...Re: Enron: The Smartest Guys in The Room Enron: The Smartest Guys in The Room is a movie about one of the US largest corporations, Enron, that went bankrupt in 2001. The movie starts with the story of Enron Corporation founder who was the chief executive officer of Houston Natural Gas, Kenneth Lay. Kenneth Lay established Enron in 1985. He had a close relationship with George Bush senior and his son, George W. Bush. While George W. Bush was Texas’ governor, he helped Kenneth Lay in subsidizing Enron International. Kenneth Lay successfully built natural gas power energy in East Texas. At that time, Enron stocks increased sharply from before. Enron involved in government energy market deregulations. Two years later, Enron committed in a scandal which known as oil scandal where two traders was betting in Enron stocks. Even though Enron stayed in stable share and obtain high profit, the bets put Enron in danger. Those two traders were fired by Enron after they gambled in Enron’s reserves. On the other hand, Kenneth Lay refused to admit his involvement in this act, but in fact he attended the meeting that discuss about oil scandal issue. Another scandal which is presented in the first part of this documentary film is Louis Borget, Enron’s CEO fraud in diverting company money into his personal account offshore. Auditors tried to uncover this problem and Kenneth Lay also encouraged him to keep making millions for Enron. However, Louis Barget was put in jail by the court for a year...
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...more power plants to be built, as they obviously cared more about the spotted owl than everyday people. They even helped tar the Governor with the moniker “Gray-Out Davis,” thereby ensuring his putsch-like removal from office a short time later. In reality, the shortfalls were wholly artificial and cruelly calculated; brought about by manipulations at Enron to create demand and drive up prices. But don’t take my word for it, listen to theaudio tapes of Enron employees who discuss cheating grandmothers out of their money and rooting for wildfires because they were bringing millions of dollars to the company they so slavishly admired. People suffered and the state of California lost billions, and these paid enforcers of Enron doctrine are directly, unavoidably responsible. And yet we still have policy wonks who insist that deregulation works. And sure it does, only not for the public. One of the few heroes in this mess is the late Cliff Baxter, an Enron executive who thankfully committed suicide as the pressure started to build. Remarkably, he felt a pang of conscience (or so he says in his suicide note), but I have a feeling it was the prospect of facing a future without his mansion and numerous cars. Again, he blew his head off, so...
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...public and shareholders from accounting errors, unethical behavior, and corporate scandal. There are 11 titles that include the requirements for reporting, retention period for records storage, management of electronic records, and standards for external auditors. The act is supervised by the Public Company Accounting Oversight Board, and administered by the Securities and Exchange Commission (SEC). Sarbox requires the CEO and CFO to certify and be liable for the annual and quarterly reports that are filed. If the financial reports are discovered to be untrue, such acts of noncompliance are fines, imprisonment, or both, depending on the severity. The Act was designed for publicly traded companies only, in reaction to scandals such as Enron, WorldCom, and Tyco. These scandals cost investors billions of dollars when the companies collapsed, or the stocks plummeted. These companies altered or destroyed records, defrauded shareholders, or “cooked the books”. When a company cooks the books, it means that incorrect information has been used to create their financial statements. They manipulate earnings and expenses to improve the bottom line, or earnings per share (EPS). This manipulation of information is used to bring in new investors, keep the shareholders happy, attain a bonus, and reach their budget goals. Banks review these statements for loan applications. Investors and company managers use them to analyze how well the company is doing. Accounting and Manipulation...
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...Enron and Organizational Behavior The book I chose to read for my book report was The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron by Bethany McLean and Peter Elkind. The book was published by the Penguin Group and copyright (C) Fortune, a division of Time Inc., 2003. The Smartest Guys in the Room is about Enron’s rise and fall. Enron was created in 1986 from a combination of InterNorth and Houston National Gas which is basically a natural gas pipeline company. The Founder, Chairman, and CEO of Enron was Kenneth Lay who had a Ph.D. in economics and pushed for deregulation of government power because he believed that was the best way for a company to make money and become successful. In June 1990 Jeff Skilling joined Enron. Jeff Skilling was called a visionary and prophet because of his way of thinking and planning for the future. Ken Lay and Jeff Skilling shared the same interests and Lay wanted Skilling to start making Enron money with Skilling’s ideas. Skilling’s biggest idea was to find a new way to deliver energy rather than be bound physically by the pipeline. Skilling suggested that Enron would become a kind of stock market for natural gas and transform energy into financial instruments that could be traded like stocks and bonds. A year later in June 1991, Enron asked the Security Exchange Commission to approve their mark to market accounting. What is mark to market accounting? Mark to market accounting allowed Enron to book potential...
