FIN 590 Types and Components of Audits: Case Two: Lou Pai (business executive)

Lou Pai was a CEO for Enron in the energy trading division (Brand, 2006).

Very little is known about Lou Pai because he was able to leave the company before the collapse. What is known is that Pai was one of the engineers that devised the energy trading system that allowed Enron to create massive growth and profits (at least on paper (Brand, 2006)).
This system of trading was built on the idea that future profits could be claimed in the present which increased the profitability of the company by allowing the Enron to post incredible profits that did not exist (Brand, 2006). This system would ultimately prove to be the undoing of Enron because it was unstainable and the profits were not real.
Lou Pai ultimately cashed out of Enron taking tremendous profits as well as having spent lavishly during his tenure as a CEO. These costs would ultimately be paid by investors who purchased his stock which was overvalued due to his system of energy trading (Brand, 2006). It should be noted that, Lou Pai was never charged in the Enron scandal mainly due to the fact that the system he invented was not considered illegal at the time and hew was no longer with the company when it fell.

References

Lou Pai, Enron’s Elusive Mystery Man

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