Business Ethics Case

Structure:

Company profile
The ethical point of view
The guilty parties
Main ingredients of the downfall
Closing thought

Enron Company Profile

Enron Corporation was an American energy company based in Houston, Texas.

Enron employed around 21,000 people and was one of the world's leading
electricity, natural gas, pulp and paper, and communications companies, with
claimed revenues of $111 billion in 2000.
Fortune named Enron "America's Most Innovative Company" for 6 consecutive
years.
It was formed in 1985 when Houston Natural Gas merged with InterNorth.
After several years of international and domestic expansion involving complicated
deals and contracts, Enron was billions of dollars into debt.
All of this debt was concealed from shareholders through partnerships with other
companies, fraudulent accounting, and illegal loans.

Ethical Point Of View

The Guilty Parties

These include Ken Lay, Jeff Skilling,
and Andrew Fastow
Believe Enron was great for economy
Circulated money, provided jobs,
dealt with international companies
Did not inform public in order to keep
Enron in business

The Guilty Parties

Kenneth Lee Lay
Born April 15, 1942
Died July 5, 2006
(age64)
Charge(s): Fraud, false
statement ;
Penalty: Could have
faced 40 years in
prison plus monetary
fines, but died before
sentencing
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The Guilty Parties

Jeffrey Skilling
Born November 25,
1953(1953-11-25)
Charge(s): conspiracy,
securities fraud, false
statement, insider
trading
Penalty: originally
sentenced to 24 years
and 4 months and
fined $45 million USD,
pending resentencing
Status: Incarcerated

The Guilty Parties

Andrew Stuart Fastow
Born: December 22,
1961
Charge(s): conspiracy,
securities fraud, false
statement, insider
trading
Penalty: 6 years,
followed by 2 years of
probation
Status: Incarcerated
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The Guilty Parties

Arthur Andersen was one of the
worlds five leading accounting
firms (Big Five)
Was paid $52m in 2000, the
majority for non-audit related
consulting services.
Type: Limited Liability
Partnership
Founded: 1913
Industry: Accounting,
Professional
Services,Tax,
Consulting;
Licenses of Certified Public
Accountants surrendered in
2002

Arthur A
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Houston ersens
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The main ingredients

for the downfall of
ENRON

DEREGULATION government
decision to let gas prices float with
the currents of the market

MARK-TO-MARKET accounting
practice that allowed Enron to book
potential future profits on the very
day a deal was signed
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The main ingredients

for the downfall of
ENRON

SPECIAL PURPOSE ENTITIES -

is a
legal entity (usually a limited company of some
type or, sometimes, a limited partnership)
created to fulfill narrow, specific or temporary
objectives. SPE's are typically used by companies
to isolate the firm from financial risk. A
company will transfer assets to the SPE for
management or use the SPE to finance a large
project thereby achieving a narrow set of goals
without putting the entire firm at risk.

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Closing thought
Every fraud
could have been
prevented
if honest people
had asked the right
questions
at the right time
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