Enron Essay

2404 words - 10 pages

Enron: An American Accounting ScandalAbstractEnron, a budding company of the 1990's seemed to have everything going for it. Touted by Wall Street analysts as the next blockbuster company that would generate hundreds of millions of dollars in earnings. By creating an innovative energy trading platform, Enron rocketed to the top of their industry. Just as things were starting to peak, the greed of needing to outperform their own previous earnings, Enron stretched their investments to the limits and then created an elaborate accounting scheme to hide the losses. Specifically, mark to market and special purpose entities became the two "drugs of choice" used to hide substantial losses from their balance sheets and inflate their earnings. Eventually Enron's circle game ended with criminal convictions for many and the accounting profession was faced with taking a hard look at where there standards went wrong.Greed"Successful people are always looking for opportunities to help others. Unsuccessful people are always asking, "What's in it for me?" (Tracy, 2001) In the 1990's an emerging way to do business, based in the virtual world of the internet, was building to enormous proportions. One such business, Enron, was taking full advantage of these new and exciting, not to mention uncharted business opportunities. Enron was an energy company created in 1985 with the merging of Houston Natural Gas and InterNorth. Ken Lay, the then CEO of the Houston based gas company retained his title with the newly formed Enron. Mr. Lay was a pioneer of sorts during this time of American history when corporate America was fighting to deregulate the Energy business at the state level. More specifically Mr. Lay had his eye on California. His efforts along with others in the fight led to this state's deregulation of energy in 1996. The vision here was to create a business of trading energy (wholesale) similar to the way stocks are traded on Wall Street. Enron saw an opportunity of making a fortune in this new and emergent market. They started trading energy in California and almost immediately an unprecedented amount of black-outs started occurring. Enron was manipulating the loopholes in the states energy statutes and began ransoming energy at up to an 800% increase in costs. ("The California crisis:," 2001)Enron seemed to be on the cutting edge in this market. They continued their vision with additional expansions in the energy trading market, flanking with international projects such as a building project of a power plant in India in 1993. (Perry, 2001) Enron also created a subsidiary company called Enron Broadband Services, which partnered with Blockbuster, to bring videos to homes via the Internet. By the middle of the 1990's Enron was positioning to be one of America's darlings with a bright and profitable future. Many times however, things are not as they appear."Enron grew rapidly and moved into areas it believed fit its basic business plan: buy or develop an asset,...

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