The Enron Scandal

Executive Summary In this investigative report, it will show how Enron was involved in improper accounting practices that led to over $70 billion of losses and also Enron’s method that was used to able them in covering their losses. Enron’s fall and bankruptcy had affected not only the employees, but also the shareholders, U.S Citizens and also the impact that it had on other countries that Enron was affiliated with. The focus of this paper is on the creation of Enron’s business model that resulted in the fall of Enron. Also, how the SPEs and the Raptors come to play in assisting Enron. After the Enron scandal broke out, a new legislation was introduced and passed to prevent similar scandals from erupting again. In investigating Enron on their deregulatory schemes, it will help other companies in realising the consequences that can result from such accounting manipulation.

An overview of the company
In 2000, Enron was listed as number 7 on the Fortune’s Magazine “Most Innovative” in the United States for being the largest marketer of natural gas and electricity. The company’s pipeline stretched over 36,000 miles from United States to north of Canada. Enron was formed in 1985 from the merger between Houston Natural Gas (HNG) and InterNorth. Initially, Houston Natural Gas was a retail gas business but sold the business to concentrate on gas exploration and production and other businesses. InterNorth was one of the nation’s premier pipelines (Frontain, 2002). The merger of two well-established companies had provided Enron to be the largest marketer of natural gas and electricity.
In 1989, Enron created a new market of natural gas called the Gas Bank that served as an arbitrator between buyers and sellers of gas. The company began to view itself as mainly a trader and a market manufacturer in electric power, coal, steel, paper and pulp, water and broadband fiber optic capacity. When Enron entered the broadband fiber optic market, it created Enron Online

References: and Appendices 1) Baker, C. Richard, (2003). "Investigating Enron as a public private partnership", Accounting, Auditing & Accountability Journal, Vol. 16 Iss: 3, pp.446 – 466 2) BBC News, (2002, August 22). “Enron Scandal at-a-glance,” BBC News: World Edition. Retrieved on April 3, 2013 from http://news.bbc.co.uk/2/hi/business/1780075.stm 3) CBC News, (2006, May 25). “The Rise and Fall of Enron: A Brief Story.” CBC News: Business. Retrieved on April 2, 2013 from http://www.cbc.ca/news/business/story/2006/05/25/enron-bkgd.html 4) Frontain, Michael (2002). "Enron Corporation," Handbook of Texas Online. Retrieved on April 1, 2013 from http://www.tshaonline.org/handbook/online/articles/doe08 5) Obringer, Lee Ann (2002). “How Cooking the Books Works,” How Stuff Works. Retrieved on April 5, 2013 from http://money.howstuffworks.com/cooking-books7.htm 6) Peavler, Rosemary (2002). “The Sarbanes-Oxley Act and the Enron Scandal – Why are they Important? Business Finance. Retrieved on April 5, 2013 from http://bizfinance.about.com/od/smallbusinessfinancefaqs/a/sarbanes-oxley-act-and-enron-scandal.htm 7) Thomas, C. William, (2002, April). “The Rise and Fall of Enron,” Journal of Accountancy. Retrieved on April 2, 2013 from http://www.journalofaccountancy.com/Issues/2002/Apr/TheRiseAndFallOfEnron.htm