Scott W. Rothstein (Ponzi scheme)

Scott W. Rothstein (Ponzi scheme)

Introduction

The Enron scandal was a corporate scandal that involved the American energy giant Enron Company based in Houston, Texas and the auditing and accountancy-consulting firm Arthur Andersen. The scandal was uncovered in October 2001. Enron Corporation was undoubtedly a giant corporation and in fact, some individuals suggest that it was one of the largest energy companies' world over. It comprised of a multibillion corporation that employed several individuals and had various affiliations right to the White House. Enron majorly depended on external sources of credit to finance its operations (Loren, 2003).

Discussion

In 2001, the corporation collapsed leaving in its wake financial chaos and financially ruined lives and families. It emerged that the Enron Corporation's remarkable financial condition thrived on institutionalized, systemic and intricately planned accounting fraud that was later to be referred to as the “Enron scandal”. From that instance, Enron has continued to become a very popular symbol and example of willfully orchestrated corruption. The collapse of Enron Corporation destroyed lives and shattered reputations, questions have been raised on how the fraudulent transactions occurred and who was involved. In this paper, all these questions will be investigated explicitly. The paper will also focus on the various ways in which the Enron debacle created an awareness of corporate ethics within the United States (Peter & Ross, 2002). Enron Corporation was formed when Houston Natural gas Company of Houston, Texas merged with InterNorth that is a natural gas company based in Omaha in 1985. Originally, Enron was basically an operator of the interstates gas pipelines but later it diversified its operations and commenced trading in energy related commodities. Enron became very successful and was touted as the largest merchant of energy within both the United States and the United Kingdom. The success of the corporation was further bolstered as it won “Fortune Magazine” award as the most innovative company six times in a row. Indeed Enron continued to enjoy this status until 2001 when it filed for bankruptcy amid intense allegations of insider trading and mega fraudulent accounting practices (Loren, 2003).

Enron had created and fashioned offshore entities and units that were meant to be used for the planning and avoiding of taxes with the main aim of raising the company's profitability standings. This practice enabled the management and the ownership the freehand to play with its profits and the autonomy that enabled the corporation to mask its lost. These entities actually made Enron to look more profitable than it was. Moreover, this created a very dangerous trend especially among the managers and financial officers who had to manipulate its financial accounts each quarter to create an illusion of billions in profits while in the actual sense the company was losing millions. The practice of providing a false financial picture to the public drove the prices of its stocks to considerably high levels, from which point most of its executives commenced to work on insider information and went ahead to trade millions of dollars worth of ...