Why Did Enron Fall?

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.

The reason Enron failed so miserably was due to the failure to meet the important ethical challenges and dilemmas in its corporate environment, the majority of the liability falls upon Kenneth Lay, the company founder, chief financial officer Andrew Fastow and Kenneth Lay’s successor Jeffrey Skilling.

Enron, the natural gas provider turned trader of natural gas commodities and in 1994, electric, was once touted as the seventh largest company in America. Kenneth Lay, founder, began changing Enron from just a provider into a financial energy powerhouse. Lay took advantage of the dot-com boom of the late 1990’s by creating Enron Online, an internet trading platform. Internet stocks were valued at astronomical prices and were all the rage on wall street, who accepted the increasing prices as normal (Investopedia). On December 2, 2001 Enron declared chapter 11 bankruptcy, resulting in the loss of twenty thousand jobs and billions of investor and creditor dollars. Enron, once designated as "America 's Most Innovative Company" by Fortune for six years consecutively, enacted massive financial fraud at the fault of its top level executives: Kenneth Lay, Jeffery Skilling, and Andrew Fastow.

The Enron scandal has far-reaching political and financial implications. In just 15 years, Enron grew from nowhere to be America's seventh largest company, employing 21,000 staff in more than 40 countries. But the firm's success turned out to have involved an elaborate scam. Enron lied about its profits and stands accused of a range of shady dealings, including concealing debts so they didn't show up in the company's accounts. As the depth of the deception unfolded, investors and creditors retreated, forcing the firm into Chapter 11 bankruptcy in December. More than six months after a criminal inquiry was announced, the guilty parties have still not been brought to justice.

Enron was founded by Ken Lay in 1985 as a result of a merger of two gas companies. Enron was in top fortune 500 at number 7 and could not produce accurate financial statements to their investors. Top executives sold over a billion dollars in personal stock two years prior to their demise. Thousands of employees lost their jobs and. Author Anderson shredded all the financial statements all in one day. Employees of Enron lost over a billion and retirement and pension. Many of the top executives got off with just a slap on the wrist. The Sarbanes-Oxley Act of 2002 was set into place to make sure financial organizations are honest with investors.

(Madrick, 2003, p. 5) If Beth McLean published this story before the bankruptcy, investors may have gotten some warming and they would not have bought the stocks. Unfortunately, because of journalists bribes, investors did not realize the actual situation of Enron until Enron went bankrupt. Furthermore, journalists kept reporting some positive news about Enron without checking the dependability. Jeffrey Madrick

Corporate malfeasance has earned a place among the defining themes of the last decade and a half, helping to give birth to the global recession and the Occupy Wall Street movement. Enron, a Houston based commodities, energy, and service corporation, created arguably one of the worst scandals of the past two decades. Due to reporting tactics implemented by Chief Executive Officer Ken Law and Chief Executive Officer Jeff Skilling, which hid huge debts from the company’s balance sheet, the company filed for bankruptcy, shareholders lost $74 billion, thousands of employees and investors lost their retirement accounts, and many employees lost their jobs. Before the accounting scandal became public in 2001 due to whistleblower and Vice President

Abstract Enron’s accounting for its non-consolidated special-purpose entities (SPEs), sales of its own stock and other assets to the SPEs, and mark-ups of investments to fair value substantially inflated its reported revenue, net income, and stockholders’ equity, and possibly understated its liabilities. We delineate six accounting and auditing issues, for which we describe, analyze, and indicate the effect on Enron’s financial statements of their complicated

The story of Enron is one of a perfect storm--the right people in the right places with the right ideas, but the exact opposite. Moreover, it is a story about accounting fraud, deception, the ugly side of corporate culture and, most of all, greed. In entry level accounting classes, it is taught that publishing accurate financial statements and being honest in accounting practices are fundamental to maintaining a healthy business and achieving lasting success. Enron is a shining example of what happens when you choose to violate these principles. In order to fully understand what caused the collapse of the corporate "rock star" that was Enron we will discuss the people involved, the crimes they perpetrated, and the results of said

