Enron and Parmalat

Upon watching the documentary, one could conclude that Enron’s bosses created a culture of pushing limits and taking risks. From the movie, we understand that Jeff Skilling was known to be a nerd as well as others within Enron. It seemed as though Jeff had woken up one day and decided to change himself by wearing contacts instead of glasses, changing is wardrobe, and doing some modeling. As he changed, so did others who worked under him for the fact that they saw Skilling as their hero. With time, it has been noted that Jeff became some sort of tragic figure. He became a man who was radically different than how he portrays himself. It was known that Skilling was a huge risk taker and he often talked about, and then started to manifest in trips that he began to lead with small groups and customers that were often times dangerous. These

The Italian dairy food corporation Parmalat SpA was founded by Calisto Tanzi in 1961 and grew to a global company. It had about 140 production centers, 36,000 employees and 5,000 contracted dairy farms (https://en.wikipedia.org/wiki/Parmalat). The dairy food giant defaulted on debt in November 2002 and filed bankruptcy in December 2003. It sounds ridiculous because Parmalat’s subsidiary in Cayman Islands had a $4.9 billion cash balance in Bank of America account. However, this account was falsified. Meanwhile, Parmalat also hid losses of $10 billion and increasing assets as high as $19 billion. The auditors did not show enough professional skeptism and due care during the audit.

CEO Kenneth Lay was a very smart man who always thought ahead of the curve. In his search for new opportunities, he started thinking about the deregulation of energy markets, particularly the natural gas market. Then in 1985, Lay eventually founded Enron in Houston, Texas. This was the result of merging two relatively small regional natural gas pipeline companies: Houston Natural Gas and InterNorth.

Enron’s history dates back to the Omaha-based Northern Natural Gas Company, an interstate pipeline company formed in 1932. In 1979, the Northern Natural Gas Company merged under their holding company InterNorth. Accordingly, InterNorth branched into a more diversified energy company working in natural gas marketing, production, and transmission alongside plastics innovation and other energy-related products. In 1985, during the reorganization of the merger between Houston Natural Gas and InterNorth, the company named itself “HNG/InterNorth Inc.” and built a large headquarter complex in Omaha, much of it being formed with pink granite (locally dubbed as the “Pink Palace”). Six months after the reorganization of the company, Samuel Segnar, the company’s first CEO, departed--paving way for Kenneth Lay (HNG’s former CEO) to replace Segnar. The next year, Lay received the post of chairman. Following Lay’s entrance into HNG/InterNorth Inc., chapter two began with a running start.

They compared default rates of 1926-1930, when bank affiliates and investment banks were both actively underwriting numerous security issuances. The main focus of the investigation was set at issues from commercial banks’ affiliates (bank affiliates), investment banks (without the deposit business) and especially at issues from J.P Morgan, Kuhn, Loeb & Co., The First National Bank and The Chase Bank. The two latter banks were accused of actively misleading the public into investing in poor quality security issues and also committing various abuses against their shareholders and the government. Precisely, in relation to their underwriting activities, the security affiliates of these two banks were blamed of misrepresenting the actual quality of new issued securities, as well as of abusing their commercial and investment banking business for the packaging of bad loans into securities and transferring them to uninformed public investors. These two banks are analyzed separately because evidence was leveled against these two in the Pecora hearings (Ang and Richardson, 1993, P. 353). Furthermore, Ang and Richardson (1993) especially mention J.P Morgan and Kuhn, Loeb & Co., since they cannot be clearly classified as commercial banks or pure investment banks, since they do accept deposits but have a broad history of underwriting. The

To analyze this scandal, we first need to know what happened. Enron opened as a natural gas company in Houston, Texas in 1985, founded by Ken Lay. It then formed into energy, commodities, and service company. Lay then hired Jeff Skilling as CEO; it was these two and a few other high-ranking executives that led to the failure of Enron. In short, Enron was losing money, but with the work of fancy accounting and taking advantage of free enterprise, reported huge false profits. This all came to a head in 2001 when Enron declared bankruptcy.

For instance, the funds owed the company by the Rigas family went undisclosed in the statements, because the management at Adelphia deemed such disclosure as being “unnecessary” (Barlaup, Hanne, & Stuart, 2009). Given that Adelphia was a publicly traded company, the purposeful non-disclosure caused potential investors to rely on financial records that were grossly misleading. The inevitable result was the investors continued to inject money into a company that had all the appearances of profitability and sustained growth, but that was, in reality, rapidly becoming insolvent. Moreover, lending institutions also relied on the “independently-audited” financial statements, and they were more than eager to loan the company money, given Adelphia’s presumed state of financial “profitability.”

