Eron

Enron Corporation Gordon Duke Instructor Gus Weekley Business Law 100 – 024016 Week 4 May 2, 2010 Enron was the largest energy corporation on the planet and fall down quicker than anyone would think. Two gas pipeline companies merging in Houston, Texas quickly coming to power and earning in the billions of dollars in revenue. Enron had misleading accounting practices, and the head executives were getting more than they should have got in bonuses, along with corrupt auditing, it was the perfect storm for disaster. Kenneth Lay who was the CEO of Enron and lead company into one of the largest bankruptcies in history. Being unethical when billions of dollars are on the line will always result into a misfortune for the people involved and the company as a whole. Not solving an issue when it arises was the down fall in the Enron scandal, high risk accounting issues leads to disaster and all of the chairman knew if it wasn’t cleaned up it could lead to what it was today. Being structured differently could have saved the company before it got out of hand. The chair people had some knowledge that that accounting books were missing millions if not billions of dollars and being covered up misleading earnings. During the merge of companies both record book had to be adjusted and the holes that never got filled in turned larger and larger making the extra money go to the expensive life style of the chair people, with bonuses in the millions of dollars. The balance sheet that goes public every year had understatements about the liabilities and over stated the equity. Having the records misleading made the stock market assume that the company is always having a good year more than it really was. Cleaning up the records and having different non-corrupt accountants view all the files and take actions on how the company was handling all the money would be the first step on avoiding such activities as it has seen. Enron was a dishonest company and a few bad people faults made for the worst mishap in history. Enron officers were out of line when it came to how the accounting issues were handled. Money that wasn’t accounted caused to make stock prices keep going up while the chair people sold lots of their own stock every year. Pumping the stock price up with false information to investors and shareholders was the plan so that the officers could continue to be rewarded larger bonuses and more shares. The officers wanted to mislead the world to think that they didn’t owe as much as they did making it that investors and other partner would continue wanting to do business. The officers of this sandal didn’t handle any of the accounting the correct way, and everyone involved were out of their authority resulting in prison time most of the chair people and even accountants. Employees were out of jobs and billions were lost in the stock market, no person has the authority to hide information that lead to what happen. Rules are place to prevent companies to not do such things and keep eyes on the moves of the larger companies. By making the accounting books so complex that not many people truly knows what is going on is taking advantage of the public views. Their authority was pushed to the limit and many punished for the scandal, prison time for most, and other had large fines to pay back. Greed was in the head office of Enron, many know but no one would be willing to try and clean up the false acts of a billion dollar company. Many took under the table money in this scandal and that started the white collared scandal forcing the culture of the company to keep is corrupt and avoid any good ethical chairmen to let the truth out. Enron hired and paid for its own auditor and I’m sure they were able to twist the truth on the books. The culture of Enron was to have employees afraid to voice their opinion on the company, and if everything was covered up the correct ways it can be a great payday for all the people involved. Large bonuses fueled the fire to the corruption, having over the top salaries and a great deal of stock shares handed out made it hard for Enron to start practicing the right ways. The rich culture of Enron made people feel untouchable, so doing unethical things were okay is the whole company is in on it. Alleged irregularities were the topic of discussion in the whole scandal of Enron. The reasons of why they did things were up in the air and didn’t make sense until it all came down at the end. A number of irregularities were found in the case against the auditors, and it came to not a huge surprise because they were hired by Enron. Before reporting the hundreds of million dollars lost auditors destroyed files and all the audit materials after it was complete. The pension savings of thousands of workers and the investments of other companies lost millions after the paperwork and files were destroyed. The supervisor of the audit team was the reason that caused the destruction of all the audit work. Know that they wanted to cover up any unethical practices on their part, most all files on Enron was removed. During that time there was no rule on how long a firm should hold on to the audit work, causing a block in the investigation is the intent of the missing files. A cover up of whatever was going on what the reason of the destruction of Enron documents. Since the auditor firm got paid over 50 million dollars just to perform consulting and the audit that along is enough to raise a second guess on what is really going on. At the end of the day Enron was responsible for every action that took place and it paid the ultimate price, former employees won law-suits on the wrong doing of the people in the head office. Enron acknowledged that they had overstated its income for more than four years. Securities fraud was the intent of Enron because they were making it look as they were doing better than they really were to drive up the stock prices. Enron front office was selling stock shortly before the company announced the big lost and letting other shareholders take the lost. When all of the wrong doing in this scandal the Sarbanes-Oxley Act was created to make sure nothing would happen like this again. The SEC changed the way larger companies handle their accounting information so that share holders and other investors would be able to understand what is going on. Works Cited Bagley, C. E. (2010). Managers and the legal environment: Strategies for the 21st century: Selected chapters: 2010 custom edition (6th ed.). . Mason, OH: South-Western Cengage Learning. Enron scandal . (2010, April 27). Retrieved May 2, 2010, from Wikipedia: http://en.wikipedia.org/w/index.php'title=Enron_scandal&oldid=358565433 Kadlec, D. (2002, January 13). Enron: Who's Accountable' Retrieved May 2, 2010 , from Time: http://www.time.com/time/business/article/0,8599,193520,00.html