Enron from the Beginning to the End - 2542 Words

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†¦show more content†¦These were named â€Å"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 independen t 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 entireShow MoreRelatedExecutive Office Of Houston Natural Gas1689 Words   |  7 Pag es Enron was created in 1985 when Houston Natural Gas and InterNorth merged together. Houston Natural Gas was a utility company based in Houston, Texas before being taken over by InterNorth. InterNorth was a very large energy company based out of Omaha, Nebraska. They specialized in natural gas pipelines, but also were successful in the plastic industry, coal and petroleum exploration and production. In the beginning Kenneth Lay, who was the Chief Executive Office of Houston Natural Gas, becameRead MoreRelationship Between Ethics And Business Performance1181 Words   |  5 PagesAlthough the relationship between ethics and business performance is still the subject of controversy, the Enron case is a demonstration that the lack of ethical behavior is inseparable from the competitive disadvantage. The question is not so much whether the disaster could be avoided if the company had adopted from the beginning, transparency criteria. The main thing to know as citizens, so far repute d and honest, have managed to create an environment to bring their managers to take ethically reprehensibleRead MoreRelationship Between Ethics And Business Performance1278 Words   |  6 PagesAlthough the relationship between ethics and business performance is still the subject of controversy, the Enron case is a demonstration that the lack of ethical behavior is inseparable from the competitive disadvantage. The question is not so much whether the disaster could be avoided if the company had adopted from the beginning, transparency criteria. The main thing to know as citizens, so far reputed and honest, have managed to create an environment to bring their managers to take ethically reprehensibleRead MoreThe rise of Enron took ten years, and the fall only took twenty days. Enron’s fall cost its1600 Words   |  7 PagesThe rise of Enron took ten years, and the fall only took twenty days. Enron’s fall cost its investors $35,948,344,993.501, and forced the government to intervene by passing the Sarbanes-Oxley Act (SOX) 2 in 2002. SOX was put in place as a safeguard against fraud by making executives personally responsible for any fraudulent activity, as well as making audits and financial checks more frequent and rigorous. As a result, SOX allows investors to feel more at ease, knowing that it is highly unlikelyRead MoreSkilling Watkins Served As The Whistle Blower Essay876 Words   |  4 Pages Sherron Watkins served as the â€Å"whistle-blower† who played a major part in bringing down the Enron Corporation. Watkins had joined Enron in 1993, after leaving Arthur Anderson. (Enron Whistle) She managed Enron’s massive portfolio of investments used in its multiple vehicles (Welcome). In her letter to then-CEO Kenneth Lay, Watkins questioned whether Enron could withstand the scrutiny of an SEC investigation. Not only would Jeffrey Skilling’s abrupt departure trigger such an investigation, butRead MoreEnrons Accounting Frau d1304 Words   |  6 PagesNorthern Natural Gas Company (the ancestor of ENRON) was established in 1930. In 1979, Inter North Inc. bought Northern Natural Gas Company and placed it  under a new management. 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The executives at Enron were gambling intelligently, according to the