Enron Essay
As Bethany McLean and Peter Elkind portray in The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron, there was a chain-reaction of events and a hole that dug deeper with time in the life-span of, at one time the world's 7th largest corporation, Enron. The events were formulated by an equation with many factors: arbitrary accounting practices, Wall Street's evolving nature and Enron's lack of successful business plans combined with, what Jeff Skilling, CEO of Enron, believed was the most natural of human characteristics, greed. This formula resulted in fraud, deceit, and ultimately the rise and fall of Enron.
Kenneth Lay created Enron in 1985 as a result of the merger of Houston Natural Gas and Internorth. Within a short time, Enron incurred massive debt and lost exclusive rights to its pipelines. Enron's core business was losing money, so they hired consultant Jeffery Skilling, who would soon create a stock market for natural gas transforming energy into financial instruments that could be traded like stocks and bonds. They moved to trading derivatives in 2000, Enron's derivatives-related assets increased from $2.2 billion to $12 billion. They had deals in areas such as weather derivatives, water services, metal trading, broadband supply and power plant. Soon enough, Enron had more contracts than any of its competitors and could predict future prices with great accuracy. Enron seemed to always have steady, high profits. Behind the scenes, however, there was much more to it.
Starting with the Vahalla scandal, the board learned that Louis Borget and Tom Mastroeni were gambling beyond their limits, destroying trading reports, keeping two sets of books and manipulating accounting in order to give the appearance that Vahalla was earning steady profits. The board did not fire the Vahalla executives, instead, the message to Borget and Mastroeni was "please keep making us millions," (20). Borget and Mastreoni later ended up on...
Please login to view the full essay...