A very bright man, Skilling was a major force behind Enron’s transformation into a successful company – at least temporarily.įirst, Skilling turned Enron into what he called a Gas Bank. Skilling, formerly a consultant for McKinsey and a graduate of Harvard Business School, joined Enron in 1990, taking the position of CEO at a new subdivision called Enron Finance. The company’s main problem was that it didn’t have a business model that could turn real profits, an issue Enron hoped to solve by hiring Jeffrey Skilling. But as we now know, this kind of deceit and carelessness was at the very core of Enron’s company culture.Įnron managed to pull itself out of its first crisis, but by the end of 1988 it was in hot water once again. He assured analysts on Wall Street that this downturn was just a freak event that could never repeat itself. However, by 1987, Enron’s oil trading game had taken such a loss on high-risk bets that the entire company was on the verge of bankruptcy.īut Ken Lay was prepared to act. Their fictitious losses enabled them to move earnings from one quarter to the next.Įnron was trying to prove to Wall Street that it could turn a steadily increasing profit, a trend that the stock market is quick to reward. Enron Oil wasn't producing or selling oil, but simply speculating on oil prices not only that, but the oil traders were manipulating their earnings.įor example, they would set up deals with fake companies that let them take a huge loss on one contract, only to cancel out these losses with a second contract that generated the same amount in profits. By early 1986, Enron reported a first-year loss of $14 million, and by January 1987 its credit rating was at junk status.Įnron had been engaging in dishonest business practices that had brought the company to the brink of bankruptcy, and a specific subdivision called Enron Oil was causing the most trouble. Unfortunately for Lay, it wasn’t long before Enron was in dire financial straits. An intelligent and ambitious man named Ken Lay assumed the role of CEO, and in 1986 the company was renamed Enron. In fact, in 1987, just two years after it was founded, Enron was already saddled with debt.Įnron was formed in 1985 through a merger between two pipeline companies, Houston Natural Gas (or HNG ) and InterNorth.
The company’s demise due to huge debts and fraudulent business practices mirrored problems they had experienced years earlier, when first starting out.
Does it ever feel like history is repeating itself? It sure seemed that way in 2001 when the American energy colossus Enron filed for bankruptcy.
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