Enron Essay

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The rise of Enron took ten years, and the fall only took twenty days. Enron’s fall cost its investors $35,948,344,993.501, and forced the government to intervene by passing the Sarbanes-Oxley Act (SOX) 2 in 2002. SOX was put in place as a safeguard against fraud by making executives personally responsible for any fraudulent activity, as well as making audits and financial checks more frequent and rigorous. As a result, SOX allows investors to feel more at ease, knowing that it is highly unlikely something like the Enron scandal will occur again. SOX is a protective act that is greatly beneficial to corporate America and to its investors.
Enron was formed following a merger between two natural gas companies in 1985, Houston Natural Gas and InterNorth.3 When Enron formed, it had accumulated a large sum of debt, roughly 2 billion dollars.4 As a result of deregulation, Enron no longer had the exclusive rights to its pipelines, resulting in the company hemorrhaging money. Kenneth Lay5, the chief executive officer (CEO) of Houston Natural Gas, became Enron’s CEO. Lay knew he had to quickly come up with a new innovation to keep the company afloat. Lay hired McKinsey & Company6 to help in coming up with a business strategy for Enron. McKinsey & Company assigned Jeffrey Skilling7 to Enron’s company as a consultant. Skilling, who had a background in banking, asset and liability management, came up with a solution to Enron’s financial crisis in the gas pipeline business. He said to create a “gas bank”, in which Enron would buy gas from a network of suppliers and sell it to a network of consumers, allowing them to control the supply and price of the gas. Enron’s debt was no more, and Lay was so impressed with Skilling, that he created a new d...

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...at when it went down, a whole lot more than just Jill came tumbling after. The entire marketplace crashed, stockholder lost billions, and the government needed to do something. The government finally stepped in and passed the Sarbanes-Oxley Act, which was put in place to prevent things like this from ever occurring again. The only problem, what about the people that invested? The people that lost all their money because Enron fell off the top of its hill? What about the companies that were being backed by Enron’s so called “billions”? The people were abandoned, there was nothing the government could do to help them, all the companies that were backed by Enron eventually fell. The Sarbanes-Oxley Act is a good precaution to prevent things like the Enron scandal from occurring, and hopefully, making sure the people never have to suffer through that kind of loss again.

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