Business Ethics: The Enron Meltdown.

Essay by andge2High School, 11th gradeA-, July 2003

download word file, 3 pages 2.7

Downloaded 317 times

On July 1985, Houston Natural Gas merged with InterNorth; a natural gas company established in Omaha, Nebraska, and together formed the modern-day Enron. The Enron Corporation began bartering natural gas commodities, and by the early 1990's, the company became the largest natural gas merchant in North America and the United Kingdom. Soon after in 1994, Enron North America began selling electricity and eventually becomes the largest marketer of electricity in the United States. Before the crisis Enron went through, the company had been doing glowingly and their status amongst the nation and Americans was very high and well-respected.

In the early 1990s Enron decided to "branch off" into trading energy futures and energy derivatives such as coal, pulp, paper, plastics, and metals. With the new right and capability to trade these derivatives, Enron decided it was easier to cheat the system than play by the rules. Rather than letting the free market determine the energy future prices, Enron began setting up "nearly 3000 offshore companies, many of which they treated as partnerships".

These offshore companies provided Enron with the means to control energy prices, and by doing so, at the same time, hide its own debts. When states, such as California, came to Enron to determine their energy contracts, Enron would show them contracts it had signed with its "partnerships" offshore which were exceedingly expensive, and therefore, the contracts it would make with California would be at increasingly astronomical prices. By showing these contracts, Enron's customers had to give in to Enron's overly-expensive pricing because the offshore companies were paying just as much. Remarkably, all of these partnerships were "approved by Enron's board of directors, and reviewed by the companies outside auditors and lawyers - Arthur Andersen and Vinson & Elkins".

George W. Bush, and the CEO of Enron,