Enron Corporation history
An energy company created in 1985 with the merger of the Houston Natural Gas Co. and InterNorth Corp. of Omaha, integrating several pipeline companies to create the first nationwide natural gas pipeline system. A year later, Kenneth Lay became the chief executive officer, and the company officially chose Enron as its name.
In 1987, the company began developing risk reduction techniques to protect itself against the fluctuating prices of gas and oil. It also began offering customers the ability to buy long-term gas contracts at fixed prices and began diversifying itself internationally, especially in Britain and South America. In 1994, it entered the electricity trading market after the DEREGULATION caused by the Energy Policy Act of 1992. As a direct result, throughout the 1990s the company continued to acquire UTILITIES companies, including the Dabhol power plant in India and Wessex Water in Britain. It also expanded into the domestic utilities business by purchasing the Portland General Electric Corp. in 1997 in a much-contested acquisition pitting the company against Oregon’s utilities board.
Jeffrey Skilling joined the company in 1989 and was elected president and chief operating officer in 1996. The company continued to make acquisitions during the later 1990s as a deliberate strategy of growing through merger. In 1999, the company initiated a broadband services group and began trading energy through an on-line Web site, which quickly became the largest e-business site in the world. By 2000, annual revenues had reached $100 billion, much of it provided by energy trading. Within a year, the company was reported to be the sixth-largest energy company in the world and ranked in the top 10 largest U.S. companies measured by assets.
In the fall of 2001, fortunes began to change at Enron when it announced more than $1 billion in charges for the third quarter and the Securities and Exchange Commission began an inquiry into its affairs, including special investment partnerships Enron had created over the preceding years. Then it announced that it would have to restate its earnings for the previous four years. It was subsequently discovered that the company had engaged in massive fraud regarding its earnings. Its stock price plummeted in the market. Its bankruptcy filing following these discoveries was the largest in U.S. history at the time and prompted the SARBANES-OXLEY ACT, passed by Congress to monitor the activities of accountants and directors of public companies. The company’s accountant, Arthur Andersen & Co., was also sued by the Justice Department and was subsequently disbanded for its role in helping Enron shred documents deemed vital for the investigation ordered by the Securities and Exchange Commission.
Further reading
- Fox, Loren. Enron: The Rise and Fall. New York: John Wiley & Sons, 2002.
- Swartz, Mimi, and Sherron Watkins. Power Failure: The Inside Story of the Collapse of Enron. New York: Doubleday, 2003.
