ENRON SCANDAL
INDEX

ENRON CORPORATION

WHAT WAS THE SCHEME?

PARTIES INVOLVED

CONSEQUENCES OF ENRON SCANDAL
ENRON CORPORATION

Enron Corporation was an American energy, commodities,
and services company based in Houston, Texas.

Enron employed approximately 20,000 staff and was one
of the world's major electricity, natural gas,
communications, and pulp and paper company.

It claimed revenues of nearly $111 billion during 2000.
Fortune named Enron "America's Most Innovative
Company" for six consecutive years.
WHAT WAS THE SCHEME?

The mark-to-market practice led to schemes that were designed to hide
the losses and make the company appear to be more profitable than it
really was.

Andrew Fastow, a rising star who was promoted to CFO in 1998 and
Jeffrey Skilling the former CEO and architect of Enron’s business model
came up with a devious plan to make the company appear to be in great
shape, despite the fact that many of its subsidiaries were losing money.

That scheme was achieved through the use of special purpose entities
(SPE)

An SPE could be used to hide any assets that were losing money or
business ventures that had gone under; this would keep the failed
assets off of the company's books.

In return, the company would issue to the investors of the SPE, shares
of Enron's common stock, to compensate them for the losses.
PARTIES INVOLVED

Jeffrey Skilling- Jeffrey Skilling, the former CEO and
architect of Enron’s business model, is in prison in
Englewood, Colo., five years into a 24-year sentence for
conspiracy, fraud, and insider trading. He continues to
maintain his innocence and in November 2011, filed a
second petition with the U.S. Supreme Court for a new
trial.

Andy Fastow - Andy Fastow, the former chief financial
officer and one-time Skilling protégé, pleaded guilty to
two conspiracy counts and agreed to a 10-year sentence in
exchange for his testimony. He ultimately served only five
years, completing the final months at home while working
as a clerk at a Houston law firm. The sentence ends Dec.
17, 2011.

Sherron Watkins -Sherron Watkins, the Enron vice president who
famously warned the company would “implode in a wave of
accounting scandals,” gained fame as a whistleblower, but she says
the label made her “radioactive” in the business world. Watkins
makes her living on the lecture circuit, where she says business
groups and students are still eager to hear about Enron.
ECONOMIC EFFECTS


Enron stands for the greatest company scandal in the
history of the US economy and has become a symbol of
corruption for the whole Western economic system.
4500 employees lost their jobs.
• Investors lost some 60 billion dollars within a few days; for
many it meant losing their old-age security.
• Losses on the financial market amounted to the worst
stock value loss in peaceful times.
• Banks were suspected of collusion.
• The auditing firm Arthur Anderson lost its accreditation.
• The rules for company financial reporting were drastically
sharpened: Sarbanes-Oxley Act (2002)
Bibliography

WALL STREET JOURNAL

THE ECONOMIST

www.global-ethic.us

THE NEW YORK TIMES