Reaction Paper on Enron Case
September 9, 2013
Summary:
Enron’s origins date back to 1985 when it began life as an interstate pipeline company through the merger of Houston Natural Gas and Omaha-based InterNorth. Kenneth Lay, the former chief executive officer of Houston Natural Gas, became CEO, and the next year won the post of chairman. From the pipeline sector, Enron began moving into new fields. In 1999, the company launched its broadband services unit and Enron Online, the company’s website for trading commodities, which soon became the largest business site in the world. About 90 per cent of its income eventually came from trades over Enron Online.
Growth for Enron was rapid. In 2000, the company’s annual revenue reached $100 billion US. It ranked as the seventh-largest company on the Fortune 500 and the sixth-largest energy company in the world. The company’s stock price peaked at $90 US.
However, cracks began to appear in 2001. In August of that year, Jeffrey Skilling, a driving force in Enron’s revamp and the company’s CEO of six months, announced his departure, and Lay resumed the post of CEO. In October 2001, Enron reported a loss of $618 million its first quarterly loss in four years. Chief financial officer Andrew Fastow was replaced, and the U.S. Securities and Exchange commission launched an investigation into investment partnerships led by Fastow. That investigation would later show that a complex web of partnerships was designed to hide Enron’s debt. By late November, the company’s stock was down to less than $1 US. Investors had lost billions of dollars. On Dec. 2, 2001, Enron filed for bankruptcy protection in the biggest case of bankruptcy in the United States up to that point. Roughly 20,000 Enron employees subsequently lost their jobs. The next month, the U.S. Justice Department opened its investigation of the company’s dealings, and Ken Lay quit as chairman and CEO.
The Term Paper on Kenneth Lay Enron Company Services
... Enron. Soon thereafter, Lay resigned as CEO. This was done while the US Congress prepared to extend its investigation of the bankrupt energy trading company. ... than on year, they will be in for a surprise. By looking at Enron's Income Statement, it seems the company was in ... The letter continued to state that Enron sees its market opportunities tripling over the next five years. This letter seems to be ...
In January 2004, Fastow agreed to a plea bargain and a 10-year sentence. He pleaded guilty to one count of conspiracy to commit wire fraud and one count of conspiracy to commit securities fraud. He also agreed to cooperate with federal prosecutors. In February, Skilling entered a plea of not guilty to 40 charges, including wire fraud, securities fraud, conspiracy, insider trading and making false statements on financial reports. Lay was charged with fraud and making misleading statements in July. He pleaded not guilty to the 11 charges.
Insights:
After watching the documentary Enron: The Smartest Guys in the Room and reading articles online about our first reaction paper all I can say is Ask why? As the tag line of Enron company is to always ask why? Why one of the America’s largest companies went to bankruptcy? Why do 20,000 employees have to suffer for the greediness of a few? Why someone have to commit suicide? Why Enron’s top management didn’t do anything to survive on the market?
Enron credibility and its reputation were misused by some of its top management for their own interest that leads to a conspiracy and down fall of its company. Cooking books or presenting fake earnings to attract investors are unethical use of accounting principles. It is easy for them to have fraudulent activities to make their market value look good and deceive investors where in fact they’re in immense depth.
I’ve realized how powerful accounting information is and how important the knowledge should one have for us not to be betrayed by some people like in Enron’s top management. They say “looks can be deceiving” and by that it should be a learning lesson to all of us that in doing business, everyone should still use the basic information like financial status to review each companies capabilities that we’re targeting to invest or do transactions with. We also should know how to read and understand each reports that we are given. It’s the same thing with our law is saying “ignorance of the law excuses no one”.
The Report on Corporate Greed Enron Company 2003
To fully understand how the business culture has acquired the greed mindset, a look at what a corporation is and defining corporate behavior becomes the starting point. First a corporation is defined as "an association of individuals, created by law and having an existence apart from that of its members as well as distinct and inherent powers and liabilities (Webster Dictionary)." Although made up ...
For the exploitation of Enron’s anomalies transactions, at least there’s still someone who are bravely and courageously enough to stand up and voiced t out. I salute Ms. Sharon Watsons for still having the integrity to her sworn oath as an accountant. She was not blinded and goes for what she knows truth and correct.
I sympathize to those 20,000 employees who lost their job, medical insurance, $1.2 Billion in their retirement funds and retirees who lost $2 Billion of their pension funds. They’re casualties for the materialism of people driving their company. I feel sorry for Mr. Cliff Baxter for committing suicide. Maybe his conscience can’t manage to accept that he had done some terrible things and the only way for him escape on it is by ending his own life. I believe that Enron’s tragic collapse was a wakeup call to all the businesses in the world. Sadly but true, some of us need to learn the hard way the true essence of Accountancy.