The Enron Scandal

The Enron scandal

Introduction

The Enron scandal is classified as one of the biggest financial scandals in the history of United States. The scandal gained popularity because its affects were widespread and affected the financial and political sectors of the United States. The involvement of high profile personalities in the scandal made it even more prominent at the surface. Enron is one of the giants in electronics and among the most admired companies of the United States. The whole loss which was incurred by the company included the pension funds of the employees, $1.5 Million of cash and $13 billion of debt. For years due to artificial accounting the company's directors misaligned the balance sheets of the company and presented inflated profits which went unnoticed (Petrick, 2003).

Persistent rumors

The rumors about the company regarding the mismanagement of funds has been surfacing from a very long time however it gained prominence when the millions of hidden debt amount has been revealed which should be accounted for in the balance sheet. There were several shell companies created which were used a s special purpose vehicles for the transfer and storage of funds. The investigation was initiated by the Securities and Exchange Commission. The findings of the investigation showed that the profits of the company for the last five years were 600 million lower than it was declared in the last five years. The business of Enron has reached a massive scale that there was nothing comparable and several different types of companies were operating under the umbrella of Enron (Grinstein, 2003).

Enron ended in a disaster. The investor confidence in the American financial system has been shaken by the Enron disaster. The Enron hid the losses and profits in collusion with the auditor Arthur Anderson. The former auditor of the company has approved all the illegal financial and accounting practices of the company. The fraudulent activities were carried out so neatly that no evidences were left behind. The investors at the Wall Street become intolerant to this act and then they called for complete investigation into the financials of the company and all the companies which are operating under the umbrella of Enron. Due to this case the companies which were having a complex accounting systems faced severe losses in the stock market due to investor confidence (Petrick, 2003).

White House

During the investigation it has been founded that the roots of Enron goes back to the doors of White House. The former president and founder of Enron, Kenneth Lay has been closely connected with the George W. Bush. Several members of the Enron's initial administration have been closely linked with the Bush. The speculation than started regarding the popularity of the Bush that how he is linked with the scandalous Enron, however Bush at that initiated an investigation and adopted a critical tone towards the irregularities which have affected the Enron. However the case still haunts the White House because of the evidence of involvement which has been found ...