Management and Ethics

Essay by chrisrae0310 July 2004

download word file, 6 pages 3.7

The Enron Corporation (Enron) was once one of the world's leading energy companies. In December 2001, Enron filed the largest corporate bankruptcy claim in United States history. The collapse led to investigations of both Enron and Arthur Andersen, an accounting firm employed by Enron. Investigators focused on charges that Enron deliberately concealed its financial problems, misled investors, and failed to pay income taxes.

Enron has taken a downward slide since January making their stock worthless today. With corrupt executives and the help of their auditing firm, they have been able to provide investors with false financial information, which gave them a false picture of the company's true state of affairs. The collapse of Enron has made thousands of employees lose their life savings in 401k plans, and company stock holdings. Investors were defrauded out of billions of dollars and everyone is asking the questions, "How did this happen, and can we prevent this from happening again?"

Enron began business in 1986 as a result of the merger of two natural gas companies intent on creating the first nationwide natural gas pipeline.

Enron wanted to take advantage of the newly deregulated markets for energy and become a market middleman for energy. They wanted to accomplish this by bringing together buyers and sellers of energy, in addition to delivering natural gas. But instead of simply bringing buyers and sellers together, Enron entered the contract with the seller and signed a contract with the buyer, making money on the difference between the selling price and the buying price. Enron kept its books closed, making it the only party that knew both prices. Over time, Enron began to design increasingly varied and complex contracts. Customers could insure themselves against all sorts of eventualities-such as a rise or fall in interest rates, a change...