Enron's Collapse
Introduction
Enron grew rapidly through the 1990s even though it was already manifesting the worst of its
culture. Its executives’ obsessions with bonuses, the stock price and exotic accounting were
also growing, and out of control. Jeff Skilling, Enron’s top executive during that period, fostered
a growth at any cost culture. He did not listen to anybody that tried to warn him. He overrode all
checks and balances. In 2001, Enron Corporation admitted it found a few errors in its books.
Close to $600 million in mistakes spread over 4 ½ years. Enron’s business and financial
practices are directly responsible for its collapse.
Business Practices
Enron’s investments partnerships led to $1.2 billion loss in one quarter. The problems started
when steep losses drew renewed attention to a pair of investment partnerships created by
former Chief Financial Officer Andy Fastow with the approval of the company’s board of
directors. The partnerships were formed using Enron equity and outside capital. They were
designed to help the company grow quickly without adding too much debt to its books or
diluting the value of the company’s stock.
Fastow’s dual roles as Enron CFO and managing director of the two partnerships created a
conflict of interests. Under pressure from investors Fastow resigned from those partnerships.
Fastow earned as much as $30 million through his role with the partnerships, while a number
of other Enron employees also invested in them. Enron terminated all these employees
including Fastow.
The idea of the partnerships was for them to become sources of capital...
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