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Enron Scandal

Enron was created by Kenneth Lay to move the energy business away from government control. In its early years, Lay managed the business well but later allowed risky gambles that drained reserves. Jeffrey Skilling introduced a new accounting method that overvalued stocks. Enron grew through global natural gas projects but losses from failed ventures in India and broadband were concealed. Yearly profits were fabricated through deceptive accounting by Andy Fastow as debt grew to $300 billion. When doubts about the company emerged, stock prices plummeted to $0.40, leading to Enron's collapse in 2001 due to unethical practices and lack of financial transparency.

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Renge Taña
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31 views1 page

Enron Scandal

Enron was created by Kenneth Lay to move the energy business away from government control. In its early years, Lay managed the business well but later allowed risky gambles that drained reserves. Jeffrey Skilling introduced a new accounting method that overvalued stocks. Enron grew through global natural gas projects but losses from failed ventures in India and broadband were concealed. Yearly profits were fabricated through deceptive accounting by Andy Fastow as debt grew to $300 billion. When doubts about the company emerged, stock prices plummeted to $0.40, leading to Enron's collapse in 2001 due to unethical practices and lack of financial transparency.

Uploaded by

Renge Taña
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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To manage a business/company it requires skills and understanding and the main goal of

each company is to generate profit and to ensure that the company didn’t fail.

Enron was created by Kenneth Lay because of his view to get the government out of the
energy business which apparently share the same view to some oilman. In the first two years
Kenneth Lay manage the business well, not until 1987 whereby two traders misappropriate a
money to the company and use it to gamble, the CEO Kenneth Lay instead of reducing risks,
he encourage the traders to gamble more because he think that the traders are the one earning
profits for the company and so the traders draw the company reserve, and when Mike
Muckleroy learned about this, he immediately cover it and manage to save the company.
Jeffrey Skilling a man that has an idea step up and introduced his idea. The mark-to-markt
accounting is the company using for the past years, Skilling decided to change this accounting
method to Hypothetical Future Value which can earn the company a multi-million dollars.
And because of Jeff Skilling idea the share of Enron stock became $42/share.
Enron began to vast a natural gas operation all over the world which worth a billion
dollars and one is in India which it didn’t become successful, but Enron manage to cover up
the loss. Another project that Enron developed was the Enron Broadband Services Network
which led the executives to sell their stocks because it didn’t become successful again. Year by
year Enron kept losing money but because of Andy Fastow covering it up, the company
reporting profit. To cover Enron debt that is worth 300 billions, California become their target
to the experiment of deregulated electricity and because of this traders manage enron already
and the CEO knows it but ignore it and as doubt surface around the company and the erratic
behavior of the CEO the stock value drops until 40 cents/share in December 3, 2001.
Kenneth Lay and Jeffrey Skilling can manage the company well but because of deep goal
to generate profits, their goal turn to greed and they become immoral and unethical. Enron
company is lack of transparency in the financial statement, accuracy because of that they
didn’t attain the sustainability.

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