Enron Corp. case study
List the things that Enron did that were corrupt, not ethical, etc. 1. Enron did insider trading. The ex-CEO Louis Borget was accused that involved in insider trading. He got some inside information which can bring a huge profit for company, embezzled public funds privately and tampered the financial statements. 2. Enron became embroiled in scandal that two traders begin betting on the oil markets, resulting in suspiciously consistent profits. They gambled away Enron's reserves, nearly destroying the company. 3. Enron built many offshore companies in order to avoid taxes and increase the profits. The company can divert funds casually without being noticed. The company became a Shell-company soon. And Louis Borget was discovered to be diverting company money to offshore accounts. 4. Enron’s new CEO Jeffrey Skilling hired lieutenants who enforce his directives inside Enron, known as the "guys with spikes", including Lou Pai, the CEO of Enron Energy Services, who is notorious for using shareholder money to feed his obsessive habit of visiting strip clubs. Pai abruptly resigns from EES with $250 million soon after selling his stock. Despite the amount of money Pai has made, the divisions he formerly ran lost $1 billion, a fact covered up by Enron.
5. Enron utilized mark-to-model accounting, which allowing the company to book potential profits on certain projects immediately after the deals are signed whether or not those projects turn out to be successful. This gives Enron the ability to subjectively give the appearance of being a profitable company even if it isn't.
6. One of Enron’s executives, Andrew Fastow, created a network of ‘shell companies’ designed solely to do business with Enron, for the ostensible dual purposes of sending Enron money and hiding its increasing debt. However, Fastow has a vested financial stake in these ventures, using them to defraud Enron of tens of millions of dollars. Fastow also takes advantage of the...
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