The Enron Scandal Accounting

Enron Scandal

Enron began its life in 1985 and appeared to be a rising star in the business world. In
conjunction with the accounting firm Arthur Anderson Enron became one of the
biggest accounting scandals in history. There were numerous ethical dilemmas in
addition to the many illegal acts during rise and fall of Enron. This paper will discuss
the history of the company, the actual crisis inside of Enron, and an analysis of how
the company responded to the scandal.

The Enron scandal was the biggest bankruptcy in United States history which cost
4,000 employees their jobs. Once it was obvious that something was amiss with
Enron's bookkeeping, there was action on behalf of the Securities and Exchange
Commission. By October 31, 2001 the inquiry had upgraded into a formal
investigation and on December 2, 2001 Enron filed for bankruptcy. It was an event
that will always be remembered as one of the most disastrous events in the financial
world. In late 2001 Enron's shares drastically dropped from over $90.00 to just
pennies which was seen as a catastrophe to the many investors, employees and the
watching nation.

Enron's plunge occurred after it was revealed that much of its profits and revenue
were the result of deals with special purpose entities. The result was that many of
Enron's debts and losses that the company suffered were not reported in the financial
statements. Enron had created offshore entities that were being used for planning and
avoiding taxes, which in turn raised the profitability of the business. The executives
and insiders at Enron faced an ethical dilemma because they knew about the offshore
accounts that were hiding losses for the company and the possible ramifications of
this information being released. However the investors knew nothing of the fraudulent
practices.

On August 14, 2001, Jeffrey Skilling, the chief executive of Enron, a former energy
consultant at McKinsey & Company joined the company in 1990, announced he was
resigning his position after only six months. People noticed that in the months leading
up to his exit, Skilling had sold at minimum 450,000 shares of Enron at a value of
around $33 million. During this time the Enron executives were encouraging people
to invest much of their life savings into the company as they were simultaneously
selling there own shares.

Enron's European operations filed for bankruptcy on November 30, 2001. On the day
that Enron filed for bankruptcy, the company's employees were told to pack up their
belongings and leave the building within the following thirty minutes. Thousands of
Enron investors and employees lost all their savings, children's college funds, and
pensions when Enron collapsed. The lawsuit accused twenty-nine of the executives
and directors of insider trading and misleading the public. Had one of the executives
or directors spoken up when they learned of these unethical acts the company may not
have had to declare bankruptcy and ruin their business and reputations.

Former Enron CFO Andrew Fastow was the mastermind behind Enron's complicated
network of offshore partnerships and questionable accounting practices. Fastow was
indicted on November 1, 2002 by in Houston. He was convicted on 78 counts
including fraud, money laundering, and conspiracy. Fastow was sentenced to serve a
ten year prison sentence and forfeit $23.8 million.

Another key player in the Enron scandal Ben Glisan Jr., a former Enron treasure, was
the first man to be sent to prison for the scandal. His conviction really got the public
interested in the shameful events. He pleaded guilty to one count of conspiracy to
commit security and wire fraud. John Forney, a former energy trader, was also
indicted in December 2002, on 11 counts of wire fraud and conspiracy.

The chief executive Jeffrey Skilling, who left his position only 6 months after being
hired, was arrested on February 11, 2004, by the FBI. Skilling was convicted of 19 of
28 counts of securities fraud and wire fraud and acquitted on the remaining nine.
Skilling was sentenced to 24 years, 4 months in prison for his illegal acts.

Kenneth Lay was the former Chairman of the Board and Chief Executive Officer for
Enron and went to trial for the part he played in the scandal in January 2006. He was
convicted of all six counts of securities and wire fraud for which he had been tried,
and he faced a total sentence of up to 45 years in prison. He passed away on July 5,
2006 before his sentencing was scheduled.

This scandal quickly set off a wave of other accounting scandals. Enron's collapse
also contributed to the creation of the U.S. Sarbanes-Oxley Act, signed into law on
July 30, 2002. The purpose of this act is to protect people from the types of deceptive
acts that took place within Enron. The act changed the way corporate records are to be
stored because of the poor decision Arthur Andersen made to shred many of Enron's
financial documents. The act also strives to protect the individual that reports
unethical or illegal acts. Sarbanes-Oxley is considered the most significant change to
federal securities laws since FDR's New Deal in the 1930's.

Rather than Enron restructuring, they faced liquidation and later changed the
company's name to “Enron Creditors Recovery Corporation” to reflect its new task of
managing payouts it owes from litigation and creditors.

