Enron: corporate fraud and financial collapse

¶ … Downfall of Enron

During the mid-1980's, the price of oil again began to fall and people began using fuel oil instead natural gas. The fuel oil was far less expensive than other alternatives, and Enron, a major gas producer, lobbied Congress to try and get the natural gas market deregulated (NPR). The price of natural gas began to fluctuate wildly and many buyers were scared out of the market. Enron began to sell natural gas futures, along with futures in electric power after Enron lobbied to have that market deregulated as well. These futures guaranteed the commodity would be available for delivery at a certain price, which helped to calm down buyers on natural gas and other resources.

Enron hired Jeffery Skilling in 1990, and the man was made president and chief operations officer in 1997 (NPR). Skilling was put in charge of the development of new futures markets for Enron, and began to build futures markets for things like internet bandwidth and even a market where a person could bet against inclement weather (NPR). All of these markets were generating business and forging new partnerships for Enron, but they didn't create any real financial gain. The debts that were being incurred and the millions of dollars the company was losing in these futures markets were not reported in the company's financial statement (NPR) Enron's chief auditor, Arthur Anderson began to believe that some of the company's debts as well as the debts of its partners should be reported in the company's financial statement, and notified company founder Ken Lay, who sis not share Anderson's views (NPR).

Since many of Enron's partnerships and investments hadn't been returning any gains, and these losses weren't being reported as losses for the company, the news that Enron and its had lost billions during the 1990's came crashing down on its shareholders and investors. This news led to the downgrade of company debt which forced Enron to pay much more of their nearly one billion dollars in debt much sooner (Kaldec 2). Enron's stock was sent plummeting, forcing a Congressional investigation in December 2001. This investigation turned up the fact that Enron's partnerships were illegally kept off its books, and that Anderson had instructed employees to destroy much of the incriminating paperwork and records well before the investigation took place (Kaldec 1). The Securities and Exchange Commission also learned that documents were shredded shortly before its own investigation in 2002, and charges were brought against Anderson, Skilling, and Lay.