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.
Enron was a corporation that reached heights unknown, only to watch it fall apart from the inside out based on a foundation of falsehoods and cheating. Enron established a business culture that flourished on competition and was perceived in society as an arrogant corporation, mainly because of its corporate leadership. The fairytale of Enron actually ended as a nightmare with it destroyed by one of America’s largest bankruptcies in history. The demise of Enron impacted the livelihood and futures of numerous employees, their pensions, and in due course impacted Wall Street in a significant way. Even people today are amazed at how such a powerful company met its demise so rapidly. Enron’s end was a product of greed when certain executives of Enron were not eager to accept the failure of their company. The company utilized mark-to-market accounting that detailed the projected impending profits from a long-term deal (Lawry, 2015, p. 28) The results of the deals did not generate revenue as anticipated, but tremendous loss instead. This resulted in Enron accumulating enormous amounts of debt that they attempted to keep classified from the public. Ultimately the truth came to fruition.
Arthur Anderson Limited Liability Partnership (LLP) was established in 1913 into the Accounting industry. They offered tax, consulting, and, auditing services to large corporations everywhere. Their headquarters were located in Chicago, Illinois and eventually had over 85,000 employees in 84 different countries (Collins, 2016). By the 1990’s Arthur Andersen had become one of the largest accounting firms, and was recognized as one of the “big five.” Along with being one of the largest accounting firms Arthur Andersen was also one of the most reputable. There were many factors that distinguished Arthur Andersen from other accounting firms, and the most notable were the honesty and integrity Arthur Andersen had established for the company (Moore & Crampton, 2000). Andersen set high standards which in turn resulted in the growth of their prestige. Many companies came to Arthur Andersen because of the trust it had established in the public and in the accounting Industry. One of the ways Arthur Andersen established their reputation was through their organizational structure and the culture of the company.
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.
Between the years 2000 and 2002 there were over a dozen corporate scandals involving unethical corporate governance practices. The allegations ranged from faulty revenue reporting and falsifying financial records, to the shredding and destruction of financial documents (Patsuris, 2002). Most notably, are the cases involving Enron and Arthur Andersen. The allegations of the Enron scandal went public in October 2001. They included, hiding debt and boosting profits to the tune of more than one billion dollars. They were also accused of bribing foreign governments to win contacts and manipulating both the California and Texas power markets (Patsuris, 2002). Following these allegations, Arthur Andersen was investigated for, allegedly,
The time frame is early 2002, and the news breaks worldwide. The collapse of corporate giants in America amidst fraud and stock manipulations surfaces. Enron, WorldCom, HealthSouth and later Adelphia are all suspected of the highest level of fraud, accounting manipulation, and unethical behavior. This is a dark time in history of Corporate America. The FBI and the CIA are doing investigations on all of these companies as it relates to unethical account practices, and fraud emerges. Investigations found that Enron, arguably the most well-known, had long shredding sessions of important documents and gross manipulation of stocks and bonds. This company alone caused one of the biggest economic
The fall of the colossal entity called Enron has forever changed the level of trust that the American public holds for large corporations. The wake of devastation caused by this and other recent corporate financial scandals has brought about a web of new reforms and regulations such as the Sarbanes-Oxley Act, which was signed into law on July 30th, 2002. We are forced to ask ourselves if it will happen again. This essay will examine the collapse of Enron and detail the main causes behind this embarrassing stain of American history.
These two disgraceful accounting frauds by senior and executive managers at Enron and WorldCom, as well as similar events that took place at other public companies in the early to mid-2000s and the Arthur Andersen conspiracy were the genesis for the call of accounting reforms and auditor independence that would ultimately become the
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.
It was 13 years ago that the announcement of bankruptcy by Enron Corporation, an American energy, commodities and service firm at the time, would unravel a scandal resulting in what is regarded as the most multifaceted white-collar crime FBI investigation conducted in history. High-ranking officials at the Houston-based company swindled investors and managed to further their own wealth through intricate, shifty accounting practices such as listing assets above their true value to increase cash inflows and earnings statements. This had the effect of making the company and its shares look more enticing than they really were to potential investors. Upon their declaration of negative net worth in December 2001, shareholders filed a $40 billion lawsuit against the company, citing a drop of shares from around $90 per share to around $1 per share within only a few months. In light of these events, officials at the Securities and Exchange Commission (SCE) were prompted to initiate further investigation to figure out how such a drastic loss occurred.
The focus of the corporation soon changed direction once it was realized that investing in selling intangible assets on the market could provide easier and higher revenue returns. This type of trading on the open stock market, with little regulations is what allowed the infamous criminal acts to take place and led to one of the world’s worst bankruptcy cases in United States history. An investigation finally occurred when investors found suspicious stock prices increasing exponentially and a whistleblower raised concern that finally revealed the fraudulent operations of Enron’s top executives conspiring with multiple businesses.
Enron became a giant middleman that worked like a hybrid of traditional exchanges. But instead of simply bringing buyers and sellers together, Enron entered the contract with the seller and signed a contract with the buyer, making money on the
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).
Enron Corporation was an energy company founded in Omaha, Nebraska. The corporation chose Houston, Texas to home its headquarters and staffed about 20,000 people. It was one of the largest natural gas and electricity providers in the United States, and even the world. In the 1990’s, Enron was widely considered a highly innovative, financially booming company, with shares trading at about $90 at their highest points. Little did the public know, the success of the company was a gigantic lie, and possibly the largest example of white-collar crime in the history of business.
To make matters worse, when Andersen found problems in the financial statements, they didn’t make corrections due to a conflict of interest. The concern was that if Andersen brought these problems to light, Enron would walk away and cost Andersen millions of dollars in the long run. Andersen contemplated dropping Enron as a client, but did not follow through with it. Because the audit and consulting was done at the same firm, it clouded Andersen’s judgment. Andersen employees in Houston began shredding documents and therefore brought obstruction of justice charges that destroyed the firm.