On March 5th, 2001, Fortune magazine released an article by Bethany McLean. The theme of this article was that Enron’s stocks were overpriced. She stated that Enron’s stocks were really popular and that its numbers were really impressive. Its revenues had doubled to over $100 billion, earnings were increasing by 25% and stocks were returning over 89%. All this seemed a little too much like a fairy tale. She raised questions like ‘Where does Enron get its revenues from?’, ‘Why it was so complicated to get information from Enron?’ and so on. When asked these questions, various Enron…
References: C. William Thomas (2002), The Rise and Fall of Enron, Journal of Accountancy, [electronic version], Retrieved 11/29/2008.…
Was established in 1985, Enron was an American energy trading company based in Houston, Texas through the merger of two pipeline companies, Houston Natural Gas and Internorth Corporation. Enron Corporation set Special Purpose Vehicles are subsidiary corporations which are designed by the parent company to hide its debt and cheat the public. The essential purpose is to increase the companies’ profit and reputation, and it allows the general public to purchase its stock. In August of 2000, Enron reaches its peak market value of $68 Billion. By December 2001, Enron was in bankruptcy. Under the cloud of its financial scandals, the price per share plummeted from nearly $100 a share to less than 50¢ a share. On May 25, 2006, Enron was convicted of defrauding the public. Arthur Andersen, Enron’s auditors, allowed the chaos, and they had no paid for the responsibility of professional care. Enron was one of its biggest clients. It earned $27 million from Enron for consulting services, and only $25 million on auditing. At the time, Andersen was one of the top five accounting firms in the world. At the end, it was dissoluble due to its role in Enron’s financial scandal, and it committed auditing…
Enron was the country’s largest trader and marketer for electric and natural gas energy. Its core business was buying energy at a negotiated price and later, selling the energy when prices increased. As an energy broker, Enron provided a service by allowing producers to negotiate a certain price while Enron took the risk that prices would fall below what it bought energy. Buyers of energy also benefited because Enron could ensure the supply of energy. In 2000 Enron was listed number five on the Fortune 500. What happened to the company which was among the most admired for vision and quality thinking? Enron was the company that held virtual assets and not the real assets, such as power stations, which were capital incentive with low returns and ongoing debt.…
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.…
Some argue Enron’s record-breaking bankruptcy and eventual demise was the result of a lack of ethical corporate behavior attributed, more generally, to capitalism’s inability to check the unmitigated growth of corporate greed. Others believe Enron’s collapse can be traced back to questionable accounting practices such as mark-to-market accounting and the utilization of Special Purpose Entities (SPE’s) to hide financial debt. In other instances, people point toward Enron’s mismanagement of risk and overextension of capital resources, coupled with the stark philosophical differences in management that existed between company leaders, as the primary reasons why the company went bankrupt. Yet, despite these various analyses of why things went wrong, the story of Enron’s rise and fall continues to mystify the general public as well as generate continued interest in what actually happened.…
In 2001, Enron, one of America’s leading energy companies, disappeared overnight. At its height, Enron had “a stock price over $90...a marker value of 70 billion… [and] gigantic executive compensation incentive packages” (Giroux). After being exposed of unethical business and accounting methods, Enron eventually went bankrupt. Enron was convicted of fraud, money laundering, conspiracy, and over 50 other charges. The Enron Scandal is a watershed moment in accounting because of the exposure and reevaluation of faulty business administration and unethical business ethics, the creation of the President’s Corporate Fraud Task Force, and the creation of the Sarbanes-Oxley Act.…
The central text for this project is the film Enron: The Smartest Guys in the Room by filmmaker Alex Gibney. This film investigates, documents and then exposes the many moves that led to the collapse of Enron. The director focuses on the chief leaders of the corporation as his principal characters in order to develop the story as a human tragedy. Throughout the course of the film, each leading character is revealed. All players were found to be distinct in their strategies and methods. However, all were alike in their attitude and way of thinking. Each one was goal-driven and each found a way, by whatever means possible, to achieve their desired end: making money. Gibney incorporates many strategic moves into this film that contribute…