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...Nobody Won Michelle L Brown Oklahoma Wesleyan University Abstract When the Arthur Andersen LLP/Enron scandal surfaced in 2001, there was much confusion as to whom committed what crime and how many employees were actually involved. After the facts and criminal charges were final, the sequence of events makes sense; the union of two companies, the rise of the participating executives, and finally the end of the money ride. The leaders of both companies used dishonesty to make an abundant amount of money and gain power status (Thomas 2002). Christopher Bergland said it best when he wrote, “Karma is a boomerang and the long-term shame and anxiety of cheating will ultimately negate the short-term gains of victory,” (Bergland, 2012). This definitely held true for the employees who were disgraced at the conclusion of the legal proceedings; they may have had more money than they needed, but they ultimately lost in the end. The Beginning The joining between Arthur Andersen LLP and Enron was a marriage too good to be true (Thomas, 2002). The relationship started in 1986 when Enron hired the accounting firm Arthur Andersen LLP to perform “creative accounting,” allowing the energy company to appear more powerful on paper than it really was (Investopedia, 2011). Enron Corporation started investing massive amounts of money in “Special Purpose Entities” to generate huge amounts of revenues. Special Purpose Entities are creative ways for companies to more efficiently raise debt, but...
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...Based in Houston, Texas an American energy, commodities, and services company named ENRON CORPORATION was Ranked number 7 on the fortune 500 list in 2000, it was one of the most famous and largest integrated natural gas and electricity companies in the world. The company went bankruptcy on December 2, 2001. But before that it marketed natural gas liquids around the world and was working as one of the biggest natural gas transmission systems in the world, with transmissions over a massive area of 36,000 miles. Serving both upcoming and the industrial market, It was one of the largest autonomous developers and creators of electricity. Enron also supplied of solar and wind renewable energy in many parts of the world, it was one of the largest suppliers in this form of energy as well. ,,,,,,,,,,,,,,,,,,, It managed the largest portfolio of natural gas-related risk management contracts in the world, and was one of the world's biggest independent oil and gas exploration companies. In North America, Enron was the largest wholesale marketer of natural gas and electricity. Enron pioneered innovative trading products, such as gas futures and weather futures, significantly modernizing the utilities industry. After a surge of growth in the early 1990s, the company ran into difficulties. The magnitude of Enron's losses was hidden from stockholders. The company folded after a failed merger deal with Dynegy Inc. in 2001 brought to light massive...
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...We use two theories to understand how it occurs. One is functional theory, another one is conflict theory. For functional theory, deviance is a basic part of social organization. By defining deviance, society sets its moral boundaries. And the deviance here is universal. However, for conflict theory, deviance results from social inequality. Norms, including laws reflect the interests of powerful members of society. In other words, deviance is political: people with little power are at high risk of being labeled deviance. In terms of functional analysis, deviance is a necessary element of social organization. Deviance affirms cultural values and norms. There can be no good without evil and no justice without crime. Responding to deviance clarifies moral boundaries. By defining some individuals as deviant, people draw a boundary between right and wrong. Responding to deviance brings people together. When terrorists attacks occurred, people joined by a common desire to protect their country and bring the terrorists to justice. Deviance encourages social change. Today’s deviance can become tomorrow’s justice. For example, rock-and-roll condemned as immoral in the 1950’s, however, it became a multibillion-dollar industry a few years later. So does hip-hop music. Let’s look at the definition of conflict crime. Conflict crimes are deviant acts that the state defines as illegal but the definition is controversial in the wider society. As we learned in the class, the key concept of...
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...| Enron | A Scandal born out of Greed and Lust for Power and Money | | | Abstract This is a brief summary of the leaders of a successful company that became so greedy in their thirst for power and money they ruined a corporation, along with other prominent corporations and companies, most of all many lives and affected the way business is conducted in this country today. These were not smart people as many would say, but they were greedy and selfish people. The major players of this scandal were able to sweep mounds of hidden debt under the rug. The minor players of this scandal were able to keep this facade running smoothly, and kept the public turning a blind eye. Because of this vicious scandal, punishment was handed out to persons and businesses and, new rules were put in place by government to try and prevent such a scandal from ever happening again. Enron A Scandal born out of Greed and Lust for Power and Money In 2001, the nation was astounded by the total and complete collapse of Enron, a multibillion dollar corporation. “Enron was once proclaimed to be one of the most innovative, fastest growing corporations in the United States.” (Steward, 2003) It was heralded by many as the future of energy and power. Leaders of the company turned Enron into what many people thought was the largest trader in natural gas, water and other forms of power. The impetus to start such a scandal was the deregulation of energy by the government. Just as the...
