Enron Project

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Category: Business and Industry

Date Submitted: 09/21/2011 09:24 AM

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KaTrina Lewis

November 11, 2007

BMGT 496-6988

According to Wikipedia, corporate accounting scandals date back to 1980. The many scandals that have taken place over the years have involved complex methods of misuse or misdirecting of funds, overstatement of revenues and the values of various company assets, understatement of expenses and/or underreporting liabilities.[1] In 2001 Enron, once known as a Fortune 500 Company (Ferrell Fraedrich Ferrell p. 318), filed for bankruptcy and protection from its creditors for most of the reason listed. How can a company with so much go under so fast? Did they do this to themselves? Did external parties play a role in their collapse?

Enron was a company, many described as, arrogant and prideful (p. 321). This was due to executives, such as CFO Andrew Fastow’s extreme confidence. Chairman and CEO Kenneth Lay stated that he “wanted it [Enron] to be a highly moral and ethical culture…” (p. 321). This baffles me because I can’t figure out where or when, throughout Enron’s existence was there any type of moral and/or ethical checks and balances. How could there be? Enron employed a CFO with all interest in inflating the company’s profits so that his too may be inflamed and heavy. According to a special report, written in Business Week February 4, 2002, Fastow’s cockiness was considered a factor in Enron’s collapse.[2] In addition to cockiness, arrogance and pride, money too was a driving factor in Enron’s collapse. Employees were hung up on improving their financial position. (p.321) Fastow was a prime example of greed. This was displayed through his personal life as well as his corporate life. According to Business Week, “insiders saw him as sometimes volatile and vindictive, determined to get to the top by pleasing Skilling. That meant putting together creative financial structures that ensured Enron could expand its business without adding too much new debt to the balance sheet or threatening its crucial credit rating.” It...