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The Enron Scandal

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Enron

Enron was founded in 1985 through the merger of Houston Natural Gas and
Internorth, a natural gas company based in Omaha, Nebraska, and quickly became the major energy and petrochemical commodities trader under the leadership of its chairman Kenneth Lay. In 1999, Enron moved its operations online, boasting the largest online trading exchange as one of the key market makers in natural gas, electricity, crude oil, petrochemicals and plastics. Enron diversified into coal, shipping, steel & metals, pulp & paper, and even into such commodities as weather and credit derivatives.
At its peak,Enron was reporting revenues of $80 billion and profits of $1 billion and was for six consecutive years lauded by Fortune as America’s most innovative company
Enron managed their numbers to meet aggressive expectations. They were less concerned with the economic impact of their transactions as they were with the financial statement impact. Creating favourable earnings for Wall Street dominated decision making.
The Board improperly allowed conflicts of interest with Enron partnerships and then did not ensure appropriate oversight of those relationships. There was a fundamental lack of communication and direction from the Board as to who should be reviewing the related-party transactions and the degree of such review. The Board was also unaware of other conflicts of interests with other transactions.
The Board did not effectively communicate with its auditors from Arthur Andersen. The idea that Enron’s employed accounting techniques were "aggressive" was not communicated clearly enough to the board, who were blinded by its trust in its respected auditors.
The Board did not give enough consideration when making important decisions. They were not really informed nor did they understand the types of transactions Enron was engaging in, and they were too

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