The Fall of Enron Essay Example | Topics and Well Written Essays - 1500 words

The Fall of Enron - Essay Example It was 1985 when Kenneth Lay’s Houston Natural Gas merged with Nebraskan-Northern Natural Gas Company’s holding company, InterNorth, to form Enron. The two separate companies were primarily dealing with the distribution and transmission of oil and electricity in the United States of America. They were also active in the construction, development and maintenance of power plants, pipelines and other similar infrastructure worldwide (Wikipedia, 2006). Under the new company name, Lay was appointed as the Chief Executive Officer and wanted to expand Enron’s market share as he had envisioned for his former venture. 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 1980’s, Enron and other gas firms vigorously lobbied for deregulation. 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 water utility sector by creating Azurix that partly collapsed on the NYSE in 1999 and shut down operations in 2001 (Wikipedia, 2006). Jeffery Skilling was hired in 1990 to lead the new division – Enron