The collapse of Enron was a lesson well learned and was spurred by greed and fraudulent accounting practices. The company was booking profits that they never even made as of present. The profits they were accounting for were only potential and for future projections that may or may not even be realized.
The company also had traders who would use corporate funds to trade oil freely and in doing so, lost the company millions of dollars. Enron executives’ covered up loses in order to retain phony, realized profits in the books. The company was also losing money year after year from its business operations and covering those loses up with fake profits as well. These deceiving practices achieved the goal of raising the stock price so executives’ could cash in on options they were granted.
Numerous people and even whole companies were responsible for the fall of Enron. The list included top level executives’ accounting firms and even large, well know financial intuitions like Meryl Lynch. Nobody involved with Enron seemed to care about the true financial health of the company and its stockholders because they were all getting rich deceiving the public. Enron executives were making millions of dollars, and in some cases they were making hundreds of millions.
The Enron story is almost unbelievable, and the fact they managed to keep operations going for as long as they did is even more unbelievable. Of all the horrific practices the company took part in, the one that shocked me the most was the energy strangle hold the Enron traders put on California and its citizens.
Hopefully we can all learn and take something away from the Enron story so that the same thing can be prevented or at least stopped before getting to the point that it did.