Crazzy Eddie

Topics: Enron, Kenneth Lay, Jeffrey Skilling Pages: 2 (486 words) Published: May 23, 2014
Enron Fraud

The Enron Fraud Enron Corporation began as a
small natural gas distributor and over the course of
15 years grew to become the seventh largest company
in the United States. Soon after the federal deregulation
of natural gas pipelines in 1985, Enron was born by the
merging of Houston Natural Gas and InterNorth, a
Nebraska pipeline company. Initially, Enron was
merely involved in the distribution of gas, but it later
became a market maker in facilitating the buying and
selling of futures of natural gas, electricity, broadband,
and other products. However, Enron’s continuous
growth eventually came to an end as a complicated
financial statement fraud and multiple scandals sent
Enron on a downward spiral to bankruptcy.
During the 1980s, several major national energy corporations began lobbying Washington to deregulate the
energy business. Their claim was that the extra competition
resulting from a deregulated market would
benefit both businesses and consumers. Consequently,
the national government began to lift controls on who
was allowed to produce energy and how it was marketed
and sold. But, as competition in the energy market
increased, gas and energy prices began to fluctuate
greatly. Over time, Enron incurred massive debts and
no longer had exclusive rights to its pipelines. It needed
some new and innovative business strategies.
Kenneth Lay, chairman and CEO, hired the consulting
firm McKinsey & Company to assist in developing a
new plan to help Enron get back on its feet. Jeff Skilling,
a young McKinsey consultant who had a background
in banking and asset and liability management, was
assigned to work with Enron. He recommended that
Enron create a “gas bank” to buy and sell gas. Skilling, who later became chief executive at Enron, recognized
that Enron could capitalize on the fluctuating gas prices
by acting as a middleman and creating a futures market
for buyers and sellers of gas; it would buy and sell gas to...
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