enron
enron questions and answers
Learn about enron stock at the number one young investor website Teen Analyst.
Q: Can anyone give me a simplified explanation of how the Enron scam worked?
Alright the first answer was too simple. As for the second answer, what do you mean by a bubble bursting and then them not being able to climb back up?
A: There were multiple scams.
Basically, the head finance and accounting guy set up a bunch of phoney companies. Then , transactions were set up between enron and these shell companies to make it seem as though enron was making money from external sources, when really, money was just being juggled around. Therefore, profits were being artificially raised.
Next, Ken Lay and Jeff Skilling were in essence knowingly manipulating, or ordering financial information to be altered, so that Enron could appear to be meeting its earnings estimates.
Really, the scams were a heck of a lot more complex than this, but this is the Gist of what was going on. Lots of "creative accounting" to make the company look very profitable, and to hide their liabilities from auditors, and shareholders.
In essence, the company was like a giant internal PONZI scheme, where money that didn't exist in reality was flipped around the books, until the company collapsed.
Typically, in most companies, there are lots of internal controls that prevent this sort of thing from taking place. That is to say, that if just the accounting guy was doing stuff on his own, he would have been nailed right away. In enron's case, there was TONS of collusion. Like Ken LAY, Skilling, the head accounting guy, etc were ALL in on it. Granted, the head accounting guy actually cooked up even MORE schemes on his own and Stole money from enron, but in essence, they were all in on it. What brought enron down was the fact that a high ranking executive at enron turned them all in after enron went bankrupt. Skilling, who was the CEO, and several other executives resigned about 6 months before the company wet bankrupt, and got bonuses , stock option and so forth to the tune of tens of millions of dollars each.
Q: When a corporate executive (think Enron) is convicted of a felony what does it do to his career prospects?
I mean are these guys relegated to being cabdrivers or something? What about the average person, how is the career market for felons?
A: why is this what will deter you? well then if so----try picking beets in bakersfield in july.....
Q: What is the name of a company policy that was created after the Enron scandal?
I forget the name of it and I need it for an article I'm writing. I've looked and looked on the net and have found nothing. I know it's two names, just cannot remember. Ugh, does anyone know?
That's it! Thank you so much! I wish I could give you both best answers. You might've just helped make me closer to being a lawyer :)
A: Sarbanes-Oxley
Q: Is there a chance Jeffery Skilling from the Enron Scandal will be sentenced longer?
Is it possible for him to be restentenced to a highe security prison such as a supermax for a longer period of time. Lets say he violates prison policy and/or even tries to escape, what would happen to him.
Would a supermax prison fit the punishment to the origional crime?
A: That sort usually get sentenced to what's described as "Country Club" prisons.
His sentence could be extended only via a major breach of prison rules.
Q: What effect did the Enron scandal have on the accounting world?
I have a project that HAS to be finished by Saturday and I need to know the specific(NOT general) effect of the scandal on accounting procedures and accountability!!
A: One specific result was the passage of the Sarbanes-Oxley Act of 2002. Here's a couple cut and paste answers I've given regarding this act:
---------------------------------------------
This act was passed in response to the public outcry over the financial scandals involving Enron, WorldCom, Tyco International Ltd, Adelphia Communications, and others which resulted in stockholder, creditor, and investor losses in the millions and billions of dollars range.
The purpose of the act is to restore public confidence and trust in the financial statements of companies. It applies only to companies whose stock is traded on public exchanges.
------------------------------------------------------
For publicly traded companies, emphasized requirements for internal control have been mandated by the Sarbanes-Oxley Act of 2002 following the Enron, WorldCom, Tyco International Ltd, etc... scandals/debacles.
"Sarbanes-Oxley not only requires companies to maintain strong and effective internal controls, but it also requires companies and their independent accountants to report on the effectiveness of the company's internal controls."
--------------------------------------------------
If you search for this act on the internet, I'm sure you'll find more specific details about what it requires companies to do.
Hope this helps!
Q: What other companies besides Enron caused crisis in the capital markets due to accounting irregularities?
WorldCom
Krispy Kreme
Fannie Mae
Xerox
What else?
A: Charles Schwab~!!!
IBM~!!!
Wells Fargo~!!!
Q: With what happened with Enron, was deregulation of the energy industry such a good idea?
The "market" drove prices up and people had electric bills of over 1000 dollars, and its clear these were inflated energy prices.
Perhaps government should be involved, to protect the consumer.
