Enron

Enron Corporation was an American energy company based in Houston, Texas. Formed in 1985 through the merger of Houston Natural Gas and InterNorth, it grew into a diversified energy and commodities trading company. Under leaders such as Kenneth Lay and Jeff Skilling, Enron expanded from natural gas and electricity transmission into trading, risk management, and various service ventures, including an online trading platform launched in the late 1990s.

Enron became notable for its rapid growth and aggressive business strategies. It popularized the use of specialized financial structures and sophisticated trading practices, and it relied on mark-to-market accounting and a network of off-balance-sheet entities to present a favorable financial picture. Critics argued that these practices obscured debt and risk, while supporters cited innovation in risk management and market efficiency. The company also faced criticism for its energy market activities and for alleged manipulation tied to broader California electricity deregulation issues.

The company’s troubles came to a head in 2001 after investigations into its accounting practices. Enron filed for bankruptcy on December 2, 2001, one of the largest corporate bankruptcies in U.S. history. The collapse resulted in substantial losses for employees and investors and contributed to widespread concern about corporate governance. Auditor Arthur Andersen, Enron’s longtime accounting firm, was found guilty of improper conduct and subsequently ceased auditing; the firm dissolved.

In the aftermath, executives faced legal action, and the scandal helped drive legislative reforms, including the Sarbanes-Oxley Act of 2002, aimed at strengthening financial reporting and corporate governance. The Enron case remains a defining example of perceived corporate misgovernance and the risks of off-balance-sheet financing.