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A Few Bad Men, an Essay on Enron Scandal

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An Essay On Enron Scandal

In the late 2011, the world was shocked with the phenomenal case of the America’s largest corporate bankruptcy. As much as 74 billion US dollars lost suffered by the shareholders. Thousands of employees and investors lost their retirement accounts which was around 2 billion US dollars in total and around 20.000 employees lost their job. This was a dark history where a company took 16 years to be successful by increasing their 10 billion of assets to 65 billion of assets, but only took 24 days, less than a month, to go bankrupt.

Enron is an American energy, commodities and service company based in Houston, Texas, founded by Kenneth Lay after pushing the America’s government to make deregulation on energy markets, in particular the natural gas industry. Several years later, Kenneth Lay hired Jeffrey Skillings as Chief Operating Officer of Enron. Jeffrey Skilling had come up with an idea to find a new way to deliver energy rather to be bound by the physical flow of the pipeline. Enron would become a kind of stock market for natural gas. Skilling’s idea was to transform energy into financial instrument that could be traded like stocks and bonds. Using that idea, Enron had become the largest buyer and seller of natural gas and was even named as America’s seventh largest corporation that valued at almost 70 billion US dollars.

The root cause of the gigantic scandal started when Jeff Skilling proposed a specific term to be fulfilled by Enron before they hired him. It was that he was allowed to use a certain kind of accounting known as Mark-To-Market. Mark-To-Market accounting allowed Enron to book potential future profits on the very day a deal was signed. The outsiders of Enron will receive financial information only based on what Enron had said without any way to...

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