Enron: A Scandal Which Shocked The Nation

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Enron: A Scandal which Shocked the Nation

Enron: A Scandal which Shocked the Nation


Enron was once counted amongst the giant corporations of the 20th century. It was ranked amongst the top ten largest energy companies and the seventh largest corporation by Fortune 500 (Prebble, 2010). However, events leading up to the filing of their bankruptcy protection in the December of 2001 are filled with scandalous details relating to dubious accounting practices by various members and employees of the said corporation, as well as other government officers (Jennings, 2009). More than a decade has passed since the company disappeared from the corporate world, however, the impact on ethical issues it made are still causing repercussions.

Enron was a company which held more than 65 billion dollars in assets, which took the management approximately sixteen years to build. However, in a matter of days the company went entirely bankrupt (McLean & Elkind, 2004). Stock rates of Enron drove from up to 90 dollars to less than 1 dollar. Hundreds and thousands of employees as well as investors lost their jobs, money and livelihood (Skilling v. United States, 2010).

Evolution of Enron into a Giant

Enron was initially conceived as an interstate pipeline business in the year 1985 and evolved into a power supplier to utilities. Through a merger of Internoth and Houston Natural Gas, Enron started its journey towards becoming a global energy giant. In the ensuing years, the company was voted amongst the top electricity, communications and natural gas companies as well as an exemplary corporation (Skilling v. United States, 2010).

Hiding Enron's Accounting Improprieties

With the help of diversification techniques as well as international investment, Enron expanded to maintain and build upon its market position. However, until 2001, the fact that the company had been suffering severe losses had never been revealed. By hiding their liabilities and overstating their revenues, at the face of it, Enron showed amazing profits (Markham, 2006). They manipulated their financial statements so that they would not reflect the huge risks and subsequent losses that the company was facing, or its dismal financial condition. Investors pouring money into the company and buying stocks were also kept unaware of the real situation through fraudulent balance sheets and other financial instruments. They went as far as to lead their employees into investing their pensions into their stock options (Brien, 2005).

A partner in crime was Arthur Andersen, the audit company which was involved in the scandal by hiding their fraudulent practices for over five years. During this time frame, the upper management of the corporation was also busily embezzling funds and funnelling them into their private accounts. Another scandalous practice within the company was to drive up the prices of the stocks and pocketing large amounts of money via trading stocks illegally (Skilling v. United States, 2010).

Fraudulent Success

As mentioned above, Enron's per share price on the stock market was 90 dollars by 2001. As per Jennings (2009), “By December 2000, Enron's shares [were] selling for $85 each, its employees [had] their 401(k)s ...