The Fall of Enron Case Study

Enron Case study

In 2002, Fortune magazine ranked Enron as the fifth largest company in the United States, although by the time the magazine was published, Enron had already filed for Chapter 11 bankruptcy protection.46 It was quite a ride: from a regional gas pipeline trader to the largest energy trader in the world, and then back down the hill into bankruptcy and disgrace. With the help of its investment bankers, accountants, and others, Enron constructed a series of offthebooks partnerships that were used to hide the companys massive debt and inflate its stock price. These partnerships were managed by Enron executivesa clear conflict of interestwho stood to benefit financially from the deals. Enron also used very aggressive accounting practices to bolster the bottom line. A particularly sad aspect of this debacle was how much Enron employees lost in their 401(k) plans as the stock price plummeted. In May 2006, former CEO Kenneth Lay and former president Jeffrey Skilling were convicted of multiple counts of fraud and conspiracy and were sentenced to 24 years in prison. Ken Lay died of a massive heart attack in July 2006, before he began to serve his sentence. Jeff Skilling is currently in jail, although his sentence was reduced in 2013 and he could be released as early as 2017.47 He was also ordered to pay restitution of $45 million.48 The fines paid by various other players in the Enron collapse are startling, too. Enron itself paid over $2 billion in fines, including $1.5 billion for manipulating energy markets in California; and financial services corporations paid huge sums to settle investor lawsuits connected to Enron: Citigroup paid $2.4 billion, JPMorgan Chase paid $2.2 billion, and other banks paid fines in the hundreds of millions to settle similar suits.

questions :

*Understand the ethical and social consequences of decision-making in this case.

*Assess the ethical business practices of Enron.

*Research Enron and its actions regarding practices violating business ethics

*Synthesize the facts and issues in the Enron case and identify the detrimental effects unethical practices have on all stakeholders

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