Enron

Enron was an American energy, Commodities, and services company based in Houston, Texas. Founded by Kenneth Lay in 1985, it became one of the largest energy companies in the world. Enron is most notorious for its accounting fraud scandal that led to its Bankruptcy in 2001, which was one of the largest in U.S. history at the time.

The company used complex accounting practices, including mark-to-market accounting, to inflate its profits and hide debt. When the truth about its financial practices emerged, it resulted in significant financial losses for investors and employees, the dissolution of Arthur Andersen (one of the five largest Audit and accountancy partnerships in the world), and major reforms in corporate governance and accounting standards.

Examples include:

• The manipulation of earnings reports to show a false picture of profitability.
• The use of special purpose entities (SPEs) to hide debt and inflate profits.
• High-profile cases such as the loss of retirement savings for thousands of employees when Enron’s Stock plummeted.