Enron and Worldcom Scandal
Enron’s Questionable Transactions
1. Which segment of its operations got Enron into difficulties?
* The fact that Kopper was appointed to Fastow and he was an employee at Enron was the first thing that got them into trouble. Another reason was that over 11 million was invested and it ended up not being invested at all. I believe these two situations ended up being the start of Enron’s problems. Enron also was not reporting the revenue for service correctly and his stock was paid by promissory notes and not by cash like most business operates. 3. Did Enron’s directors understand how profits were being made in this segment? Why or Why not? * No, I don’t think they knew what was going on with Enron’s business because I believe he kept what he was doing to himself so no one would find out how he was operating the business. 5. Ken Lay was the chair of the board and the CEO for much of the time. How did this probably contribute to the lack of proper governance? * The fact that there was a lack of proper governance means that the head person had to know what was going on with how things were being handled. There is no way him being the CEO of the business and not know what was going on. He had to be the man behind what was going on like putting Enron up to running the business the improper way resulting in the down fall of the business for running it crooked. 6. What aspects of the Enron governance system failed to work properly, and why? * It seems to look like everything had start to fail because no one didn’t start questioning about what was going wrong until something actually went wrong with business plans.
9. Identify Conflicts of interest in: * SPE activities: had something to do with the transactions between Enron and LJM2 that had the greatest impact on Enron’s financial statement. * Arthur Andersen activities: was the fact that they did not enforce Enron to establish internal controls,
1. Which segment of its operations got Enron into difficulties?
* The fact that Kopper was appointed to Fastow and he was an employee at Enron was the first thing that got them into trouble. Another reason was that over 11 million was invested and it ended up not being invested at all. I believe these two situations ended up being the start of Enron’s problems. Enron also was not reporting the revenue for service correctly and his stock was paid by promissory notes and not by cash like most business operates. 3. Did Enron’s directors understand how profits were being made in this segment? Why or Why not? * No, I don’t think they knew what was going on with Enron’s business because I believe he kept what he was doing to himself so no one would find out how he was operating the business. 5. Ken Lay was the chair of the board and the CEO for much of the time. How did this probably contribute to the lack of proper governance? * The fact that there was a lack of proper governance means that the head person had to know what was going on with how things were being handled. There is no way him being the CEO of the business and not know what was going on. He had to be the man behind what was going on like putting Enron up to running the business the improper way resulting in the down fall of the business for running it crooked. 6. What aspects of the Enron governance system failed to work properly, and why? * It seems to look like everything had start to fail because no one didn’t start questioning about what was going wrong until something actually went wrong with business plans.
9. Identify Conflicts of interest in: * SPE activities: had something to do with the transactions between Enron and LJM2 that had the greatest impact on Enron’s financial statement. * Arthur Andersen activities: was the fact that they did not enforce Enron to establish internal controls,