Enron Case
Part B:
What role did the CFO play in creating the problems that led to Enron’s financial problems? In order to prevent the losses from appearing on its financial statements, Enron used questionable accounting practices. To misrepresent its true financial condition, Andrew Fastow, the Enron’s CFO, takes his role involving unconsolidated partnerships and “special purpose entities”, which would later become known as the LJM partnership. Taking advantage from the SPEs’s main purpose, which provided the companies with a mechanism to raise money for various needs without having to report the debt in their balance sheets, Enron’s CFO directly ran these partnerships and designed them to purchase the underperforming assets (such as Enron's poorly performing stocks and stakes). Although being recorded as related third parties, these partnerships were never consolidated so that debt could be getting off its balance sheet and the company itself could boost and have not had to show the real numbers to stockholders. Andrew Fastow was using SPEs to conceal some $1 billion in Enron debt. Overall, according to Enron, Fastow made about $30 million from LJM by using these partnerships to get kickbacks which were disguised as gifts from family members who invested in them and enriching himself. His manipulation of the off-balance-sheet partnerships to take on debts, hide losses and kick off inflated revenues while banning employees' stock sales was one of the reasons triggered the collapse of the company and its bankruptcy.
Did Enron’s bankers, auditors and attorneys contribute to Enron’s demise? If so, what was their contribution? One part of the fallout from Enron's demise involves its relations with banker, auditor and attorneys. Although the banks knew there was a problem with Enron finance, their underwriting filings on debt issues sold to the public proved that wwithout its bankers, of course, Enron could never remained its schemes on the investing public. The auditors were
What role did the CFO play in creating the problems that led to Enron’s financial problems? In order to prevent the losses from appearing on its financial statements, Enron used questionable accounting practices. To misrepresent its true financial condition, Andrew Fastow, the Enron’s CFO, takes his role involving unconsolidated partnerships and “special purpose entities”, which would later become known as the LJM partnership. Taking advantage from the SPEs’s main purpose, which provided the companies with a mechanism to raise money for various needs without having to report the debt in their balance sheets, Enron’s CFO directly ran these partnerships and designed them to purchase the underperforming assets (such as Enron's poorly performing stocks and stakes). Although being recorded as related third parties, these partnerships were never consolidated so that debt could be getting off its balance sheet and the company itself could boost and have not had to show the real numbers to stockholders. Andrew Fastow was using SPEs to conceal some $1 billion in Enron debt. Overall, according to Enron, Fastow made about $30 million from LJM by using these partnerships to get kickbacks which were disguised as gifts from family members who invested in them and enriching himself. His manipulation of the off-balance-sheet partnerships to take on debts, hide losses and kick off inflated revenues while banning employees' stock sales was one of the reasons triggered the collapse of the company and its bankruptcy.
Did Enron’s bankers, auditors and attorneys contribute to Enron’s demise? If so, what was their contribution? One part of the fallout from Enron's demise involves its relations with banker, auditor and attorneys. Although the banks knew there was a problem with Enron finance, their underwriting filings on debt issues sold to the public proved that wwithout its bankers, of course, Enron could never remained its schemes on the investing public. The auditors were