Rise and Fall of Enron
The meteoric rise and fall of Enron is one of the most notorious tales in the history of corporate America. Enron was the seventh-largest company in the United States in 2000 and 'Fortune' magazine had declared it as America's "most innovative company" for six straight years; its share price had climbed from $10 a share in 1991 to over $90 a share in August 2000 while its revenue jumped to more than $100 billion. ("Rise and Fall of an Energy Giant") No one could have predicted that before the end of the following year the "rising star" of corporate America would be filing for bankruptcy, shaking investor confidence to the core and signalling the end of the longest bull-run in the American stock exchange's history. The ramifications of the dramatic collapse still reverberate in global financial and energy markets as well the U.S. courts, where a number of former Enron managers face serious criminal charges. This fairy tale rise and ignominious fall of Enron is the subject of this paper.
The Rise
The Pipeline and Energy Company:
Enron Corporation was formed as a result of a 1985 merger of Houston Natural Gas (HNG) and InterNorth -- a Nebraska-based gas pipeline company. Kenneth Lay, CEO of HNG, became Enron's first CEO and proceeded to make it the first nationwide natural gas pipeline. Enron soon became involved in the transmission and distribution of electricity in addition to gas in the U.S. As well as the development, construction, and operation of power plants and pipelines worldwide. Its profits were, however, modest as in those days, energy was a government-sanctioned monopoly. (Lindstorm)
Taking...
The deregulation was forced through by legislators to whom Enron paid out massive contributions..." (Levy, 2005) The fraud was primarily comprised of "cooking the books to make it look as if the company's finances were consistently rosy, so that share prices would steadily keep rising." (Levy, 2005) More than 30 individuals have received criminal charges since 2001 connected to their dealing with Enron which incidentally "was just one of several
Enron (Movie) analysis The Smartest Guys in the Room-Enron The film is pitched around the America's seventh largest corporation that was in charge of distributing electricity and natural gas. The company was worth over 70 billion dollars in assets built over years with over 22,000 employees, it became bankrupt within 24 days. The employees lost their jobs and medical insurance, 1.2 billion in retirement benefits while the retirees lost 2 billion dollars
THE PEOPLE BEHIND THE RISE AND FALL OF ENRON Kenneth Lay being one of the pioneers of Enron from its establishment in 1986, had lead the way of Enron's emergence as one of the leading company in the U.S. And eventually to its collapse and declaration of bankruptcy on December 2001. Kenneth Lay held the position as the CEO and chairman of Enron from 1986 to January 23, 2002. Lay is
Enron could engage in their derivative trading strategy with no fear of government intervention because derivative trading was specifically exempted from government regulation. Due in part to a ruling by the Commodity Futures Trading Commission's (CFTC) chairwoman, Wendy Graham, derivatives remained free of regulatory oversight. Ms. Graham, wife of Texas senator Phil Graham, made this ruling 5 weeks before resigning as chairwoman of the CFTC and joining the Enron Board
The first set of rules required in-house lawyers to report frauds to the organization's highest authorities. The second set provided exceptions to the general rule on legal confidentiality. Both sets were heatedly discussed for decades. Similar scandals since the 70s, which gave rise to similar heated debates, included the National Student Marketing securities fraud, the OPM commercial fraud, the Lincoln Savings & Loan and Allied Savings and Loans scandal
Enron hid most of its debts by establishing several LLPs, with some of them being secretly ran by Andrew Fastow, CFO at Enron. By counting only the gains and losses of the companies, but not having to report the LLPs on its financial sheet, Enron's financial position seemed very good. Consolidating the statements would have defeated the purpose of Fastow because the goal was to dump debt, not to report
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