Enron Case Analysis

Enron’s top management, especially misled not only the board of directors he was able to misled the investor which bring about Enron filing for bankruptcy in 2001. In early, 2002 criminal investigation was open by US department of Justice into Enron’s collapse. The Security exchange commission (SEC) also opened the investigation into Arthur Andersen as well because they destroy and hide evidence of Enron’s financial statement. The role of the auditing giant Arthur Andersen in the collapse of Enron is incomprehensible to some. The accounting firm overlooked significant debts that are not the Enron’s financial statement. US department of justice found them guilty on federal charges that it obstructed justice by destroying thousands of Enron documents.
Kenneth Lay founded Enron in 1985 by merging the natural gas pipeline companies of Houston Natural Gas and InterNorth to form Enron. As a result of the approval of deregulation of the sale of natural gas by US Congress, Enron was able to sell their products at a higher price and quickly emerged as one of the biggest companies in the US. It is also important to note that, they were little oversight put in place even while some cried for appropriate regulation, which through lobbying, Enron was against. The price was volatile and they control the price of the natural gas with little regulation or oversight by the
Some investors that are misled lost chunk if not all of their investments. The public, investors, employees, pension holders and politicians were so outraged and wanted to why Enron's failings were not spotted earlier. Enron did not do these all alone, they have accomplice in the name of another giant accounting/auditing company called Arthur Andersen where they helped the firm overlooked significant debts that are not the Enron’s financial statement. They knew that Enron was over its head but they let the company conceal its debt over a long period of that which eventually led to the downfall of the company. The highlight of this section is that Enron’s top managements self interest, greed led to presenting the investors and board of directors misleading financial statements. Because of their greed and self interest, a crime was committed that led to prosecution of some of the Enron’s top managers. For example, Former Enron executive Michael Kopper pleads guilty to conspiracy to commit wire fraud and money laundering conspiracy. While Andrew Fastow Former CFO was charged with securities fraud, wire fraud, mail fraud, money laundering and conspiracy. To avoid another Enron, the US Congress passed a law called Sarbanes-Oxley Act 2002