...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. Gibney's film reveals how Lay, Skilling, and other execs managed to keep their riches...
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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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...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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...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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...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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...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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...While Earley and Kelley (2004) emphasized Enron during their post-Enron semester, the film Enron: The Smartest Guys in the Room was not used. We felt that the use of the film would engage students in learning about business ethics and increase the saliency and vividness of ethical issues; thus increasing ethical awareness. Our reasoning follows Gautschi, III and Jones (1998) findings that the use of case study and discussion can increase the vividness of moral issues, thereby enhancing the ability of students to recognize ethical issues. Using a highly interesting and engaging film will increase the vividness of moral issues; thus, heightening student awareness of ethical issues in the workplace. Vividness of information is its capacity “to attract and hold attention and to excite imagination” (Nisbett & Ross, 1980, p. 45). Information is vivid “to the extent that it is (a) emotionally interesting, (b) concrete and imagery-provoking, and (c) proximate in a sensory, temporal, or spatial way” (Nisbett & Ross, 1980, p. 45). The researchers also maintain that vivid information has more judgmental impact than pallid information. There is some evidence that visual images can enhance retention of learned information (Blanchard & Thacker, 2005; Honeycutt et al, 1993), because visual images are more readily coded symbolically and recalled. The Enron film, with its creative use of popular music, cartoons like the Simpsons, news clips, and candid interviews, is emotionally...
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...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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...ACCT 4450 June 2009 Enron Corporation: Impact on Profession of Chartered Accountancy/Auditing References: • Case “Enron Corporation and Andersen, LLP – Analyzing the Fall of Two Giants” Beasley et al, Auditing Cases – An Interactive Approach,4th Edition • Article “After Enron” John Lorinc, CA Magazine, December 2002 • Film excerpt shown in class “Enron: The Smartest Guys in the Room” Peter Elkind & Bethany McLean; Alliance Atlantis Exercise: Your group will prepare a presentation to the class (max 5 mins) on the results of the discussion of your assigned question. All questions are examinable on the final exam: 1) Who was impacted by the fall of Enron? Who were the users of Enron’s financial statements? There was implied or explicit reliance placed on various parties by the shareholders. Who were some of the parties mentioned, and what complaints were raised about these parties (whether legal or ethical)? 2) What was the “tone at the top” at Enron? How did this contribute to their demise? Does a company’s corporate culture impact an auditor’s assessment of audit risk? Explain. 3) Assess audit risk at Enron. Explain the factors that contributed to your risk assessment. (Also reference the Arthur Anderson e-mail notes from the retention meeting.) 4) Kenneth Lay, Chairman of the Board and prior CEO, testified at hearings that “I can’t be responsible for things I didn’t know about.” Jeffery Skilling, former CEO also testified...
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...energy and commodities firm Enron collapsed under the weight of a massive fraud, much has changed about how corporate America does business and much, unfortunately, has remained the same, with new frauds and excessive risk-taking exposed all too frequently. "We did learn some lessons and people were more careful, but greed creeps back in again," said Lawrence Weiss, professor of international accounting at Tufts University's Fletcher School of Law and Diplomacy. Before the bankruptcy of WorldCom in 2002, Enron's bankruptcy was the largest in U.S. history. Names like AIG and WorldCom may have replaced Enron in the vernacular when referring to corporate meltdowns and greed. Enron executives Kenneth Lay, Jeff Skilling and Andrew Fastow -- all convicted of white collar crimes -- emblemized the bad side of the one percent before the term existed. Once the darling of Wall Street, Enron was the country's seventh-largest company with a soaring stock price that grew more than 100 percent in 2000. The company collapsed in a matter of months as the media and the public became aware of its faulty accounting and business practices. Conflicts of interest continue to occur Sen. Carl Levin, D-Mich., chairman of the permanent subcommittee on investigations which reported on the role of Enron's board and investment banks' response to lessons learned from Enron, said the Enron scandal did not put an end to corporate malfeasance.. "One lesson we haven't learned from Enron is that corporations will...
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...Enron: The Smartest Guys in the Room This documentary explores the fall of the Enron Corporation. This is one of the most shocking modern corporate corruptions. The company is linked with several illegal schemes including instigating the California energy crisis as a way to drive up utility prices at the expense of the average American citizen. This was one of the largest business scandals in the history of America. The film examines Enron and how the criminal trials are for several of the company’s top executives. It explains the involvement of the Enron traders in the California electricity crisis. This organization started out as an ethically company but over time greet and performance was the most important no matter what happened. Enron’s company motto is “Ask Why” which is interesting because in the end all the employees are out of their 401 (k) as they file bankruptcy. Jeffrey Skilling was the captain of the ship. All this avaricious man desired was performance and to see how high the stock can go. When the stock market crashed there were a few questions why Enron’s stock kept climbing. Only after one dove into it did they start to undercover what was really going on with these invisible numbers that have no capital to back it up. At what point could this unethical situation be fixed is a good question. This scheme was like a tumble weed that kept getting bigger and bigger. In the year 200 Enron ran out of ways to show they were actually making money. The traders exported...
