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Enron: Questionable Accounting Leads To Collapse

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Synopsis Case 12
Enron: Questionable Accounting Leads to Collapse Enron was formed in 1985 as a result of a merger between two major gas pipeline companies. Enron became a leader in the industry with its products and services related to natural gas, electricity, and communications. Then in the 1990s it became a $150 billion energy company thanks to CEO Jeffery Skilling, CFO Andrew Fastow, and Ken Lay. In the end though, a lack of accountability, greed, and illegal activity brought the giant company to its knees. The corporate culture of Enron was described by some as “arrogant”. The company claimed to be the “World’s Leading Company” and many executives thought that no other company could beat out Enron. Many employees held great pride in …show more content…

She was concerned but was afraid to confront anyone. Then Fastow quit and Ken Lay stepped in as CEO. Watkins brought the information she found to his attention and Lay decided to have Enron’ law firm look over the financial records. Lay then sold of some of his personal stock options while still leading everyone to believe that the company was doing phenomenal. CFO Fastow, CEO Skilling, and Chair Lay were indicted and convicted by the U.S. Justice Department. Enron’s law firm Vinson & Elkins also paid a hefty price but did not admit to any liability in Enron’s scandals. Merrill Lynch also face the same consequences and also insisted that it did nothing improper in its dealings with Enron. Arthur Andersen LLP was supposed to be the auditor for Enron’s financial statements and internal bookkeeping. As a result of not asking Enron to explain the information in its books, Andersen was found guilty of obstruction of justice for destroying auditing documents related to Enron and has been barred from performing …show more content…

Enron sold off branches of its business and used the money to pay off creditors. Enron emerged from Chapter 11 bankruptcy in 2004 but still faced a dim future. A corporation was formed (The Enron Creditors Recovery Corporation) to help the jilted creditors. A total of approximately $21.5 billion has been recovered through ECRC. Enron has had to pay back its shareholders and has had to pay fines in California. As a result of the Enron scandal, officials passed the Sarbanes-Oxley Act to prevent any other companies from committing business

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