RUNNING: Demise of Enron Corporation® and WorldCom®

Demise of Enron Corporation® and WorldCom®
Your Name
October 31st, 2012
FIN/486
Instructor

Enron Corporation and WorldCom In the last decade, two powerful American companies, Enron Corporation and WorldCom, have become the models of accounting corporate fraud. The Enron Corporation was founded in 1985 by Kenneth Law in Omaha, Nebraska. The company later moved its operation to Houston Texas when InterNorth and Houston Natural Gas merged. This American organization offered paper, pulp, electric, communication, and natural gas manufacturing. Enron employed over 20,000 professionals and reported earnings worth over 100 billion dollars. A few years earlier, on the other side of the country, WorldCom was established by Bernand Ebbers in Hattiesburg, Massachusetts . WorldCom make great growth strokes through mergers, acquisitions, long distance rates, and cutting edge technology in the communications industry. It achieved an unprecedented success that would soon unveil accounting fraud, scandal, and shameful demise. But in 2002 Enron and WorldCom were exposed as corrupt organizations, run by fraudsters that had lined their pockets with tens of millions of dollars and destroyed $240 billion dollars worth of investor's money (BBC News, 2012).
Major Factors that Led to the Dissolution Business ethics are the standards of conduct or moral judgment that apply to persons engaged in commerce. Violations of these standards in finance involve a variety of actions: “creative accounting,” earnings management, misleading financial forecasts, insider trading, fraud, excessive executive compensation, options backdating, bribery, and kickbacks (Gitman, 2009, pp. 17-18). One of the major factors that contributed to the demise of Enron and WorldCom was employee’s unethical investment management. These