...Enron: The Smartest Guys in the Room, is a documentary based on the rise and fall of one of the world’s major electricity, natural gas, communications and paper companies. By 2001 Enron filed for bankruptcy, leaving citizens and shareholders all over the nation in a financial mess. With a single share costing over ninety dollars in August 2011, it was a shock when shares fell bellow a dollar by January of 2002. However, the failure of Enron was not a surprise to everyone and although millions of people lost their lifetime savings as well as over twenty-thousand employees losing their jobs, directors of the company had put aside millions of dollars for themselves, disregarding the negative impacts they were leaving on society. Numerous incidents that occurred throughout the company’s existence could have been prevented and today citizens across the nation could be living completely different lives....
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...being named one of the most innovative companies of its time, one would assume Enron would promote equality among the sexes and diversity. Every top Enron executive (excluding Rebecca Mark and Amanda Martin) was a white male with a top-notch education. Ken Lay, Jeff Skilling, Andy Fastow, and Cliff Baxter all came from Ivey League schools or prestigious business institutions. These men were the backbone of Enron’s culture and operations. Skilling had a reputation of hiring blunt, hardball executives who weren’t afraid to get their hands dirty. They had a reputation of going on adventurous company trips that encouraged risky behavior. This mirrored the approach these men took towards there work. Whether it was striking up a deal or coming up with the best new idea, everything was about taking risks and neglecting consequences. Enron believed making money came from taking big risks. And boy were they able to spend it faster than it came in. Executives had free access to company jets, catered lunches were served many times throughout the year, and huge sums of stock were handed out regularly (many of them cashing in on the stock before the company’s collapse). They spared no expense when it came to proving Enron was a company to be reckoned with; one ex-executive was once quoted saying: “Don’t do business with Enron. They’ll steal your wallet when you aren’t looking.” The faces of Enron were Ken Lay and Jeff Skilling. What I learned about these men is fascinating....
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...CASO ENRON THE SMARTEST GUYS IN THE ROOM ¿Cuál es la principal problemática del caso? La principal problemática del caso Enron parte en base al orgullo, la arrogancia, la intolerancia y la codicia de los los gerentes y altos directivos de la empresa; ellos se preocupaban más por sus ganancias personales que por el verdadero crecimiento de la empresa y de los trabajadores. Los problemas económicos de la compañía eran prácticamente invisibles para el público general ya que por muchos años Enron manipuló sus estados financieros con tal de presentar números favorables para todo aquel que invirtiera en la empresa. Las consecuencias fueron graves, ya que los empleados de Enron así como algunos empresarios de alto calibre decidieron invertir todo su capital, pensando que en un par de días se triplicaría su dinero, sin imaginar nunca lo que vendría después . Es importante mencionar que la ética que manejaban entre colaboradores era totalmente corrupta y un tanto agresiva. Por ejemplo, mediante el sistema de calificaciones entre empleados, más del 15% del staff era despedido y aquellos que obtenían buenos resultados, eran recompensados con bonos equivalentes a millones de dólares. Esto a su vez provocó una competencia feroz y poco amigable entre los corredores. Se puede deducir con facilidad que el principal problema de Enron radicó en sus ganancias inexplicables y más adelante en sus pérdidas fugaces. La ambición, el orgullo, la avaricia y el egoísmo infectó de raíz al sistema de...
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...Enron – “The Smartest Guys in the Room” Who were the smartest guys in the room? Kenneth Lay, the founder of ENRON. Louis Borget, the CEO who diverted company money to offshore accounts. Jeffrey Skilling, the CEO who implemented the mark-to market accounting. J. Clifford Baxter and Lou Pai, the executives who Skilling hired. Andrew Fastow, the CFO who created companies solely to do business with Enron. The auditors, who turned the head when the money came rolling in. Are these the smartest guy in the room? In the beginning ENRON was a natural gas supplier in Houston Texas moved gas through pipelines to locales throughout the United States. In 1984 Kenneth Lay joined the company. In the late 1980s and early 1990s it started trading. It became one of the largest energy companies in the world. But it was scandalous from the beginning. Within a few years after the company was found the first scandals began. This scandal involved two traders betting on the oil markets which resulted in consistent profits. It was also discovered that the CEO, Louis Borget, had been diverting company money to offshore accounts. Lay encouraged them to continue making money for the company after the auditors discovered their schemes. Only when it was discovered that the traders gambled away ENRON’s reserves did the traders get fired. Lay denied knowing anything about the issues. After Borget leaves the company Lay hires Jeffrey Skilling who implements mark-to market accounting...
