American energy firm Enron Corporation has its headquarters in Houston, Texas.

It was established
in 1985 as the result of the union of Houston Natural Gas and InterNorth, two modest regional
energy providers. Enron expanded its business concept over time to boost profitability. Natural gas,
power, paper, goods, water, and communication technologies were among the products and
services that Enron traded in.Enron received plaudits for its creative business strategy and was
recognised as "America's Most Innovative Company" by Fortune magazine each year from 1996 to
2001.As chief operating officer, Jeffrey Skilling took over from Kenneth on February 12, 2001. On
August 14, 2001, Skilling unexpectedly left the position, and Kenneth retook it.

Enron was one of the top energy, natural gas, communications, pulp and paper corporations in the
world until declaring bankruptcy on December 2, 2001, employing almost 20,000 people and
claiming revenues of almost $101 billion in 2000.

Skilling was named Enron's chief operating officer in 1996. He convinced Lay that the natural gas
bank approach could be applied to the electric market for energy as well. Skilling and Lay tour the
country pushing the concept to managers from power firms and energy regulators. In the United
States, the corporation grew to prominence as an activist in politics by campaigning for electric
utility deregulation. Enron paid a total of two billion dollars for Portland General Electric Corp., an
electricity company, in 1997. Skilling had converted Enron Capital and Trade Resources to the
country's largest wholesale purchase and sale of natural gas and electricity by the end of that year.

In the view of the financial world, the establishment of Enron Online (EOL) in October 1999 was
undoubtedly Enron's most thrilling development. EOL, an electronic commodities trading Web site,
was notable for at least two reasons. To begin with, Enron was a party to every transaction that
occurred on the platform. Traders got extremely helpful real-time information on the "long" and
"short" sides to each transaction, as well as product price. Then because Enron was either a buyer or
a seller in every transaction, credit risk management was crucial, and Enron's credit was the pillar
that guaranteed the energy world that EOL provided a secure transaction environment.

THE ENRON SCANDAL

Kenneth Lay formed Enron in 1985 as a result of the merging of Houston Natural Gas Corporation
and InterNorth, Inc., two natural gas transportation businesses. In 1986, Enron was rebranded from
HNG InterNorth.The corporation lost its sole authority to run its pipelines after the U.S. Congress
passed a number of measures to deregulate the selling of natural gas in the early 1990s. Enron
changed itself into a trader of energy derivative contracts, functioning as a middleman between
natural-gas suppliers and their clients, with the aid of Jeffrey Skilling, who started out as a consultant
and subsequently rose to become the company's chief operating officer. By fixing the selling price of
their goods through a contract written by Enron for a charge, the trades permitted the producers to
reduce the risk of fluctuations in the price of energy.
Under Skilling's direction, Enron quickly gained control of the natural gas contract market and began
making enormous profits from its trading. Additionally, Skilling steadily altered the company's
culture to emphasise aggressive trading. He cultivated a very competitive atmosphere inside the
business by hiring top people from top MBA programmes around the nation. This environment saw a
growing level of emphasis placed on completing as many cash-generating deals as possible in the
quickest amount of time. Andrew Fastow, one of his smartest hires, moved swiftly through the ranks
to become Enron's top financial officer. While Skilling handled the development of the company's
massive trading activity, Fastow oversaw the financing of the business through investments in more
sophisticated securities.

The Enron crisis, which caused 4,000 people to lose their jobs, has now become the largest
bankruptcy in American history. The Securities and Exchange Commission launched an investigation
after it was discovered that Enron's bookkeeping was incorrect. By the end of October 2001, this
examination had developed into a thorough inquiry, and on December 2 of that same year, the
business filed for bankruptcy.

Enron's goals were fueled by the 1990s bull market, which also contributed to its explosive rise.
Deals could be done just about everywhere, and the business was prepared to establish a market for
anything that anyone was willing to exchange.As a result, it traded derivative contracts for a wide
range of commodities, including steel, power, coal, paper, and the weather. During the dot-com
boom, Enron internet, a subsidiary for internet trading, was established. By 2001, it was carrying out
around $2.5 billion worth of online deals per day. To enable high-speed trading, Enron also made
investments in the development of a broadband telecommunications network.

Downfall and Bankruptcy

Enron's revenues rapidly decreased as the boom years drew to an end and the company faced more
competition in the energy trading sector. Mark-to-market accounting was used by Skilling to conceal
the financial losses of the company's trading division and other businesses in response to
shareholder pressure. This method evaluates a security's worth using its current market value rather
than its book value. When trading securities, this may be advantageous, but for actual enterprises, it
may be fatal.

In the instance of Enron, the business would construct an asset, such as a power plant, and instantly
record the predicted profit on its books, despite the fact that it had not yet realised any benefit from
the asset. Instead of incurring the loss if the power plant's income fell short of expectations, the firm
would transfer ownership of the facility to an off-the-books corporation, where the loss would not
be disclosed. Because of this method of accounting, Enron was able to write off underperforming
operations without suffering financial damage. The mark-to-market procedure gave rise to plans
intended to conceal losses and make the business seem more prosperous than it actually was.

