Ken Lay was the CEO/Board of Directors Chair and laminitis of ENRON. He had a desire to make one of the largest concerns in the universe. Enron ‘s central office was in Houston, Texas. Enron was in the concern of transmission and distributing electricity and natural gas. Lay tried to do it in the H2O public-service corporation market with a company called Azurix, but this part of his concern was unsuccessful.
Lay grew up hapless and wanted to make better in his grownup life. He worked difficult for his instruction. Lay earned a PhD in Economics. While developing his calling Lay was introduced to people who gave him aid in happening good paid occupations. Lay learned the importance of listening to people and retrieving their names. This accomplishment attracted people to him which helped present him to a life manner that let him bask the good things in life.
In order to maintain the company turning Lay knew it was of import to look as a generous individual. He made certain to do many charitable contributions. In the public oculus he would show him self as an up standing individual ; although in his private live he may non hold ever lived up to this.
With the aid of fellow Enron Executives Jeffery Skilling ( CEO ) and Andrew Fastow ( CFO ) , Lay was able to recognize his end of making a successful concern. Many of Lay ‘s household members and friends benefited from Enron. They were provided with occupations that paid them good. With the success of the company Lay and his household were able to bask a epicurean life manner.
With the development of EnronOnline the company became more profitable. Enron was able to make concern with energy markets around the universe. This besides gave the company the ability to spread out on other merchandises. These ventures made Lay happy ; he and his employees were able to bask the benefits of being profitable.
Long term pensions, good benefits, and stock were great inducements for employees. Many of the Enron employees knew if they worked long hours doing money for the company they in bend would be rewarded. Salary additions and publicities kept the employees competitory. Employees who were non bring forthing for the company would happen them selves out of work.
Enron was able to do a net income from the deregulating of California ‘s energy market. Timothy Beleden ( Head of Trading ) was able to happen ways around the deregulating regulations that would make a net income for Enron. Soon the Enron bargainers were
happening that they could make state of affairss that would do big net incomes. These trades non merely made money for the company but besides the employees. This state of affairs became a win-win for the executives and bargainers.
Fastow and Skilling were able to make state of affairss that would do money for Enron and let them to conceal the company ‘s liabilities. Fastow was good at managing the bankers and comptrollers who had inquiries sing their concern trades. Fastow ‘s trades
created net incomes for the company every bit good as assisting them to avoid paying revenue enhancements. This created the visual aspect of growing for Enron. The continued visual aspect of net income would make the demand to go on these types of minutess.
Skilling developed a program that would let Enron to enter possible future net incomes on their books at the present clip. Of class there was the possibility that these net incomes could really go losingss in the hereafter. This type of accounting made Enron look good and helped there stock to go more valuable. With the trades they made and the stock looking to be strong, Fastow and Skilling were able to pull investors.
Cliff Baxter was a Chief Strategy Officer and Vice Chairman with Enron.
During his clip with Enron Baxter developed a batch of trades that made a batch of money for the company. This helped Baxter to advance rapidly with in Enron. As clip passed at Enron Baxter was non happy with some of the minutess that were taking topographic point. He decided it was clip for him to go forth, so he retired in May, 2001.
Sherron Watkins was the Vice President of Corporate-development at Enron.
Prior to this place Watkins had been a CPA for Arthur Andersen. She was one of the few adult females to travel up the ranks of the company. While working at Enron Watkins became cognizant of some of the trades Fastow had developed. Watkins felt these trades were non appropriate. She realized that losingss were being hidden. She was concerned that these accounting patterns could ache Enron. Watkins felt she needed to turn to these minutess with Lay.
Lay addressed the employees of Enron to squelch concerns that the company was in fiscal problem. He was a convincing talker and used this to his advantage. Lay convinced everyone that the company was strong and stock monetary values would once more be up. In order to turn out his belief in the company Lay continued to purchase stock in Enron. He was trusting this would take others to follow his illustration and purchase more stock. As this was go oning Lay was besides selling off a batch of his stock. Lay and other executives were doing a batch of money selling their stock. The investors and employees did non cognize of these minutess.
Accounting house Arthur Andersen non merely provided auditing services for Enron but besides provided them with confer withing services. Andersen was one of the top accounting houses and was employed twelvemonth unit of ammunition with Enron. Enron was one of Andersen ‘s largest clients and paid the company 1000000s of dollars a twelvemonth. Andersen allowed it ‘s on site hearers to do the concluding determinations on the audits over the advice of the professionals in the place office. David Duncan was the hearer in charge of Enron ‘s audit. It appears Duncan may hold approved Enron ‘s questionable statements in the involvement of doing money. Carl Bass, caput of the Professional Standards Group at Andersen questioned the fiscal statements of Enron. Duncan implied to Andersen that Enron executives were non pleased with Bass and requested that he be removed from any reappraisal of Enron ‘s
audit documents. It appears that Andersen may non hold wanted to free Enron as a client, so they complied and removed Bass from the Enron history. Duncan besides made the determination non inform the Board of Enron of trades that involved internal contracts or those of related party minutess.
