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Group 5 - Case 9 (Enron)

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by

Hanna Khan

on 18 February 2016

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Transcript of Group 5 - Case 9 (Enron)

Content
Overview
Question 1
Question 2
Question 3
Conclusion
Sources
Overview
Enron is known as an energy company whose offers energy, commodities, and other services. They are based in Houston, Texas.
Had several individuals and areas within the company that were not ethically sound with the culture causing ethical issues.
The company of Enron faced several corruption issues which lead to the demise of the company.
How did the corporate culture of Enron contribute to its bankruptcy?
The culture of the company minimally promoted the core values of integrity and respect.
The company rewarded innovation and punished the employees who appeared to be a weak asset to the company.
Encouraged risky behavior.
Hiding the losses and inflating profits ( Negative cash flow of $154 millions, Enron claimed $3 million in it's cash flow.
Bad communication that consisted of delivering bad news and lying to stakeholders.
What role did the company's Chief financial officer play in creating the problems that led to Enron's financial problems?
Conclusion
Enron energy company was subjected to an enormous amount of litigation within their business.
If Enron would have been more ethically sound to a business culture than many problems that were issued by the company most likely would not have occured.
Did Enron's bankers, auditors, and attorneys contribute to Enron's demise? If so, how?
Yes, they took sides with Enron's management instead of acting professionally and unbiased.
Group 5 - Case 9 (Enron)
Hanna Khan
Jessica Frederick

Banker - Merrill Lynch
Merrill Lynch replaced a research analyst after his coverage of Enron which dissatisfied Enron’s executives.
This coverage would have saved Enron from demise if Merrill Lynch would have prevailed upon Enron to implement the it within the company.
Merrill Lynch subjected in to threats by Enron that it would be excluded from a coming $750 million stock offering
The replacement analyst is stated to have upgraded his report on Enron’s stock rating. This was considered to be very unethical and unprofessional.
Auditors - Arthur Andersen LLP
Was responsible for ensuring accuracy of Enron's financial statements.
Investors were deceived in relying reports from Andersen.
March 2002, Andersen was found guilty of obstructing justice by destroying Enron related auditing documents.
Andersen failed to ask Enron to explain its complex partnerships before certifying Enron’s financial statements.
Attorneys - Vinson & Elkins
Helped to mold some of the company's special purpose partnerships.
Known to be a great facilitator of the deals of legality, which were through transaction opinion letters.
These deals led to the demise of the company.
Took role by involving unconsolidated partnerships and special purpose entities.
He employed techniques that could rapidly exploit deregulating markets.
In order to prevent demeaning in Enron's credit rating, he tripled his staff to more than 100.
Sources
Business Ethics: Ethical Decision making and Cases.Special Edition. O.C. Ferrell
Full transcript