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The Ethics Of Enron Essay

1414 words - 6 pages

The Ethics of Enron:
A Corporate Disaster
Racheal D. Smith
Salem International University

The Ethics of Enron:
A Corporate Disaster
Ethics, as stated by Dawn D. Bennett-Alexander and Linda F. Harrison in The Legal, Ethical & Regulatory Environment of Business in a Diverse Society, are considered subjective laws as well as a how-to-guide for businesses in how they conduct themselves with their suppliers, customers, employees, and anyone else they do business with (2012). It is not enough to know how to run and conduct business, it is also important that good judgment, situational experience and common sense be used in order to be successful and remain that way. There have been ...view middle of the document...

Two of the major players, Jeffrey Skilling, CEO, and Ken Lay, CEO from 1985 to 2000 and then again in 2001 after Skilling resigned, reportedly received $41.8 million and $67.4 million respectively according to the 2015 Enron Fast Facts.
On December 2, 2001, the once powerful energy company declared bankruptcy to the crippling total debt of $38 billion (DiLallo, 2015) after the U.S. Securities and Exchange Commission (SEC) opened an investigation against Enron’s transactions on October 21, 2001 (Enron Fast Facts, 2015). Andersen, the company’s auditor, created off-balanced-sheet entities for Chewco, Whitewing, LJM, and Raptors that exposed the fraud. In the case of company officer-run Chewco that was created by Enron in 1997 to “acquire a stake in a joint venture the company set up” was reported to have earnings of $405 million when the company faced a devastating loss of $628 million. It was through this practice with these entities that Enron falsely inflated values and profitability even though some were later found to not have existed at all, which was used to hide the companies growing fraud, debt, and failure from investors, leading to the U.S.’s largest bankruptcy scandal in history to date (DiLallo, 2015).
In January of 2002, Enron faced a criminal investigation by the U.S. Department of Justice following them filing Chapter 11, the suspension of their shares being traded by the NYSE, and the end of a partnership with their Chief Auditor, Arthur Andersen, also under investigation by the SEC, and indicted by the U.S. Department of Justice for obstruction of justice for shredding evidence documents (Enron Fast Facts, 2015).
On May 25, 2006, a jury convicted Kenneth Lay of all six of the counts against him, while Judge Simeon T. Lake four more counts in a separate bench trial. He died from a heart attack on July 5, 2006, thus invoking the legal practice of erasing the convictions against the defendant by the U.S. federal courts “if the defendant dies before he/she has a chance for an appeal to be heard” by Judge Lake (Enron Fast Facts, 2015).
The same jury convicted Jeffrey Skilling on nineteen counts of fraud, insider trading, conspiracy, and false statements, while finding him not guilty on nine accounts of insider trading, earning him a sentence of twenty-four years and four months in prison (Enron Fast Facts, 2015) and $45 million in fines, which went to the victims of the Enron fraud (Mears, 2012). On November 16, 2006, he appealed to the Fifth Circuit Court of Appeals, but was ordered to prison because the presiding judge denied his freedom until the upcoming appeal. The convictions were affirmed, however, it was returned by the U.S. Court of Appeals for resentencing on January 6, 2009 (Enron Fast Facts, 2015). His conviction was upheld within the courts, though “the conspiracy charges that involved allegations he withheld his honest services" were dismissed (Mears, 2010), which led to the case being referred back to...

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