ENRON CORPORATION

Enron Corporation

Enron Corporation

Company Background

In 1930, to the north Natural Gas, a Nebraska-based gas pipeline company was founded. By 1950, the company had increase two-fold in size. Adecade subsequent, it started processing and conveying natural gas liquids. The company was renamed InterNorth in 1980 and bought Belco Petroleum three years later. InterNorth furthermore assisted build the Northern Border Pipeline to link Canadian fields with the joined States markets. (C-Span.com, 2002)

Also in 2001, Enron was in converses with a small competitor, Dynegy. The initial affirmation of 22 billion dollars was discussed. However, Dynegy soon canceled the deal as Enron's credit rating and supply cost continued to drop. Days after the affirmation disintegrated, Enron filed for section 11 bankruptcy defence and filed a lawsuit alleging that Dynegy breached the merger affirmation and challenged the to the north Natural Gas option. In January 2002, Enron agreed to let Dynegy take control of the pipeline; however, Enron would have the choice to repurchase the pipeline in June of 2002. (C-Span.com, 2002)

Key Problems and Issues

The Energy economic assembly graded Enron the sixth largest Energy business in the world. In January 2001, Enron's stock strike a concluding high for the year at 82.00 dollars per share (Goldberg & Davis, 2001). Investors and analysts knew Enron's financial statements were very complicated, but because Enron did not display any large-scale fluctuation in their profits development, nobody liked to question the company and took them at face value. On October 16, 2001, Enron reported that they were taking a foremost loss on their third quarter earnings. As a outcome, every person was interrogating their economic stability. The third quarter deficiency were connected to the finish of the connection with a two of buying into partnerships that were conceived by head economic Officer (CFO) Andy Fastow. The joint venture LJM Cayman and LJM2 were formed utilising Enron's equity and outside capital. They were designed to help the business augment quickly without adding too much liability to its books or diluting the worth of the company's stock.

The CFO's connection with these entities was a cause for concern because it put him on both sides of the deal; representing himself as the purchaser and trader simultaneously. This was a foremost confrontation of interest on his part because they did not actually understand whom he was representing in any of the transactions throughout the partnership. On October 22, 2001, the Securities and Exchange Commission ...