Enron
ENRON:
The Idiocy and the Irony
Introduction
Red flags were blinding as Enron learned about possible corruption with Enron Oil Trading in Valhalla, New York. After the merger between HNG and InterNorth, the Valhalla office, originally established by InterNorth seemed all but forgotten until quarterly and annual reports were due. Supervisors Tom Harding and Steve Sulentic were rarely on-site, preferring the comfort of offices in Houston. Louis Borget who established and operated the trading business was an autocratic manager, receiving excessive incentive payment for profitable performance. Between 1984 - 1986, Valhalla continued to report profits in the emerging oil trading industry.
A call to Enron in Houston by Apple Bank would shatter the false sense of security regarding Valhalla. An ensuing investigation by Arthur Andersen, an accounting firm employed by Enron, failed to produce concrete evidence of misappropriation within Valhalla. Questionable practices were identified, but Enron failed to react appropriately to this information. CEO Lay was able to persuade key executives within Enron and the board of directors to keep running Valhalla offices, with minor changes in personnel. Mick Seidl, unhappy with Lay’s influence over the board, called Mike Muckelroy to investigate Valhalla.
Muckelroy’s investigation would become the tipping point regarding Valhalla. With a secret set of books discovered, fraudulent trading entities identified and $1 billion of hidden debt revealed, this obscure office of 40 employees almost bankrupt the giant Enron Corporation. After the collapse of Enron in 2001, denial was identified as Enron’s modus operandi.
This paper will examine the warning signs of Enron Oil Trading prior to the fall of Enron, highlight the inconsistencies and demonstrate and unwillingness of Enron to learn from their mistakes.
Background
One of the most fascinating aspects of Enron is the question that still lingers in the
The Idiocy and the Irony
Introduction
Red flags were blinding as Enron learned about possible corruption with Enron Oil Trading in Valhalla, New York. After the merger between HNG and InterNorth, the Valhalla office, originally established by InterNorth seemed all but forgotten until quarterly and annual reports were due. Supervisors Tom Harding and Steve Sulentic were rarely on-site, preferring the comfort of offices in Houston. Louis Borget who established and operated the trading business was an autocratic manager, receiving excessive incentive payment for profitable performance. Between 1984 - 1986, Valhalla continued to report profits in the emerging oil trading industry.
A call to Enron in Houston by Apple Bank would shatter the false sense of security regarding Valhalla. An ensuing investigation by Arthur Andersen, an accounting firm employed by Enron, failed to produce concrete evidence of misappropriation within Valhalla. Questionable practices were identified, but Enron failed to react appropriately to this information. CEO Lay was able to persuade key executives within Enron and the board of directors to keep running Valhalla offices, with minor changes in personnel. Mick Seidl, unhappy with Lay’s influence over the board, called Mike Muckelroy to investigate Valhalla.
Muckelroy’s investigation would become the tipping point regarding Valhalla. With a secret set of books discovered, fraudulent trading entities identified and $1 billion of hidden debt revealed, this obscure office of 40 employees almost bankrupt the giant Enron Corporation. After the collapse of Enron in 2001, denial was identified as Enron’s modus operandi.
This paper will examine the warning signs of Enron Oil Trading prior to the fall of Enron, highlight the inconsistencies and demonstrate and unwillingness of Enron to learn from their mistakes.
Background
One of the most fascinating aspects of Enron is the question that still lingers in the
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