Enrons Downfall

Maddie Mcmillan
Economics
12/1/14

Enron used a form of accounting called Mark to Market accounting, a concept coined
by Skillings. Lay, the current CEO of Enron since 1985 (he became CEO/started Enron after
merging 2 Texas energy companies) decided in 1990 to give Skilling the right to Enron.
Skilling, however, said he would not take over Enron until he was cleared to use his form of
accounting. It was signed off by the Clinton Administrations Dept. of Justice (even though it
was illegal, obviously illegal) and he became CEO. He and Andy Fastow made Mark to market
accounting work. Fastow had hundreds of small companies that only did business with Enron.
These companies would take away Enrons debt and get rid of it. They wouldnt pay it off, and
through Arthur Andersons help, they cooked the books, giving off an impression that Enron
wasnt losing money, but making millions. The main concept of Skillings accounting system
was that Enron could collect ALL of the projected profits from the company right after the deal
was signed. This put many companies (Blockbuster being a prime example) into economic
limbo.