This case study is extracted mainly from two major novels titled “What went wrong at Enron” by Fusaro P.C. and Miller R.M. and “The unshredded truth from an Enron insider” by Brian Cruver. The Vision Called Enron The history of Enron goes back to the 1920’s‚ when a pair of Houston pipeline companies was incorporated to carry gas along the coast of the Gulf of Mexico. In 1956 these companies merged under the name of Houston natural Gas (HNG). While these companies were working along the coast
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cost of capital that exceeded Enron’s return on capital employed‚ through the 1990s few expressed qualms about Enron’s business model and its rapid diversification into new sectors.” In 1997 Enron used offshore accounts to hide losses which were not reported on financial statements. By hiding losses‚ Enron was able to inflate numbers and assets which were nonexistent. The deceptive financial moved caused the downturn of the company. According to Kobrak (2009) Enron’s losses on speculative and strategic
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prices would fall (2). In January 1987‚ a security officer at Apple Bank in New York alerted Enron auditors of a strange set of transactions by two of the company’s oil traders: Louis Borget and Thomas Mastroeni. The bank security man said that $100‚000 transfers were coming from an Enron account at Standard Chartered Bank in Britain’s Channel Islands. Transactions from the Channel Islands were a red flag to bank security men because the islands are a source of secret offshore bank accounts and
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initially focussed on the company’s close ties with the political establishment and the policy-making bureaucracy. However‚ more details of Enron’s "business model"‚ so successful until it crashed dramatically after October 2001‚ indicate that the Enron bubble was just an example of the manner in which speculative finance dominates business. ROSSMAN DAVE/GAMMA Enron’s chief executive officer Kenneth Lay with wife Linda. In 1985‚ Enron started as a pipeline company selling gas. The deregulation of the
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sense of the myriad people‚ places‚ and events making up the sixteen years of Enron’s existence as an American energy company. Some argue Enron’s record-breaking bankruptcy and eventual demise was the result of a lack of ethical corporate behavior attributed‚ more generally‚ to capitalism’s inability to check the unmitigated growth of corporate greed. Others believe Enron’s collapse can be traced back to questionable accounting practices such as mark-to-market accounting and the utilization of
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Government Regulation Research Paper 1 John Smith Introduction Government regulation is around us everywhere. The government needs to make sure that the public’s interests are maintained and preserved. Being an accounting student‚ I have heard and read about regulation in the accounting industry numerous times. There have been many major accounting scandals in history that have lead to many different kinds of government regulation. The government regulations in accounting are mostly enacted
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1. What problems did Enron encountered? Many went sour in the early months of 2001 as Enron’s stock price and debt rating imploded because of loss of investor and creditor trust Methods the company used to disclose (or creatively obscure) it’s complicated financial dealings were erroneous and‚ in the view of some‚ downright deceptive The company’s lack of transparency in reporting its financial affairs‚ followed by financial restatements disclosing billions of dollars of omitted liabilities and
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Week 1 Essay Questions (80 Points) 1. Why is corporate governance important? a) good corporate governance produces direct economic benefit to the organization b) To avoid scandal c) To imbibe trust in investors d) The perception of good corporate governance is an important ingredient of the image of an organization‚ whether public‚ private‚ or nonprofit. e) A perception of unethical conduct by an organization can be very costly in legal cases Reference:
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The Fall of Enron Enron was so admired prior until 2000; they grew to a powerful company. In 1985‚ Internorth acquired Houston Natural Gas to form HNG/Internorth‚ a natural gas pipeline company. This company was renamed to Enron. At the time of Enron’s creation‚ the U.S. gas market was in the middle of deregulation. In 1985‚ rules were established that allowed gas users to realize the cost savings by purchasing gas at spot prices and separately contracting with pipeline firms for delivery. The
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1) Deregulation Deregulation of the U.S. energy industry made possible Enron’s emergence as a major corporation‚ but also ultimately may have contributed to its collapse. The company successfully seized the opportunity created by deregulation to create a new business as a market maker in natural gas and other commodities. Enron successfully influenced policymakers to exempt the company from various regulatory rules‚ for example in the field of energy derivatives. This allowed Enron to enter various
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