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Enron Corporation Scandal - Research Paper Example

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Enron Corporation Scandal Name University Enron Corporation was one of the most innovative corporations in the US through the 1990s. The company had maintained its standing in the corporate arena by innovatively creating a new economy rebel that questioned the old ways of the industries and their assets towards the unrestrictive e-commerce world…
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Enron Corporation Scandal
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Download file to see previous pages The Enron Corporation was founded in the year 1985 and was one of the leading companies offering services in electricity, communications, natural gas and pulp and paper industries. The financial performance of Enron Corporation had also been uniquely impressive before its collapse in 2001 where its annual revenues showed an increase of $9 billion to over $ 100 billion from year 1995 to 2000. However at the end of year 2001 it was brought to attention and revealed that the company’s reported financial condition was sustained mainly because of the systematic, institutionalized and creative plan of accounting fraud. It has been reported by Thomas (2002), that the shares of Enron Corporation dropped from $90 per share in the mid of year 2000 to nearly less than $1 per share by the end of year 2001, this drastic decrease in the stock price of the company caused shareholders a loss of $11 billion. Thus Enron Corporation revised its financial statements for the past five years declaring a loss of $586 million only. In the December of 2001, Enron fell to bankruptcy. Also with the revelation of Enron Scandal in 2001, Arthur Andersen, one of the biggest audit and accountancy partnerships also dissolved. Enron undoubtedly was the biggest audit failure but this company that was famous in the world, also became famous for its so sudden collapse (Li, 2010). The scandal of the Enron Corporation is one of the most notorious scandals of the American corporations. It is commonly believed by economists, historians and analysts that the case of Enron is undoubtedly a case of White Collar Crime. The term White Collar Crime is used as a phrase when various interrelated and overlapping areas of law including the misappropriation, securities law, fraud, bankruptcy, money laundering, financial frauds, corruption, tax frauds, cybercrime, government frauds, bribery etc happen or occur. Hence white collar crime is not a discipline that is autonomous rather it is interdisciplinary that tends to combine individuals and professionals from various professions and disciplines which may include auditors, accountants, law enforcement, investigators and attorneys ( Gill & Scott, 2008). In view of the white collar crime Enron Corporation which was a big name in the corporate sector and was of one of those corporations that were seen to be practicing price stability, merchant bank selling and hedging of funds. However the later discovery of this information that Enron was nothing less than a giant fraud changed the course of it. The nature of fraud at the company was both classic as well as modern frauds. The charges of White Collar Crime include: 1. Involved in Ponzi Schemes The company was engaged in the Ponzi scheme, whereby the top executives of the company that were in charge of running the company became rich at the expense of its employees and the investors. This all was happening with the support of Arthur Anderson, an accounting firm – which further disclosed that the main business of Enron Corporation was selling of stocks, which was the main profit generating source for the company (Pontell). 2. Involved in Hype and Dump Manipulation Schemes Similarly Enron was also involved in the hype and dump manipulation schemes, whereby it greatly inflated its stock prices ...Download file to see next pages Read More
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