Preview

Scandals: Enron and Fun Fact

Satisfactory Essays
Open Document
Open Document
1227 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Scandals: Enron and Fun Fact
The 10 Worst Corporate Accounting Scandals of All Time
If there is one theme to rival terrorism for defining the last decade-and-a-half, it would have to be corporate greed and malfeasance. Many of the biggest corporate accounting scandals in history happened during that time. Here's a chronological look back at some of the worst examples.
Waste Management Scandal (1998)
Company: Houston-based publicly traded waste management company
What happened: Reported $1.7 billion in fake earnings.
Main players: Founder/CEO/Chairman Dean L. Buntrock and other top executives; Arthur Andersen Company (auditors)
How they did it: The company allegedly falsely increased the depreciation time length for their property, plant and equipment on the balance sheets.
How they got caught: A new CEO and management team went through the books.
Penalties: Settled a shareholder class-action suit for $457 million. SEC fined ArthurAndersen $7 million.
Fun fact: After the scandal, new CEO A. Maurice Meyers set up an anonymous company hotline where employees could report dishonest or improper behavior.
Enron Scandal (2001)
Company: Houston-based commodities, energy and service corporation
What happened: Shareholders lost $74 billion, thousands of employees and investors lost their retirement accounts, and many employees lost their jobs.
Main players: CEO Jeff Skilling and former CEO Ken Lay.
How they did it: Kept huge debts off balance sheets.
How they got caught: Turned in by internal whistleblower Sherron Watkins; high stock prices fueled external suspicions.
Penalties: Lay died before serving time; Skilling got 24 years in prison. The company filed for bankruptcy. Arthur Andersen was found guilty of fudging Enron's accounts.
Fun fact: Fortune Magazine named Enron "America's Most Innovative Company" 6 years in a row prior to the scandal.
WorldCom Scandal (2002)
Company: Telecommunications company; now MCI, Inc.
What happened: Inflated assets by as much as $11 billion, leading to 30,000 lost
Continue Reading
View Writing Issues

You May Also Find These Documents Helpful

  • Powerful Essays

    AU 240
    • 2166 Words
    • 7 Pages

    AU 240

    Top-level employees manipulated transactions and the financial statements to minimize expense recognition. This was accomplished through a variety of ways. These ways include: “Avoided depreciation expenses on their garbage trucks…, assigning arbitrary salvage values to other assets…, failed to record expenses for decreases in the value of landfills as they were filled with waste, refused to record expenses necessary to write off the costs of unsuccessfully and abandoned landfill development projects, established inflated environmental reserves (liabilities)…, improperly capitalized a variety of expenses, and failed to establish sufficient reserves (liabilities) to pay for income taxes and other expenses.” (Beasley, pg. 106) The SEC determined that these fraudulent practices were executed at the executive level. These transactions were manipulated or perpetrated at company headquarters.…

    • 2166 Words
    • 7 Pages
    Powerful Essays
    Read More
  • Powerful Essays

    Healthsouth Memo
    • 1333 Words
    • 6 Pages

    Healthsouth Memo

    HealthSouth Corp., one of the nation’s largest healthcare services providers in the United States was involved in one of the largest accounting scandals in United States history. HealthSouth Corp and its officials overstated earnings in order to meet Wall Street earnings expectations. This memorandum will describe who was involved, how the operation was carried out, as well as a timeline documenting the resulting damages of the scandal.…

    • 1333 Words
    • 6 Pages
    Powerful Essays
    Read More
  • Satisfactory Essays

    Business Ethics Fin 486 Wk1 Ind
    • 536 Words
    • 2 Pages

    Business Ethics Fin 486 Wk1 Ind

    Enron was considered a very strong company. At one point, they were named America’s most innovative company. One mistake Enron made was they were changing their financial accounts to show they were more profitable than they were. The were entering information on their accounts, but not showing their activities and losses on the balance sheet. Some of their assets and profits were not accurate and in some cases did not exist. The books did not show their losses and debts. They were put into entities that were offshore. The case of Worldcom is also similar to that of Enron. They changed the financial books and the executives of the company…

