Enron, Worldcom, Madoff Case

Topics: U.S. Securities and Exchange Commission, Bernard Madoff, Fraud Pages: 3 (1126 words) Published: December 23, 2012
Ayusarita Satriani
Financial Management

Resources: http://en.wikipedia.org/wiki/Enron_scandal ; http://news.bbc.co.uk/2/hi/business/1780075.stm; http://finance.laws.com/enron-scandal-summary Enron is an energy company that successfully grew from nowhere to be America's seventh largest company, which has 21,000 staff in more than 40 countries in 15 years. It was one of the world's leading electricity, natural gas, communications, and pulp and paper companies, with claimed revenues of nearly $101 billion in 2000. But the firm's success turned out to have involved an elaborate scam. Enron was attributed as the biggest audit failure. Enron lied about its profits and stands accused of a range of shady dealings, including concealing debts so they didn't show up in the company's accounts. Enron's non-transparent financial statement did not clearly depict its operations and finances with shareholders and analysts. In addition, its complex business model and unethical practices required that the company use accounting limitations to misrepresent earnings and modify the balance sheet to portray a favorable depiction of its performance. By misrepresenting earnings reports while continuing to enjoy the revenue provided by the investors not privy to the true financial condition of Enron, the executives of Enron embezzled funds funneling in from investments while reporting fraudulent earnings to those investors Shareholders lost nearly $11 billion when Enron's stock price, which hit a high of US$90 per share in mid-2000, plummeted to less than $1 by the end of November 2001. The U.S. Securities and Exchange Commission (SEC) began an investigation, and rival Houston competitor Dynegy offered to purchase the company at a fire sale price. The deal fell through, and on December 2, 2001, Enron filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. Enron's $63.4 billion in assets made it the largest corporate bankruptcy in...
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