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...The fall of Enron: Corporate Culture, Governance and Ethics Written By: Bilge-Kagan Ozturk 2007 Abstract This paper examines the critical importance of an ethically based corporate/organisational culture to ensuring company-wide ethical conduct. Testament to this topic I use the case of Enron and its ethical demise to successfully support my argument and highlight the need of top level management to be the main proponents of this culture to allow lower level employees to adopt a behaviour of moral reasoning. The body of the essay will highlight the importance of shaping an ethically based organisational culture, through a number of components, namely a company’s executive management team and its corporate governance system. I also briefly evaluate agency and stakeholder theories and how they relate to an organisational culture from an ethical perspective, and point out Enron’s culture was predominantly one of agency reasoning. Finally I provide a brief and direct conclusion to assert my argument that ethics needs to exist deep within an organisation’s culture and needs to be the key leading value of an organisation. A breakdown of ethics can eventually lead to the demise of a once very reputable and successful company. A great textbook example is of course, the fall of Enron – one of the biggest corporate bankruptcies in US history. Like most companies, Enron had a code of ethics in place and employees who were educated in the field of ethics, agency...
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...Kayley Stasiewski 12/6/2015 Auditing Principles Enron: The Smartest Guys in the Room From being the nation’s seventh largest corporation once valued at 65 billion dollars, Enron filed for bankruptcy in less than a year of cooking their books. It was very unconventional for a wealthy company to go from almost 70 billion dollars to zero dollars in so little of time. This scheming corporation is what was called “a house of cards”. In other words, their profits were a result of gambling with the shareholders’ money. Quoted from the film, "Oil trading is like gambling, sometimes you win, sometimes you lose. But Enron oil always seemed to win”. This scandal was noted in the film as “arguably the most shocking example of corporate corruption”. Enron’s cost strategy was considered “mark to market accounting”. They decided what they wanted to list their profits at. Avoiding to reveal their thirty billion dollars worth of debt to the shareholders and public, Enron kept the stock price high to continue the in flow of cash. To cover up the debt, Enron falsely created companies to show a movement of money. In reality, there was no true movement of money, it was all a scandal. The only movement of money ever was into their personal bank accounts. We can put most of the blame on the Chair and CEO Kenneth Lay and the COO Jeff Skilling. These men and their workers successfully deregulated California’s electricity market once they merged with Portland General Electric. The people...
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...Enron Summary In the documentary Enron: The Smartest Guys in the Room, we get an in-depth look into how greed and the lust for power led to the rise and ultimate downfall of Enron. Starting in 1985 as a merger of two oil companies, Enron experienced astronomical growth behind the leadership of its CEO, Ken Lay, and executives Jeff Skilling and Andy Fastow. However, this growth did not come from hard work alone, as the film details some of the underhanded tactics used by Enron to become one of the largest companies in America. Lay, Skilling, and Fastow created an environment where all that mattered was the bottom line, meaning that anything was in the realm of possibility (no matter how despicable) as long as it brought hefty returns for the company. There were many lessons to be learned from Enron. First off, we learn a great deal about the psyche, and how certain primal urges can cause us humans to do things that would at first glance seem appalling. Also, the importance of company culture and corporate ethics is revealed throughout this film. There was a great deal of negative energy permeating throughout Enron that made it nearly impossible for them to sustain their upward trajectory. By no means should Enron’s leadership be let off the hook for what they did, but it is important to understand what motivated them to act in such a way. Early in the film, we get a little background information on the company’s leaders. Lay grew up in poverty and learned the value of hard...
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...The scandal behind ENRON is a subject I had heard and read briefly about but never really knew all of the details. When I watched the film, Smartest Guy In The Room, I really got the opportunity to understand what caused the fall of ENRON and the negative impacts ENRON caused. The film begins by questioning the reasons for ENRON’s fall to bankruptcy in 24 days by addressing the characteristics of Pride, Greed , Arrogance, and Intolerance which were all strong characteristics of the corporate culture at ENRON. Ultimately, the executives and employees at ENRON were blinded by money which eventually sunk their own lifeboat. The movie is definitely a story about people rather than merely addressing ENRON from a financial perspective, and tells the story of the different people behind the rise and fall of ENRON. I was amazed that ENRON was the 7th largest corporation in America with over 70 billion dollars charting the future of energy and power. I also didn’t know all the political connections ENRON had invested with the Bush family and how they were the largest contributor to G.W.Bush’s First Presidential Campaign. This was definitely an alarming point to find out and learn just how politics and corporate America really are tied together. The film talks about Kenny Lay, the founder of ENRON, who grew up poor and wanted to make wealth for himself. Lay really wanted to liberate businessmen from regulation of government and deregulate energy markets. He had a strong desire for...
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