The Enron Scandal

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What Enron did in their accounting procedures and what eventually happened to the company. Enron was an American energy company based in Houston, Texas. It was formed in 1985 by the merging of Houston Natural Gas – a gas utility headquartered in Houston, Texas -- and InterNorth -- a large energy company based in Omaha, Nebraska. Former HNG CEO Kenneth Lay became the newly formed Enron’s CEO. Revealed in 2001, the Enron scandal made national news because of the meteoric rise of Enron stock over the company’s relatively short life and the even greater losses foisted on shareholders at its demise. As stated above, Enron was formed in 1985. In the early 1990’s sale of natural gas was deregulated. As a result, by 1992 the company was the largest seller of natural gas in North America, selling energy at very high prices and greatly increasing its revenue. By 1998 Enron stock was up 311%. It was up an additional 57% by 1999 and 87% by 2000. By mid-2000 Enron stock was valued as high as $90.00 per share. Its market capitalization exceeded $60 billion, placing it at 70 times earnings and 6 times book value. When it crashed in November of the same year stock value was below $1.00 per share. Share holders lost nearly $11 billion from the fall of Enron. The reason that no one saw the disaster coming was because Enron executive Jeff Skilling engineered it so that no one would see. Skilling was made Enron CEO in February 12, 2001. For that, he received 132 million in a single year. On August 14th of that same year he resigned (citing personal reasons) and immediately unloaded large shares of his stock in blocks of 10,000 t500,000. Although Skilling had done the exact same thing when he was an analyst for First City Bancorporation of Texas in Houston (suddenly and unexpectedly resigning just before the bank’s failure) no one had connected the incidents even though First

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