Case Study: Mark-To Market Accounting In The Enron Corporation

1. Enron Corporation was an American energy company in Houston, Texas. In 2001, it was revealed that it reported financial condition was substantial by planned accounting fraud of Enron scandal. The scandal brought into the question of the accounting practices and activities of many corporation in the U.S affected the greater business world.

2. Mark-to-Market accounting is the condition of Skilling to build an industry new and start a business from scratch that had to meet before Skilling would join Enron. Mark-to-Market accounting is the major cog in the downfall ultimately of Enron. It allow Enron to book potential future profits on the very days a deal was signed. No matter how little cash actually came in the door to the outside world.

Lou Pai is Skilling Lieutenant helped build the trading business in early years, he went on to run Enron’s doomed effort called Enron Energy Services. Lou Pai tapped to run the EES business, because this was so important to the company and to Skilling’s future. Skilling’ called Lou Pai as: “my ICBM.” There are two things motivated Lou Pai, money and a peculiar fascinator with strippers. He even charges strippers with Enron’s account money. Lou Pai lost all interest running for EES as soon as the numbers got high enough. He left Enron with $250 million, because he had stock with Enron after a divorce from his wife in order to marry his stripper girlfriend who had his child. The division he left behind lost a total of nearly billions but Enron manage to disguise that fact. Lou Pai became the second largest landowner in

Enron CFO Andy Fastow had his eye on John Olson one of the only analysts skeptical of Enron story. Fastow reward the bank with two investment banking job worth fifty million dollars. His job is to cover up the fact that Enron was financial fantasy lack. Fastow figured a way to keep the stock price up by hiding the fact that Enron was thirty billion in debt and created hundreds of special companies to perform a magic trick that prop up Enron stock by making its debt disappear. In fact, Enron was just stashing it debt in Fastow’s companies where investor could not see it. LJM was Fastow’s most ambitious creation. It would work magic for Enron and it would allow Fastow to conjunct forty five million dollars for himself. Skilling and Lay and Enron board had signed of a Fastow’s LJM funds. They saw the benefits of letting Fastow to deals with himself. Fastow can be selling LJM to a group of Merrill Lynch Bambers. They pitches them on the benefits of investing a fun that only buys asset from Enron. Fastow know what kind of deal he was offering was Enron’s CFO. He could guarantee profits for LHM and he letting them gamble with Enron’s chips. More than ninety six individual bankers invested in LJM and America’s major banks put up as much as twenty five million each.

10. The virtual organization of this company is Traditional Model. They are mainly focuses on downward and used by managers, management to clarify orders, rules and tasks. They are formally structured roles to set expectations