Enron Case

2186 Words Aug 8th, 2009 9 Pages
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
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The employees tend to view themselves as individuals, focus upon their own needs and without putting extra effort on behalf of the overall company business. The culture was all about how much money could be made for many executive through the stock option incentive program. Finally, the culture makes it hard for creating an ethical environment and fraud is almost inevitable. The reason was Enron’s management has less focus to create a relationship of openness and trust with employees. Staff members who saw wrongdoing were either ignored or silenced. As such, it is an essential component in any business's ultimate success or failure.

Part A

It is hard to believe Enron, the seventh largest leading corporation in electricity, natural gas and communications based in United Stated filled for Chapter 11 bankruptcy in December 2001. The company with claimed revenues of $101 Billion in 2000 finally ended up when investigations revealed that it had inflated its earnings by “hiding its debt, committing institutionalized, systematic and well-planned accounting fraud”. The scandal is the most significant corporate collapse in the United States since the failure of many savings and loan banks during the 1980s. (1)

Enron Corporation was born in 1985, a resulting company of Houston Natural Gas and Omaha-based InterNorth. Ken Lay, who had been CEO of Houston Natural Gas, becomes chairman and CEO of the following year. Enron won Fortune Magazine's award of

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