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...ENRON Corporate Culture Q1: Analyse the corporate culture at Enron and its management’s behaviour. Include in your analysis, the normative theory of ethics which you would consider most relevant in driving the decision making at Enron. Enron began by merger of two Houston pipeline companies in 1985, although as a new company Enron faced a lot of financial difficulties in the starting years, though the company was able to survive these financial problems (Enron Ethics, 2010). In 1988 the deregulation of the electrical power markets came into action and flipped the company from up to down, after deregulation company business updated from delivering energy to becoming an energy broker and soon after this Enron once a company struggling to survive transformed to booming one. Deregulation opened the gates for Enron to step into the market and compete with the leading competitors in the market bringing buyers and sellers in to market together (Enron Ethics, 2010). . Enron earned a lot of money from the stock exchange by trading their own shares and earning profit from the difference in buying and selling prices. Deregulation gave permission to Enron to be creative, for the first time in history a firm that was required to operate within in the guidelines could be creative and test the limits the way they want. As time went by Enron’s products and services evolved, so did the culture of the company. In this newly deregulated and creative platform, Enron embraced...
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...Enron’s Impact The movie Enron: The Smartest Guys in the Room is an informative documentary exposing an unprecedented level of corruption in the business industry. This movie is based on a book written by Bethany McLean and Peter Elkind, who are also the primary interviewees in the film. This movie captures the tragedy in an incredibly detailed and emotion-jerking way, from the beginning of Enron to the end. Enron is well known to anyone familiar with economics, accounting, or business. For many, the name Enron evokes harsh feelings and leaves a sour taste in the mouth. For those who are not familiar with Enron, a few key terms might be helpful in understanding the type of business Enron was: Deceptive, Dishonest, Insolent, Corrupt, Blatant Disregard for Humanity, and Business Failure. Enron strategically and criminally manipulated market-to-market accounting, where projected earnings were allowed in the profits reported; however, market-to-market accounting was not necessarily the problem. The problem lay in the carefully crafted deceptive projections by top executives, which initially no one cared to question. This allowed Enron’s stock price to maintain elevated, even though the money was never there. Enron Oregon Corp. and Enron Corp., a Delaware corporation merged on July 11, 1997, surviving entity, Enron Corp. Recorded puppeteers at the time: Kenneth L. Lay, Chairman of the Board/Chief Executive Officer and Director/Principal Executive Officer; Richard A....
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...FORENSIC ACCOUNTING ENRON: The Smartest Guys in the Room Movie Summary Gerald Prayogo ------------------------------------------------- 342858 Enron: The Smartest Guys in the room is a documentary movie based on the book of the same name. Essentially, it tells us about one of the biggest fraud ever performed in the US. It tells us of the downfall of Enron: its scandals, the prosecution of its perpetrators, as well as its role in California electricity crisis. The film describes the biggest names on the fraudulent corporation. First is Kenneth Lay, the founder of Enron. Kenneth, nicknamed ‘Kenny Boy’ by his spouse, got the company into scandal in just two years after its establishment, after Enron’s managers bet on oil markets. The second is Jeffrey Skilling, the man who utilized mark-to-market accounting, which allow Enron to appear as being a profitable company, even if the reality might not be so. He also applied the Darwinian philosophy on Enron by establishing a ‘rank and yank’ system, a system of which a group of review commitees grades employees and fires the bottom fifteen percent. Skilling was also described as having a soft spot for “guys with spikes”; which made him recruit J. Clifford Baxter, a manic-depressive; and Lou Pai, the CEO of Enron Energy Services which was known for using shareholder money to pay strippers. Enron managed to get a myriad of profits during the dot-com bubble by using the process known as “pump and dump”: pushing up their stock prices and...
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...Written Report on Documentary: Enron: The Smartest Guys in the Room For this assignment view the video, ENRON: The Smartest Guys in the Room [1 hr. & 50 min]. Write a critique of the film in 4-5 page double-spaced paper; number the pages. Answer each of the following questions in your essay. The written assessment of Enron is due according to Syllabus. Submit a paper copy in class and also post it on BB website SafeAssign. It is worth 50 points. 1. The date and time I viewed the Enron video is: _________________________ 2. Describe the dominant culture of ENRON and the subculture of Enron’s trading group. 3. What did Jeff Skilling say is the only thing that motivates people? Do you agree or disagree? 4. What did ENRON executives mean by “pump and dump”? Do you think this is ethical behavior? Why? 5. What was Arthur Andersen’s role with regards to Enron? Was this a conflict of interest? What could have been done to prevent this? 6. How did Skilling treat Fortune author Bethany McLean when she started asking questions about Enron’s financials? Do you think this was a tactic, and if so, what did he hope to achieve by it? 7. Describe which ethical norms were violated at ENRON. How and why? 8. Do you believe that Enron’ failure is a result of the behavior of “a few bad men”, or a demonstration of the downside of the market system and self-interest? Explain 9. What are the three most important “takeaways” messages you learned...
