Financial Disasters: The Enron Scandal Essay

2653 Words Dec 24th, 2008 11 Pages
ENRON


The Enron scandal was a financial scandal that was revealed in late 2001. After a series of discoveries involving irregular accounting procedures which could be turned in as fraud, went on throughout the 1990s, involving Enron and its accounting firm Arthur Andersen. Enron stood at the verge of falling into the largest bankruptcy in history by mid-November 2001. An attempt by a smaller energy company, Dynegy, was not feasible. Enron filed for bankruptcy on December 2, 2001. As the scandal was shown, Enron shares dropped from over $90.00 to just pennies. As Enron had been considered a blue chip stock, this was event came as a surprise to all and was an overall disaster in the financial world. Enron's downfall happened soon after
…show more content…
"After a thorough review of our businesses, we have decided to take these charges to clear away issues that have clouded the performance and earnings potential of our core energy businesses," said Kenneth Lay in a statement.[21] Some analysts were unnerved. "What's next?," asked David Fleischer at Goldman Sachs, an analyst called previously 'one of the company's strongest supporters' [22] asserting that the Enron "[m]anagement... lost credibility and have to reprove themselves. They need to convince investors these earnings are real, that the company is for real and that growth will be realized".[23]
Additionally Enron asserted that the broadband unit alone was worth $35 billion, a claim also mistrusted. "I don't think anyone knows what the broadband operation is worth," said Todd Shipman, an analyst at Standard & Poor's.[24]
On October 22, 2001, the share price of Enron fell to $20.65, down $5.40 in one day, following the Securities and Exchange Commission's announcement that it was investigating several suspicious deals struck by Enron, called "some of the most opaque transactions with insiders ever seen".[25] Attempting to explain the billion dollar charge and calm investors, Enron's disclosures spoke of "share settled costless collar arrangements," "derivative instruments which eliminated the…

More about Financial Disasters: The Enron Scandal Essay