The Enron Scandal Of The United States

Kenneth Lay, former Chairman and CEO, and Jeff Skilling who was also a CEO and COO of Enron, had the major part in Enron when it collapsed and went bankrupt. Because of deregulations Ken Lay enter Enron in 1985 through a merger a vast network of natural gas and pipeline. Later, Enron grew into an energy trading company which was worth $68 billion in 2000. Lays family was poor, which made him ambitious to earn wealth regardless of the path he takes, hence, unethical professionalism at Enron. Enron took advantage of his decision to let gas prices float on the market. Rich Kinde found out about Enron’s oil scandal in 1987 by the misappropriation of

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 was one of the largest corporations in the United States. Enron was reporting revenues of over $100 billion, and its stock was being sold for $80 a share (Goethals, Sorenson, & Burns, 2004). However, it was using shady and unethical business practices, such as listing inflating its revenue and hiding debts in special purpose entities. Eventually, their faulty accounting caught up with them, and their market share plummeted. This was credited as one of the worst auditing failures.

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.

Enron was founded by Ken Lay in 1985 as a result of a merger of two gas companies. Enron was in top fortune 500 at number 7 and could not produce accurate financial statements to their investors. Top executives sold over a billion dollars in personal stock two years prior to their demise. Thousands of employees lost their jobs and. Author Anderson shredded all the financial statements all in one day. Employees of Enron lost over a billion and retirement and pension. Many of the top executives got off with just a slap on the wrist. The Sarbanes-Oxley Act of 2002 was set into place to make sure financial organizations are honest with investors.

Enron Corporation was an American energy trading company who committed the largest audit fraud alongside Arthur Andersen and filed for one of the largest bankruptcies in history in 2001 after producing false numbers and committing fraud for years (“Enron’s Questionable Transactions” page 93). Enron failed to run an ethical business in multiple aspects. The executives of the company abused their powers by having board members not properly oversee its employees. Enron committed accounting malpractice by producing false financial reports to hide the debt from failed projects and deals. Using a mark-to-market accounting method, Enron would create assets and claim the projected profit for the books immediately even if the company had not made any profit yet. In order to hide its failures, rather than reporting their loss, they would transfer the loss to an off-the-books account, ultimately leading the loss to go unreported. Along with Enron hiding losses and creating false profit for the

In my opinion the Enron scandal was one of the worst in American history. While we could argue many facets of the scandal the main talking point in my mind stems from the sheer level of corruption they managed to obtain. Which begs the question how far would the corruption have went had it not been for an insider blowing the whistle? It is estimated that Enron hid approximately 51.2 billion dollars worth of debt. They achieved this by utilizing several ingenious but unethical and illegal methods. However, the key to this scandal was the key involvement by the company which was supposed to be the watchdog. This is one of the major reasons SOX was created by the federal

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

Ethics in the business world can often times become a second priority behind the gaining of profits and success as a company. This is the controversial issue that led to the Enron scandal and ultimately the fall of this company. Enron Corporation was an energy company, and in the peaks of their success, they were the top supplier of natural gas and electricity throughout America. Enron Corporation came about from a merger between Houston Natural Gas and InterNorth. Houston Natural Gas was a gas providing company formed in Houston during the 1920’s. InterNorth was a company formed in Nebraska during the 1930’s and owned one of America’s largest pipeline networks. In 1985, Sam Segnar, the CEO of InterNorth bought out Houston Natural Gas for $2.4 billion. A year later in 1986, Segnar retired and was replaced by Kenneth Lay, who renamed the company and created Enron. Enron was the owner of the second largest pipeline in America that measured over 36,000 miles. The company was also the creator of the “Gas Bank”, which was a new way to trade and market natural gas and served as an intermediary between buyers and sellers. As the company continued to develop, it became more of a trader rather than a producer of gas. This trading extended into coal, steel, water and many other areas. One of Enron’s largest successes was their creation of a website called, “Enron Online” in 1999, which quickly became one of the top trading cites in the world. By the year 2000 Enron as a company was

Enron and Arthur Anderson were both giants in their own industry. Enron, a Texas based company in the energy trading business, was expanding rapidly in both domestic and global markets. Arthur Anderson, LLC. (Anderson), based out of Chicago, was well established as one of the big five accounting firms. But the means by which they achieved this status became questionable and eventually contributed to their demise. Enron used what if often referred to as “creative” accounting methods, this resulted in them posting record breaking earnings. Anderson, who earned substantial audit and consultation fees from Enron, failed to comply with the auditing standards required in their line of work. Investigations and reports have resulted in finger

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?

Enron's entire scandal was based on a foundation of lies characterized by the most brazen and most unethical accounting and business practices that will forever have a place in the hall of scandals that have shamed American history. To the outside, Enron looked like a well run, innovative company. This was largely a result of self-created businesses or ventures that were made "off the balance sheet." These side businesses would sell stock, reporting profits, but not reporting losses. "Treating these businesses "off the balance sheet" meant that Enron pretended that these businesses were autonomous, separate firms. But, if the new business made money, Enron would report it as income. If the new business lost money or borrowed money, the losses and debt were not reported by Enron" (mgmtguru.com). As the Management Guru website explains, these tactics were alls designed to make Enron look like a more profitable company and to give it a higher stock price.

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.