Major private financial institutions in the USA, Japan and Europe ended-up in the hands of such executives who were thus in no violation of any legislation but were in fact acting greedily and unethically, betraying the confidence of their customers. The border line between the laws and the Ethics were lost.

In 1985, Houston Natural Gas and InterNorth, a natural gas pipeline company, merged, and Lay became CEO of both houses. In 1986, after many changes and more growth, the firm changes its name to Enron and relocated to Lay’s hometown of Houston, Texas. At this time Enron was both a natural gas and oil company. The company specialized in the moving of natural gas through its pipelines, extending thousands of miles across the continental United States. As the firm continued to flourish, it reformed its commercial approach by becoming a leading producer and distributer of energy in both the United States and the U.K., as well as becoming more involved in the trading market. Ambition and determination truly carried Enron to new heights, helping it to become one of the most powerful and innovative companies in the United States, even being “voted Most Innovative among FORTUNE'S Most Admired Companies” for “six years running” (Helyar). However, with much success, temptation arose, and good intentions were led astray. Damaging arrogance, risky behavior, and deception ultimately warranted the demise of the mighty Enron.

United States 1). During the first years of the deregulation of the electric market, under the vision and command of Kenneth Lay, who, supported by his studies of economics and the experience obtained from his work in important positions in the cabinet of government of the United States of America, decides to explore the energy industry especially in the area of natural gas. In 1989, Ken Lay hired Jeffrey Skilling, then a consultant to McKinsey & Co., to help him implement the new diversification strategy, which was successful so that by 1995 Enron was already the industry marketing leader, controlling 20% of the energy market in the United States. “Later in the 1990s, Enron used favorable Washington decisions to expand its reach, marketing a variety of other real and virtual commodities, from plastics to bandwidth.” (St. Petersburg Times, "Enron's meltdown.").

This report allows the facts to be known concerning the still mysterious case of Bernard L. Madoff and his longtime investment securities activities, which eventually turned into an enormous fraud of incomparable size. In this report, you will begin to understand how Bernard Madoff was able to execute such an elaborate fraud. The illegal business behavior found in this case is too numerous to count however, quite a few will be identified. In addition, the roles of the perpetrators, accomplices, and their involvement in this scheme will be made known. This fraud had such an enormous impact on the victims, we will examine several implementations that the private investors could have implemented to protect themselves. An

In 1984 Ken Lay became chairman and Chief Operator of Houston Natural Gas. It quickly doubled when it bought Florida Pipeline Company. The next year in 1985 Houston Natural Gas merged Internorth Incorporation. With the merger they both combined to own around 40,000 miles of pipeline and shortly after they changed their name to Enron. Around that time Washington was being lobbied by energy corporations to deregulate business and let companies set their own prices. Energy companies said this would not only lead to the end of monopolies but the extra competition would benefit companies and consumers. Over the next several years Washington began to lift controls on who could produce energy and how it was sold. With an influx of new suppliers

The ones who finally exposed the scam were Bernard Madoff’s sons, Andrew and Mark Bernard, who after they found out that the company was based on a Ponzi scheme reported it to the authorities. This resulted in the arrest of Madoff on December 11th, 2008. He was accused of fraud and the embezzling of up to 65 billion dollars. He pled guilty to all charges, including money laundering, mail fraud and making false filings, and in June 2009, Madoff was sentenced to serve 150 years in prison [6].

In 2011, Eric Ben-Artzi was working at the Deutsche Bank when he found out a wrongdoing about the overvaluation of collateralised debt obligations (CDO). After raising concerns internally, following bank procedures and policies, and after having no proper answers from its hierarchy, as the problem wasn’t solve or acknowledged, Eric had to inform the law enforcement

Enron began as an energy company in 1985. After the deregulation of oil and gas in the U.S., Enron lost its’ exclusive rights to natural gas pipelines. The CEO, Kenneth Lay then hired a consulting firm to reinvent the company in order to make up lost profits. He hired Jeffery Skilling, who was in banking, specifically; asset and liability management. Under the topic “The Beginning Presages the End”, C. William Thomas (2002) writes: “Thanks to the young consultant, the company created both a new product and a new paradigm for the industry—the energy derivative.” When Skilling’s plans were very profitable, he was promoted to COO of the trading division. With this success, he hired Andrew Fastow; who became CFO Chief