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Essay on Hedging and Enron
John F. Moore
Tuesday, January 06, 2004
According to the Houston Chronicle Enron was formed in the year 1985 through the combination of Houston Natural Gas and InterNorth a natural gas company in Omaha, Nebraska and in 1986 Kenneth Lay, PhD. ... Skilling and groomed him as his replacement as President and Chairman of the Board for the Enron Corporation.
Enron’s culture didn’t happen overnight. ... Skilling, a longtime Enron Consultant, created the “gas bank,” making Enron the first company to buy large volumes of gas from producers and resell it to industrial customers on long-term contracts. ... gas Market, expanded gas production nationwide and fueled the phenomenal growth that Enron reported during the decade. Thanks to the deregulation and exotic investment tools that had been unleashed by the financial institutions, Skilling was able to amass a large amount of cash, which is stored in the Enron bank accounts (BEHR and WITT, 2002). ...
Skilling was able to persuade the federal regulators to allow Enron to use “mark-to-market” accounting that is an accounting system used by brokerages for securities trading. This type of accounting allowed Enron to calculate revenue from long-term contracts and count much of it as immediate profit, although the money was not there. ... Skilling has one very close comrade in the business in which he has placed a tremendous amount of faith and that is Andrew Fastow the Chief Financial Officer for Enron. Fastow developed ways for Enron and in particular his boss, Skilling, to hide funds and to develop more money through investments.
Approximate Word count = 1219
Approximate Pages = 4.9
(250 words per page double spaced)
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