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Case study of enron
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Company Background Enron is the story of the largest bankruptcy in the history of the United States. Through a variety of accounting tricks relating to partnerships, the company was able to inflate its profit and lower its debt. Enron executives earned millions through these partnerships and by selling stock before its demise while employees lost pension plans and retirement funds and stockholders lost value. In 1985, the merger of Houston Natural Gas and InterNorth of Omaha, Nebraska formed Enron Corp. Enron began as a natural gas pipeline company but soon evolved into marketing electricity and natural gas, delivering energy and other physical commodities and providing financial and risk management services to customers worldwide. Eventually, the company became the largest natural gas merchant in North America and the United Kingdom. Enron’s divisions included transportation and distribution wholesale services, retail energy services, broadband services and corporate services. Its Transportation and Distribution sector was named Enron Transportation Services and Portland General. The services include Enron’s interstate natural gas pipelines, Transwestern Pipeline Company, and Enron’s 50% interest in Florida Gas Transmission Company. Their wholesale services included businesses around the world. Operations were in developed nations as well and developing nations. Enron, through its subsidiary Enron Energy Services, customers are able to manage their energy requirements and reduce their total energy costs Enron’s Broadband services include providing customers with a single source for bandwidth services. Other services include providing water and waste services, developing and constructing power projects and operations at Enron’s headquarters. In 1984, Enron became the largest marketer of electricity in the United States. In November 1999, Enron launched Enron Online, which was the first global web-based commodity-trading site. On this site about $1.5 billion worth of transactions are done every day. Key Players The major executives that were involved in the Enron scandal include Kenneth Lay, Andrew Fastow, Jeffrey Skilling and Jeffrey McMahon. Kenneth Lay became the first Chief Executive Officer of Enron when it was first formed. He was previously the president of Fransco, a rival company. He was CEO from 1985 until February 2001 and remained chairman until the company’s collapse. In August 2001, he again became Chief Executive Officer. Lay can either be looked at as a manager who knew what was taking place and overlooked it or one that as completely unaware of the financial misrepresentation. Andrew Fastow joined Enron in 1990 from Continental Bank in Chicago, Illinois.
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