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Enron Downfall Essay

635 words - 3 pages

Enron’s Downfall

In 1985 Enron was created from a merger between Houston Natural Gas and InterNorth, both companies dealing of natural gas pipelines. During the process of the merger, Enron incurred massive debt – the only hope of survival was initiating a new business plan and strategy to generate profits.
Over the next decade, Enron’s reputation grew within the country. CEO Kenneth Lay hired Jeffrey Skilling to lead the company’s efforts, again to success. The business began to flourish while employees were expected to perform at top rankings and produce earnings after Skilling’s roll out of RICE went into effect.
In 1999, Richard Causey, a previous Arthur Andersen accountant who left his former position to join Enron as assistant controller, is named Chief Accounting Officer and assists Andrew Fastow, one of Skilling’s first hires, in creating two partnerships maintained to buy poorly performing Enron assets and risky investments to hide company debt. ...view middle of the document...

Not two months later, Enron announces a $638 million 3rd Quarter loss and a $1.2 billion reduction in shareholder equity from trading venture write-offs. Causing much concern, Securities and Exchange Commission launches an investigation into the finances of Enron and possible conflict of interest with employees. While an investigation is underway, Dynegy Inc. announces an agreement to purchase the company for an $8 million dollar deal, later to find, Enron restates 3rd quarter earnings and discloses a $690 million debt is owed and revises financial statements to report $586 million in losses. The deal is shortly aborted and Enron stocks plummet to below $1. December 2nd 2001, Enron files bankruptcy and their employees are laid off.
In 2002, the department of justice launched its investigation into Enron. The accounting firm, Arthur Anderson, used by Enron acknowledged that the documents required for SEC were destroyed and no trace of them remains. He soon after gave up his rights to practice accounting and his office was closed. For the employees of Enron, 85,000 people were left unemployed and without pensions losing over $9 billion in annual income. Many of the upper-management employees of Enron were convicted of conspiracy and several other charges that landed them with prison sentences. CEO of Enron, Kenneth Lay died before his sentencing but was found guilty of all charges.
In my opinion, greed was the cause to downfall of Enron. This greed filled people and caused them to make unethical decisions to show great success within the company. Had the top executives truly rebuilt the company after the merger and played a hard game to get into the market; they could have still been a truly successful company but for the real efforts, not by forging financial statements and falsifying figures into offshore accounts. Their only concern was truly making money and making themselves richer.


Gibney, A. (2005). Enron: The smartest guys in the room. [Video file]. Retrieved from

Thomas, C. (2002). The rise and fall of enron. Journal of Accountancy. Retrieved from

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