Some investors that are misled lost chunk if not all of their investments. The public, investors, employees, pension holders and politicians were so outraged and wanted to why Enron's failings were not spotted earlier. Enron did not do these all alone, they have accomplice in the name of another giant accounting/auditing company called Arthur Andersen where they helped the firm overlooked significant debts that are not the Enron’s financial statement. They knew that Enron was over its head but they let the company conceal its debt over a long period of that which eventually led to the downfall of the company. The highlight of this section is that Enron’s top managements self interest, greed led to presenting the investors and board of directors misleading financial statements. Because of their greed and self interest, a crime was committed that led to prosecution of some of the Enron’s top managers. For example, Former Enron executive Michael Kopper pleads guilty to conspiracy to commit wire fraud and money laundering conspiracy. While Andrew Fastow Former CFO was charged with securities fraud, wire fraud, mail fraud, money laundering and conspiracy. To avoid another Enron, the US Congress passed a law called Sarbanes-Oxley Act 2002…
1. Based on Alex Gibney’s film version of the rise and fall of Enron, do you accept Joel Bakan’s argument that the corporation shows “psychopathic” traits?…
Enron, one of the largest corporations in America and once ranked Fortune magazine’s “Most Admired Companies” went down in 2001 after they were exposed of defrauding their investors in a series of creative ways. Enron was known for being an innovative company in the energy, technology space but much of their innovation seemed to lie in how they managed to hide their debts and cover their losses through unscrupulous means. They would book hypothetical profits on projects and joint ventures that had not yet launched and on the day a deal was signed. They would hide their debts through the use of complex Special Purpose Entities (SPEs). They would solicit support from top tier investment banks by giving them lucrative deals to work on. All this and more was conducted with one clear objective in mind: to make as much money as possible through manipulation. Everyone was happy as long as there was money to be made. Ethics was out the window. Manipulating financial books and records, exploiting deregulated markets became their predominant strategy -all in the name of maximizing profits and pushing up the company’s stock price. When indicted, the chief executives of Enron, Kenneth Lay (former Chairman and CEO) and Jeffrey Skilling (CEO), amongst others, continually denied their involvement.…
The internal controls that were ignored when LJM1 was created were one, LJM’s books were kept separate from Enron's. LJM1 ignored some of Enron’s entries in the books that were missing. Outsiders owned less than 3% of the Special Purpose Entities equities. There was an error made by Arthur Andersen to let LJM’s financial statement to remain unconsolidated. If the financial statements had been consolidated, some of the errors could have been found. They may have even had some time to correct these errors before that had gotten so far out of control. There was not governing controls in place and fraudulent activities were unlimited. Andrew Fastow created LJM1 to handle investments with Rhythms NetConnections, high-speed Internet service provider. The stock that they bought at $10 million was worth $300 million after a year. Enron tried to sell the stocks to an investor, in case the stock price dropped. They could not find an investor to purchase the stock at the put option because of the risks that was involved. This is a clear violation as it created a scenario where Enron was basically insuring itself, and therefore, without insurance…
On December 2, 2001, Enron filled for bankruptcy under chapter 11 of the US banking code. This sudden collapse of one of Fortune 500 largest companies shocked the world. Once the world’s largest energy company, Enron’s scandal became the largest bankruptcy recognition and was attributed as the biggest audit failure in American history. The impact of this downfall was felt within the company and throughout the business world.…
Management was compensated extensively using stock options. This stock option awards caused management to make up a look that the company is aggressively growing and it actually kept the stock price going up and up. Enron’s statement of 2010 stated that, within three years, these awards were expected to be exercised.…
1. Is there sufficient evidence of fraudulent intent to convict Ken Lay for stock manipulation "beyond a reasonable doubt"? Why or why not?…
In 2001, the world was shocked by the demise of Enron, a multibillion dollar corporation that had thousands of employees and people that had affiliations with the company including The White House itself. Because of the financial chaos and destroyed lives and reputations this catastrophe left in its path, questions arose concerning how exactly it happened, why it occurred, and who was behind it. It is essential to understand how this multibillion dollar corporation rose to power and later imploded. Enron itself was born as the result of Houston’s Natural Gas and InterNorth, a gas based pipeline company from Nebraska in 1985. In the final analysis, the conspiracy of Kenneth Lay, Jeffery Skilling, and others, including the accounting firm of Authur Anderson, led to the collapse of Enron due to fraud, shady accounting practices, false reporting revenue, and general disregard of virtually every principle of business ethics.…
The corporate Culture at Enron could have contributed to its bankruptcy in many ways. Its corporate culture supported unethical behavior without question for as long as the behavior resulted in monetary gain for the company. It was describe as having a culture of arrogance that led people to believe that they could handle increasingly greater risk without encountering any danger.…
1. The Enron debacle created what one public official reported was a “crisis of confidence” on the part of the public in the accounting profession. List the parties who you believe are most responsible for that crisis. Briefly justify each of your choices.…
The Enron debacle created what one public official reported was a “crisis of confidence” on the part of the public in the accounting profession. List the parties who you believe are most responsible for that crisis. Briefly justify each of your choices.…
The top management of Enron including Kenneth Lay, Jeffrey Skilling and Andrew Fastow. These managers created a tone at the top of Enron that allowed and encouraged accounting that mislead investors.…
1. The Enron debacle created what one public official reported was a “crisis of confidence” on the part of the public in the accounting profession. List the parties who you believe are most responsible for that crisis. Briefly justify each of your choices.…
To understand why Enron’s scandal was such a shock, it is first important to note its background. Prior to its collapse, Enron was one of the biggest global energy and services company. It sold natural gas and electricity. Once deregulation of electricity took place, Enron became more innovative and instead just selling energy, it became an “energy matchmaker” bringing buyers and sellers together and profiting from their exchanges (Borden, 2003). It was named the greatest company to work for by Fortune Magazine several years in a row and at one time was the seventh largest company in the United States (Borden, 2003). Unfortunately, Enron’s unethical behavior led Enron to set yet another record—the highest corporate bankruptcy ever at that time (Borden, 2003).…
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.…