Case 1
I
/
~"IESE CBS
Business School
University
BE-180-E
November 2012
of Navarra
Jeffrey Skilling, Bernie Madoff the Monster & the Other
Smartest Guys of the Room
Enron and Madoffs Ponzi scheme: two scandals that changed U.S. history and prove just how weak the controlling mechanisms of developed economies are.
Enron, the seventh largest company in the United States, was declared bankrupt in December 200 1 after its investment partnership proved to be masking a colossal mountain of debt (around
$1.2 billion).
Similarly, Madoffs company, Bernard L. Madoff Investment Securities, was associated with a
$65 billion fraud ' that affected around 4,800 clients worldwide, includíng investment banks (e.g.,
Banco Santander, UniCredit, HSBC), hedge funds (e.g., Ascot Partners and Man Group PLC), charities (e.g., Mortimer B. Zuckerman Charitable Remainder Trust, JEHT Foundation), universities (e.g., New York University, Carnegíe Mellon University), prominent private investors
(e.g., the International Olympic Committee) and, of course, many Hollywood players.?
There are severa! similarities between the two stories, and there are at least two issues that should never be forgotten.
First, the people involved in these stories were incredibly·smart; their professional trajectories were exceptional to say the least: Jeffrey Skilling, president of Enron, obtained an MBA from
Harvard Business School and, before joining Enron, was the youngest partner of McKinsey in the history of the company; John Clifford Baxter, CEO of Enron North America, earned an
MBA from Columbia University and moved up quickly within Enron; Richard Causey,
Bnron's chíef accounting officer, obtained an MBA from the University of Texas at Austin and, before joining Enron, was a partner of Arthur Andersen. Similarly, Bernie Madoff was an icon of the North American financia! sector.
, The Guardian, November 18, 2011.
2 tne Wall Street
Joumat,
March 6, 2009.
This case was prepared by Professor Antonino Vaccaro
/
~"IESE CBS
Business School
University
BE-180-E
November 2012
of Navarra
Jeffrey Skilling, Bernie Madoff the Monster & the Other
Smartest Guys of the Room
Enron and Madoffs Ponzi scheme: two scandals that changed U.S. history and prove just how weak the controlling mechanisms of developed economies are.
Enron, the seventh largest company in the United States, was declared bankrupt in December 200 1 after its investment partnership proved to be masking a colossal mountain of debt (around
$1.2 billion).
Similarly, Madoffs company, Bernard L. Madoff Investment Securities, was associated with a
$65 billion fraud ' that affected around 4,800 clients worldwide, includíng investment banks (e.g.,
Banco Santander, UniCredit, HSBC), hedge funds (e.g., Ascot Partners and Man Group PLC), charities (e.g., Mortimer B. Zuckerman Charitable Remainder Trust, JEHT Foundation), universities (e.g., New York University, Carnegíe Mellon University), prominent private investors
(e.g., the International Olympic Committee) and, of course, many Hollywood players.?
There are severa! similarities between the two stories, and there are at least two issues that should never be forgotten.
First, the people involved in these stories were incredibly·smart; their professional trajectories were exceptional to say the least: Jeffrey Skilling, president of Enron, obtained an MBA from
Harvard Business School and, before joining Enron, was the youngest partner of McKinsey in the history of the company; John Clifford Baxter, CEO of Enron North America, earned an
MBA from Columbia University and moved up quickly within Enron; Richard Causey,
Bnron's chíef accounting officer, obtained an MBA from the University of Texas at Austin and, before joining Enron, was a partner of Arthur Andersen. Similarly, Bernie Madoff was an icon of the North American financia! sector.
, The Guardian, November 18, 2011.
2 tne Wall Street
Joumat,
March 6, 2009.
This case was prepared by Professor Antonino Vaccaro