English 101A


Recently, giant-companies including Enron, World Com went bankrupt because of unethical and illegal activities. In from Micro point of view, viewing Enron’s case from a micro, the scandal has not only destroyed the company itself, but from Macro point of view, it also has negative impact to America economic.

In the last 15 years, Enron became the seventh largest company in America, which has more than twenty thousands staff around the globe. In year 2000 Enron was ranked "one of the world's leading energy, commodities and service companies" with $101 billion revenues (Enron homepage). In 2001 Enron received a title of "Most Innovative Company in America" for the sixth consecutive year in Fortune Magazine (Fortune Magazine). As the company's CEO and chairman Kenneth Lay said, "Our world-class employees and their commitment to innovative ideas continue to drive our success". Furthermore, Enron was placed number 18 on Fortune's list of 535 "Most Admired Companies", in the top five in "Quality of Management", "Quality of Products/Services", and "Employee Talent"(Enron special press release ). Although Enron was praised in the marketplace for impeccable leadership and success, the company unexpectedly collapsed after multiple unethical and illegal activities had been discovered. Enron lied about its profits and stands accused of a range of shady dealings, including concealing debts so they didn't show up in the company's accounts. As the depth of the deception unfolded, investors and creditors retreated, forcing the firm into Chapter 11 bankruptcy in December. More than six months after a criminal inquiry was announced, the guilty parties have still not been brought to justice.

Enron's stunning collapse has cost thousands of employees their savings and led to criminal and congressional investigation. Formed in 1985, Enron began as an energy company shipping natural gas through pipelines. In 1989, it entered the natural gas commodities market. In 1994, Enron started trading electricity contracts and soon became the largest US electricity trader. By the late 1990s, Enron had ventured into trading coal, paper and even telecom bandwidth. By this time, most of the Enron's revenues came through trading. However this massive growth came crashing to a halt in October 2001 when the company made an unexpected announcement. It was worth $1.2 billion less than it had previously claimed - largely due to debts and losses the company had attributed to separate investment partnerships it had created in the late 1990s, all remained unmentioned in the company's books. Enron declared bankruptcy on December 2. Since then investigation has been going on about the knowledge that Enron's management had but did not reveal regarding the partnerships. Partner in this accounting scam was Enron's accounting firm and external auditors, Arthur Andersen who approved those financial statements. In late 2001, Arthur Andersen, one of the world's largest accounting firms, found itself plunged into what will likely be remembered as one of this generations greatest business scandals. The scandal involved Enron Corp., one of America's most successful corporations, and the darling of investors, employees, and market analysts alike. Enron was accused of a multitude of ethical breeches, including deliberately misleading shareholders about the company's true financial status. Ultimately, Enron was found guilty of a number of financial misdeeds, went bankrupt, and Anderson's involvement in the scandal brought the ethics of accounting firms into question.