The company's response to the scandal seemed to be evasive, with finger pointing and
a great deal of executives tried for some type of conspiracy or fraud count. Criminal
investigations began early January 2002. Fastow invoked the Fifth Amendment, while
Skilling said that Enron had no problems when he left, Waktins said Fastow and
Skilling had “duped” Lay, and Lay declined to testify. Enron did come up with a plan
to reorganize and try to sell off their assets for as much as possible in November 2004,
when it emerged from bankruptcy.

This plan did take a while to formulate, and in the time it took to write it, Enron had
not come up with a response to defend their actions. Realizing that there is no way to
spin the events in their favor, Enron executives went to trial with a goal of simply
getting through the scandal. It is hard to say how ethical or effective this lack of
response is. They did brave the storm, so to say, and are now in the process of paying
back what they owe, so it is effective in that manner. As for the ethical side,
executives were brought to justice in the court of law, and the reasons for this scandal
are simply explained away with greed and large ego.

Now that Enron is known as Enron Creditors Recovery Corporation, its response to
the crisis is to just come up with as much as the cash as possible by any means. They
are receiving money from MegaClaims, from businesses said to participate and profit
from their collapse. With settlements of about $1.76 billion made, and declined claims
of about $1.38 billion, they are still pursuing more from Citigroup. They have filed a
suit to reclaim fraudulent commercial paper debt prepayments, and have received over
$170 million and still pursue over $400 million. They are also involved with equity
transaction litigation, and have received around $250 million. Enron Creditors
Recovery Corporation is slowly, but effectively, paying people back. So long as
payments are being made this response is ethical as well.

Enron had initially appeared to be a successful and blossoming company. But the
unethical and illegal decisions that were made throughout Enron's history caused
thousands of employees to loose their jobs and many others to loose very substantial
amounts of money. The Enron scandal will forever live in history and has prompted
the Sarbanes-Oxley Act to prevent a catastrophe like this from ever taking place
again. Hopefully the future of business will be a more ethical and law abiding one.

Resources:

About ECRC. October 2007. Enron Creditors Recovery Corp. 15 Mar 2008
<http://www.enron.com/index.php?
option=com_content&task=section&id=1&Itemid=>.

"Employers Beware: Sarbanes-Oxley Requires Reinstatement for Real." Morrison &

Foerster. June 2005. 20 March. 2008
<http://www.mofo.com/news/updates/bulletins/bulletin02021.html#2>.

Gerth, Jeff, Marko, and Richard A. Oppel Jr. “Regulators struggle with a marketplace
created by Enron.” The New York Times (Nov 10, 2001)

Litigation Overview. October 2007. Enron Creditors Recovery Corp. 15 Mar 2008
http://www.enron.com/index.php?
option=com_content&task=view&id=10&Itemid=19.

Oppel, Richard A., Jr, and Alex Berenson. “Enron's chief executive quits after only 6
months in job.” The New York Times (August 15, 2001)

"Timeline." The Fall of Enron. September 2006. Houston Chronicle. 15 Mar 2008
<http://www.chron.com/news/specials/enron/timeline.html>.

Fowler, Tom. "Enron's implosion was anything but sudden." Houston Chronicle 25
Dec 2005. 17 Mar 2008
<http://www.chron.com/disp/story.mpl/special/enron/2655409.html>.

Skandal Enron

Enron memulai hidupnya pada tahun 1985 dan tampak sebagai bintang yang sedang
naik daun di dunia bisnis. Sehubungan dengan perusahaan akuntansi Arthur Anderson
Enron menjadi salah satu skandal akuntansi terbesar sepanjang sejarah. Ada banyak
dilema etis selain banyak tindakan ilegal selama naik turunnya Enron. Makalah ini
akan membahas sejarah perusahaan, krisis aktual di Enron, dan analisis bagaimana
perusahaan menanggapi skandal tersebut.
Skandal Enron adalah kebangkrutan terbesar dalam sejarah Amerika Serikat yang
menelan biaya 4.000 karyawan untuk pekerjaan mereka. Begitu sudah jelas bahwa
ada sesuatu yang salah dengan pembukuan Enron, ada tindakan atas nama Securities
and Exchange Commission. Pada tanggal 31 Oktober 2001, penyelidikan telah
ditingkatkan menjadi penyelidikan formal dan pada tanggal 2 Desember 2001 Enron
mengajukan kebangkrutan. Itu adalah sebuah peristiwa yang akan selalu diingat
sebagai salah satu peristiwa paling mengerikan di dunia finansial. Pada akhir tahun
2001 saham Enron secara drastis turun dari lebih dari $ 90,00 menjadi hanya sen yang
dianggap sebagai malapetaka bagi banyak investor, karyawan dan negara yang
menonton.

