Naguit,AnaGianelli

ACETHIC

ENRON:TheSmartestGuysintheRoom

MostpeopleespeciallythoseinourfieldarefamiliarwiththeEnron
Corporationbecauseofthescandalthatthecompanywasinvolvedlast
October2001.Butbeforewediscussthisincident,letusfirstknowafew
thingsabouttheEnronCorporation.EnronCorporationisanAmerican
companythatprovidesenergy,commoditiesandservices.Previously,
beforeitsbankruptcy,iswastheworldsmajorelectricity,naturalgas,
communications,andpulpandpapercompanies.Infact,for6
consecutiveyearsitwasnamedasAmericasMostInnovative
CompanyaccordingtoFortune.Unfortunately,itwaslaterrevealedthat
thiswasbecauseofplannedaccountingfraudandcorruption.This
incidentwaslaterknownasthe
Enronscandal
.

Inthemovieshowninclass,
Enron:TheSmartestGuysinthe
Room
,Iwasabletounderstandandexaminetheeventsthatresultedto
theEnronscandal.Atthebeginningofthemovie,thefounderofEnron
wasintroducedwhowasKennethLay.Meanwhile,LouisBorget,oneof
EnronsCEO,wasdiscovereddoingsomethingunethicaldivertingthe
moneyofEnrontooffshoreaccounts.Becauseofthis,anotherCEOwas

hiredJerrySkilling.JerrySkillingwastheonewhoinfluencedthe
companytousethemethodmarktomarketaccounting,amethodthat
allowscompaniestorecordpotentialprofitsoncertainprojects
immediatelydespiteactualprofitsarenotyetgained.Thiscontributedto
Enronappearingtobeprofitablewheninrealityitisnot.Inadditionto
that,Skillingmadeaccountingloopholestohidebillionsofdollarsindebt
fromfaileddealsandprojects.HealsothenhiredJ.CliffordBaxterand
LouPaiwhowaslaterassignedastheCEOofEnronEnergyServices.In
myopinion,whathedidwasmorallyandethicallywrong.Heisan
individualwhoabusedhispowerbyusingshareholdermoneyashis
luxurysuchasspendingmoneyinstripclubs.Moreover,whenhe
resigned,helefthisdivisionalossof$1billion.Eventually,thiswas
discoveredbyEnronwhenhealreadyboughtalargeranchmakinghim
oneofthelargestlandownerinColorado.Thisactionwasaveryselfish
onesinceshareholdersofEnronwouldlosealltheirinvestmentsand
Enronwouldbetheoneresponsibletoreturntheseinvestmentsinsteadof
Pai.

Inthefollowingyears,Enroncontinuedtogrowandachieve
success.InfactitwasnamedbyFortunemagazineasthemost
admiredcorporation.However,thisdidnotlastverylongsinceanEnron
investornamedJimChanosandaFortunereporternamedBethany

McLean(oneofthewritersofthemovie)observessomeirregularities
withthecompanysfinancialstatementsandthevalueofthestocks.
Moreover,CFOAndrewFastowmisledtheboardofdirectorsandaudit
committeeofEnronregardinghighriskaccountingpracticesandthen
madeArthurAndersen,oneofthefivelargestauditandaccountancy
partnershipsintheworldbeforethescandal,ignoretheseaccounting
issues.ThiseventledtothedefactodissolutionofArthurAndersen.This
onlymeansthatauditingfirmsshouldbecarefulinchoosingcompanies
whereintheywouldexpresstheiropinionfortheinformationofthe
public.SincetheyweredraggeddownbyEnron,theyalsoservedbig
consequencesjustlikeEnronCorporation.ArthurAndersenwasfound
guiltyafterillegallydestroyingthedocumentsthatarerelevanttothe
SECinvestigation.Ontheotherhand,theshareholdersofEnronwere
alsoaffectedsincethecompanysstockpriceplummetedtoalessthan$1
fromahigh$90.75pershare.Thus,alawsuitwasfailedamountingto
$40billion.

Inconclusion,Ilearnedtoalwaysbetruthfulineverythingyoudo.
Onemustalwaysprotecttheintegrityoftheirprofessionforthebenefitof
thepublic.Inourcase,weshouldalwaysreportfairlyfinancial
statementsandrejectanyformofcorruptioneveniftimesarehardand
manypeoplearedoingit.