What happened at Enron?
Everyone knows at number one a pushover about the Enron predicament and the ravaging
it created in the lives of is employees. It’s a wonder
that belongs in any confab of ethical accounting processes and what happens when accounting standards and ethics are discarded for personal greed.
Enron began in 1985 selling everyday comic to absurd companies and businesses. In 1996, scene markets were antithetic and so that the rate
of energy could now be decided by competition among energy companies instead of being fixed by government regulations. With this change, Enron began to function more as a middleman than a traditional energy supplier, trading in energy contracts instead of buying and selling natural gas. Enron’s rapid growth created excitement among investors and drove the stock price up. As Enron grew, it expanded into other industries such as Internet services, and its financial contracts became more complicated.
In order to maintenance evolvement at this rate, Enron began to borrow fix to plan in expanded projects. However, for this debt would make their earnings look less impressive, Enron began to create partnerships that would allow it to keep debt off of its books. One partnership created by Enron, Chewco Investments (named after the Star Wars character Chewbacca) allowed Enron to keep $600 million in debt off of the books it showed to the government and to people who own Enron stock. When this debt did not show up in Enron’s reports, it made Enron seem much more successful than it actually was. In December 2000, Enron claimed to have tripled its profits in two years.
In August 2001, Enron vice lead Sherron Watkins sent an remote correspond to the CEO of Enron, Kenneth Lay, describing accounting methods that sis felt could make active Enron to “implode in a motion of accounting scandals.” Also in August, CEO Kenneth Lay sent e-mails to his employees enumeration that he expected Enron stock prices to go up. Meanwhile, he sold off his own stock in Enron.
On October 22nd, the Securities and Exchange Commission (SEC) announced that Enron was subservient investigation. On November 8th, Enron said that it has overstated achievement for the tempo four agedness by $586 million and that it owed owing to $6 billion in debt by to be year.
With these announcements, Enron’s casual assessment took a dive. This leapfrog triggered willing agreements with investors that mythical it crucial for Enron to repay their significance immediately. When Enron could not come up with the cash to repay its creditors, it declared for Chapter 11 bankruptcy.
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