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...Enron Corporation 1. Why did the company collapse? Enron In order to understand what happened within the company we need to start with its origins. Enron Corporation Inc. (later became Enron) begun operating in Huston Texas in 1985. It started from a merger of two natural gas companies, becoming the largest commercial, natural gas pipeline operating in the United States at that time. Throughout Enron’s humble beginnings it generally centred in the delivery of gas to utilities or businesses at market price. When the deregulation of the business markets emerged Enron’s role changed, they begun to act as energy brokers. Enron entered into contracts with the sellers (natural gas wholesaler) and signed the contract with the buyers (gas utility distributors). Enron then transitioned from an old-line energy company with pipelines and power plants, to a high tech global enterprise that traded energy contracts like commodities, launched into new industries like broadband communications, and oversaw a multi-billion-dollar international investment portfolio. Enron’s key corporate achievements during the 1990s was creation of an online energy trading business that bought and sold contracts to deliver energy products like natural gas, oil or electricity. It operated in over 40 countries and areas such as Europe, South America, Australia basing its main operations in the United States. Enron was only competing with a few major players in the recently deregulated industry and begun to design...
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...world. We all remember one of the most publicized cases of fraud, Enron. For many years there has been fraudulent activity in many companies. Sarbanes-Oxley was established to prevent these types of scandals. Some believe it is not as valuable as once predicted, but is anything 100% preventable? Prior to Sarbanes-Oxley Act, the Securities and Exchange Commission was in place since 1934. It was established to police U.S. financial markets. However after years of failure and proof that the Securities and Exchange Commission’s wasn’t enough, the Sarbanes-Oxley Act was born. In 2002 Sarbanes-Oxley Act was created by Senator Paul Sarbanes and Representative Michael Oxley. Several large company failures not only sparked the public on fraud activity, but also these two gentlemen who decided to put into place something that would enforce financial honesty in businesses. There are several layers to the Sarbanes-Oxley Act. ,For example section 404 requires companies to have internal control report with their annual audits. This section of Sarbanes-Oxley also puts accountability and personal liability on the accounting teams of the companies. The infamous Enron scandal unraveled itself in 2001. Enron marketed gas and electricity among other public utilities. They were the 6th largest energy company in the world. In addition, they also provided financial and risk management services to customers all over the globe. Enron was established in 1985 and by 2000 they made the Fortune 500...
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...Fraud is a serious problem for most businesses today and often technology compounds the problem. In addition, the role of the independent auditor in the detection of fraud is often questioned. (http://www.swlearning.com/accounting/hall/ais_4e/study_notes/ch03.pdf) Fraud is dishonest activity causing actual or potential financial loss to any person or entity including theft of money or other property by employees or persons and where deception is used at the time, immediately before or immediately following the activity. (http://about.curtin.edu.au/definitions-impact.cfm) * Types of Fraud (http://www.auditsol.com.au/media/Fraudw.pdf) 1. Employee fraud Is internal or employee frauds are when fraud is committed against the company or organization a person is working for. Internal frauds can include: * payment fraud Payment fraud is any fraud that involves falsely creating or diverting payments. Payment fraud can include: * creating bogus customer records and bank accounts so that false payments can be generated * intercepting and altering payee details and amounts on cheques and Payable Orders, then attempting to cash them * creating false payment and financial information to support fraudulent claims for benefits * processing false claims by accomplices for benefits, grants or repayments self authorizing payments to oneself. * procurement fraud Procurement fraud is any fraud relating to a company purchasing goods,...
