Scadal

In: Business and Management

Submitted By harmanjot99
Words 707
Pages 3
Research

Enron Scandal the rise and fall
Enron Formed after Merger
Enron was formed in 1985 following a erger m between Houston Natural Gas and Omaha­based
InterNorth. Kenneth Lay, who had been the chief executive officer (CEO) of Houston Natural
Gas, became Enron's CEO and chairman, and quickly rebranded Enron into an energy trader and supplier.
Deregulation
of the energy markets allowed companies to place bets on future prices, and Enron was poised to take advantage.

Enron Named America's Most Innovative Company
By 1993, Enron had set up a number of limited liability special purpose entities that

allowed Enron to hide its liabilities while growing its stock price. Analysts were already criticizing Enron for "swimming in debt," but the company continued to grow developing a large network of natural gas pipelines, and eventually moving into the pulp and paper and water sectors. Enron was named "America's Most Innovative Company" by Fortune for six consecutive years between 1996 and 2001.

Misleading Financial Accounts
Creative accounting allowed Enron to appear more powerful on paper than it really was.
Special purpose entities subsidiaries that have a single purpose and that did not need

to be included in Enron's balance sheet were used to hide risky investment activities


and financial losses.
Forensic accounting later determined that many of Enron's recorded assets and profits ere inflated, and in some cases, completely fraudulent and w nonexistent. Some of the company's debts and losses were recorded in offshore entities, remaining absent from Enron's financial statements.
During the late 1990s and into the early 2000s, more and more special purpose vehicles were created that allowed the company to keep debts off the books and inflate assets.
These entities, along with…...

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