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The Enron Scandal

The Enron Scandal

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Published by: abou_rs on Mar 12, 2010
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Enron scandal
was acorporate scandalinvolving the Americanenergy  companyEnron Corporationbased inHouston,Texasand theaccounting, auditing, andconsultancyfirmArthur Andersen, that was revealed in October  2001.
Enron'sstock priceis $90 per share in mid-2000, plummeted to $0.10 in October 2001. The drop in Enron’s stock price is estimated to have caused itsstockholders to lose $11 billion.
On December 2, 2001, with assets of $63.4 billion, it was the largest corporate bankruptcy in U.S. history until
By 1992, Enron was the largest merchant of natural gas in North America,Enron’s net income, with anearnings before interest and taxesof $122 million.
Enron’s stock rose from the start of the 1990s until year-end 1998 by 311% percent. The stock increased by 56% in 1999 and a further 87% in 2000,compared to a 20% increase and a 10% decline for the index during the sameyears. By December 31, 2000, Enron’s stock was priced at $83.13 and its marketcapitalization exceeded $60 billion.
Financial reporting
Mark-to-market accounting,was central to Enron’s income recognition
Transactions that involve setting up of special purpose entities.
Executive compensation
At December 31, 2000, Enron had
96 million shares
January 2001 stock price of $83.13
and the directors’ beneficial ownershipreported in the 2001 proxy, the value of director stock 
ownership was $659million for Kenneth Lay and $174 million for Jeffrey Skilling
Financial audit
In 2000, Arthur Andersen earned
$25 million in audit fees and $27 million inconsulting fees.
Timeline of Enron's downfall
March 5, 2001,Bethany McLean's.
questioned how Enron could maintainits high stock value,
which was trading at 55 times its earnings
August 14, 2001, Skilling had sold at minimum 450,000 shares
of Enron ata value of around
$33 million
October 22, 2001
, the share price of Enron
fell to $20.65, down $5.40
in oneday.

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