Enron Fraud

In 1985 after federal deregulation of natural gas pipelines, Enron was born from the merger of Houston Natural Gas and InterNorth, a Nebraska pipeline company. Enron incurred massive debt and no longer had exclusive rights to its pipelines. Needed new and innovative business strategy Kenneth Lay, CEO, hired McKinsey & Company to assist in developing business strategy. They assigned a young consultant named Jeffrey Skilling. His background was in banking and asset and liability management. His recommendation: that Enron create a Gas Bankto buy and sell gas

Compared to other financial statement frauds, Enron was very complicated. WorldCom, for example, was a $7 billion fraud that involved simply capitalizing expenses (line costs) that should have been expensed (Accounting 200 topic). Enron involved many complex transactions and accounting issues.