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...Nicholas Barton 00343164 Accounting 2600 Case Study: The Enron Collapse “Why was it that Enron, a financial services company, in effect, could not release a balance sheet with their earnings statement?” -Jim Chanos, President Kynikos Associates. In the film “Enron: The Smartest Guys in The Room,” analyst Jim Chanos asks why, the 7th largest company in the world at the time, could not supply investors with basic financial statements. These statements as we learn in accounting are the fundamental tools through which we communicate a corporation’s financial position. So why was it that a corporation valued as much as $70 Billion at one time would have ever achieved such success without performing basic accounting functions? The CEO, Jeff Skilling’s caustic reply to the question foreshadowed the collapse of a company that had been built on lies and deceit. While the Enron scandal is one of the best known in the history of international business, the reasons for the collapse were built into the company from its very roots. I will begin with an overview of the company and the ensuing scandal, as well as touching on many of the events that led up to the collapse of the company. I will also touch on events that contributed to the company’s inflated stock prices and their unethical and often desperate business practices that undermined the foundation of their business. The aforementioned film, Enron: The Smartest Guys in The Room was an excellent resource as it was primarily historical...
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...The Enron scandal • Enron, the 7th largest U.S. Company in 2001, filed for bankruptcy in December 2001. • Enron investors and retirees were left with worthless stock. • Enron was charged with securities fraud (fraudulent manipulation of publicly reported financial results, lying to SEC…) • Enron was a Houston-based natural gas pipeline company formed by merger in 1985. • By early 2001, Enron had morphed into the 7th largest U.S. Company, and the largest U.S. buyer/seller of natural gas and electricity. • Enron was heavily involved in energy brokering, electronic energy trading, global commodity and options trading, etc. • On October 16, 2001, in the first major public sign of trouble, Enron announces a huge third-quarter loss of $618 million. • On October 22, 2001, the Securities and Exchange Commission (SEC) begins an inquiry into Enron’s accounting practices. • On December 2, 2001, Enron files for bankruptcy. The Background Enron was founded as a pipeline company in Houston in 1985. Enron was a company that was able to profit by providing the delivery of gas to utility companies and businesses at the fair value market price. As the deregulation of electrical power markets arose, Enron with the help of former chairman Kenneth Lay decided to diversify their business portfolio and enter into becoming an energy broker who traded electricity and other commodities. Enron took what would prove be a fatal turn that would ultimately meet their demise...
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...Steve Jobs, although no paragon of business ethics, has preached from the scripture of Matthew 16:26, “What good will it be for someone to gain the whole world, yet forfeit their soul?” (Rink, 2012) This sagacious verse simply translates to question how can someone profit or be advantageous when acquiring the world if you damage or lose your character along the way. What is worth more than your soul? This wise question can help one in determining their own code of ethics by balancing what is right, meaningful, and most important to them. Knowing and understanding your ethical views is vital while on the journey of achieving their goals. Ethics is “the moral principles that govern a persons or group’s behavior.” Similarly, business ethics, or corporate ethics is “the critical, structured examination of how people and institutions should behave in the world of commerce” (MacDonald, 2012). We all have our own code of ethics, which is what drives each and every action that we take, whether in day-to-day activities, or in larger, business- related decisions. Ethics, to me, means how you treat others, and should be guided by the golden rule: treat others the way you want to be treated. It is about distinguishing the difference between right and wrong, and then choosing the right choice. A good place to start is with the law and then to involve your own morals and values. However, business ethics is more complex. Business ethics deals with how you treat your employees, other companies...
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...Enron - Were they the Crookedest Guys in the Room? The Rise of the Big "E" In May 1985, InterNorth Incorporated and Houston Natural Gas announced that they would merge. Their combined value was an estimated $2.3 billion. These firms were two of the largest gas pipeline companies in the United States. As part of the negotiations, the chairman and CEO of InterNorth, Sam Segnar, would be the head of the new entity until January 1, 1987, when the chairman and CEO of Houston Natural Gas, Kenneth Lay, would take over. The new company was initially called HNG/lnterNorth and later was renamed Enron.' Lay's first choice for the new name of the company was “Enteron,” but that was scrapped just days before it was announced to the public when Lay learned that enteron was the name for the digestive tract. In 1990, Lay created a division of Enron called Enron Finance Corporation and hired Jeffrey Skilling to run the company. Skilling had been an accounting consultant to Enron through the firm of McKinsey & Company. Lay was so impressed with the accounting systems that Skilling developed for Enron that he custom-tailored the lead position at Enron Finance Corporation for him. By 1995, Enron had become the largest independent natural gas company in the United States. In 1996, Andrew Fastow, Enron's chief financial officer and one of the key players in Enron's downfall, was almost fired from Enron when he did an unsatisfactory job of managing a retail unit of Enron that competed...
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