What Went Wrong Inside Enron?

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  • Topic: Enron, Kenneth Lay, Jeffrey Skilling
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  • Published : September 14, 2013
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What went wrong inside Enron?
Enron was an American energy, commodities, and services company, based in Houston, Texas (Answers.com). Enron was formed in 1985 when InterNorth acquired Houston Natural Gas. Throughout its history Enron also branched into other non-energy related markets such as, risk management, internet bandwidth, and a type of weather insurance for seasonal businesses. Their core business still remained in the realm of power distribution. Enron was once the seventh largest company in America and was considered one of the country's most innovative companies and went under the biggest audit failure in American history, at that time. So how can a company that was so respected and revered have gone from the top of the mountain to rock bottom? What did go wrong inside Enron? The more appropriate question would be what didn’t go wrong?

Prior to the fall of Enron, they were involved in an oil scandal known as the “Valhalla” scandal. Enron CEO’s would bet on the rise and fall of oil prices and traders gambled away all of Enron’s reserves. Louis Borget was one of the people involved in the Valhalla scandal and the one responsible for handling offshore accounts, phony books, falsified bank records, and manipulated earnings. When this came to light, Ken Lay was advised to fire rogue executives, despite the fact that he was aware of the Valhalla incident. Borget was later convicted of fraud and sentenced to one year in prison. This was only the beginning of the problems Enron would soon land themselves in.

It can be said that arrogance, intolerance, and greed of the people in charge were some of the key factors in the downfall of Enron. It can be said that the fall of Enron is rooted in the fact that in 1992, Jeff Skilling, then president of Enron's trading operations, convinced federal regulators to permit Enron to use an accounting method known as "mark to market"; a method only used by trading and brokerage companies at the time. The...
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