The Nature of Fraud

Enron was a multinational  company that  specialized  in marketing  electricity, natural gas,  energy,  and other  physical commodities. Enron  initiated  the wholesale  natural gas and electricity  markets in  the United Stases. It was  officially  formed  in 1985  as a result of the merger  of Houston  Natural Gas  and Inter north of  Omaha, Nebraska. In 2000, Enron reported  revenues  of $101 billion, supposedly  making  it the  seventh  largest  U.S.  company   in terms  of revenue. In  2000, Enron employed  21, 000 employed  21, 000 employees  and operated  in over 40 countries.

In October 2001, it was determined  that a  large financial  statement fraud had  been  occurring  at  Enron and that  revenues, income, and assets  had been   significantly overstated. Its stock price  which  reached  a high $90 earlier  in the year, dropped  to less then  $1 in a matter  of days. In December  2001, Enron declared of one the  largest  corporate  bankruptcies in U.S history. Once the scandal was discovered  numerous Enron officers. Both Jeff Skilling  and Kenneth  Lay (former CEO and current CEO) were charged with numerous incidences of fraud. Before his trial, Kenneth Lay died  of heart disease and Jeff Skilling was found guilty and sentenced to 24 years in prison. Arthur Andersen, Enron`s auditor was convicted of obstruction  of justice  largely  because of destruction  of evidence charges brought against it by the U.S.  government. Enron citing accounting errors,  had to restate its financial  statements cutting  profits for the three years 1999-2001 by autos  20 percent or around $586  million. Many  of the lawsuits that were filed  against Enron and partied alleged that executives reaped personal gains  from  “of-the-book“ partnerships while the energy giant violated basic rules of accounting and ethics. As the accounting discrepancies became public  knowledge, Enron investors lost billions of dollars, shattering their  retirement plans. The Enron and WorldCom frauds were there main impetus  for the passing of the Sarbanes-Oxley  Corporate Governance  Act in 2002 and are, without doubt the two must well know frauds in the history of The United Stases.