Enron Corp. Group 5 Andrew Beamon Brandon Hall Joseph Gasparini Matthew Pugh.
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Transcript of Enron Corp. Group 5 Andrew Beamon Brandon Hall Joseph Gasparini Matthew Pugh.
Enron Corp.
Group 5
Andrew BeamonBrandon Hall
Joseph GaspariniMatthew Pugh
• Founded– 1985– Kenneth Lay–Merger of Houston Natural Gas and
InterNorth
• An American Energy Corporation• External Auditor: Arthur Andersen
LLP
Background
Accounts Affected
• Mark-to-Market Accounting
• Losses –Written off to SPE
• Assets inflate profits– Purchased assets– Projected revenues immediately
recorded to books
Key Individuals
• Kenneth Lay– Founder/CEO– Retired 2001
• Jeffrey Skilling– CEO– Retired after 6 months
• Andrew Fastow – CFO– Mastermind of fraud
Detecting the Fraud
• Bethany McLean– Fortune Magazine writer
• Sherron Watkins– VP of Corporate Development–Wrote an anonymous letter to Lay about
accounting practices
Concealing the Fraud
• Executives circumvented accounting rules to artificially increase earnings
• The use of special purpose entities aka “Raptors” to buffer earnings
• Picked out bad investments, then hedged them
Arthur Andersen
• Shredded subpoenaed documents• Was paid $25 million for auditing
services and $27 million for consulting services
• Prior allegations with Waste Management and Sunbeam
• Senior executives of Enron worked for Arthur Andersen
Preventative Actions
• Arthur Andersen– External auditor and consultant
• Board of Directors– Too much upper management involved– Lack of attention caused overlook of
financials due to incentives and compensation
• CEO/CFO–Wasn’t responsible for signing off on
financial statements
Preventative Actions
• Consolidation– Didn’t have to show all entities together
which inflated assets and revenues
• Disclosure Requirements– Less requirements for detailing certain
accounts
• Sarbanes Oxley Act 2002
Key People Today
• Kenneth Lay- Deceased
• Jeffrey Skilling- Currently in prison
• Andrew Fastow- Completed prison time and now traveling the country