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Fundamentals Of Business For Managers Essay

1237 words - 5 pages

What brought about Enron's collapse?The lack of corporate values brought about Enron’s collapse. Enron's failure can also be attributed to the arrogance and greed. The company's bankruptcy was brought on by dishonesty and fraud. But in fact Enron's bankruptcy was an event of greater cultural import than either the Left or the Right perceives. It represented the failure of corporate values.Enron traded energy, at first. It was good at trading energy. It created an online commodities market for energy, which basically meant it created a marketplace where people could buy and sell energy. Enron also produced energy. Its commodities market was a big change from the rule of state-regulated monopolies. Trading energy was a fine business idea, possibly even a groundbreaking one. It was not, as Enron had us believing for a while, the be-all end-all of corporate creativity. The people at Enron were smart, but not as smart as they thought they were. They tried to trade it all: energy, broadband Internet access, water, news, you name it. They failed. They lost billions of dollars on broadband, water investments, and Brazilian utility and on an electricity plant in India. In order to hide their debt, Enron engaged in "aggressive accounting." They created partnerships with nominally independent companies. Those companies were headed by Enron executives, and backed, ultimately, by Enron stock. But Enron did not count their "partners"' debt as its own. This is called "off-balance-sheet" accounting. Enron also found fancy ways to count loans from banks as "profit."Isn't that illegal? That's the multibillion-dollar question. No less than 10 congressional committees, the Justice Department, the FBI, a host of investigators for civil suits and the Securities Exchange Commission (SEC) are all looking into whether Enron and/or its accounting and consulting firm, Arthur Andersen, broke the law. Another emerging issue centers on Enron and Western energy markets. A lot of the market figures aren't public, but the evidence suggests that Enron controlled a huge portion of the California energy market, among others. When you control the supply of a vital commodity like energy, you can manipulate the price. Only slightly simplified, the story goes something like this: Enron lobbies to deregulate market. Market deregulates. Enron gains control of market. Prices are suddenly very high. Enron reaps huge profits. Federal regulators have been asked to investigate whether Enron engaged in price manipulation. Did Enron fix California's energy prices? Did Enron deliberately mislead investors? Did they deliberately hide debt and mislead their shareholders? Did they base their profits on estimates they knew were inflated? Does unloading your own stock, while you urge or force your employees to buy or keep it, qualify as illegal insider trading? We shall see.What finally happened to bring it all crashing down? On Oct. 16, Enron held a conference call to go over its third quarter....

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