Kenneth lay jail

Enron Corporation

Enron Corporation Scandal

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Enron Corporation Scandal

White collar offenses are crimes committed by someone who uses their position at a certain profession to disguise their criminal behavior. In the past couple of decades white collar crime has been on the rise and the scandal surrounding these crimes have gotten more and more shocking. One of the most infamous white collar crimes involves the scandal involving the Enron Corporation. Enron is one of the most infamous cases of fraud by company executives that embezzled millions from the company while providing a false financial record to the board of directors and investors. As a result many of these executive went to jail and Enron was bankrupted.

History of the Enron Scandal

Enron was established in 1985 when Omaha-based InterNorth and Houston Natural gas merged into one company. Kenneth Lay was appointed CEO and the company saw immediate success. In 1993 the company made its first mistake when they created a number of limited liability special purpose entities that allowed Enron to hide its liabilities while growing its stock price (Folger, 2011). This was criticized by financial analysts who found the company was hiding large amounts of debt. From 1993 to 2001 the company was considered innovative and a leader in energy technologies. Despite the debt the company continues to purchase pipelines and bought into other industries, such as water and paper.

Enron was an energy trader and supplier that took advantage of the deregulation of the energy market to become successful in the energy industry. A year after Enron was formed Lay became Chairman of the Board and by 1999 the company embraced new technology and launched its broadband services and then established a website for trading commodities known as Enron online. Investors flocked to the company y eager to invest. Many ended up losing thousands if not more.

Enron Online was an immediate and huge success with about 90 per cent of the company’s income came from trades (George, 2006). By 2000 the company was making profits well into the billions and in the same year was the sixth largest company in the world. The company's stock price peaked at $90 US (George, 2006). Even though Enron appeared to be thriving financially it was not being properly managed but because of political influence from political powerhouses, such as President Bush and Vice President Dick Cheney, the company appeared to be legitimate and thriving financially.

In fact Ken Lay had access to Vice President Dick Cheney, who earlier in 2001 drafted a new national energy plan that seemed to lean heavily on the suggestions of Mr. Lay (Lashinski, 2011). It was believed Cheney supported the National Energy Plan for the purpose of supporting the goals of Ken Lay. Jeffery Skilling took over the position of President from Ken Lay and later become Chief Financial Officer until he resigned in 2000. Skilling is an important player in the Enron scandal because similar to Lay he was deeply involved in the criminal activities occurring in the company.

Under Shillings leadership the broadband branch of the company seemed to flourish and the stock continued to rise but when he retired in 2000 Lay returned to the position of CEO and Andrew Fastow became the CFO. Due to false reports given to the public investors flocked to the company but these reports were false. Fastow quickly figured out the true financial state of the company and resigned. Shortly after his resignation an investigation was launched by U.S. Securities and Exchange commission.

Deregulation

Enron formed after the government lifted the regulations placed on the energy industry. In the 1980’s and the 1990’s Kenneth Lay lobbied for the deregulation of the energy industry using his political power to persuade Federal Energy Regulatory Commission (FERC) to deregulate natural gas (). Lay was a huge contributor for the Bush campaign which gave him a lot of influence in Washington. As a result he was later successful in having electricity deregulated allowing it to become a commodity that was bought and sold. Through the support of the Bush Administration state after state was deregulated.