1985 Enron Was Born Of Term Paper

Length: 10 pages Sources: 8 Subject: Accounting Type: Term Paper Paper: #61453903 Related Topics: Deregulation, Internal Auditing, White Collar Crime, White Collar Crimes
Excerpt from Term Paper :

These blackouts were orchestrated as away to drive up the prices of energy. Tapes of conversations were released to the public and the employee's are on tape mocking the people of California after they were at the root cause of the problem for consumers (Johnston, 2004).


Buchholtz, a. & Carroll, a, (2008) Business and Society, 7th ed. Cengage Learning

Harvard Law Review, (2003), the good, the bad, and their corporate codes of ethics:

Enron, Sarbanes-Oxley and the problems with legislating morality, the Harvard

Law Review Association, 116(7) 2123-2141

Johnston, L. (2004, June 2). Enron tapes anger lawmakers - CBS Evening News

Retrieved November 15, 2010, from http://www.cbsnews.com/stories/2004/06/02/eveningnews/main620795.shtml

Sims, R., & Brinkmann (2003) Enron ethics (or culture matters more than codes), Journal of business ethics 45(3)

Thomas, W., (2002) the rise and fall of Enron: when a company looks to good to be true, it usually is. New York: Random House

Book Report #2

Arthur Andersen

Known as one of the Big Five, Arthur Andersen was one of the leading accounting firms in the United States. Their second largest client was Enron. In the relationship between Enron and Arthur Anderson, Arthur Andersen's job was to audit the accounts of Enron. An audit involves evaluating the assessments made by the management in their financial statements ensuring the accuracy of the assessments made and if the financial statement presents overall the companies financial standings. These financial statements made by the auditors are vital pieces of information to the public investors (Barrett, 2003). This second book report will focus on the main theme of Barret's work regarding Arthur Andersen, Enron and the fallout from their interactions

In addition to working as the external auditor for Enron, they also offered consulting services which accounted for half of the fees generated by the Enron account. This was an enormous conflict of interest. A system of checks and balances is also theoretically supposed to be worked into the system with Enron having an internal auditing process and then the auditing of Arthur Andersen. However, Arthur Andersen negotiated a contract with Enron to take over their internal auditing as well. As with most high paying clients, there is a tendency to not want to rock the boat and things are more likely to slide (Barrett, 2003).

Arthur Andersen also was found to have destroyed a number of documents once it came out that a formal investigation was being launched by the Securities and Exchange commission. At the time however, it was not obstruction of justice and Arthur Andersen was charged with knowingly persuading someone to change or withhold documents. The case was eventually argued in front of the Supreme Court which found the trial judge had erred in their instructions to the jury and overturned the conviction (Hasnas, 2004/2005).

In the end however, Arthur Andersen was unable to weather the storm and they eventually collapsed. In a market economy this is exactly how it is supposed to work. When as a company, the public has lost their faith, they vote with their feet and walk away (Barrett, 2003).

Like most organization, Enron had an internal code of conduct meant to act as a form of governance over the companies dealings with the public and other stakeholders. However, the one thing the Enron case proves conclusively is that code of conduct or ethics established by a company are only as useful as the person who is making sure they are being followed. The leaders of Enron did not set a good example for their employees and the board did nothing to work as the check on the executive officers to ensure the stability and future of the company long-term and signed of on ethics violations (Harvard Law Review, 2003).

When it came to the special purpose entities, the board had to waive a conflict of interest so that Fastow, who was...


The board is the last power to check a run away executive leadership and instead they turned their heads and did not ask questions. There was nobody overseeing Fastow's numerous and sophisticated financial transaction that would end up bringing the entire company down (Harvard Law Review, 2003).

From the upper levels of the executives, to the board and the employees in the office, there was a culture and environment of do not ask questions and stretch the limits as far as possible in an attempt to maximize profits. Even a code of ethics is useless if the leaders are okay with stretching the ethical limits even if it includes rolling black outs to manipulate energy prices.

If white collar crimes were prosecuted under the same procedures as criminal law there would be very few convictions. There are no "smoking guns" in white collar crimes and undertaking the effort to uncover accounting scandals is labor intensive which further reduces the likely hood of prosecutors bringing a case to trial. The mens rea requirement, which requires the prosecution to prove intent, also hinders prosecution because the decision making process is often diffuse as well as the attorney client privilege which makes it hard to get to any of the documentation needed to prosecute a white collar crime (Hasnas, 2004/2005).

For the past century the judicial branch has been whittling away at some of the constraints on government when pursuing white collar crimes. While the Supreme Court decision may have taken a step back, some of the previous court decisions were codified and made law with the Sarbanes-Oxley Act passed in 2002. The act was passed as a measure of reform and was designed to increase transparency, integrity and accountability of public companies. This was done by increased reporting requirements for the companies. The company had to have a code of ethics and was required to disclose when an ethics waiver had been granted (Harvard Law Review, 2003).

For those who were part of the wrong doing at Enron and Arthur Andersen, their ultimate demise was the market force of distrust in a companies reputation, honesty and integrity. While the laws have subsequently been changed, Arthur Andersen was able to get away with destroying documents, which they should have had the foresight to know would have been pertinent to an investigation into the corporation the company is auditing. Now the requirements have been changed and will hopefully deter future acts such as this.

Skilling and Law were both convicted on numerous charges of fraud, conspiracy and insider trading. Skilling was convicted on eighteen counts of fraud and conspiracy each of which carried a five to ten-year prison sentence and ten years for the one insider trading conviction making the sentence a maximum of one hundred and ninety years. Lay was found guilty of six counts of fraud and four counts of bank fraud which is a maximum of eighty years (Barrionuevo, 2006).

