The Enron and Worldcom Scandals

E. Boos – Week a couple of – Project

February 18, 2013

The Enron and WoldCom Scandals

ENRON

1 . The segment of Enron's operations that got these people into troubles had a lot of parts. They published misleading financial reviews. They could not meet their very own bridge loans commitment with Barclay Traditional bank because outside investors weren't found. For this reason, they restated activities of JEDI and Chewco SPEs so they could be retroactively consolidated into Enron's accounts. The SPEs helped to hide the inaccurate accounting information. Enron's legal department wrote contracts that helped give a cover for wrong use of cash regarding the SPEs. Future income was reported as current revenue. Stocks were paid with promissory notes rather than cash. Additionally, they engaged in off-the-books activities and excessive business compensation. Enron's board of directors allowed the business owners, accountants and legal section to use Particular Purpose Agencies (SPEs), a kind of partnership, in an attempt to camouflage their very own debt and create a façade of financial steadiness (Brooks, 2007).

several. Enron's administrators understood how profits were made. They also recognized management's activities were unethical. Andrew Fastow was active in building the SPE partnerships wonderful affiliation with LJM2 was obviously a conflict of interest. When ever Enron commenced experiencing monetary problems in October 2001, the table of administrators began having special meetings. They were paid with cash, restricted inventory, phantom stock units and stock options. The Senate Subcommittee Report, dated July 8, 2002, found that the Enron board of directors was aware that workers participated a manager of the SPEs which was a conflict of interest. The directors overlooked the inaccurate accounting, extensive unrecorded activities and excessive executive compensation. The Senate report discovered that the board of directors knew of financial activities between Enron and some of the...

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