Corporate Fraud Has Taken The World By Storm For Over The Past Decade

Enron was an energy trading and communications company located in Houston, Texas. During 1996-2001 Enron was given the name of America’s Most Innovative Company by Fortune magazine as it was the seventh-largest corporation in the US. The problem that led this company to bankruptcy was due to the fact that fraudulent accounting practices took place allowing Enron to overstate their earnings and tuck away their high debt liabilities in order to have a more appealing balance sheet (Forbes.com, 2002). Enron’s accounting team “cooked” the books to every meaning of the word so that their investors would not see anything wrong with the failing organization. This poorly structured company led people to jail time, unemployment, and caused retirement stocks to be dried up. Enron had a social responsibility to its stockholders and rather than being up front and honest about the failing company they hid every financial flaw in order to keep receiving money from its investors. By Enron not keeping a social

Enron had the largest bankruptcy in America’s history and it happened in less than a year because of scandals and manipulation Enron displayed with California’s energy supply. A few years ago, Enron was the world’s 7th largest corporation, valued at 70 billion dollars. At that time, Enron’s business model was full of energy and power. Ken Lay and Jeff Skilling had raised Enron to stand on a culture of greed, lies, and fraud, coupled with an unregulated accounting system, which caused Enron to go down. Lies were being told by top management to the government, its employees and investors. There was a rise in Enron 's share price because of pyramid scheme; their strategy consisted of claiming so much money to easily get away with their tricky ways. They deceived their investors so they could keep investing their money in the company.

This now bankrupt company, misappropriated investments, pension funds, stock options and saving plans after deregulation and little oversight by the federal government. However, with deregulation an increasing competitive culture emerged as the CEO Jeffry Skilling motto to his organization was to “do it right, do it now, and do it better” this was the rally cried that pushed ambitious employees to engage in unethical behavior as Enron use deceptive “accounting methods to maintain its investment grade status” (Sims, & Brinkmann, 2003, pp.244-245). As Enron continued to flourish and received accolades from the business community this recognition drove executives to continue the façade of bending ethical guidelines before their public fall from

The word “fraud” was magnified in the business world around the end of 2001 and the beginning of 2002. No one had seen anything like it. Enron, one of the country’s largest energy companies, went bankrupt and took down with it Arthur Andersen, one of the five largest audit and accounting firms in the world. Enron was followed by other accounting scandals such as WorldCom, Tyco, Freddie Mac, and HealthSouth, yet Enron will always be remembered as one of the worst corporate accounting scandals of all time. Enron’s collapse was brought upon by the greed of its corporate hierarchy and how it preyed upon its faithful stockholders and employees who invested so much of their time and money into the company. Enron seemed to portray that the goal of corporate America was to drive up stock prices and get to the peak of the financial mountain by any means necessary. The “Conspiracy of Fools” is a tale of power, crony capitalism, and company greed that lead Enron down the dark road of corporate America.

Jumping right into the summary then. Enron was one of the most successful corporations in America during its prime. Marketing electricity and other commodities, as well as, providing financial and risk management services to other companies were the main types of business that Enron conducted. However, Enron’s successful appearance was found out to be a façade, when it came out that the corporation was making a plethora of unethical business moves. Once the corporation’s actions became public, Enron’s fall from grace quickly followed. (Johnson, 2003)

The story of Enron is truly remarkable. As a company it merely controlled the electricity, natural gas and communications sectors of the world. It reported (key word, reported) revenues over one hundred billion US dollars and was presented America’s Most Innovative Company by Fortune magazine for six sequential years. But, with power comes greed and Enron from its inception employed people who set their eyes upon money, prestige, power or a combination of the three. The gluttony took over sectors which the company could not operate proficiently nor successfully.

In the early 1990s, a young company named Enron was quickly moving up Fortune magazine’s chart of “America’s Most Innovative Company.” As the corporate world began to herald Enron as the next global leader in business, a dark secret loomed on the horizon of this great energy company. Aggressive entrepreneurs eager to push the company’s stock price higher and a series of fraudulent accounting procedures involving special purpose entities were about to be exposed. In early 2002, the United States Justice Department announced its intent to pursue a criminal investigation into the once mighty company, Enron.

