Enron Unethical

Topics: Enron, Kenneth Lay, Jeffrey Skilling Pages: 3 (702 words) Published: September 13, 2012
Enron's collapse was the result of unethical practices; alas, such practices had a long, ignominious presence.

The Enron story begins with CEO Kenneth Lay, who in 1986 combined his Houston Natural Gas company with several other entities. Until 1996, Enron primarily sold natural gas. Yet, in a sign of trouble to come, in 1987 Lay overlooked evidence of financial misdeeds in the company’s Valhalla, NY unit as executives Louis Bourget and Thomas Mastroeni greatly inflated profits while embezzling funds.

With this precedent, Enron’s corruption arguably received a further boost the following year with the arrival of Jeffrey Skilling. Skilling had a reputation for painting a picture of robust profits without regard to underlying conditions. One of Skilling’s prerogatives as Enron president was an insistence on using “mark-to-market” accounting, utilizing both a bevy of off-book accounts in addition to documenting anticipated profits as present in the current fiscal year.

Lay continued to turn a blind eye; after all, Enron was turning into a behemoth by the mid-Nineties and a fresh influx of money was continually needed for the company’s seemingly endless diversification plans. By 1996, deregulation of the oil and gas industries had allowed Enron to more heavily spend in these markets, buying companies in addition to serving as a major supplier.

Investors took notice. Enron stock began its inexorable climb in the latter half of the Nineties. With diversification often comes debt, but rather than keep this debt on the books and allow it to be written off over time, by now Skilling and Lay had begun creating partnerships such as Chesco Investments, allowing it to keep its multi-million dollar debt off the ledgers shown to current and potential investors. In what would turn out to be another fated decision, Enron also presented improper ledgers to the US Securities and Exchange Commission.

Enron had begun to pursue mammoth growth for its own sake; this...
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