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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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11/25/2010

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The
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
On
March 5, 2001,Bethany McLean's.
questioned how Enron could maintainits high stock value,
which was trading at 55 times its earnings
.
On
August 14, 2001, Skilling had sold at minimum 450,000 shares
of Enron ata value of around
$33 million
.
On
October 22, 2001
, the share price of Enron
fell to $20.65, down $5.40
in oneday.

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