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The Rise and Fall of the Enron Corporation


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The Rise and Fall of the Enron Corporation

Malay Blama

Leg 500 Summer Quarter

Prof. D. F. Page

Strayer University

August 9, 2009


Enron was an American energy trading and communication company based in Houston, Texas. It was formed in 1985 by Kenneth Lay after merging with Houston Natural Gas and InterNorth companies. Kenneth Lay was originally the CEO of the Houston Natural Gas company prior to the merger. By the middle of 2000 Enron stock price hit all time high of $90.00 per share causing share holders to lose nearly $11 billion when it plummeted to less than $1 per share by the end of November 2001. Few years later following its formation when Jeffery Skilling was hired, he developed a staff of executives that through the use of accounting loopholes, special purpose entitles and poor financial reporting, were able to hide billions in debt from failed deals and projects. They were able to mislead Enron’s’ board of directors and audit committee of high-risk accounting issues as well as pressure what was supposed to be and independent Certified Public Accounting Firm, the Author Anderson, to ignore the issues. The corporation went bankrupt as a result of committing institutionalized, systematic and well-planned accounting fraud. Since its fall, Enron has become a symbol of corporate fraud and corruptions.

Corporate governance structures have traditionally been a private matter between shareholders and managers with some state law restrictions, but the Sarbanes-Oxley Act (SOA) has made structures governing the conduct of the corporation a matter of federal law. Even the adoption of ethics, previously within the domain of management prerogatives is now a requirement under SOA. (Tipgos M. et al.,2004). The principal weakness of Enron structure was the excessive concentration

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