Enron Was The Largest Trader Of Electricity, Energy And...

Alessia Scolaro Accounting II Before its collapse, Enron was the largest trader of electricity, energy and natural gas in the world. Founded in 1985 by businessman Kenneth Lay, Enron quickly became one of the largest corporations in America. It was a company who claimed to valued itself on integrity and truthfulness and whose main goal was to try to change the way the world bought and sold energy. Unfortunately, greed and arrogance along with accounting fraud lead to its ultimate demise. The company’s first case of fraud was uncovered in 1987 after two rogue traders in Enron’s International Oil unit in Valhalla, NY began taking exceedingly risky gambles with company funds. In an otherwise risky market, Enron suspiciously seemed†¦show more content†¦The investigation unveiled the fact that Lay had actually been warned early on by auditors about the illegal actions of his employees. Fearing the loss of profits from firing his biggest money-makers, Lay had decided that it was in the company’s best interest to allow the illegal activities to continue. Both traders were eventually fired and one served a one year prison sentence. Jeffrey Skilling joined the Enron team as CEO shortly after. Under his leadership Enron adopted the accounting method mark-to-market which allowed the company to report potential future profits on the same day a deal was signed. No matter what their actual profits were, on paper, they could be whatever the company decided. This easily manipulative system contributed majorly to Enron’s eventual downfall. To the outside world, the company seemed prosperous. Stock prices rose dramatically and reported profits exceeded expectations yearly. Fortune magazine even called Enron the â€Å"country’s most innovative company.† In reality, it was all an elaborate illusion to hide the fact that Enron was drowning in debt. The chief financial officer, Andy Fastow was tasked with covering up Enron’s financial crisis. Fastow established hundreds of fake limited liability companies to create the illusion that Enron was earning profits by conducting business with these entities. They