![]() ![]() ![]() But no one was making sure that the contract was actually fulfilled.įor example, Enron might sign a contract to build a power plant in India. The contract went on the books as income (even if a dime had not been paid), causing the company stock to go up, which generated huge paydays for the executives who were paid in stock. Employees and executives were encouraged to land contracts which would be promptly traded away. But Enron was so successful that the contract trading came to dominate the company to the point that it ceased to provide “real” services. It was a good idea that transformed the energy markets in the US. As a side business, Enron would sell the long term contracts as if it were any other commodities future. Buyers loved the stability, and sellers needed ready cash to develop new claims. Here is a quick review of the Enron scandal: Enron grew from a pipeline company to an economic powerhouse by playing the middle man, selling long term gas contracts to buyers for a fixed price and paying cash upfront to gas suppliers, thereby reducing the risk associated with the wild fluctuations in natural gas prices. The Smartest Guys in the Room recounts the rise and fall of Enron, the spectacularly fraudulent energy trading company whose 2001 collapse cost investors hundreds of millions of dollars. ![]()
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