The Fall of Enron

Taken from Andrew Meuth’s paper on Enron at http://www.geocities.com/andyjrbill42/ENRON.htm

Andrew Meuth’s thesis for his paper was that Enron ultimately failed because of immoral leadership, faulty accounting, lying to the public, and the failure of market regulators. Enron failed because of their leader, Jeff Skilling, and his financial advisor Andrew Fastow. Fastow had the desire to make money no matter what the costs, whether it be lying to the public or making illegal transactions. Fastow made it appear that Enron was doing great with their profit increasing but they were in severe debt, that was hidden because Fastow dumped it on other companies such LJM and LJM2 which he headed and it was where all Enron’s debt was dumped. The leaders of Enron sold their stock while the company was doing good and thought they would get away while the company crashed ruining people’s lives. Enron failed because of faulty accounting because they made it out to look like they were making huge profits and the stock prices soared, but really they had debt that was piling up and when the people began to want to sell their shares back, Enron could not afford it causing them to declare bankruptcy. Fastow began Enron failed because the lied to the public as the public thought they were doing good, but they were trading with themselves to make it look like they were prospering and they made up companies that did not exist to make their records look better. The final reason they failed was because the failure of the financial advisor to do his job and point out when an illegal or faulty change had been made. Arthur Andersen, Enron’s financial advisor, was supposed to report irregularities in Enron’s books to the SEC in its examinations of Enron’s accounts. Yet Enron had paid Andersen and the company to advise their company which was not illegal but would cause problems because the company gathered evidence but did not seek any way to solve the problems of Enron’s books. These factors led to the declared bankruptcy of Enron and the loss of many jobs and pensions. The leaders of Enron stand trial now for what they have done while those that were wealthy during Enron’s success now are poor and jobless.