Additionally, the company's problematic operations were moved to so-called special purpose
organisations (SPEs), which are effectively limited partnerships formed with third parties. Despite
the fact that many businesses gave their distressed assets to SPEs, Enron exploited the system by
employing SPEs as a clearinghouse for its troubled assets. By moving those assets to SPEs, Enron was
able to keep them off its books and distort the severity of its losses. Ironically, Fastow himself
managed several of those SPEs. In addition to acting as Enron's auditor at this time, Arthur Andersen
also provided consulting services to the business.

Additionally, the company's problematic operations were moved to so-called special purpose
organisations (SPEs), which are effectively limited partnerships formed with third parties. Despite
the fact that many businesses gave their distressed assets to SPEs, Enron exploited the system by
employing SPEs as a clearinghouse for its troubled assets. By moving those assets to SPEs, Enron was
able to keep them off its books and distort the severity of its losses. Ironically, Fastow himself
managed several of those SPEs. In addition to acting as Enron's auditor at this time, Arthur Andersen
also provided consulting services to the business.

Lay continued in his role as chairman until Skilling took over as Enron's CEO in February 2001.
However, Skilling unexpectedly left his position as CEO in August, and Lay took over. By this time, Lay
had obtained an unnamed note from Sherron Watkins, a vice president of Enron who had expressed
concern over the Fastow partnerships and warned of potential accounting issues.

On October 16, the business shuttered its Raptor ISPE and disclosed its first quarterly loss. Enron
altered the pension plan's administrators a few days later, thereby prohibiting employees from
selling their shares for at least 30 days. The SEC soon started looking into the business dealings
between Enron and Fastow's SPEs. Then some employees of Arthur Andersen started destroying
records pertaining to the audits of Enron.

Additionally, the corporation updated its 1997 profits. By the end of 2000, Enron had $690 million in
debt and $591 million in losses. On November 28, Dynegy, a business that had earlier declared it
would combine with Enron, withdrew from the agreement, dealing the merger its death knell. Enron
has already filed for bankruptcy on December 2, 2001.

LESSON LEARNT FROM ENRON SCANDAL

1. Importance of ethical leadership.

The demise of Enron serves as a sharp reminder of the need of ethical leadership inside enterprises.
Senior executives at the corporation fostered a poisonous culture that prioritised short-term gains
and personal enrichment over ethical behaviours and long-term viability. Leaders must value ethical
behaviour, create an ethics code, and enforce it. To prevent ethical breaches and fraud, ethics
training, whistleblower systems, and a strong ethical tone at the top are critical. While the Malaysian
Code on Corporate Governance supports the adoption of better corporate governance structures
and processes, some corporate governance structures and procedures in Malaysia are required by
listing criteria.

2. Effective corporate governance is required.

The board of directors of Enron failed to monitor the company's operations and hold management
accountable. The board lacked independence, was swayed by conflicts of interest, and lacked
appropriate scepticism. The Enron disaster underscores the critical role of an independent and
diligent board of directors in actively monitoring business operations, challenging management
decisions, and acting in the best interests of shareholders and stakeholders. Effective corporate
governance measures, such as public reporting, strong internal controls, and frequent audits, are
critical for preventing fraud and maintaining responsibility.

3. The importance of regulatory supervision

The Enron crisis showed regulatory flaws that allowed the business to game the system. It triggered
a major review of financial rules, which resulted in the passing of the Sarbanes-Oxley Act in 2002.
The act boosted auditor independence, reinforced financial reporting standards, and improved
company governance. Enron serves as a reminder that strong regulatory monitoring is critical to
protecting investors' interests and the integrity of financial markets. Continuous monitoring,
enforcement, and periodic regulatory revisions are required to adapt to changing business practises
and protect against fraud and misbehaviour.

4. Transparency and disclosure are critical.

The company's real financial health was hidden by Enron's fraudulent financial reporting and
complicated off-balance-sheet operations. The controversy underlines the essential need of financial
openness and complete disclosure. Companies must give investors and stakeholders with reliable,
comprehensive, and clear information so that they may make educated decisions. Regulatory
authorities such as the Securities and Exchange Commission play an important role in creating and
enforcing disclosure standards. Transparency encourages trust, market integrity, and a fair playing
field for all participants. Transparency and disclosure are essential components of every transaction.

CONCLUSION
What I can conclude based on Enron scandal case is the Enron affair forever altered the corporate
environment. A healthy and sustainable business environment requires ethical leadership, good
corporate governance, transparency, and strong regulatory monitoring. Companies must prioritise
ethical behaviour, build robust governance systems, maintain transparency, and comply with legal
constraints. Organisations may try to restore confidence, encourage accountability, and create a
more resilient and responsible corporate environment by learning from Enron's shortcomings.
Malaysia has had its fair share of mini-Enron’s. Seasoned investors and regulators can name a slew
of publicly traded firms that have succumbed to Enron-like maladies. The importance is no structure
or method can ever replace good character and righteousness. There is also no structure or method
can ever replace morality and integrity.