Enron’s fraudulent financial practices lead to the Sarbanes Oxley Act of 2002. Mistakes made by the company and their leadership shocked the world and cost billions. Enron’s leadership could have taken steps to prevent or mitigate the repercussions of their actions. The act restored ethical and reliable financial practices to the market.The major provisions of the act made corporations responsibility for financial reports, and required internal and external audits. The Act changed the accounting regulatory environment. And although corporations incurred the additional expense of audit and new reporting standards, these changes restored consumer investing confidence, strengthening the corporations and the stock market overall. (Flanigan, 2002.)

The agencies not only discovered the complex web of fictitious partnerships that hid Enron’s massive debt but also that the company’s external accounting firm, Arthur Anderson, was creating materially false and misleading audit reports. . The true nature of Enron’s massive financial losses was shown to the public and the stock price plunged, causing investors to lose billions of dollars. Enron, however, was just the first and largest scandal to become public. Numerous companies including Tyco, WorldCom, and Kmart were found to have inflated earnings (Martin & Combs, 2010, 103). Investors had been manipulated to invest into companies that followed unethical business practice thereby shattering future investor confidence.

Enron placed No.18 overall on Fortune’s list of the nation’s 535 ‘Most Admired Companies,’ up from No. 36 last year. Enron also ranked among the top five in ‘Quality of Management,’ ‘Quality of Products/Services’ and ‘Employee Talent.’ [“Propaganda Pg.1, sec. 19]

Enron was named the most admired company for six years in a row, and it was widely considered one of the best companies to work for by Fortune magazine. Enron shocked the world, and it's stockholders when it was revealed at the end of 2001 that the company’s “reported financial condition was sustained substantially by institutionalized, systematic, and creatively planned accounting fraud”. (Enron, 2011, para. 1) Enron maximized it’s long-run profits for itself, but not within the limits of the law. Enron disregarded it’s social responsibility to it’s stackholders when the company only strive for it’s maximized profits, and didn’t strive

Enron Corporation was an American energy trading company who committed the largest audit fraud alongside Arthur Andersen and filed for one of the largest bankruptcies in history in 2001 after producing false numbers and committing fraud for years (“Enron’s Questionable Transactions” page 93). Enron failed to run an ethical business in multiple aspects. The executives of the company abused their powers by having board members not properly oversee its employees. Enron committed accounting malpractice by producing false financial reports to hide the debt from failed projects and deals. Using a mark-to-market accounting method, Enron would create assets and claim the projected profit for the books immediately even if the company had not made any profit yet. In order to hide its failures, rather than reporting their loss, they would transfer the loss to an off-the-books account, ultimately leading the loss to go unreported. Along with Enron hiding losses and creating false profit for the

The first important factor in the Enron case advanced interests on share price. The second factor how the company was liberalized over the past 20 years along with the reduction of legal responsibility of investment banks and accounting firms. The third factor, which is the most important, was the immediate alteration of pay packages given to investment bankers, executives, and accountants (Barreveld, 2002). In this case, the factors mentioned above was a result of the culture implemented by the executive leaders whom were influenced by unethical behaviors they engaged in. One could agree that Enron was definitely reaping the bad seeds that the

Enron’s ride is quite a phenomenon: from a regional gas pipeline trader to the largest energy trader in the world, and then back down the hill into bankruptcy and disgrace. As a matter of fact, it took Enron 16 years to go from about $10 billion of assets to $65 billion of assets, and 24 days to go bankruptcy. Enron is also one of the most celebrated business ethics cases in the century. There are so many things that went wrong within the organization, from all personal (prescriptive and psychological approaches), managerial (group norms, reward system, etc.), and organizational (world-class culture) perspectives. This paper will focus on the business ethics issues at Enron that were raised from the documentation Enron: The Smartest Guys

The story of Enron begins in 1985, with the merger of two pipeline companies, orchestrated by a man named Kenneth L. Lay (1). In its 15 years of existence, Enron expanded its operations to provide products and services in the areas of electricity, natural gas as well as communications (9). Through its diversification, Enron would become known as a corporate America darling (9) and Fortune Magazine’s most innovative company for 5 years in a row (10). They reported extraordinary profits in a short amount of time. For example, in 1998 Enron shares were valued at a little over $20, while in mid-2000, those same shares were valued at just over $90 (10), the all-time high during the company’s existence (9).