    • 536 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Better Essays

    Stanford Financial Group Corporate Scandal
    • 1472 Words
    • 6 Pages

    Stanford Financial Group Corporate Scandal

    In February of 2009, the Antigua/Texas based global financial group (made up several subsidiaries owned by the same owner) owned by R. Allen Stanford was charged with scamming their customers by the Securities and Exchange Commission. Stanford Financial Group was charged with fraud when deceptively selling consumers $8 billion dollars in deposit certificates. According to The Money Alert, ”A certificate of deposit, or CD, is a type of low-risk investment that many people use when they want a small return on their investment without having to worry about losing their money” (1). The firm ensured its customers/investors an unrealistically large return on their certificates of deposit. According to Zachary Goldfarb, “Stanford International Bank offered CDs paying anywhere from 7.45 percent to 10 percent annual interest rates” (16). Stanford Financial also lied to their customers on how their money was being invested. Customers were told that their deposits were invested in easily sellable securities, however in actuality the customer’s deposits were invested in dubious real estate and private equity holdings. The investment portfolio of the company was kept secret from their customers and was only known by R. Allen Stanford and James M. Davis (the Chief Finical Officer).…

    • 1472 Words
    • 6 Pages
    Better Essays
    Read More
  • Good Essays

    Accounting Scandals Before The Turn Of The Century
    • 307 Words
    • 2 Pages

    Accounting Scandals Before The Turn Of The Century

    Just before the turn of the century and shortly afterward, the financial world saw some of the biggest corporate accounting scandals of all time. Corporate giants like Waste Management (1998), Enron (2001), and Tyco (2002) were all caught in the unethical practice of generating fictitious financial statements. All these companies did this buy using fraudulent accounting entries. Assets were inflated, sales numbers were inflated and huge debts were omitted from balance sheets. Another company that used accounting to put out fraudulent financial statements was Worldcom. Being the largest accounting scandal in American History at the time of its exposure, the Worldcom scandal cost 30,000 workers their jobs and investors over $180 billion.…

    • 307 Words
    • 2 Pages
    Good Essays
    Read More
  • Good Essays

    Sarbanes-Oxley
    • 717 Words
    • 3 Pages

    Sarbanes-Oxley

    Issues surrounding corporate accounting fraud emerged with great controversy during the Enron Scandal. Enron was most famously known for buying and selling energy, in addition to its creative business strategies. Keller ((2012)), "Enron used Wall Street magic to transform energy supplies into financial instruments that could be traded online like stocks and bonds. These contracts guaranteed customers a steady supply at a predictable price or at least that’s what Enron wanted investors to believe” (Enron for Dummies). The company misled the public and its investors into believing it was experiencing growth in revenue when in actuality it was losing big and hiding the losses behind bogus partnerships. The Chief Executives, Kenneth Lay and Jeffrey Skilling were collectively found guilty of fraud, conspiracy, insider trading and bank fraud Enron’s unethical practices led to substantial losses for its investors and highlighted the need for major regulatory reform.…

    • 717 Words
    • 3 Pages
    Good Essays
    Read More
  • Better Essays

    Research Paper
    • 1411 Words
    • 6 Pages

    Research Paper

    The Chairman of the board, Kenneth Lay, and CEO, Jeffrey Skilling hired the CFO, Andrew Fastow, and allow him to develop a staff of executives that, through the use of accounting loopholes, special purpose entities, and poor financial reporting, were able to hide billions in debt from failed deals and projects. Chief Financial Officer Andrew Fastow and other executives not only misled Enron 's board of directors and audit committee on high-risk accounting practices, but also pressured Arthur Andersen to ignore the issues.…