Kecenderungan Enron terjadi setelah diungkap bahwa sebagian besar keuntungan dan
pendapatannya adalah hasil kesepakatan dengan entitas tujuan khusus. Hasilnya
adalah bahwa banyak hutang dan kerugian Enron yang diderita perusahaan tersebut
tidak dilaporkan dalam laporan keuangan. Enron telah menciptakan entitas lepas
pantai yang digunakan untuk merencanakan dan menghindari pajak, yang pada
gilirannya meningkatkan profitabilitas bisnis. Para eksekutif dan orang dalam di
Enron menghadapi dilema etis karena mereka tahu tentang akun luar negeri yang
menyembunyikan kerugian bagi perusahaan dan kemungkinan konsekuensi dari
informasi ini dilepaskan. Namun para investor tidak tahu apa-apa tentang praktik
penipuan tersebut.

Pada tanggal 14 Agustus 2001, Jeffrey Skilling, chief executive Enron, seorang
mantan konsultan energi di McKinsey & Company bergabung dengan perusahaan
tersebut pada tahun 1990, mengumumkan bahwa dia mengundurkan diri dari
jabatannya setelah hanya enam bulan. Orang-orang menyadari bahwa pada bulan-
bulan menjelang keluarnya, Skilling telah menjual 450.000 saham Enron seharga
sekitar $ 33 juta. Selama masa ini, para eksekutif Enron mendorong orang untuk
menginvestasikan sebagian besar tabungan hidup mereka ke perusahaan karena
mereka secara bersamaan menjual sahamnya di sana.

Operasi Enron di Eropa menyebabkan kebangkrutan pada tanggal 30 November 2001.

Pada hari Enron mengajukan kebangkrutan, pegawai perusahaan diberitahu untuk
mengemasi barang-barang mereka dan meninggalkan gedung tersebut dalam tiga
puluh menit berikutnya. Ribuan investor dan karyawan Enron kehilangan semua
tabungan mereka, dana kuliah anak-anak, dan pensiun saat Enron ambruk. Tuntutan
tersebut menuduh dua puluh sembilan eksekutif dan direktur perdagangan orang
dalam dan menyesatkan publik. Jika salah satu eksekutif atau direktur berbicara saat
mereka mengetahui tindakan tidak etis ini, perusahaan mungkin tidak harus
menyatakan kebangkrutan dan menghancurkan bisnis dan reputasi mereka.

Mantan Enron CFO Andrew Fastow adalah dalang dibalik jaringan kemitraan luar
biasa Enron yang rumit dan praktik akuntansi yang patut dipertanyakan. Fastow
didakwa pada tanggal 1 November 2002 di Houston. Dia dinyatakan bersalah atas 78
tuduhan termasuk kecurangan, pencucian uang, dan persekongkolan. Fastow dijatuhi
hukuman penjara sepuluh tahun dan kehilangan $ 23,8 juta.

Pemain kunci lainnya dalam skandal Enron Ben Glisan Jr., mantan harta Enron,
adalah orang pertama yang dikirim ke penjara karena skandal tersebut. Keyakinannya
benar-benar membuat masyarakat tertarik pada peristiwa memalukan tersebut. Dia
mengaku bersalah atas satu tuduhan konspirasi untuk melakukan kecurangan
keamanan dan kawat. John Forney, seorang mantan pedagang energi, juga didakwa
pada bulan Desember 2002, dengan 11 tuduhan kecurangan dan konspirasi kawat.

Kepala eksekutif Jeffrey Skilling, yang meninggalkan posisinya hanya 6 bulan setelah
dipekerjakan, ditangkap pada 11 Februari 2004 oleh FBI. Skilling dinyatakan bersalah
terhadap 19 dari 28 tuduhan penipuan sekuritas dan kecurangan kawat dan dibebaskan
pada sembilan sisanya. Skilling dijatuhi hukuman 24 tahun, 4 bulan penjara atas
tindakan ilegalnya.

Kenneth Lay adalah mantan Ketua Dewan dan Chief Executive Officer untuk Enron
dan diadili untuk peran yang dimainkannya dalam skandal tersebut pada bulan Januari
2006. Dia dinyatakan bersalah atas enam tuduhan sekuritas dan kecurangan kawat
yang telah dia coba, dan dia menghadapi hukuman maksimal sampai 45 tahun
penjara. Dia meninggal pada tanggal 5 Juli 2006 sebelum hukumannya dijadwalkan.

