Enron Case Study

When many of us hear the word Enron we inevitably associate it with the worlds biggest Wall Street outrage. It took Enron less than a month to go from having sixty-five billion dollars in assets to complete bankruptcy and disgrace. Enron, which once ranked as the seventh largest company on the Fortune 500, caused huge amount of loss to stockholder, employees and the overall corporate world with its unethical practices.

Enron started off with humble beginnings as an interstate pipeline company. Its real “success” began with the merger of Houston Natural Gas and InterNorth in 1985. By the end of the twenty-century Enron was one of the most admired corporations of the time. This “admiration” was a result of Enron reaching outstanding bottom line figures by overstating revenue and hiding its losses. Enron also failed to disclose potential risks to stockholder; instead it wrongfully encouraged investors to purchase stock and employees to invest in Enron as well. As a result thousand of people were left with no job, their pensions were wiped clean and in most cases costing them their life savings, as Enron’s shares diminished to penny stock. Investors had losses of billions of dollars from one day to the next. Enron had fraudulently hiked up its success through the use of media exposure and overstated books to deceive investors and the overall public. Enron executives maliciously constructed one of the biggest frauds in corporate history.

One of the main executives involves was Jeffery Skilling. Kenneth Lay, Enron’s CEO at the time hired Skilling in 1990. Skilling’s managed to turn Enron from a traditional natural gas firm into a trading company that everyone looked up to. Skilling’s worked his way up the corporate ladder replacing Lay as CEO in 2001. With all the risks Enron was taking came a lot of loss and debt that they were unable to keep up with. Skilling’s found ways to keep Wall Street's expectations up and did a seemingly great job at covering up the losses with fraudulent behavior. http://www.theguardian.com/books/2002/nov/04/enron.business He made sure that stock prices stayed high to mislead the market and stockholder that the company was booming. In August 2001, Skilling unexpectedly resigned and attempted to sell millions in Enron shares. Only three months after Skilling’s resignation Enron reported loss of 618 million. After this surprising revelation the Securities and Exchange Commission began examining the company. The SEC discovered overstated revenues, and off- the book entities. Shorty after this, in December 2, 2001, Enron filed for bankruptcy.

Skilling’s among other top Enron executives were indicted. Skilling was charged with scheming to deceive investors about Enron’s true financial performance by controlling financial reports and making deceitful statements. Skilling was accused of over 25 applicable counts of securities fraud, wire fraud, making dishonest depiction

...