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...Plot Alex Gibney, who wrote and produced Eugene Jarecki's The Trials of Henry Kissinger, examines the rise and fall of an infamous corporate juggernaut in Enron: The Smartest Guys in the Room, which he wrote and directed. The film, based on the book by Fortune Magazine reporters Bethany McLean and Peter Elkind, opens with a reenactment of the suicide of Enron executive Cliff Baxter, then travels back in time, describing Enron chairman Kenneth Lay's humble beginnings as the son of a preacher, his ascent in the corporate world as an "apostle of deregulation," his fortuitous friendship with the Bush family, and the development of his business strategies in natural gas futures. The film points out that the culture of financial malfeasance at Enron was evident as far back as 1987, when Lay apparently encouraged the outrageous risk taking and profit skimming of two oil traders in Enron's Valhalla office because they were bringing a lot of money into the company. But it wasn't until eventual CEO Jeff Skilling arrived at Enron that the company's "aggressive accounting" philosophy truly took hold. The Smartest Guys in the Room explores the lengths to which the company went in order to appear incredibly profitable. Their win-at-all-costs strategy included suborning financial analysts with huge contracts for their firms, hiding debts by essentially having the company loan money to itself, and using California's deregulation of the electricity market to manipulate the state's energy supply...
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...you're going to read only one book on Watergate, that's still the one. Today, Enron is the biggest business story of our time, and Fortune senior writers Bethany McLean and Peter Elkind are the new Woodward and Bernstein. Remarkably, it was just two years ago that Enron was thought to epitomize a great New Economy company, with its skyrocketing profits and share price. But that was before Fortune published an article by McLean that asked a seemingly innocent question: How exactly does Enron make money? From that point on, Enron's house of cards began to crumble. Now, McLean and Elkind have investigated much deeper, to offer the definitive book about the Enron scandal and the fascinating people behind it. Meticulously researched and character driven, Smartest Guys in the Room takes the reader deep into Enron's past—and behind the closed doors of private meetings. Drawing on a wide range of unique sources, the book follows Enron's rise from obscurity to the top of the business world to its disastrous demise. It reveals as never before major characters such as Ken Lay, Jeff Skilling, and Andy Fastow, as well as lesser known players like Cliff Baxter and Rebecca Mark. Smartest Guys in the Room is a story of greed, arrogance, and deceit—a microcosm of all that is wrong with American business today. Above all, it's a fascinating human drama that will prove to be the authoritative account of the Enron...
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...the consequences of their actions and what has been done to prevent such an occurrence in the future and how it has revolutionized the financial reporting standards. There is no greater example of fraud than that of the Enron scenario which occurred in October of 2001. Enron was once one of the energy giants in the world and was deemed ‘too big to fail’. Enron was once very successful and provided thousands of jobs, however, due to a few key executives who driven my their own greed, the company collapsed, causing many people to lose a lot of their money and for many of them their life savings. There came a point in time when Enron began struggling to generate profit and cash flow from the regular business transactions. The company launched many projects which became write-offs and Enron found themselves a massive debt pit. Due to the greed of a few key executives namely Jeff Skilling, Ken Lay, Andy Fastow and the Public Accounting Firm Arthur Anderson, the company covered up their losses and poor balance sheet position by falsifying the financial statements and declaring nonexistent revenues. They did this to protect their initial reputation personal wealth. Andy Fastow created a very smart, yet unsustainable plan. He covered up the fact that the Enron was in $30 billion...