Skandal ini dengan cepat memicu gelombang skandal akuntansi lainnya. Keruntuhan
Enron juga berkontribusi terhadap terciptanya Undang-Undang Sarbanes-Oxley A.S.,
yang ditandatangani dalam undang-undang pada tanggal 30 Juli 2002. Tujuan
tindakan ini adalah untuk melindungi orang dari jenis tindakan menipu yang terjadi di
dalam Enron. Tindakan tersebut mengubah cara catatan perusahaan disimpan karena
keputusan Arthur Andersen yang malang membuat banyak dokumen keuangan Enron.
Tindakan tersebut juga berusaha melindungi individu yang melaporkannya tindakan
ilegal atau ilegal. Sarbanes-Oxley dianggap sebagai perubahan paling signifikan
terhadap undang-undang sekuritas federal sejak Kesepakatan Baru FDR di tahun
1930an.

Daripada restrukturisasi Enron, mereka menghadapi likuidasi dan kemudian

mengubah nama perusahaan menjadi "Enron Creditors Recovery Corporation" untuk
mencerminkan tugas baru pengelolaan pembayaran yang harus dibayar dari proses
pengadilan dan kreditor.

Respon perusahaan terhadap skandal itu tampaknya mengelak, dengan menunjuk jari
dan banyak eksekutif mencoba beberapa jenis konspirasi atau penghitungan
kecurangan. Penyelidikan pidana dimulai awal Januari 2002. Fastow meminta
Amandemen Kelima, sementara Skilling mengatakan bahwa Enron tidak memiliki
masalah saat dia pergi, Waktins mengatakan bahwa Fastow and Skilling telah
"menipu" Lay, dan Lay menolak untuk bersaksi. Enron memang datang dengan
rencana untuk melakukan reorganisasi dan mencoba menjual aset mereka semaksimal
mungkin pada bulan November 2004, ketika muncul dari kebangkrutan.

Rencana ini memerlukan beberapa saat untuk merumuskan, dan dalam waktu yang
dibutuhkan untuk menuliskannya, Enron tidak mendapat tanggapan untuk membela
tindakan mereka. Menyadari bahwa tidak ada cara untuk memutar acara yang
menguntungkan mereka, para eksekutif Enron pergi ke pengadilan dengan tujuan
untuk hanya melewati skandal tersebut. Sulit untuk mengatakan seberapa etis atau
efektifnya kurangnya respons ini. Mereka memang berani menghadapi badai, jadi
untuk mengatakannya, dan sekarang sedang dalam proses membayar kembali hutang
mereka, jadi ini efektif dengan cara itu. Sedangkan untuk sisi etis, eksekutif dibawa ke
pengadilan di pengadilan, dan alasan skandal ini hanya dijelaskan dengan
keserakahan dan ego yang besar.

Sekarang Enron dikenal sebagai Enron Kreditur Pemulihan Corporation, respon

terhadap krisis adalah hanya datang dengan sebanyak uang sebanyak mungkin dengan
cara apapun. Mereka menerima uang dari MegaClaims, dari bisnis mengatakan untuk
berpartisipasi dan mendapatkan keuntungan dari keruntuhan mereka. Dengan
permukiman sekitar $ 1,76 miliar dibuat, dan menolak klaim sekitar $ 1,38 miliar,
mereka masih mengejar lebih banyak dari Citigroup. Mereka telah mengajukan
tuntutan untuk mengklaim kembali pembayaran prabayar surat hutang komersial
palsu, dan telah menerima lebih dari $ 170 juta dan masih mengejar lebih dari $ 400
juta. Mereka juga terlibat dalam proses transaksi ekuitas, dan telah menerima sekitar $
250 juta. Enron Kreditur Pemulihan Corporation secara perlahan, tapi efektif,
membayar orang kembali. Selama pembayaran dilakukan, respons ini juga etis.

Awalnya Enron tampil sebagai perusahaan yang sukses dan mekar. Namun, keputusan
yang tidak etis dan ilegal yang dilakukan sepanjang sejarah Enron menyebabkan
ribuan karyawan kehilangan pekerjaan dan banyak lainnya kehilangan sejumlah besar
uang. Skandal Enron akan selamanya hidup dalam sejarah dan telah mendorong
Undang-Undang Sarbanes-Oxley untuk mencegah malapetaka seperti ini terjadi lagi.
Semoga masa depan bisnis akan menjadi lebih etis dan taat hukum.
Praise the presence of God, Allah Swt. for all His grace so that this paper can be
arranged to completion. Not forgetting we also say a lot of gratitude for the help of
those who have contributed by contributing both material and mind.

And we hope this paper can increase knowledge and experience for the readers, For
the future can improve the form and add the contents of the paper for the better.

Due to our limited knowledge and experience, we believe there are still many
shortcomings in this paper, therefore we are looking forward to constructive
suggestions and criticism from readers for the perfection of this paper.