Deception, Fraud, and the Collapse of Enron Essay -- Business Manageme

Deception, Fraud, and the Collapse of EnronIntroductionFrom Americas 7th most valuable companionship in December 2000, to acompany in ruins by early 2002, Enron has been involved in one of themost incredible reverses of fortune ever. With shares riding high onWall Street at $84.87 on the 28th December 2000, and awards such asAmericas most innovative company from Fortune Magazine 6 yearsrunning, and Energy partnership of the Year from the Financial Timesalso in 2000, it looked as though Enron were promising to be one ofthe biggest American companies of all time.Things started going drastically wrong. As large losses were beingreported, share prices tumbled, and Enron, within the space of only ayear, was on the verge of return. I shall be investigating thefactors of this collapse, some of them callable to business and economicfactors, but mostly through deception and fraud.AnalysisThe timeline of events from when Enron were at the top to the bottomof the business world is quite out standing. (See Figure 1, Appendix).The collapse seems to span a time of around 5 months, from August 2001to January 2002. During this time, many scandals have come out, whichsuggest Enron has played a major part in its own downfall, throughunsuccessful diversification to fiddling the accounts. As these thingsadd up, it is no surprise Enron is now in the position it is.In 2000 the company preserve record turnovers of $100m (See Figure 2,Appendix), a $60m increase from the previous year. Shares were sellingat a high price, meaning that future expansion would have beenpossible overdue to high coronation in the company. A collapse at thispoint seemed absolutely out of the question, it just seemedimpossible, with future investment and high turnovers.In October 2001, the trine quarter results were published, showing amysterious loss. This of course set the share price falling, asinvestors lost confidence about Enrons long termination capabilities. Thiswas the beginning of what was go ing to be a difficult few months forEnron, as different scandals and information was released.The reasons for this loss have not been explained fully but in that respect aremany different possibilities, some through bad business decisions,some through bad accounting, and some from unnecessary purchases. Allof these combined meant that Enron was veneer debts of around $690m.Enron consists of ... ...e problems, they might not be in the position they aretoday. With independent audits, financial irregularities might havecome to light sooner. Poor communication theory with shareholders andpotential investors meant they were unaware of the situation they weregetting themselves in. Enron also spent a large amount of money onunnecessary items where perhaps better investment would have been asafer option.Overall, the factors all combine to the failure of Enron, and at timeof writing it is still unclear the exact reasons for the downfall, andhow much of the information released by newspape rs and the companyitself is reliable. Based on the information available at the time, itis clear there are many deceptions and poor business decisions thathave meant Enron have a real bleak future ahead of them.BibliographyWebsites www.bbc.co.uk (20th February-10th March 2002) www.telegraph.co.uk (report on 1/12/01) www.enron.com (March 2002) www.observer.com (March 2002)Other Sources Independent Newspaper 27th February The Economist (December 2001) Nuffield Business and Economics savants Book The Money Programme- Inside the Enron Scandal (BBC2 April 4th 2002)