A: If you're talking about the issues in California, the problems were caused because the supposed "deregulation" was nothing of the kind. The law as written was not deregulation but just a very poorly re-regulation that allowed the unscrupulous tactics to which you refer. If the law had been actual deregulation, much as the legislators in Pennsylvania did with good results, then the whole fiasco never would have happened.
Did you know that it was a Democrat who actually sponsored and championed that bill with the unanimous consent of both houses of the California legislature?
Q: Why did Enron collapse, and why were some people incarcerated?
Can somebody please explain the Enron scandal because I am reading the newspaper, and Kenneth Lay died yesterday.
A: Enron
1)Enron’s Culture.
Enron’s culture seemed to be a mix of arrogance, greed, & cutthroat fear. The company seemed to a company where rule breaking was acceptable from top to bottom. Rumors of indecent behavior in the executive ranks ran rampant. They raised their noses up at companies like Exxon Mobil. Skillings commented, “We are going to eat your lunch.” They also made the prediction that their stock, which was at $80 a share, would sell for $126 per share. Employees seemed paranoid to the point that there was very little camaraderie. They were too afraid to go to the rest room for fear that a co-worker would use information found on their computer to their advantage. Employees were so afraid of becoming the bottom 20%, because it meant that they may loose their jobs.
2)Did Enron always have this culture? If not, what changed the culture?
Money was always the priority and shareholders came second. Greed was evident, even in the early days. One example given was in the energy services division. Compensation was based on a market valuation formula that relied on internal estimates. This led to pressure to inflate the value of contracts. If market valuations are done in-house the temptation to inflate prices will be there. Since Enron already had the culture of putting shareholders last and executives first this behavior will be perpetrated.
3) Was this a productive or non-productive culture? Explain.
I don’t think this culture was productive. Any culture that encourages flouting rules is destined to be doomed. People were too afraid to make mistakes, so they would cover them up for fear of being fired.” People perpetuated the myth this myth that there were never any mistakes.” If employees cannot go their boss to let them know that they made a mistake, they may not be productive. If you’re so afraid to make a mistake, it may hold you back from being innovative, and definitely slow down productivity. Employees should not have to work in an environment were they are constantly looking over their shoulders. Genuine belief in the company and shareholders should be upheld. If people are stepping over each other to get money, promotions and power the company will no longer exist. Enron had no focus on the shareholder and only on adding money to executive’s pocket.
3)What ethical dilemmas did Enron employees face?
Pressure to lie, cheat steal.
Q: Do you think that the situations with Enron, World Com, Adelphia, and Martha Stewart will have lasting effects?
Do you think that the situations with Enron, WorldCom, Adelphia, and Martha Stewart will have lasting effects on investors' attitudes about investing? Has the government responded to these situations adequately in your assessment?
A: Enron and Martha Stewart and an atom bomb and a flyswatter.
Wholesale accounting fraud has already had lasting effects.
Insider trading isn't news on that scale.
Q: Besides Enron & Leiman Brothers, what other major companies have gone under during the Bush administration?
What other major companies went under for corruption during the past 8 years? I'm just curious how many of them closed because of illegal practices.
A: There are so many corporate scandals during past 8 year, though most notably scoundrel award goes to Enron, Worldcom, and Tyco.
See this for lot more:
http://en.wikipedia.org/wiki/Corporate_scandal
http://en.wikipedia.org/wiki/Accounting_scandals_of_2002
Maybe Bush is not the one solely responsible for this :D
Q: Should the people responsible for the Enron scandal be given amnesty?
I mean, they just wanted a better life for themselves and their family, and it's not like they're violent criminals.
roscoe: Does the lesser of 2 evils make that choice just?
A: Great point. However the pros won't agree
Q: Can someone explain Enron scandal to me simply but detailed a little bit?
I've been reading about it but its a lot of information to sort through and I'm still not sure what actually happened.
A: The links below will give you a good summary. Essentially the directors of the company ' window dressed ' the accounts over a number of years. Their 'creative accounting' practices mislead the investors. Enron lied about its profits and stands accused of a range of shady dealings, including concealing debts so they didn't show up in the company's accounts.
Q: What really happened at Enron?Please give me an accurate summary about the enron scandal.?
Please give me a really accurate one and please include the after effects of the scandal concerning the economy, the company, the firm, and everything else. Also give me a time line of events if you can.
A: Download the video, "The Smartest Guys in the Room".