As an accounting major, the Enron Scandal is something that is frequently discussed as an example of what not to do. The Enron Scandal caused many people to lose trust in the business world and we now have to prove to the world that we are highly ethical people. In every class I take now, we talk about the implementation of ethics because when people are investing their money they want to be able to trust that they are not going to lose it all.
Enron started as a small company with big dreams, and ultimately their beliefs in extreme competition and creating their own rules led to their downfall and the downfall of many. It all started out when they were approved for the mark-to-market accounting method which allowed them to report gains for future projects, which is not allowed in present day accounting.
Furthermore, Jeffrey Skilling, one of the CEOs trained all of his traders to be extremely cutthroat. He believed in a survival of the fittest work environment and had peer evaluations every year where approximately 15% of Enron employees were let go each year. He trained his traders that to keep their job he had to do whatever it took, and believed that the only thing that motivated people was money. He was a risk taker and took his customers and employees out on dangerous trips to make them feel on top of the world.
Jeffrey Fastow, CFO of Enron, also led to the downfall of Enron by cooking the books and making up imaginary companies to be the subsidiaries of Enron to hide their money losses in these made-up companies. Banks knowingly invested in these illegitimate companies and the auditors approved this knowing that this was wrong.
Enron knew how to work the system and rewarded their auditors, lawyers, and analysts so that they could keep their fraud rolling. One analyst lost his job for speaking out about the accuracy of Enron's statements.
The biggest point of conflict for me is when they decided to ruin the lives of the people of California just to make a profit. They were facing significant losses and had already invested in a power company out in California when suddenly they came up with a great idea. They would increase the demand needed for power so that they could increase the price of electricity to increase 800%. They would export power outside of California so that people would experience power shortages, which made them think that they needed to invest more money in power. They also convinced power companies in California to shut down temporarily so that they could keep rising the prices. The governor at the time asked for help and tried to shut down Enron, but the citizens of California soon lost confidence in him.
Presently, Jeff Skilling is getting released from his 14-year sentence this year and Jeffrey Fastow has finished his 6-year sentence. In my opinion, they should have to give up the millions of dollars they kept from selling their stocks before the downfall of employees and give it to the thousands of employees they hurt, and to the citizens of California who suffered through heat waves and detrimental situations because of Enron's greed.
