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What was the enron scandal?

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  • Anonymous
    1 decade ago
    Favorite Answer

    Enron wasn't actually doing very well financially, but the executives illegally changed their financial records to make it look like they were doing great.

    So everyone thought it was good, and people kept on buying shares, and share prices kept on rising. All the while, the executives of Enron were slowly selling off their shares at a high price, because only they knew that the reality was that the shares were worthless. The crime is called "Insider Trading". It's also what Martha Stewart was arrested for.

    They got caught, and went to jail. The share prices plummeted, and all of the shareholders lost their investment money. For many innocent Enron employees, their pensions were guaranteed in Enron stock, so when they share prices died, so did their pension funds. Thousands of innocent people lost huge amounts of money.

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  • 1 decade ago

    The Enron scandal was a financial scandal that was revealed in late 2001. After a series of revelations involving irregular accounting procedures bordering on fraud, perpetrated throughout the 1990s, involving Enron and its accounting firm Arthur Andersen, it stood at the verge of undergoing the largest bankruptcy in history by mid-November 2001. A white knight rescue attempt by a similar, smaller energy company, Dynegy, was not viable. Enron filed for bankruptcy on December 2, 2001.

    As the scandal was revealed, Enron shares dropped from over US$90.00 to just pennies. As Enron had been considered a blue chip stock, this was an unprecedented and disastrous event in the financial world. Enron's plunge occurred after it was revealed that much of its profits and revenue were the result of deals with special purpose entities (limited partnerships which it controlled). The result was that many of Enron's debts and the losses that it suffered were not reported in its financial statements.

    In addition, the scandal caused the dissolution of Arthur Andersen, which at the time was one of the world's top five accounting firms.

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  • Anonymous
    1 decade ago

    Enron evolved from a legitimate pipeline gas trader into what is known in business as a "black box" -- an enterprise that reports but cannot verify its profits. Jeff Skilling, the company's leader, instituted "mark to market" accounting, where projected profits from any of the company's deals were registered on the books as real, even if over time they turned out to be losses. So Enron appeared to be successful despite losing money, a fact carefully hidden from investors whose purchase of Enron stock provided the capital to keep the charade going. Other corporate entities were established by Enron to help disguise its deficits from Wall Street. With the collusion of a bribed accounting firm and number of prominent banks, the deceit lasted until the collapse of the 1990s tech boom.

    As bad as that fraud was, the worst part of the scandal occurred when Enron used its control of a West Coast electric company to extort billions of dollars from California by creating artificial blackouts. If the state did not pay Enron's outrageous rates, the power was shut off. Consequently, people were stuck in elevators, and cars crashed because traffic signals went dead. For a company to bring a state to its knees like that is one of the most despicable acts perpetrated in American business history. Disgraced CEO Kenneth Lay escaped punishment by dying before sentencing, but Jeff Skilling will rot in prison, a curious fate for a graduate of the prestigious Harvard Business School.

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  • 1 decade ago

    I'm no economist, but here is the story in a nutshell.

    The CEO and members of the Board of Director's lied to the investors about the real worth of the company. The company was losing money, but numbers were fudeged, and details not given in an attempt to inflate the value of the stock. Then the CEO and others sold the inflated stock to make some quick money and let the bottom fall out for the rest. Employees at Enron were lied to, and they had all there life savings wiped out.

    No love loss for any of the bigwigs. May they rot in jail where they belong.

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  • 1 decade ago

    Pretty much in simple terms the CEO's of Enron knew that things were going bad and hid the true figures from everyone, including their employees, and pretty much left them to hang while the company went bankrupt. They had all sold their shares of the company before the crash and made out like bandits. It's America mang.

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  • 3 years ago

    What Was Enron

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  • Anonymous
    4 years ago

    What Was The Enron Scandal

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  • 1 decade ago

    they stole money or something

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  • 1 decade ago

    I dunno.

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