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How The Fall of Enron Affected the United States Economy - Case Study Example

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The paper "How The Fall of Enron Affected the United States Economy" states that Today we have things such as the Sarbanes-Oxley Act 2002 to prevent companies and their managers from engaging in dubious accountancy practices. This Act was passed to establish more stringent standards…
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How The Fall of Enron Affected the United States Economy
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Download file to see previous pages Kenneth Lay was made the Chief Executive Officer and he wanted to expand Enron’s market share as well as the markets Enron was in since he had a very different vision for the new shape of the company (Welch, 2005).
Houston Natural Gas had previously been in the business of generating their revenues from junk bonds from which its proceeds were used in the formation of Enron. Kenneth Lay aimed at becoming the biggest player in the energy sector through successful trade earnings from futures contracts (NPR, 2006). To his advantage, Spectrum 7, an oil-well concern welcomed a partnership with Enron a year after its creation. Spectrum 7 was headed by George W. Bush, son of the then-Vice President George H. W. Bush. With falling gas prices in the mid-1980s, Enron and other gas firms vigorously lobbied for deregulation to get benefits for themselves (Thomas, 2002). It has been known for many years that political connections can help a business but such situations often come to light only if the business is unsuccessful (Medawar, 1976).
The deregulation action came into effect when buyers switched to the cheaper alternative – fuel oil. No doubt fluctuating gas prices allowed Enron to start marketing gas futures; securing gas prices at later date promised to their stakeholders. Similarly, the company lobbied once again for electricity just before selling electric power futures contracts (NPR, 2006). From then on, Enron was aggressive in expanding its services in the other sectors such as the water utility sector by creating Azurix which partly collapsed on the NYSE in 1999 and finally shut down operations in 2001 (Thomas, 2002).
Concurrently, Jeffery Skilling who had been hired in 1990 to lead the financial side of Enron’s operation became a major proponent of the energy trading businesses and became the president and COO for Enron. ...Download file to see next pagesRead More
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