Enron ‘s fiscal problem became public in October, 2001, when it announced it would hold a loss in their 3rd one-fourth and a big loss in stockholder equity. This proclamation caused the Securities and Exchange Commission to establish an probe of Enron and Andersen. In visible radiation of the probe Andersen ‘s attorney, Nancy Temple contacted the hearers. She wanted to do certain that they had kept up the houses policies on the care of paper work. When Duncan received his reminder from Temple, he encouraged the auditing staff at Enron to destruct paper work. This created a monolithic shredding of paperss that lasted for a twosome of hebdomads. The shredding of paperss came to a arrest when Andersen was served with a subpoena and told to retain all paperss.
Loyal Enron employees were left out in the cold. When they realized the company they worked so difficult for was in problem it was excessively late for them. The autumn of Enron happened rapidly. While the company ‘s stock was rapidly falling the employees were unable to sell their portions. In December, 2001 Enron filed for bankruptcy. To add abuse to injury the employees were out of a occupation and were merely given a short sum of clip to take their personal points and leave the edifice. These difficult working people lost more than their occupations. Their retirement financess were connected to Enron ‘s stock.
Many of the employees lost a bulk of their pension financess. Enron had invested a big part of the retirement financess into the stock. Because of their belief in the company many of the employees bought a batch of stock. Now out of a occupation and no retirement fund, the former employees would hold to contend to seek and reimburse every bit much of their loss as possible. It will be a long legal conflict to be fought in the tribunals.
Arthur Andersen was found guilty of blockading justness due to the shredding of Enron paperss. Because of the Securities and Exchange Commission probe, Andersen gave up its CPA licence in the Unites States. Andersen besides had its licence to pattern in the province of Texas revoked. Andersen ‘s strong belief was finally overturned.
Thousands of people had been employed with Andersen. The company now merely has a staff of a twosome of 100. Due to the dirt Andersen ‘s repute has been damaged. They are now viewed as an undependable concern and have lost their clients. They are now covering with cases associating to the accounting services they provided for several concerns. The staffs focal point is to now cover with the cases and the closing of the company.
Lay was convicted of fraud. He suffered a bosom onslaught and died before he could be sentenced. Due to his decease, his strong belief was canceled. Cliff Baxter was found dead the dark before he was traveling to attest in forepart of Congress. His decease was considered a self-destruction. Some people believe that Baxter may hold been murdered, but at that place has non been any definite cogent evidence. Skilling ‘s strong belief resulted in him acquiring a 24 twelvemonth sentence. There will be a reappraisal of his instance in 2010.
After the Enron fraud and Andersen ‘s function in the fraud, The Securities and Exchange Commission developed some new guidelines. One of the new alterations to happen was the punishments for fraud. Public companies will besides hold to take more duty for their fiscal statements and their internal controls. Hearers of these companies are responsible for describing on the equity and presentation of these statements. The hearers will hold to describe if these statements are or are non compliant with the regulating regulations. The hearer will besides hold to reexamine the internal controls effectivity of the public company and supply a study on their findings.
Had the board of managers of Enron reviewed and questioned the trades and fiscal statements of the company they may hold stopped the fraud that was taking topographic point. Their deficiency of inadvertence injury non merely themselves but the company, the investors, and the employees. Arthur Andersen besides failed to follow through with basic accounting guidelines. If the company would hold been more persevering in following up on the audit work being done at Enron they could hold stopped the fraud. One of Andersen ‘s major defects was leting the hearers at Enron to hold concluding blessing of the fiscal statements over the experts in the place office. There were employees at Enron who could see that things were non being done decently. If these employees would hold spoken up they besides could hold prevented the fraud.
Why did so many people stand by and allow this go on? It seems that they may all hold had the same motivation to non move. In allowing the fraud continue everyone benefited financially. The executives made 1000000s of dollars. Arthur Andersen and its hearers made 1000000s of dollars. The Enron employees made good wages, had good benefits and thought they were constructing big pension financess. In the terminal they all lost. Jobs were lost, callings destroyed, lives ended, and some even went to prison.
Other companies who besides had their employees retirement connected to Enron stock were affected. Some of these people had long callings in their companies and were looking frontward to retirement. When the fraud and down autumn of Enron happened many of these people had to do alterations in their lives. They gave up on retirement programs. There were retired persons who had to look for work once more.
Hopefully with tighter ordinances frauds can be curbed. I do n’t believe that fraud can be wholly stopped. The degree of authorities engagement needed is difficult to place. No affair how many ordinances you can come up with there are ever people who will happen a manner around the regulations. Equally long as people are controlled by greed and the visual aspect of holding power there will be a demand for authorities ordinance. The best we can trust for is to catch them in a timely mode.
I am bewildered that such a big group of people would be involved in this strategy. How make these types of people find each other? We all at some point in our lives tell small white prevarications. But to be able to make so much misrepresentation and bask the life manner that comes from this is beyond my kingdom of thought. I am a truster in that karma will acquire you in the terminal. We may non ever see it but I believe there is a penalty, whether it is physical or mental.
I truly feel for those guiltless people that were hurt by this fraud. I have ever been mistrustful of trades that sound excessively good to be true. This is how I see Enron. They rose excessively rapidly in concern doing incredible net incomes. They provided their employees with
chances to do big wages and construct large pensions. I will go on to oppugn large concerns because I feel they are normally interested in what makes them money over everything else. I see it as my duty to larn every bit much as I can to do a pick that is best for me.