Enron was founded in 1985 by Jeffrey Skilling and Kenneth Lay and its headquarters was located in Houston

Enron was founded in 1985 by Jeffrey Skilling and Kenneth Lay and its headquarters was located in Houston, Tx. It become one of the world’s leading companies in Electricity, Natural Gas, Communications, and made it the fifth largest company even with its bankruptcy. Its bankruptcy was about $63 billion and had shocked many markets. The Enron scandal was caused by many unethical practices including the ideas proposed by Jeff Skilling, the high school mythology at Enron, Andrew Fastows and its partner ships, also Enron’s manipulation of electricity in the State of California.
Ken Lay was found with a problem when his biggest money maker was behind bars but soon he found Jeff skilling who seemed to have the answer to the future of what The Natural gas Business was supposed to be. Ken Lay was interested in people with ideas and Jeff Skilling was a person with big ideas and one of his ideas was to find a new way to deliver energy. Enron would become a Stock Market for Natural Gas which would transform energy into a financial instruments which would be traded as stocks and bonds. Enron in 1992 became the biggest seller and buyer of natural gas due to Jeff’s idea. But before Jeff Skilling joined the company he proposed an idea in order for him to join, he wanted to be allowed to use a certain type of accounting known as mark to market accounting treatment which would later on be one of Enron’s downfalls. Mark to market was about Enron creating future profits on the day a deal were signed no matter how little cash came in. Enron’s profits could be anything and be unpredictable. He called this HFV (Hypothetical Future Value Accounting).
One of Jeff Skilling’s contributions to the company was creating the PRC (Performance Review Committee) which required people in the workforce be graded every year from a 1 to 5 and about 10% of the people had to be a 5 which lead to them being fired. Even if the person was doing fine in his/her job it wasn’t enough to meet his requirements for the company because others could be hired and do a much better job. About 15% of the people were fired every year and this was known as “Rank or Yank.” He mentioned this was one of the most important processes as a company because it kept them growing. Only the best could be part of company even if it meant leaving some people jobless. Traders were one of the most competitive people in the business they would have to “throw people in the ditch” just to keep their jobs.
The traders in Enron created it to be one of the biggest trading company’s and if other company’s wanted to be in the market they had to deal with Enron. Its traders were said to be like the kids in high school who were never touched by the principles even with their bad behaviors because they had become one of Enron’s major profit makers. They had took Skillings’s and Lay’s beliefs in free market and created something new.
Andrew Fasthow was the CFO (Chief Financial Officer) and was familiar with the trading market and knew how to play it in Enron’s favor. He constantly kept stock prices up despite the financial conditions Enron was facing. Fasthow was able to do this by developing a select web of businesses that only worked with Enron to hide losses on its balance sheets and to outside investors it looked like money was coming into Enron. One of his most successful companies was LJM which worked in Enron’s and Andrew Fastow benefits. He stole about $45 million for himself due to LJM. About 96 individual bankers invested in LJM and some major banks put up as much as $25 million each. He made millions of dollars cheating the system.
The EES (Enron Energy Service) was going down and would be facing $500 million in losses which would cause the problem of not being able to meet its numbers by the end of its quarterly report. However somehow it would make the numbers due to the California’s blackouts. California had enough power to meet its demands but somehow still had blackouts. Enron selected the state of California to experiment with deregulated electricity. Tim Beldon ran the West Coast Trading desk and looked for loopholes in which Enron could make money off of. He found many strategies and one of them was called “Death star” which was the practice of shuffling energy around the California power grid to receive payments from the state for “relieving congestion (Wikipedia). Another strategy used was called “Ricochet” which was the act of exporting power out of the state and when prices went up they would bring it back to the state. Traders later on discovered they could create artificial shortages which would make prices get even higher. The west coast traders made about $2 billion for Enron.