Eron's Case Study: The Fall Of Enron

The Fall of Enron Kenneth Lay, the CEO of Houston Natural Gas, started a merger with InterNorth, a gas pipeline business, to create Enron in 1985. Kenneth Lay and his partner Richard Kinder set off on creating Enron’s business practices through new projects and investments. However, the company was brand new and not had enough time to become profitable and thus all their investments send them into massive debt. After paying roughly $350 million to Jacobs, another extra from the merger and reorganization, 75% of the company’s capital was equal to its debt. After a few years has passed and the company still in debt, Kenneth Lay hires Jeffrey Skilling to take over Enron’s financial problems and soon became the head of Enron’s Finance. Skillings business plans for Enron involved taking advantage of new gas deregulations. With this mindset in place, he landed a new deal with Sithe Energies to supply natural gas to a new electrical plant. The deal was worth $3.5 billion dollars for 20 years. Jeffery Skilling

Analyst prices Enron’s stock to roughly $40, the lowest it has ever been. Also, in the year’s third quarter, a loss of $618 million was reported and the Securities and Exchange Commission’s (SEC) start their investigation on Enron. Arthur Anderson auditors then destroy all of Enron’s files to cover up the unethical practices both companies have been using to gain revenue. Employees are now worried about their job securities and financial securities. Instead of Kenneth lay accepting the financial ruin that his company is in, a message is told across the company to invest more in the company’s stock because they believed it was soon going to rebound. Enron does admit to the SEC that they have inflated their profits by $2.1 billion. In December of 2001, Enron files for Chapter 11 bankruptcy and its stock lowest selling point at $.26 a stock, and being $38 billion in