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...The Smartest Guys in the Room The movie called the smartest guys in the room, narrates the process that how does Enron Corporation, one of the world’s major electricity, one of the world's major electricity, natural gas, and communications companies, with claimed revenues of nearly $111 billion during 2000, went bankrupt eventually. In this film, the interviewers narrated the process of bankruptcy. This is a famous scandal in accounting area and there are lots of illegal behaviors related. We can learn a lot from this scandal in order to behave legally and avoid losing money. Facts: Two years after the corporation founded by Kenneth Lay, there were two traders began betting on the oil markets and transferred the money they earned to the offshore accounts. Instead of fire them, Lay encouraged them to use this unethical way to make money for the corporation. Finally the two traders were fired since they gambled away Enron’s fortune. Then Lay hired Jeffrey Skilling as the new CEO. They began to use mark-to-market accounting, which allowed them to report the potential profits instead of the actual profits. In addition, the new CEO’s aggressive management idea which fires the bottom fifteen percent employees gave the employees incentives to make the profits better than the actual profits. Skilling hired more people to help him make money for Enron Corporation. Under the bull market, executives pushed up the stock prices and cashed in their multi-million dollar options...
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...Kimberly Gleason BA 3300 3 April 2016 EXTRA CREDIT: Enron: The Smartest Guys in the Room https://freedocumentaries.org/documentary/enron-the-smartest-guys-in-the-room#watch-film 1. Explain the concept and rationale behind mark to market accounting and its significance to Enron. (19:35) Jefferey Skilling was hired by Ken Lay. Skilling had agree to work with Enron if he was able to use the mark-to-market accounting which was approved by SEC. This accounting allowed them to book future potential profits on the day the deal was signed, no matter how little cash came in. 2. Describe the Enron culture. (23:28) Enron was a tough and aggressive culture. The traders considered this work ethic an economic religion. They turned Lay and Skilling’s beliefs and turned it into an ideology. They were very competitive as well. 3. What is Andy Fastow's significance to Enron? (48:36) Andy Fastow ran partnerships that were doing business with Enron. (50:50) He was Enron’s Chief Financial Officer. His job was to cover up the fact that Enron was becoming a fantasy financial land. He was the master of structure finance. 4. What is Sherron Watkins significance to Enron? (1:28:15) She was the Vice President of Enron. She notified Ken Lay about the accounting irregularities. 5. Why did Wall Street wait until the collapse of Enron to investigate the company? Was there a diffusion of responsibility whereby the executives at Enron told themselves that their behavior was okay because...
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...Jessica Snyder 2-13-14 Enron: The Smartest Guys in the Room CEO Jeff Skilling took advantage of accounting loopholes and questionable practices to increase Enron’s profits. There were unethical decisions made and unethical accounting practices at almost every level of the organization. Even though they had the legal OK from the SEC to use mark-to-market accounting, doesn’t mean it was an advisable or ethical thing to do. Mark-to-market accounting let Enron post profit from future deals on their current books. For example, Enron posted a $53 million dollar deal with Blockbuster Video as soon as they announced it. Unfortunately, the deal never went through and the profits were never made. So while the deal was technically legal, it was far from ethical. The “If it’s legal, it must be ethical” consensus trickled down to lower-level employees and soon the whole company became corrupted and unethical. One energy trader was recorded calling a power plant and asking them to shut down power for a couple of hours. As a result, California had rolling blackouts and energy process skyrocketed. One top level employee was overseeing multiple subsidiaries and Enron ignored the conflict of interest. That top level employee shifted Enron’s debt to the subsidiaries to ensure profitability for the parent company. According to the documentary, the formula for a winning company in the 90s was to beat your projected quarterly earnings. Enron made sure to beat them, any way possible...
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...The Enron scandal Tobias Pavel 910422 Mylene Encontro 850224 Chalmers University of Technology Finacial Risk, MVE220 Examiner: Holger Rootzén 2012-12-02 Göteborg This report has been written and analyzed by both group members jointly. Abstract From the 1990's until the fall of 2001, Enron was famous throughout the business world and was known as an innovator, technology powerhouse, and a corporation with no fear. The sudden fall of Enron in the end of 2001 shattered not just the business world but also the lives of their employees and the people who believed that their soar to greatness was genuine. Their collapse was followed by a series of revelations on how they manipulated their success. Introduction Enron shocked the world from being “America’s most innovative company” to America's biggest corporate bankruptcy at its time. At its peak, Enron was America's seventh largest corporation. Enron gave the illusion that it was a steady company with good revenue but that was not the case, a large part of Enron’s profits were made of paper. This was made possible by masterfully designed accounting and morally questionable acts by traders and executives. Deep debt and surfacing information about hiding losses gave the company big problems and in the late 2001 Enron declared bankruptcy under Chapter 11 of the United States Bankruptcy Code. Many factors affected Enron's surge to the top and its sudden fall. In this report we will discuss and present what we think...
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