Enron was formed in 1985 following the merger of Houston Natural Gas Co. and InterNorth Co. The Chairman Kenneth Lay, CEO Jeffrey Skilling, and CFO Andrew Fastow were the backbone of Enron during its growth period. These executives exercised their power and expertise to unethically “increase” Enron’s profits by hiding the company’s debt. The ethical dilemma that Kenneth Lay and Jeffrey Skilling faced was whether to let their stakeholders know how poorly the company was doing, or to hide the debt. They chose to cut corners and falsify information that would later come back to get them in trouble.

The Enron Corporation started in 1985 by Kenneth Lay and was the result of a merger between Houston Natural Gas and InterNorth Corporation (Madsen & Vance, 2009). Enron had the biggest gas transmission system in the U.S which consisted of a network of 38,000 miles of pipeline (Giroux, 2008). After the addition of Jeffrey Skilling, Enron transformed itself from a producer and distributor of natural gas to a trading company (Chandra, 2003). Enron lobbied hard for deregulation and was capable of being able to trade almost anything (Chandra, 2003).This idea required vast amounts of liquidity (Chandra, 2003). Enron’s revenue began to increase at a rapid speed (Chandra, 2003). Skilling developed a workforce that enabled the concealing of billions of dollars through the use of special purpose entities, fraudulent financial reporting, and accounting inadequacies (Giroux, 2008). Enron committed fraud over an extended period of time to manipulate earnings in order to maintain compensation of central executives. Despite the collapse of Enron, many executives were paid millions of dollars while other Enron workers were terminated and lost all of their retirement funds (Giroux, 2008). Enron has went down in history as not only being the biggest bankruptcy in U.S. for that time period, but also the largest audit failure (Giroux, 2008).

This scandal began with CFO, Andrew Fastow understating the company’s liabilities, and overstating incoming revenue which is why this company made it to the Fortune 500. Soon after this accounting scandal began, Jeffrey Skilling resigned as CEO in 2001, and Kenneth Lay became CEO once again (he was previously CEO when the company was founded). Just a few months after this change, Enron released an announcement that they had a third quarter loss of $618 million dollars. After this huge loss, business investigators began to question the company’s practices within the company. And soon after Enron’s third quarter loss, the SEC (Securities and Exchange Commission)

Enron was a corporation located in Houston, Texas and in just fifteen years the US energy trading and utilities company grew to become one of America’s largest and more successful cooperation’s. Enron suffered a major fall. After being one of the most successful corporations Enron became the biggest company to file bankruptcy in history. In this research paper it will discuss about the history of Enron, the fraud committed and who is to blame. The historical development of white collar crime in the Enron Corporation was committed for financial gain. The Enron scandal is an example of a continuing trend of falsifying data in the history of white collar crime.

I have described the ethical and governance issues of the Enron scandal that took place in 2001. In this paper, there is information about the way things went the way it did with the Enron scandal. They hide a lot of documents pertaining to how their profits increase so rapidly. It also includes the close link Kenneth Lay had with George Bush. The investigators had some help with what happened in the scandal of Enron.

recent collapses of high profile business failures like Enron,Worldcom,Parmlat,and Tycohasbeen a subject of great debate among regulators, investors, government and academics in the recent past. Enron’s case was the greatest failure in the history of American capitalism and had a major impact on financial markets by causing significant losses to investors. Enron was a company ranked by Fortune as the most innovative company in the United States; it exemplified the transition from the production to the knowledge economy. Many lessons can we learn from its collapse. In this paper we present an analysis of the factors that contributed to Enron’s rise and failure, underlying the role that energy deregulation and manipulation of financial statements played on Enron’s demise. We summarize some lessons that can be learned in order to prevent another Enron and restore confidence in the financial markets, as well as in the accounting and auditing professions.