ENRON Corporation

Fast Facts

BACKGROUND
Formed in 1985 by Kenneth Lay after merging Houston Natural Gas and InterNorth.
Energy, commodities, and services company based in Houston, Texas.
Traded in more than 30 different products, including petrochemicals, plastics,
power, pulp and paper, steel, etc.
As of 2001, Enron owned and operated 38 electric power plants worldwide (with
over 21,000 staff).
Awards
o Most Innovative Company in America (Fortune)
o Fortune Magazine's 100 Best Companies to Work For
o All Star List of Global Most Admired Companies
Motto: Respect, Integrity, Excellence
SCANDAL
Enron bought and owned smaller firms which enabled them to add more revenue to
their books but disregarded debt and loss- a clear violation of the accounting principle
Owner of Partnership (if a company or person owns less than 50-percent of a company,
it is acceptable to not report the loss and debt in the books) when in fact, ENRON owned
more than 50% of the firms.
Embezzlement of funds
Three charges of white collar crime
o Security Fraud. Enron is accused with failing to give correct copies of share-
worth (earnings per-share), net income and the overall growth or decline of the
corporation to stockholders.
o Insider trading. Former Enron officers have been accused of selling Enron stocks
before officially declaring bankruptcy.
o Tax Fraud and Tax Evasion
Politics
o Enron had ties with Bush Family.
o They were applied and were subsequently granted Government Deregulation
(lesser intervention from government).
ETHICAL DILEMMAS
The Board of Directors failed to oversee and control the management and their
procedures. The lack of interest is due to the fact that profits and stock prices were
going up.
Conflict of Interest- Arthur Andersen was held responsible because he signed the bank
statements which contained false information when in fact, an auditing firm is supposed
to act as the diagnostic eyes and ears of the stockholders.
CURRENT STATUS
They reopened during 2004 and pursued litigation against parties seeking to hold them
financially accountable for the alleged wrongful acts that led to the collapse and
insolvency of Enron. New Mission To reorganize and liquidate certain operations and
assets of the "pre-bankruptcy" Enron for the benefit of its creditors.