Accounting ক্লাসে কিছুদিন আগে একটা assingment করতে দেয়া হয়াছিল। ২ দিন ব্যাপক (!) গবেষণার ফলস্বরুপ এই লেখাটি মাথা থেকে বের হল! এখানেও শেয়ার করলাম। পড়ে দেখতে পারেন।

From fabulous to scandalous: The Enron Saga

Introduction- In 1985, after federal deregulation of natural gas pipelines, a new company came into being, resulting from the merger of Houston natural gas and Internorth. This very company was named Enron by it’s founder Kenneth Lay. In it’s early period, it was swimming in debt. A consultant from Mckinsey and Co.(hired by Lay to generate profit), Jeffrey Skilling proposed a new plan. Following through his plan, Enron, in addition to delivering natural gas, became a market middleman for energy, bringing together buyers and sellers of energy. It soon dominated the market with more contracts than its’ competitors.
The Rise- With its market power, Enron could predict future price more precisely, thereby ensuring superior profits. In 1994, Enron started to explore the field of Electric energy. The company was rewarded pretty well as its revenue grew from $2 billion to $7 billion by 1997. Afterwards, Enron branched into other areas of products trading, including chemicals, coal, fiber-optic bandwidth, metals, and paper. Gradually, Enron became international. In November 1999, Enron introduced Enron online(EOL, an electronic commodities trading Web site) which became an overnight success by handling $335 billions in online commodity trades in 2000. By March 2000 Enron was regarded as the sixth-largest energy company in the world. Back then it had 21000 employees and $100 billion in revenue.
The collapse- The facts behind Enron’s unbelievable success started to unfold in 2001. Enron incorporated mark-to-market strategy, in which companies having long-term derivative contracts could, on their own, assume the future-price of the products and use them in their balance-sheet. Due to a fall in the energy price, Enron’s valuation estimates started overstating its’ earnings. Besides, Skilling instituted performance review committee which only focused on the amount of profit an employee could produce. This forced them to make deals without considering the company’s risk management policy. This sort of haste resulted in massive loss. Still, in its effort to be a lucrative company for the stock-owners, Fastow(one of Skilling’s earliest hires) took the help of SPEs. Enron sold its damaged assets to partnerships and listed theirs sales as earnings. Meanwhile Fastow manipulated the partnership deals for his own gain, at the expense of Enron and its stockholders. Reckless to increase its cash-flow, Enron adopted to “Creative Accounting” and still continued to elude its stock-holders. This raised suspicion among the wall-street analysts and a SEC investigation had begun. On October 16 Enron reported a third-quarter loss of $618 million. On 17th, it revealed that due to an accounting error it had overstated the company’s net worth by more than $1 billion. The two reports caused investors to lose confidence in Enron, and its stock price fell. In November it restated its profit in 4 years which was $568 million less than it had announced before.
After-effects- Average Enron worker had 62% of his/her savings in Enron stock. Senior executives managed to exit after selling their stocks in the market(when it was still high) but most of the employees weren’t that fortunate. They fell victim to corporate fraud. To prevent such fraud, Sarbanes-Oxley act was introduced in 2002. Lay, Skilling, Fastow were convicted in US court. Enron is now Enron Creditors Recovery Co-operation which aims at paying off the victims. This report could be concluded just by saying that in an economic world, transparency should be maintained. Lack of it could result in a great debacle, just like Enron.

References
1. http://www.journalofaccountancy.com
2. Wikipedia
3. http://www.breakinglegalnews.com
4. Microsoft Encarta.
5.What Went Wrong At Enron, Peter C. Fusaro and Ross M. Miler.