What Happened in Enron

Topics: Enron, Enron scandal, Accounting scandals Pages: 9 (2528 words) Published: June 9, 2010
What happened in Enron and Arthur Andersen?

United States' seventh largest company Enron, with the slogan "Ask Why" was admired for its innovation, but it all ended up in bankruptcy and criminal matters.

The company filed for bankruptcy in December 2001. This was one of the world's biggest corporate scandals in history. USA's seventh largest firm had in over sixteen years increased its assets from 10 billion to 70 billion U.S. dollars, and was by the stock market analysts from Wall Street hailed as the new economy model.

Five years in a row, readers of Fortune magazine appointed Enron as 'The most innovative company in America'. The company's director and founder (in 1985) was Kenneth Lay, who was the future business idol. In his holidays, he played golf with former President Clinton - while he made Enron the largest contributor to George W. Bush's career as Texas governor, and not least as U.S. president.

As a former employee of the now defunct U.S. federal energy commission, Acting Deputy Minister of Energy compared the Interior and economist for the Pentagon during the Vietnam War had Lay conditions for developing its business in light of a political concept: aggressive 'deregulation', the removal of all regulatory and legal obstacles for privatization and monopoly profits.

Enron was dealing with natural gas. As oil prices fell during the '80s, and natural gas (which had flourished in the wake of the oil crisis) was again threatened by falling oil prices, Lay found out that 'deregulation' was the answer. Large customers would no longer be bound by agreements with local, often public energy facilities, but could buy directly from producers, which in turn should have access to the pipe and conduit systems.

Public monopolies were broken. Lay went directly to the Federal Energy Regulatory Commission (FERC) and got the rules repealed. The result was more volatile energy prices. Now, Lay got his most 'innovative' idea: to make natural gas and energy commodities in line with all other mass production. Natural gas was now controlled by electricity supply - and the electricity market was deregulated to a large wholesale market. Lay went directly to the U.S. Congress, and Congress changed the rules.

In 1994 Enron began trading with electricity next to the natural gas, where it became the largest supplier in the U.S. and in England. In 1997 it was also America's largest electricity trading, as did the rear of public electricity companies, as the federal BPA. The U.S. energy deregulation model became a global model. In country after country it was being introduced.

In 2001, the company only had 24 days to go bankrupt and turned out to consist of hot air. Investors lost everything. 20,000 employees lost their jobs, health insurance and retirement savings, while managers such as Ken Lay and Jeffrey Skilling walked out with nearly one billion U.S. dollars.

The senior people in the company had earned nearly 1 billion U.S. dollars from the sale of company shares over the last two years. The founder and leader of the firm, Kenneth Lay, earned 123 million U.S. dollars in 2000 and 25 million in 2001 and then sold his Enron shares before the collapse and had a great profit out of it. At the same time he urged employees to buy shares, which would soon prove to be worthless, while he told them "third quarter looks to be super," and predicted that its value would increase by 800% or more in Over the next decade. Employees would not touch the shares they had in the company, and many whose retirement savings were over $ 1 million worth in August 2001, were left with a life savings of only $ 4000 at Christmas 2,001th.

Many companies are working hard to develop a "corporate culture" and "employee loyalty". This was obviously not the case with Enron. Thousands of workers ended up with an empty bank account and an uncertain future, this was the only reward for believing that they were "part of a team." It is these...
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