Enron: What Caused the Ethical Collapse

Only available on StudyMode
  • Download(s) : 1965
  • Published : April 21, 2013
Open Document
Text Preview
It is not easy to find one single person, who can be blamed for the collapse of Enron, because there was so many players in so many levels. We can’t find one responsible person, but there are many person who shared the blame for the scandal that turned Enron into the ultimate poster child for fraudulent accounting practices, and caused one of the largest bankruptcies in the us history. The key people involved internally at Enron were the executives, Kenneth Lay (Chairman and CEO), Jeffrey Skilling (President and CEO), and Andrew Fastow (CFO). They built up a highly successful company, but soon they began to divert funds into phony investments, and cashed their own stocks, while the price was still high. From October 1999 to November 2001, Lay sold a total 1.8 million shares for $101 million. Altogether, 29 Enron officers pocketed $1.2billion from selling Enron shares, while unsuspecting employees went broke. Simultaneously, while this was going on, more than half of employees’ 401(k) savings, or about $1.2 billion, were invested in Enron stock, which were rendered worthless. The chairman sent an email to the workers: the company had "never been stronger" and its future growth "has never been more certain”, so most of the workers held their stocks, because nobody could foresee what was about to happen. In Texas, the Teachers Retirement system lost $35.7 million in Enron stock, In Florida; the pension fund for teachers, state employees, and county workers bought 7 million shares of Enron stock (the fund that covers 650,000 workers and 150,000 retirees estimate they lost $306 million). In the end millions in 401(k) savings were lost. Enron was hiding massive losses by using their strategy of “mark to market” accounting. Fastow was also found by an internal Enron investigation to have secretly made $30 million from managing one of these partnerships.

Outside of the company, Arthur Andersen, the gigantic accounting firm responsible for Enron’s accounting and...
tracking img