I did not understand why it went so far as to changing the name of a stadium from Enron to Minute Maid Park. I was only a teen at the time, but now I am not. I now hope to explain my opinion on how the past, the executive’s and outliers were red flags prior to the Enron crisis. My thoughts on how they could have handled the matter. Lastly, express what I would have done if I was an executive or general council to such a company.

The company Enron was formed in 1985 after two natural gas companies, Houston Natural Gas and InterNorth merged together. Kenneth Lay, former chief executive officer of Houston Natural Gas was named CEO of Enron and a year later, Lay was assigned to the chairman of Enron. A few years later, Enron launched a website to allow customers to buy stock for Enron, making it the largest business site in the world. The growth of Enron was rapid; it was even named seventh largest company on the Fortune 500 list; however things began to fall apart in 2001. (News, 2006). In the third quarter of that same year, Enron posted an enormous loss of over $600 million in four years. This is one of the reasons why one of the top executive resigned even though he had only after six months on the job. Their stock prices fell dramatically. Eventually, Enron filed for bankruptcy protection. This caused many investors to lose money they had invested in the company and employees to lose their jobs and their investments, including their retirement funds. The filing of bankruptcy and the resignation of one of the top executives, also led to an investigation by the U.S. Securities and Exchange Committee, which proved to be one of the biggest scandals in U.S. history. (News, 2006). All former senior executives stood trial for their illegal practices.

Enron started as a sound company that had a promising future in the oil and energy business. The companies CEO and CFO were charged on 35 different accounts of fraud, conspiracy, and insider trading that cleared most of its employee’s retirement pensions and billions of dollars for others (Unknown, 2016). It is impossible to account for every transaction that a company will produce, but the revamping of government

Even the small profits reported by Enron in 2000 were eventually determined to be only a illusion by court-appointed bankruptcy examiner Neal Batson. Batson’s report reveals that over 95% of the reported profits in these two years were attributed to Enron’s misuse of MTM and other accounting techniques. But while financial analysts could not be expected to know that the company illegally manipulated the earnings, the reported profit margins in 2000 were so low and were declining so steadily that they should have merited ample skepticism from analysts about the company’s profits.

Enron executives and accountants cooked the books and lied about the financial state of the company. They manipulated the earnings and booked revenue that never came in. This was encouraged by Ken Lay as long as the company was making money. Once word got out that they were disclosing this information, their stock plummeted from $90 to $0.26 causing the corporation to file for bankruptcy.

All of the prior represents the business side of the downfall of Enron. That being said, businesses fail all of the time. The reason why Enron Corporation and its executives will always live in infamy is not because the company failed, but how and why the company failed. How, exactly, does a company worth about $70 million collapse in less than a month? It became clear that the company not only had financial problems, but ethical problems that started from the top of the company and trickled down. A key player in these problems was Jeffrey Skilling. He was a man brought to the company by Ken Lay himself. Skilling brought his own accounting concept to the company. It was called mark-to-market accounting. This concept allowed Enron to record potential profits the day a deal was signed. This meant that the company could report whatever they “thought” profits from the deal were going to be and count the number towards actual profits, even if no money actually came in. Mark-to-market accounting granted Enron the power to report major profits to the public, even if they were little or even negative. It became a major way

Most of the world has heard of Enron, the American, mega-energy company that “cooked their books” ( ) and cost their investors billions of dollars in lost earnings and retirement funds. While much of the controversy surrounding the Enron scandal focused on the losses of investors, unethical practices of executives and questionable accounting tactics, there were many others within close proximity to the turmoil. It begs the question- who was really at fault and what has been done to prevent it from happening again?

Unfortunately, scandals like Enron are not isolated incidents and the last decade has offered Americans a disheartening perspective with comparable scandals like that of WorldCom and Tyco, Sunbeam, Global Crossing and many more. Companies have a concrete responsibility not just to their investors but to society as a whole to have practices which deter corporate greed and looting and which actively and effectively work to prevent such things from happening. This