Kenneth Lay passed away later on in 2006 after suffering from heart problems. Due to this his conviction was vacated and the property seizure the government was going to try use to get back some of the money for investors and employees was out of reach to the prosecutors (Johnson, 2006).

Skilling is now attempting to get his conviction over turned and it looks like he might have a good chance. In June of 2010 the Supreme Court found that the Skilling conviction was flawed, renewing the prospect that the conviction would be over turned. The case went back before a federal appeals court in Houston where his lawyers argued the conviction should be over turned due to the Supreme Courts decision.

The implications this has on the justice systems ability to work correctly when prosecuting white collar crimes are astounding. While a thug who murders an innocent child has robbed that baby's family of a loved one, the devastation brought on families around the country by greedy, corrupt corporations is just as gut wrenching as they lose everything they had worked their whole life for. These are the sort of extremes that the government must find away to get a handle on because if Skilling's conviction gets overturned, he has effectively made a mockery of our system of justice (Lattman, 2010).

Simply having a code of conduct or ethics is not enough to keep executives honest and ensure the interests of all stakeholders are being considered during the decision making process. While the government has taken measures to ensure that financial statements and other information is disclosed to investors in the public sphere, there is still really nothing preventing the conflicts of interest that Arthur Andersen faced while working with Enron offering consulting services and taking over internal audit controls. While it will be easier now thanks to congressional action to get convictions when a company destroys documents the way Andersen did it does not prevent the act from happening. In…

Sources Used in Documents:


Barret, M., (2004), Enron and Andersen-what went wrong and why similar audit failures can happen again, Foundation press

Barrionuevo, a. (2006, May 25). Enron chiefs guilty of fraud and conspiracy, New

York Times. Retrieved November 15, 2010, from http://www.nytimes.com/2006/05/25/business/25cnd-enron.html

Hasnas, J. (2004/2005), the significant meaninglessness of Arthur Andersen LLP v.
Retrieved November 15, 2010, from http://www.cbsnews.com/stories/2004/06/02/eveningnews/main620795.shtml
NYTimes.com. Retrieved November 15, 2010, from http://dealbook.nytimes.com/2010/11/01/skilling-pursues-case-to-overturn-his

Cite this Document:

"1985 Enron Was Born Of" (2010, November 24) Retrieved September 27, 2022, from

"1985 Enron Was Born Of" 24 November 2010. Web.27 September. 2022. <

"1985 Enron Was Born Of", 24 November 2010, Accessed.27 September. 2022,

Related Documents
Corporate Ethical Breaches in Recent Times, Assess
Words: 1884 Length: 4 Pages Topic: Business Paper #: 99713524

corporate ethical breaches in recent times, assess whether or not you believe that the current business and regulatory environment is more conducive to ethical behavior. Provide support for your answer. Unethical behavior has drawn the attention of the public for the few last decades in all kinds of business. Many transformations in the business environment have taken place, including immoral conducts and the tendency for corruption. Unethical accounting behavior is

Illegal Aliens on California's Healthcare
Words: 3925 Length: 15 Pages Topic: Healthcare Paper #: 48436746

Gene Rogers who served as the medical director for Sacramento County's Indigent Services program for the most of the last decade who has "waged a long fight against the central California country's practice of providing non-emergency medical care to illegal immigrants - a policy he says violates federal law and results in the poorest American citizens being denied the care they deserve." (Cromer, 2007) it is related in Cromer's

Retirement Portability Is a Hot
Words: 20119 Length: 76 Pages Topic: Economics Paper #: 53847496

As Geisel (2004) notes: Income-tax deductions are worth the most to high-bracket taxpayers, who need little incentive to save, whereas the lowest-paid third of workers, whose tax burden consists primarily of the Social Security payroll tax (and who have no income-tax liability), receive no subsidy at all. Federal tax subsidies for retirement saving exceed $120 billion a year, but two thirds of that money benefits the most affluent 20% of

21st Century Skills and Competencies
Words: 4983 Length: 10 Pages Topic: Leadership Paper #: 99195603

21st Century Leadership What does leadership mean today? The 21st Century environment presents totally different challenges and needs from the previous centuries with regards to leadership. Studies have shown that emotional and social intelligence are two big areas that pertain to 21st century leadership, as they relate to how well leaders can effectively establish positive relationships with followers (Boyatzis, 2008; Den, Deanne, Belschak, 2012; Higgs, 2013; Schyns, Schilling, 2013). There are,

Declining Organization Is Divided in to Five
Words: 3976 Length: 12 Pages Topic: Business Paper #: 45645019

declining organization is divided in to five stages by Jim Collins. By referring to each stage an organization gets an insight about the degree and relative stages of decline it has encountered. Planning to rectify the problems by referring to the decline stage can catalyze the process of rehabilitation and reestablishment of the organization. The following paper discusses the case of Enron Company that failed on account of its

Steve Jobs and Entrepreneurialship College Dropouts Steve
Words: 2817 Length: 8 Pages Topic: Education - Computers Paper #: 48631416

Steve Jobs and Entrepreneurialship College dropouts Steve Wozniak and Steve Jobs founded Apple Computer in April 1976. The 1984 launch of the Macintosh computer finally moved Apple into the business office, and by 1988, over one million Mac's had been sold. Jobs stunned the world with the 1984 Super bowl commercial, and literally changed computing for all time (Appleseed, 1984). Now, Apple designs, develops, produces markets and services microprocessor-based personal computers,