In 1984 Ken Lay became chairman and Chief Operator of Houston Natural Gas. It quickly doubled when it bought Florida Pipeline Company. The next year in 1985 Houston Natural Gas merged Internorth Incorporation. With the merger they both combined to own around 40,000 miles of pipeline and shortly after they changed their name to Enron. Around that time Washington was being lobbied by energy corporations to deregulate business and let companies set their own prices. Energy companies said this would not only lead to the end of monopolies but the extra competition would benefit companies and consumers. Over the next several years Washington began to lift controls on who could produce energy and how it was sold. With an influx of new suppliers energy prices were very unstable. With these deregulations Enron was allowed to sell natural gas on an open market such as oranges and wheat. With this new way of business Enron was able to grow into the seventh largest company in the United States with over 25,000 employees in over thirty countries. It became an innovator in gas trading and technological advances in the energy field. In 1990 Enron hired Jeffery Skilling as the company Energy’s Trading Operation Consultant. At age thirty-six Ski
Enron set up these partnerships using stock as funding which did not appear on the company’s balance sheet. These partnerships were set up as an SPE or a Special Purpose Entity, which agrees to pay Enron if it investments decline in value. As the investments decline payments were made to Enron and posted as profit. But in reality Enron was paying it self with its own money.
As Skilling went up in rank he started to get the company involved in risky investments to make more profit. In an interview with the University of Virginia he said “We like risk because you make money by taking risk,” This was one of the many reasons which got Enron into financial debt, Skilling also persuaded regulators to allow Enron to use “market-to-market” accounting. A technique used by brokerage companies for securities trading. It allowed Enron to count long-term contracts as immediate profit although most of the money wouldn’t be coming in for several years. For example if a pipeline in Europe was projected to produce $89 million of profit it would be posted, but there was one problem the pipeline hadn’t been built yet.
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