enron case of fraud and errors

8/7/2019 Enron Case of fraud and errors

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Business Ethics Case


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Structure:

Company profile

The ethical point of view

The guilty parties Main ingredients of the downfall

Closing thought

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Enron Company Profile

Enron Corporation was an American energy company based in Houston, Texas.

Enron employed around 21,000 people and was one of the world's leading

electricity, natural gas, pulp and paper, and communications companies, with

claimed revenues of $111 billion in 2000.

Fortune named Enron "America's Most Innovative Company" for 6 consecutiveyears.

It was formed in 1985 when Houston Natural Gas merged with InterNorth.

After several years of international and domestic expansion involving complicated

deals and contracts, Enron was billions of dollars into debt.

All of this debt was concealed from shareholders through partnerships with other

companies, fraudulent accounting, and illegal loans.


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Ethical Point Of View


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The Guilty Parties

These include Ken Lay, Jeff Skilling, and

Andrew Fastow

Believe Enron was great for economy Circulated money, provided jobs, dealt with

international companies

Did not inform public in order to keep Enron inbusiness

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The Guilty Parties

Kenneth Lee Lay

Born April 15, 1942

Died July 5, 2006 (age 64)

Charge(s): Fraud, falsestatement ;

Penalty: Could have faced

40 years in prison plus

monetary fines, but diedbefore sentencing

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The Guilty Parties

Jeffrey Skilling

Born November 25,

1953 (1953-11-25)

Charge(s): conspiracy,securities fraud, false

statement, insider trading

Penalty: originally

sentenced to 24 years and 4

months and fined $45

million USD, pending

resentencing

Status: Incarcerated7


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The Guilty Parties

Andrew Stuart Fastow

Born: December 22, 1961

Charge(s): conspiracy,

securities fraud, falsestatement, insider trading

Penalty: 6 years, followed

by 2 years of probation

Status: Incarcerated

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The Guilty Parties

Arthur Andersen was one of the worldsfive leading accounting firms (Big Five)

Was paid $52m in 2000, the majority fornon-audit related consulting services.

Type: Limited Liability Partnership

Founded: 1913

Industry: Accounting, ProfessionalServices,Tax, Consulting;Licenses of Certified PublicAccountants surrendered in2002


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The main ingredients for the

downfall ofENR

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DEREGULATION government decision to let

gas prices float with the currents of the

market

MARK-TO-MARKET accounting practice that

allowed Enron to book potential future profits

on the very day a deal was signed

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The main ingredients for the

downfall ofENR

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SPECIAL PURPOSEENTITIES - is a legal entity(usually a limited company of some type or, sometimes, a

limited partnership) created to fulfill narrow, specific or

temporary objectives. SPE's are typically used bycompanies to isolate the firm from financial risk. A

company will transfer assets to the SPE for management

or use the SPE to finance a large project thereby

achieving a narrow set of goals without putting the entire

firm at risk.

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Closing thought

Every fraud

could have been prevented

if honest people

had asked the right questions

at the right time

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enron case of fraud and errors

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