    • 1411 Words
    • 6 Pages
    Better Essays
    Read More
  • Good Essays

    The Enron Scandal
    • 844 Words
    • 4 Pages

    The Enron Scandal

    Enron was established in 1930 as Northern Natural Gas Company and joined with three other companies to undertake this industry. The four companies eventually began to break apart between 1941 and 1947 as a result of a public stock offering. In 1979, Northern Natural Gas was placed under new management when it was bought by InterNorth Inc. In 1985, Kenneth Lay, CEO of Houston Natural Gas Company devised a transaction for InterNorth to purchase Houston Natural Gas. Lay was named CEO of the new company and changed InterNorth 's name to Enron Corporation. This newly developed company originally was involved in distributing gas and electricity throughout the United States, and operation of power plants and pipelines worldwide. In fifteen short years Enron became the nation 's seventh largest company, but the company 's growth was due to several illegal activities. During 2001, Enron shares fell from eighty-five dollars to thirty cents. The devastating results occurred after it was revealed that many of its profits and revenue were the result of deals with special purpose entities (Carson, 7).…

    • 844 Words
    • 4 Pages
    Good Essays
    Read More
  • Good Essays

    Fall of Enron
    • 1436 Words
    • 6 Pages

    Fall of Enron

    Q1- Who were the key stakeholders involved in, or affected by the collapse of Enron? How and to what degree were they hurt or helped by the actions of Enron management?…

    • 1436 Words
    • 6 Pages
    Good Essays
    Read More
  • Good Essays

    Ethics and Enron
    • 574 Words
    • 3 Pages

    Ethics and Enron

    Enron had a lack of accounting transparency, which enabled the company’s managers to make their financials look much better than they actually were. I believe that Kenneth Lay got rid of several million shares of Enron stock and made over a billion dollars. While the Enron employees lost their jobs, the money in their pension funds as well as any money they invested into the company. Not only did Enron damage the lives of their employees, but they also affected the customers that were buying their products, and the outside investors who lost a significant amount of their money.…

    • 574 Words
    • 3 Pages
    Good Essays
    Read More
  • Powerful Essays

    Healthsouth Fraud
    • 1061 Words
    • 5 Pages

    Healthsouth Fraud

    The FBI investigation initially uncovered wrong doings from the years 1999-2002 where Scrushy had overstated his salary 1 million + dollars to meet expectations of shareholders and Wallstreet. Unfortunately, this was just the beginning, and as forensic accountants dug deeper, the FBI soon found that HealthSouth’s corporate accountants were adjusting entries to offset liabilities, reduce expense accounts and state elevated salaries to balance their bookkeeping. It was reported ~$373 million dollars of cash on the books was fictitious.…

    • 1061 Words
    • 5 Pages
    Powerful Essays
    Read More
  • Good Essays

    Enron: the Smartest Guys in the Room
    • 586 Words
    • 3 Pages

    Enron: the Smartest Guys in the Room

    In October of 2001 the Enron scandal was revealed, which led to their bankruptcy. It was the biggest bankruptcy reorganization in American history at that time.…

    • 586 Words
    • 3 Pages
    Good Essays
    Read More
  • Good Essays

    What Are the Systemic, Corporate and Individual Ethical Issues Rose by This Case?
    • 968 Words
    • 4 Pages

    What Are the Systemic, Corporate and Individual Ethical Issues Rose by This Case?

    As the value of Enron stock plunged in value, many Enron employees lost their jobs and nearly all of their retirement savings. In their testimony before Congress, former Enron employees testified that while they had retired with $700,000 to $2 million in Enron stock, they now had…

    • 968 Words
    • 4 Pages
    Good Essays
    Read More
  • Better Essays

    Enron
    • 976 Words
    • 4 Pages

    Enron

    The downfall of Enron is one of the most infamous and shocking events in the…

    • 976 Words
    • 4 Pages
    Better Essays
    Read More
  • Good Essays

    Fraud: The Bernie Madoff Scandal
    • 1249 Words
    • 5 Pages

    Fraud: The Bernie Madoff Scandal

    sheets. The fraud was detected when a new CEO was brought in and the new management team went through the books. Motivation seems to be that this publicly traded company needed to keep stock prices up to keep investors and shareholders happy. Incentive, opportunity and rationalization are all at play here.…

    • 1249 Words
    • 5 Pages
    Good Essays
    Read More

Related Topics