Enron and Company Essay

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Enron
In 2001 Enron one of the largest financial investment firms was caught up in one of the largest scandals for abuse of business ethics and financial fraud of our time.
The company had ties all the way to the White House and left in its wake financial chaos and destroyed lives and reputations. This paper will discuss some of the questions as to why it happened, how it occurred and the various ways the scandal brought to light corporate abuse in the business world.
First we must look at a brief history of Enron. Enron's origins date back to 1985 when it began life as an interstate pipeline company through the merger of Houston Natural Gas and Omaha-based InterNorth (CBC News, 2006). At the very beginning of this merger the company grew large amounts of debt along with the deregulation of pipelines the company lost the rights to their own pipelines. To help solve the debt problem CEO Kenneth Lay enlisted the help of Jeffrey Skilling a financial wizard for his young age. They began trading energy contracts, as well as establishing a web-based commodities trading firm. This launched the company into an overnight success with their stock skyrocketing to over 50 percent in one year. The creation of a partnership named Chewco was created which was owned by Enron. The company Chewco was created to buy the University of California pension fund's stake in another joint venture dubbed JEDI (USA Today, 2006). The stocks continued to rise. Another partnership LJM was created to buy poorly performing Enron assets and hedge risky investments it helped the Enron Company to hide debt and inflated profits.
The fact that the CEO and top management dealt in shady business practices is of course evident however there are others outside the Enron company that also had involvement in the unethical practices that ultimately led to the downfall of the company. One in particular is the Anderson accounting firm responsible for auditing Enron. The Anderson company denied any wrong doing of their audit stating that the energy giant's demise was ultimately the result of a failed business model, not shady accounting (CNN, 2002). During the investigation the Anderson accounting firm was found to have create false earnings reports and the shredding of documents to aid in the cover up of the financial debts.
It is very disturbing that a company can grow as large as Enron did on such faulty business practices however the fact that this company was able to last as long as it did means it had significant help and this help reached all the way up to the government including the White House. Proof of this was stated in a government document generated as the result of an independent government oversight investigation: "Many public officials have described Enron's demise as the product of corporate misbehavior. This perspective ignores a vital fact: Enron would not have scaled such grand global heights, nor fallen so dramatically, without its close financial relationships with government agencies. Since 1992, at least 21 agencies, representing the U.S. government, multilateral development banks, and other national governments, helped leverage Enron's global reach by approving $7.219 billion in public financing toward 38 projects in 29 countries" (Vallette and Wysham, 2002).
Considering the fact that multiple government agencies were involved does help to understand how a company was able to thrive and grow to such heights with all the internal corruption however it didn’t stop with government agencies. There have been formal inquires on just how far in the White House the scandal could reach as well. The release of the information came hours after a deeply divided Senate panel voted to issue two subpoenas to the White House for information about contacts with Enron, with Democrats accusing the White House of resisting earlier requests for information and Republicans suggesting that the move was politically motivated
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