While I enjoyed reading the Enron Case Study by Sims and Brinkmann and found it to be extremely informative, the movie, Enron: The Smartest Guys in the Room, provided additional information, details, and context regarding the individuals, decisions, and factors that contributed to Enron’s downfall (McLean & Elkind, 2003). To begin with, the movie delved into Ken Lay and Jeff Skilling’s personal, educational, and professional background and provided context regarding how their backgrounds influenced their decisions as Enron executives. Subsequently, I was able to better understand how their character flaws of selfishness, greed, and unscrupulousness were driven by personal insecurities, intellectual arrogance, and a deep seeded desire to succeed…
The movie, Enron: The Smartest Guys in the Room, is a classic story about corporate America's greed an deceit that was discovered after the demise of Enron. The collapse of Enron was one of the largest bankruptcy in history and the movie captures the culture of money and politics involved in big American corporations. The film did a very good job portraying the culture that allowed Enron to become one of the largest corporations in America while hiding the fraud behind the facade of success. It also showed the rise and fall of the companies stock price and the lies behind the companies success which drove their stock price above and beyond. The movie does a great job of building on how Enron…
The Enron: The smartest guys in the room it’s a documentary film based in an important and huge company that was involved in a huge scandal in the American history. The Enron Corporation when they first start was a successful company. In its beginning, Enron was a small company from Texas, after years Enron became in the seven largest business in the U.S. with a smarts an experts employees working for Enron. The founder was Ken Lay a smart executive. The company was leader for many years the culture of Enron was very maleness they needed “Guys with spikes”. So Enron did have the smartest guys. Ken Lay hire as CEO Jeffrey Skilling and J. Clifford Baxter, an intelligent executive he committed suicide,…
ENRON was a multinational energy corporation that was founded in Omaha, Nebraska in 1985. Regardless of ENRON’s vast successes within the natural gas industry - within which it was considered to be one of the foremost natural gas conglomerate companies, the mention of the name ENRON in current times is commonly associated with a financial scandal involving the company. This scandal, also known as the ‘ENRON Scandal’ gained a vast amount of media coverage on both domestic and international levels; in addition, the ENRON scandal resulted in the bankruptcy of the company, the criminal prosecution of a number of executives, and an loss of upwards of $2 billion with regard to investors, employees, and clients.…
From the 1980s until now, there have been a lot of accounting scandals which were widely announced on by media. The result of this situation is many companies were bankruptcy protection requests, and closing. One of the most widely reported emulation of accounting scandals is Enron Company. Enron Corporation is one of the largest energy companies in the world. Enron was founded in Houston, Texas, America in July 1985 by the consolidation between Houston Natural Gas and InterNorth of Omaha, Nebraska (“Enron and Enderson: The story”, n.d.). According to Sridhanran, Dickes & Caines (2002, p.1), Enron’s rank number is the seventh in the United States by Fortune magazine in April 2002. Their businesses were sale of nature gas, electricity sector, water, metal, broadband and newsprint. Enron has been altered from the old economy company to the new economy company and focus on HFV (Hypothetical Future value). The profits were grown by buying electric at stable prices from the suppliers and sale the different prices for customers. When the falsehood of their profits was opened, the investors withdraw the capital. Enron start collapse (“Case study: The collapse”, n.d., pp.1-2).…
Viewing this documentary, provides a look at what can happen when an organizations culture is not based on values, but on productivity alone (Ferrell, Fraedrich, & Ferrell, 2013). Leaders of the organization set the tone for the entire company, and in this case, many of the stakeholders, as well (Enron: The Smartest Guys in the Room, 2005).…
Enron shocked the world from being “America’s most innovative company” to America 's biggest corporate bankruptcy at its time. At its peak, Enron was America 's seventh largest corporation. Enron gave the illusion that it was a steady company with good revenue but that was not the case, a large part of Enron’s profits were made of paper. This was made possible by masterfully designed accounting and morally questionable acts by traders and executives.…