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Enrron Scandal Cases

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Farsum Chaudhary Professor Pearl Unethical Issue- ENRON The ENRON Scandal is known to be one of the most notorious scandal cases within American history. What ENRON consisted of was a group of company executives involved in White Collar Crimes, which were revealed October 2001. White Collar Crimes are defined financially-based criminal activity typically taking place in a setting in which its participants hold advanced knowledge in regards to employment that is considered to be prestigious. Term regulation by the government involves the government keeping a check on the companies and regulating them by keeping a watch on them. The ENRON executives applied for and were granted government deregulation, which meant they were less restricted and less liable to state regulation.As a result of this declaration, ENRON executives were allowed to maintain control over the earnings reports that were to be released …show more content…

They exploited investors and stockholders out of their money through the fake image they put up of the company which caused investors to keep investing and new investors to start investing. The people that were mainly accountable for this fraud taking place were ENRON founder, Kenneth Lay and the CEO Jeffrey Skilling, who were convicted on May 25 for the conspiracy that took place. The fraud can be defined as white collar criminal activity that involved unethical and unlawful actions taken to attain money and funding of the investors and stockholders. While the executives were using the money for their personal use, the company was reaching bankruptcy. Due to the fraud and unethical behavior of the executives, the company went bankrupt. Investors lost over $70 billion. This whole fraud consisted of the misappropriation of pension funds, investments, stock options, and savings

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Enron which was the seventh-largest company in America at the time were involved in the scandal due to its accounting practices the company eventually collapsed. Many Enron executives were ultimately convicted of financial crimes for falsifying the company's assets, overstated its earnings and hiding liabilities. SOX requires a company’s chief financial officer to certify that its financial reports are accurate. All publicly traded company are required to have internal controls in place to confirm accuracy in financial disclosures. SOX makes it a crime to deceive shareholders of publicly traded companies by the filing of false financial reports.

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The Bernie Madoff scandal of 2008 was the largest Ponzi scheme ever recorded in world history. Never before has someone breached the business ethics standard at such a high level. Madoff had clear ethical responsibilities to both his employees and his clients that he completely disregarded. The U.S. Securities and Exchange Commission (SEC) also played a big role in allowing this scandal to take place as well. They were made aware on more than several occasions that there was question as to how Mr. Madoff’s portfolio was performing impossibly well.

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By keeping their credit rating high, Enron’s stock values would persist abnormally high. And in comes another creating accounting method used by Enron, which was the creating of special purpose entities which were named the ‘Raptors’, they were ultimately created in order to cover Enron’s losses if the stocks in their other investments fell. Comparing the Enron case to a European case, we have the Parmalat scandal, dubbed as the Enron of Europe. The Parmalat outrage arose following a discovery of a $14 billion black hole in the company’s finances. Using completely different illegal accounting methods than Enron, Parmalat started of by forging transfer documents, and admitting false debts (of almost eight times more than what was initially stated).

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They participated in various energy ventures like gas, oil, and electricity as well as pulp, paper, and communications. Prior to Enron’s bankruptcy, the oil and gas industries were deregulated and companies were provided with more opportunities to commit fraud. Enron became involved in fraud when executives embezzled funds and the accounting department manipulated financial data. The company went bankrupt in 2001 and the Sarbanes-Oxley Act of 2002 (SOX) was passed a year later. The SOX was drafted to curb corporate fraud and to increase investor protections.

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The Ponzi scheme Small investors, financial institutions, global banks, police departments’ pension funds, the list goes on. These corporations were targets for scammers to feed a desire that wreaks havoc on these types of victims because greed is the key factor. When making deals in secrecy that’s too good to be true, one would have to expect to get a call one day informing them they have been conned, swindled, or defrauded. If you can’t trust a regulatory agency such as the Securities and Exchange Commission for vital answers when inquiring about any investor, who can you trust? Ponzi schemes rely on inside help.

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This was a major problem in that aspect and by that implementation; Enron has no control over the situation and eventually cause the lack of error after hearing of the reports of the Company. Secondly, the rewarding individual was also critical. The main focus of Enron was more concentrated on having close deals and seeing them being competitive at the end of every company quarter. Their idea was as same as a car dealership, if you cannot bring in money then the sales person will not have a job, likewise with Enron, if you cannot make money then you will be jobless. In any business one key thing to remember is that employees are more important than clients.

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The documentary Enron: The Smartest Guys in the room is a film that is based on a book written by two reporters Bethany Mclean and Peter Elkind who reported on the largest business scandal in America. Because of this scandal many employers were fined and went to prison for different accounts of fraud. The scandal was the company Enron using accounting loop holes to show a forecast on profits for the upcoming year and was recorded in the books for traders to sell in the stock market. The problem was that if the profits were less than what was forecasted the number that was predicted would be the one that will be used in the books.

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Enron was a publicly traded company. By law, an audit was required. The audit is only as good as the auditors and accounting firm. Enron used a major accounting firm called Arthur Anderson. Prior to the Enron scandal, the largest accounting firms in the world were known as the “Big 5.”

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On December second, 2001 Enron petitioned for liquidation prompting the downfall of one of the most degenerate companies in recent U.S. history. Top executives and board members sold their stock for gigantic profits knowing the pending result of its downfall would send its stock in a spiraling plummet. Leaving many employees and investors with massive losses. The massive fraud that Enron officials represented fell into the classification of White Collar Crime. To additionally examine the massive fraud that Enron officials carried out, I will explore the anatomy behind the mind of the white-collar criminal, its sociological concepts, and correlate between the research and the article on Enron.

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When hearing the name Enron, it typically correlates to executive greed, dishonesty, corruption, and big business theft. The Enron Corporation, once a Fortune 500 company, imploded under dishonest and illegal accounting practices, while leaving billions of dollars of debt behind (Ferrell, Fraedrich, & Ferrell, 2013). The deceit manipulated by Enron, was further exaserbated by the fact that employees walked away with nothing. The case study and movie provided many of the same facts.

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In recent years, white collar crime has gained attention due to various high-profile scandals. Regardless of country, financial crimes have the potential to negatively impact investors and related economies. As such, it is important for countries with high rates of white collar crime to have effective enforcement mechanisms in place. Of these crimes, securities fraud largely involves the manipulation of reported earnings or stock prices and can cause substantial monetary loss from investors and general distrust in the country’s economy and ability to enforce violations.

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Just like with the fall in Enron most of the top executives who had big shares in the corporation turned a blind eye just so they can get a big payout. Which then turned out to be their

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